Actuarium

SOA GH DPGroup & Health — Design & Pricing

Fellowship (FSA)
5 hours·≈10–12 written-answer questions·≈400 study hours

Syllabus learning objectives

Official syllabus

Paraphrased from the SOA syllabus so the study-plan builder and practice sets track the topics you will actually be examined on. Weights are the official topic ranges.

Product design: medical, dental, disability, group life, LTC

25%
  • Describe benefit designs and cost-sharing features for medical, pharmacy, dental, disability, group life and long-term care.
  • Evaluate the effect of deductibles, coinsurance, out-of-pocket maximums and networks on utilisation and cost.
  • Assess plan design responses to adverse selection and moral hazard.
  • Describe government programmes (Medicare Advantage, Medicaid managed care, ACA marketplaces) and their pricing rules.

Manual rating & trend

30%
  • Develop manual claim costs from utilisation and unit cost by service category.
  • Select and apply medical trend, separating unit cost, utilisation, mix and leveraging.
  • Compute actuarial value and induced-utilisation adjustments for benefit changes.
  • Build a premium rate from claim cost, retention, risk margin and regulatory loads (MLR).

Experience rating & credibility

25%
  • Apply prospective experience rating with credibility blending of group and manual rates.
  • Handle pooling of large claims and pooling charges.
  • Design retrospective rating and dividend formulas for large groups.
  • Evaluate funding arrangements: fully insured, minimum premium, ASO with stop-loss.

Risk adjustment, reinsurance & regulation

20%
  • Explain risk-adjustment models (HCC) and their effect on pricing in ACA and Medicare Advantage markets.
  • Price specific and aggregate stop-loss for self-funded groups.
  • Describe rate-review, MLR rebate and community-rating requirements.
  • Assess the pricing impact of mandated benefits and rating restrictions.

Overview

DP is the Group & Health track's pricing exam: designing benefits, building manual rates, trending, experience rating with credibility, and pricing within the regulatory and risk-adjustment environment.

Duration
5 hours
Questions
≈10–12 written-answer questions
Style
Computer-based written answer
Credit
Group & Health track FSA requirement
Passing
≈ 60–65% of points

Syllabus map

Product design: medical, dental, disability, group life, LTC
25%
Aggregate Loss Models
Manual rating & trend
30%
Ratemaking FundamentalsForecasting Premium, Loss, and Profitability
Experience rating & credibility
25%
Credibility Theory: Limited Fluctuation, Bühlmann, and Bayes
Risk adjustment, reinsurance & regulation
20%
Reinsurance Structures and PricingCredibility Theory: Limited Fluctuation, Bühlmann, and Bayes

Key formulas

Claim cost PMPM   =∑svcUtilisationsvc/100012,000×Unit costsvc×(1−cost share)\;=\sum_{svc}\dfrac{\text{Utilisation}_{svc}/1000}{12{,}000}\times\text{Unit cost}_{svc}\times(1-\text{cost share})

Premium   =Claims PMPM1−retention%\;=\dfrac{\text{Claims PMPM}}{1-\text{retention}\%} (or claims + fixed retention)

Deductible leveraging   trendnet=Claims1−DClaims0−D−1>trendgross\;\text{trend}_{net}=\dfrac{\text{Claims}_{1}-D}{\text{Claims}_{0}-D}-1>\text{trend}_{gross}

Experience rate   R=Z Xˉgroup+(1−Z) M,Z=min⁡ ⁣(1,n/nF)\;R=Z\,\bar X_{group}+(1-Z)\,M,\qquad Z=\min\!\left(1,\sqrt{n/n_F}\right)

Aggregate stop-loss attachment   =125%×expected claims\;=125\%\times\text{expected claims} (typical)

Completion factor IBNR   Incurred=PaidCF\;\text{Incurred}=\dfrac{\text{Paid}}{CF}

Study strategy

  1. Lay out rating steps as a table (base cost → adjustments → trend → retention); graders follow the chain.

  2. Always separate the components of trend; questions probe leveraging specifically.

  3. For funding-arrangement questions, discuss cash flow, risk transfer, taxes/fees and administrative burden.

Common traps

  • Applying gross trend to net-of-deductible claims (ignoring leveraging).

  • Pooling large claims but forgetting to add back the pooling charge.

  • Ignoring MLR minimums when setting retention.

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