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Insurers adjust to paradigm shift

April 8th, 2014

By Javier Sanabria

Health insurers can no longer use health underwriting to determine who they will insure. This change has caused a shift in how insurers approach the individual market. The Wall Street Journal (subscription required) quotes Milliman’s Tom Snook providing some perspective on the paradigm shift:

Health plans need to know the health status of those signing up for coverage so they can project whether the costs are likely to outrun the premiums coming in. That information will be critical in figuring out prices for next year, among other things. But, under the law’s new rules, enrollees don’t have to disclose pre-existing conditions to buy insurance.

…”In the past, the whole game was about risk selection,” said Tom Snook, an actuary with Milliman Inc. who works with insurers offering plans on public exchanges. “Now the game’s all about risk management.”

The new paradigm introduces a new question for insurers: What is the risk mix of the insurance pool? While the health exchange marketplace has reportedly seen an uptick in enrollment by younger individuals recently, age alone is not a clear indicator of an insurer’s potential risk.

Here’s what Snook told The Wall Street Journal in a recent article concerning younger enrollees:

Insurance officials also caution that age doesn’t always indicate health status–younger people may have serious, expensive conditions, while some older people rarely need medical services. Age is a “pretty good predictor,” said Tom Snook, an actuary with Milliman Inc. who works with insurers offering plans on public exchanges, but “it’s not even close to a perfect measure.”

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