A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Phase III. Final Model Development and Estimation (June 23, 2011 to Present)

10/14/2011

Model development at this stage has focused on further improvements to the ARC Long-Term Care Premium Model to take into account situations of extremely low enrollment (e.g., under 1 percent), modeling of an alternative benefit design contained in the Actuarial Report on the Development of CLASS Benefit Plans (Appendix O and further described in the next section), and additional reviews of both models’ calculations and assumptions. Two independent actuaries are undertaking the latter effort as part of ASPE’s ongoing contract with Avalere Health. The CLASS Actuary also explored an alternative approach based on information derived from Genworth’s net premium rates, with adjustments (see page 14 of the Actuarial Report on the Development of CLASS Benefit Plans, Appendix O).

FEDERAL ACTUARIES MEETING

The CLASS Actuary convened a meeting of government actuaries on June 28, 2011 to discuss actuarial modeling on CLASS and alternative plan options. Attendees included actuaries from the CMS Office of the Actuary and the Center for Consumer and Insurance Oversight, the Social Security Administration, and the Office of Personnel Management. Additional attendees included CLASS and ASPE staff members. The group discussed plans outlined in detail in the next section of this report. The consensus was that some benefit options under consideration could theoretically reduce adverse selection and have the potential to be actuarially sound. However, concerns were raised about: how to interpret the three percent administrative cost provision contained in the law; the policy and administrative complexities associated with some of the options; the unique marketing challenges of offering a federal benefit to large employer groups; and the very high level of uncertainty around assumptions in the actuarial models.

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