The connections between health and wealth run deep

There is a strong connection between health and wealth. The relationship between the two is not limited to one country or ethnic group. Research shows that people classified as having “high socioeconomic status” are more likely to be healthier than those classified as having “low socioeconomic status.” People who are committed to improving their wealth, both in the short and long term, are also likely to care about their short-term and long-term physical health.

In addition, several studies have found that the overall health of a country’s population is positively tied to its level of economic development, while overall health falls in relation to the decline in the level of economic inequality.

In this paper, Milliman’s Joseph Boschert, Janet Jennings, and Robert Schmidt discuss the various connections between health and wealth and the repercussions of ignoring those connections.

Self-funding can give employers more control over every aspect of their medical insurance programs

To gain control over the ever-increasing cost of employee health insurance, more and more employers are discontinuing their fully insured coverage and switching to self-funded models. Self-insurance is an unbundled approach separating all required functions—medical provider networks, carrier or third-party administrator (TPA), pharmacy benefit manager (PBM), stop-loss insurer, and consultants—subject to competitive bidding. Moving to a self-insured arrangement can result in significant cost reductions—5% to 10% are typical. The key benefits employers derive from transitioning to a self-funded program are:

  • Enhanced cost benefit transparency into every aspect of the program
  • Expense reduction
  • Flexibility around plan design
  • Access to claims data
  • Better control of claims payments and investment income on reserves

This post will provide an overview of the actuarial components of the employer-sponsored program: projecting claims and expenses, and evaluating an employer’s budget and risk tolerance.

Expense reduction

A significant portion of the annual premium increase under a fully insured arrangement is due to required taxes and mandated fees. These fees are typically required and only add to an employer’s burden.

  • In 2018, the insurer fee of the Patient Protection and Affordable Care Act (ACA) was approximately 3.9% of premiums. We anticipate this percentage to be even higher in 2020.
  • Another fee required as part of a fully insured arrangement is the premium tax of 2%.
  • An insurer’s profit margins also add an invisible layer of fees to an employer’s healthcare expenses.

Combining the insurer’s profit with the required fees above (ACA insurer fee and premium tax), the employer’s fully insured healthcare program can easily raise the cost by 5% to 10%. Thus, exploring other market alternatives under a self-funded arrangement can potentially result in baseline savings of at least 5% to 10%.

Flexibility around plan design

Insurers offer a variety of set plan designs that may or may not meet employers’ needs. With a self-funded plan, employers can design every aspect of the program. There are no state-mandated benefits, and it is up to each employer to decide which coverages will work best for its employee population. You can select a broad or narrow network, design a program with multiple service tiers, implement a high-deductible plan, and offer wellness and disease management programs.

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Medicaid Fiscal Accountability Regulation considerations for state agencies

The Centers for Medicare and Medicaid Services’ (CMS) proposed Medicaid Fiscal Accountability Regulation (MFAR) rule aims to increase transparency of Medicaid supplemental payments and address concerns over their financing. The proposed rule defines supplemental payments as “extra compensation to certain providers” that are often made to providers on a lump sum basis apart from claim-based payments.  If the proposed rule is implemented, many states may need to revise their Medicaid supplemental payment programs to achieve compliance. This paper by Milliman’s Ben Mori, Tyler Schulze, and Jason Clarkson summarizes the key proposed changes under MFAR for state Medicaid agencies to consider.

Financial analysis of Taft-Hartley plans

The second annual Milliman Multiemployer Health and Welfare Study shows that the average multiemployer health and welfare plan could pay for approximately one year and one month of benefits and expenses with its net assets. The study shows that total incomes exceeded total expenses by nearly 10.6%, an increase of 1.4 percentage point over the prior year.

To learn more about the study, click here.

Milliman announces Thomas D. Snook Global Health Practice Director

Milliman today announced the election of Thomas D. Snook as the firm’s Global Health Practice Director. Snook succeeds Lorraine Mayne, who is retiring after six years in the role. During Mayne’s six-year tenure, Milliman’s global health practice revenue grew by more than 60%.

“Milliman has many luminary talents, and Tom has long stood out as a leader,” says Steve White, Milliman Chief Executive Officer. “Healthcare markets are juggling constant innovation, rising costs, and more data than ever, making the work that Milliman does vitally important. Tom is the ideal person to lead us into the next decade.”  

Milliman’s health discipline employs more health actuaries that any firm in the world. In addition to actuaries, Milliman healthcare experts include technologists, clinicians, pharmacists, and public health professionals. The firm’s health professionals operate all over the world.

Snook first joined Milliman in 1988 and has served as a principal in the Phoenix office of Milliman since 1996. His clients have included managed care plans operating in commercial, ACA, and Medicaid markets, as well as provider groups taking insurance risk under value-based payment arrangements.  He graduated from Rice University in 1983 and became a Fellow of the Society of Actuaries in 1988. Tom is a frequent speaker at Society of Actuaries and other professional and industry meetings. He has been an active author and speaker on topics relating to healthcare reform.

“Milliman is the leader in healthcare financial expertise and I am excited and honored to serve in my new role,” said Snook. “When it comes to healthcare, Milliman has an unmatched combination of experience, expertise, data, and intellectual property, putting us in a rare position to help our clients address the cost and efficiency problems facing healthcare systems in the US and around the world.”

What will China’s new health insurance industry look like?

With implementation measures for the National Health and Wellness Conference and the Healthy China 2030 initiative under discussion, 21 ministries and commissions jointly released the “Action Plan for Promoting the High Quality Development of the Healthcare Industry 2019-2022.” The plan promotes, in the development of health insurance products, the use of special needs medical services, innovative medical technologies and drugs and high-end medical devices, as well as health intervention procedures such as disease risk assessments, disease prevention and physical fitness activities. All of these new health service elements should be closely integrated into the healthcare industry.

In this paper, Milliman’s Jiang Guanjun and Qinqin Huang, former editor of Insurance Society of China, discuss the future of health insurance under this new action plan. Specifically, they provide:

  1. An analysis of current issues in health insurance development
  2. Information on developing new health insurance
  3. Information on opportunities and resource support under the new health insurance