Looking Ahead to 2020: Insights From An Actuarial Perspective€¦ · Looking Ahead to 2020:...
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Looking Ahead to 2020: Insights From An Actuarial Perspective
Andrew Ryba FSA, MAAA Jared Strock FSA, MAAA
CSG Actuarial, LLC www.csgactuarial.com
2016 Issues & Trends in Medicare Supplement Insurance # medsupp2016
Looking Ahead to 2020: Insights From An Actuarial Perspective
Agenda
• Looking ahead to 2020
• Impact on Medicare Supplement Pricing
• Future of Medicare Supplement
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Looking Ahead to 2020: Insights From An Actuarial Perspective
Looking Ahead to 2020
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Public Law 114-10 – April 16, 2015
• Referred to as “MACRA” • Medicare Access and CHIP Reauthorization Act of
2015
• Section 401. Limitation on certain Medigap policies for newly eligible Medicare Beneficiaries
*https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf
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Sec. 401 ‘‘(1) IN GENERAL.—Notwithstanding any other provision of this section, on or after January 1, 2020, a medicare supplemental policy that provides coverage of the part B deductible, including any such policy (or rider to such a policy) issued under a waiver granted under subsection (p)(6), may not be sold or issued to a newly eligible Medicare beneficiary.
*https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf
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Sec. 401 ‘‘(2) NEWLY ELIGIBLE MEDICARE BENEFICIARY DEFINED.— In this subsection, the term ‘newly eligible Medicare beneficiary’ means an individual who is neither of the following: ‘‘(A) An individual who has attained age 65 before January 1, 2020. ‘‘(B) An individual who was entitled to benefits under part A pursuant to section 226(b) or 226A, or deemed to be eligible for benefits under section 226(a), before January 1, 2020. *https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf
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What is the key implication of Subsections 1 & 2?
• Beginning in 2020, Med Supp Plans C & F can not be sold or issued to newly eligible Medicare beneficiaries
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Looking Ahead to 2020: Insights From An Actuarial Perspective
How will this be implemented?
• Model Regulation 651, Sections 9.1 and 9.2
• Key additional details:
• New eligibles can elect Plans D & G in GI situations
• Changes are required in all states
• Carriers can offer a High Deductible Plan G
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Looking Ahead to 2020: Insights From An Actuarial Perspective
Impact of Plan C & F Limitations
• What plan(s) will take Plan F’s place?
• How could this effect pricing?
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0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
2010 2011 2012 2013 2014 2015
Medicare Supplement Enrollment by Plan (Total)
Plans C, F & J Plans G & N All Other
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0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
2010 2011 2012 2013 2014 2015
Medicare Supplement Enrollment by Plan (Most Recent 3 Years)
Plans C, F & J Plans G & N All Other
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0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2010 2011 2012 2013 2014 2015
Medicare Supplement Enrollment by Plan (Most Recent 3 Years) Excludes: United Healthcare and BCBS Organizations
Plans C, F & J Plan G Plan N All Other
Looking Ahead to 2020: Insights From An Actuarial Perspective
Current Plan G vs. Plan F
• Only benefit difference is Part B Deductible ($166)
• For companies offering both, Plan G premium rates average $420 less than Plan F premium rates, $325 if extreme differences are excluded
• Current Plan G experience and pricing reflects both benefit differences and plan G positive selection (healthier individuals)
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60.00%
65.00%
70.00%
75.00%
80.00%
85.00%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Loss Ratios by Plan (Most Recent 3 Years)
F G
*NAIC data excluding United Healthcare
Looking Ahead to 2020: Insights From An Actuarial Perspective
One likely scenario: • Plan G will become the most popular plan for
newly eligibles • Current level of positive selection will not be
sustained • Plan N (or another cost-sharing plan)will
become plan of choice for healthier newly eligibles
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Looking Ahead to 2020: Insights From An Actuarial Perspective
Plan G Pricing Example
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Plan F Plan G Difference G/F Ratio
Claim Cost 1,520 1,354 166 89%
Positive Selection 0% 0%
Loss Ratio 75% 75%
Att. Age Premium 2,027 1,805 221 89%
Looking Ahead to 2020: Insights From An Actuarial Perspective
Plan G Pricing Example
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Plan F Plan G Difference G/F Ratio
Claim Cost 1,520 1,354 166 89%
Positive Selection 0% 10%
Loss Ratio 75% 75%
Att. Age Premium 2,027 1,625 402 80%
Looking Ahead to 2020: Insights From An Actuarial Perspective
Plan G Pricing Example
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Plan F Plan G Difference G/F Ratio
Claim Cost 1,520 1,354 166 89%
Positive Selection 0% 5%
Loss Ratio 75% 75%
Att. Age Premium 2,027 1,715 312 85%
Looking Ahead to 2020: Insights From An Actuarial Perspective
• Plan G new business premium rate may need to go up 5-15% • Will vary by carrier due to current rate level and
mix of business • Does not include trend
• Need to consider impact on inforce block
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Looking Ahead to 2020: Insights From An Actuarial Perspective
How will total Annualized New Business Premium be affected?
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Not Much! • Those eligible for Medicare prior to 1/1/2020
will still be able to purchase Plans C and F • The impact on the 2020 Newly Eligible
Beneficiaries won’t be significant
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Potential impact on the newly eligible market
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Current Market
Policy Mix Avg Premium ANBP
Plan F 4,500 2,350 10,575,000
Plan G 3,500 1,880 6,580,000
Plan N 2,000 1,645 3,290,000
Sales: 10,000 20,445,000
2020 New Eligible Market
Policy Mix Avg Premium ANBP
Plan F 0 2,350 0
Plan G 7,500 2,115 15,862,500
Plan N 2,500 1,645 4,112,500
Sales: 10,000 19,975,000 -2%
Looking Ahead to 2020: Insights From An Actuarial Perspective
Future of Medicare Supplement
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Medicare Supplement Market Update
United States Births
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The chart is from National Vital Statistics Reports, Vol. 64, No. 12, December 23, 2015, page 3
Medicare Supplement Market Update
Turning Age 65 by Year
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Source: census.gov – 2000 and 2010 census information
Medicare Supplement Market Update
Mortality Improvements
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Source: SSA Mortality Rates for the period 1900-2007
40.00
45.00
50.00
55.00
60.00
65.00
70.00
75.00
80.00
1900 1920 1940 1960 1980 2000 2007
United States Life Expectancy
Life Expectancy
Looking Ahead to 2020: Insights From An Actuarial Perspective
Age 65+ Population
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Source: census.gov
2016 Issues & Trends in Medicare Supplement Insurance # medsupp2016
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Medicare Enrollment Past and Future
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Source: 2015 Medicare Trustees Report
2016 Issues & Trends in Medicare Supplement Insurance # medsupp2016
0
20,000
40,000
60,000
80,000
100,000
120,000
Medicare Enrollment (1000s)
Looking Ahead to 2020: Insights From An Actuarial Perspective
Based on these underlying demographics, and no major changes to Medicare Supplement regulations, CSG projects….
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Past & Projected Medicare Supplement Enrollment
30 Sources: NAIC Med Supp study with projection from CSG Actuarial
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-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Medicare Supplement Enrollment (1000s)
Looking Ahead to 2020: Insights From An Actuarial Perspective
Past & Projected Medicare Supplement & Medicare Advantage Enrollment
31 Sources: NAIC Med Supp study and cms.gov with projection by CSG Actuarial
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5,000
10,000
15,000
20,000
25,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Medicare Supplement Enrollment (1000s) Medicare Advantage Enrollment (1000s)
Looking Ahead to 2020: Insights From An Actuarial Perspective
Past & Projected Medicare Supplement Annualized New Premiums
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-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Medicare Supplement Annualized New Premium (1000s)
Looking Ahead to 2020: Insights From An Actuarial Perspective
Projected 2015 Medicare Supplement Annualized New Premiums by Source
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Past & Projected Medicare Supplement Earned Premiums
34 Sources: NAIC Med Supp study with projection by CSG Actuarial
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-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
Medicare Supplement Earned Premium (1000s)
Looking Ahead to 2020: Insights From An Actuarial Perspective
What about future Medicare Supplement rate increases?
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Total Medicare Supplement Loss Ratios
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76.0%
76.5%
77.0%
77.5%
78.0%
78.5%
79.0%
79.5%
80.0%
80.5%
81.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Sources: NAIC Med Supp study
Looking Ahead to 2020: Insights From An Actuarial Perspective
• Technology
• Being used in the entire product life cycle
• Consumer Education
• Lead Generation
• Applications
• Underwriting
• Claims Processing
• Retention
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Looking Ahead to 2020: Insights From An Actuarial Perspective
Medicare Supplement Household Discounts
• More than 50 different companies using HHDs
• Discount percentages have increased, norm has increased from 5% to 7%, some above 10%
• 26 companies now using looser “cohabitation” definition in at least some of the states
• State insurance departments are starting to pay closer attention to these discounts
• Expect this trend to continue to expand in future
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Looking Ahead to 2020: Insights From An Actuarial Perspective
Positive signs in the Medicare Supplement market are attracting continued “new” activity
• New rates (rate decreases / adding household discounts, etc)
• New companies in pipeline
• New paper
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• For more information:
• csgactuarial.com
• 6th Annual Medicare Supplement Market Projection paper coming this summer
• and much more ……..
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Questions?
Andrew Ryba FSA, MAAA
Consulting Actuary
402-502-7747 [email protected]
Jared Strock FSA, MAAA
Consulting Actuary
402-502-7747
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2016 Issues & Trends in Medicare Supplement Insurance # medsupp2016