Seminar on Reinsurance Philadelphia, PA June 3, 2003 Casualty Actuarial Society A SHPS Company.
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Transcript of Seminar on Reinsurance Philadelphia, PA June 3, 2003 Casualty Actuarial Society A SHPS Company.
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A SHPS Company
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3
Today’s Agenda
1. Health Care Update
2. Medical Stop Loss Marketplace
3. Consumer Directed Health Plans
4. Predictive Modeling
5. Disease Management
6. SARS
7. Society of Actuaries Large Claim Study
8. Questions
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0
5
10
15
20
25
Year
Perc
ent o
f GD
P
National Health Expenditures as a Percentage of GDP
* Projection** 16 Year AverageSource: Bureau of Economic Analysis, Office of the Actuary
National Health Expenditures
National Defense Expenditures**
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-3.00%
0.00%
3.00%
6.00%
9.00%
12.00%
15.00%
18.00%
1987 1989 1991 1993 1995 1997 1999 2001 2003
% Change Health Cost % Profit Health Plans
Change in Average Total Health Benefit Cost1987 – (2003 estimated)
Source: William M. Mercer Employee Benefit Survey NOTE: 1987-1998 are based on cost for active and retired combined; 1998-2002 is based on active employee cost only.
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0% 10% 20% 30% 40% 50% 60% 70% 80%
Stock Opt.
Disability
LTC Ins.
Life Ins.
Pension
401 K
Health Ins.
Most Important Employee Benefit
Source: Employee Benefit Research Institute, WorldatWork
% Employees Listing as Most Important
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25th%ile 50th%ile 75th%ile 90th%ile
Pension 3.5% 4.5% 5.4% 6.5%
Cash Accumulation 2.5% 4.7% 5.7% 9.3%
Post-Retiree Medical 0.8% 1.5% 2.2% 2.8
All Retirement Benefits 5.0% 7.8% 10.2% 12.7%
Medical 7.3% 8.6% 9.8% 11.0%
Dental 0.7% 0.8% 1.0% 1.1%
Life/AD&D 0.3% 0.5% 0.7% 0.9%
STD/LTD 0.6% 0.9% 1.1% 1.3%
Vacation 5.6% 6.5% 7.1% 8.3%
Holiday/Sick Time 4.8% 4.8% 5.2% 5.8%
TOTAL 25.7% 29.8% 33.6% 36.9%
Benefit Costs as a Percentage of Base Pay
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Stop Loss Industry Results
2002- Profits Exceeded Target
Why?
Reinsurers got tough. MGUs lost their reinsurance Surviving MGUs had to write to set
RTMs
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Stop Loss Industry Results
2002- Profits Exceeded Target 2003- Profits at Target 2004- Profits Below Target
(Losses?)
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Stop Loss Industry Results
Why the negative trend?
Leveraged trend increase- 27%
vs
Sold trend increase- 21%
RTMs decrease
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Stop Loss Industry Results
Why the negative trend? Increased start-up activity An underwriter at an MGU has said
“Fear has been replaced by greed.”
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Stop Loss Industry Providers
Currently- 115 (approx)2002- asked to evaluate 1 start-up2003 (to date)- asked to evaluate 12
start-ups
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Features:
• HRA
• High Deductible PPO Weak Discounts Weak Med Mgt
• High Administrative Fees
• Theory – Consumers seeking low cost providers will offset weak discounts and high administration fees
• Introduces “consumer cost impact”
Pre
ven
tive
Car
e 10
0%
Personal CareAccount
(Health Reimb.Account)
$1,000
Health InsurancePPO (80% IN,
60% OON)$1,500 deductible
MemberResponsibility
$500 Consumer
Directed
Consumer Directed Health Plans
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Pre
ven
tive
Car
e 10
0%
Personal CareAccount
(Health Reimb.Account)
$1,000
Health InsurancePPO (80% IN,
60% OON)$1,500 deductible
MemberResponsibility
$500 Consumer
Directed
Internet
Provider Information Pricing Quality
Account Information Benefits Balances
General Health and Wellness Info
Health Risk Assessment
Voluntary Medical Management (“Health Coach”)
+
Consumer Directed Health Plans
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Potential Benefits May reduce cost - May reduce unnecessary care - May reduce routine visits later in the year when HRA funds disappear
Encourages “consumerism” and the cost-effective use of services by exposing employees to cost impact
Encourages provider competition on both price and quality
Provides employees with useful information - Health risk assessments - Provider price and quality information - Nurse coaches and health interventions
Consumer Directed Health Plans
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Potential Drawbacks
Entire premise might be flawed – not reduce cost - Not enough history for credible actuarial predictions - Very low enrollment history so far
Vendors / programs are not well established
Cost might increase - Adverse selection (only healthy people enroll) - Relatively weak discounts from “rented” networks - Employees waiving coverage historically might return to receive HRA funding - People may forego preventive care - Higher administrative fees
Consumer Directed Health Plans
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Predictive Modeling
Predictive Modeling – the use of artificial intelligence or “expert systems” to predict future chronic and catastrophic claimants.
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ClaimsData
ClinicalRecords
ExpertOpinion
LiteratureReview
• Identify claimants with high risk of severe medical conditions
• Of those claimants, identify those for whom an appropriate intervention exists
• Design/determine interventions to be used
Predictive Modeling
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0% 10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% of Members
% o
f M
ed
ica
l Co
st
Bracket Study
62% mbrs, 3% care
87% mbrs, 41% care
99% mbrs, 69% care
Predictive Modeling
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62%
25%
12%
1%3%
38%
27%31%
0%
10%
20%
30%
40%
50%
60%
70%
Healthy Acute Chronic Catastrophic
% Members % Cost
Claims PMPM $9.27 $179.76 $361.28 $4,790.63
Source: Aetna Healthcare
Predictive Modeling
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Disease Management
Definition- the planned and systematic approach to caring for a population of patients with anticipatable needs and problems, typically defined by a chronic illness.
Source: Pacific Business Group on Health
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Disease Management
Common disease management conditionsDiabetesAsthmaCoronary Artery DiseaseCongestive Heart FailureDepressionPregnancy
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SARS
What are the actuarial implications?90% have mild symptoms10% have severe symptoms
15 day intensive care length of stay50% of these will die (5% mortality
rate )Could spread easily through workplace
and family
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Society Of Actuaries Large Claim Study
New study covering 1996 to 1998 expected to be released in fall 2003
10 large insurers have contributedFollow-up to study covering 1991 to
1992, released in 1997