Grasp review Problem 17

[JMCOOP]

This problem gives you claims for 5 months that you then have to annualize. However when you annualize them shouldn't that change the midpoint from 4/15 to 8/1. Therefore wouldn't you only use 5 months of trend for that year?

[Rainson]

No. Multiplying by 12/5 does not change the average cost pmpm underlying the claims because you theoretically are also multiply the members by 12/5 too. Think of it inflating claims from 2/1/07-6/30/07 and adding 3 1/2 months on both ends to estimate claims for the period 10/15/06-10/14/07. Both have the same midpoint (4/15/07) and the same average cost pmpm.