A. Analysis of Past Actual Behavioral Healthcare Experience

1. Accumulate historical actual behavioral healthcare utilization and paid claims experience (prefer to have 2-3 years) by type of service (acute IP, residential, partial hospital, IOP, therapy visits, medication management visits, rad/path, etc. - separately for MH vs. CD where appropriate) and incurred month, and group into calendar quarters
2. Apply reasonable lag factors to claims paid-to-date from actual historical experience to develop completed incurred claims; apply separate lag factors by major type of service as appropriate (IP, OP, acute alternative, etc.); if claim lag tables are not available to develop IBNR, use factors from M&R sources
3. Separate claims by plan type (Indemnity, PPO, HMO, etc.), and separate in-network claims, out-of-network claims, and out-of-area claims to the degree possible
4. Accumulate historical member/employee counts from actual demographic data as available to develop utilization rates and per member/employee costs, and to translate rates between "per employee" and "per member"
5. Develop annual utilization rates, average paid unit costs and per member per month (pmpm) plan costs by service type from the historical experience
6. Develop historical trend rates on utilization levels and pmpm costs, reviewing quarterly, semi-annual and annual results

B. Evaluate Benefit Changes

1. Analyze behavioral healthcare benefit specifications relevant to historical benefit plans and cost levels and changes being made in benefit plans being offered under the contract terms
2. Determine changes in benefit plan designs related to:

   Deductibles
   Out-of-pocket limits
   Coinsurance/copayments
   Calendar year limits on IP days, OP visits, other benefits
   Other relevant plan design features

3. Develop expected changes from historical benefit coverage and cost levels related to changes in plan design by service type from M&R Health Cost Guidelines and Rating Factors
4. Develop expected changes from historical service utilization levels by service type (induced services) based on changes in benefit design (e.g. lowered copayments and increased calendar year limits increase utilization) from M&R Health Cost Guidelines and Rating Factors
5. Determine if adjustments are necessary due to the impact of EAP changes (EAPs impact utilization of insured behavioral healthcare benefits)

C. Evaluate Fee Schedule Changes

1. Review historical reimbursement arrangements for behavioral healthcare providers, including facilities and professional services (discounted fee-for-service, per diems, fee schedules, etc.)
2. If necessary and relevant, develop average provider reimbursement rates from HIAA data by CPT and area, actual and/or M&R expected utilization by CPT code, etc.
3. Identify planned reimbursement levels for providers under CHI contract terms
   
4. Develop adjustments from historical cost levels arising from changes in reimbursement levels between historical levels and CHI levels by service type, with separate adjustments for in-network, out-or-network, and out-of-area as necessary

D. Evaluate Impact of CHI Utilization Management

1. Determine historical categorization of utilization management programs based on discussions with plan/CHI/vendors/etc. - typically classified along the Degree of Healthcare Management (DoHM) continuum among loosely managed, moderately managed and well (best practice) managed programs.
2. Identify the expected DoHM for CHI UM activities for the business during the contract period
   
3. Develop adjustment factors by type of service (separate considerations for in-network, out-of-network, and out-of-area) to reflect changes in DoHM using data from the M&R Health Cost Guidelines, M&R Care Guidelines, other behavioral healthcare research and industry knowledge.

E. Develop Expected Trend Rates

1. Review trend parameters from M&R Health Cost Index and Health Cost Guidelines by service type
   
2. Review historical trend experience related to group by benefit type, making considerations for historical DoHM and benefit design
3. Select utilization and unit cost trend rates to project from experience period to contract period

F. Evaluate Demographic Changes

1. Review historical demographic data (age/sex/geographic area distributions)
   
2. Identify any significant changes in membership demographics between the historical experience levels and the contract period that should be reflected in pricing
   
3. Develop demographic adjustment factors as necessary from M&R Health Cost Guidelines and Rating Factors

G. Determine Additional Margins

1. Determine required profit/risk margins for reinsurer and CHI
   
2. Determine any additional risk/contingency margins required based on unique risks inherent within the group(s) and the historical experience data

H. Project Cost-of-Care Rates for Contract Period

1. Determine baseline cost and utilization levels from historical experience data
2. Apply adjustments for benefit design changes by service type
3. Apply adjustments for provider reimbursement/fee schedule changes by service type
4. Apply adjustment for utilization management differences based on CHI DoHM targets and expectations by service type
5. Apply selected trend rates to project historical data to contract period
6. Apply demographic adjustment factors
7. Apply profit/risk/contingency margin