Category Archives: Issuers

Five financial statements considerations for health actuaries to think about

Health actuaries have seen unprecedented challenges this year because of the ongoing COVID-19 pandemic. It has disrupted all facets of the U.S. healthcare system. How the pandemic affects an insurer’s financial statement will vary based on the distribution between lines of business, areas of service, and support channels.

As chief financial officers and actuaries attempt to determine the pandemic’s effect on year-end financial statements, the following five issues will require additional attention:

  1. Premium deficiency reserves
  2. Provider financial solvency
  3. Incurred but not reported (IBNR) claim estimates
  4. ACA risk adjustment
  5. Appropriate documentation

Milliman’s Catherine Murphy-Barron, Doug Norris, and Daniel Perlman take a closer look at these five issues in their article “Year-end health actuarial work: Five things to consider in light of COVID-19.”

How will the pandemic impact Medicare Advantage revenue and risk scores in 2021?

While there is a great deal of focus on resource availability and handling a potential influx of severe inpatient cases resulting from COVID-19 infections, the majority of the United States saw a dramatic reduction in healthcare services around March and April 2020 and measurable reductions continue with great variation across the nation. 

As with many prospective risk adjustment models, Medicare Advantage (MA) and Part D (PD) risk scores are based on medical claims, more specifically diagnoses from face-to-face visits from the year prior to the year in which the risk score drives revenue. For 2021 MA payments, 2020 diagnoses are the basis of the final risk scores. To the extent that beneficiaries delay or avoid care, there may be fewer face-to-face encounters with providers where diagnoses can be recorded and applied toward 2021 risk scores.  

While the Centers for Medicare and Medicaid Services has announced additional flexibilities in including telehealth-based diagnoses in risk score calculations, a significant reduction in overall services is likely to result in a material reduction in both MA and PD risk scores. In this article, Milliman’s Rob PipichKarin Cross, and Deana Bell discuss the results of an analysis they performed to support 2021 MA and PD bids. They present nine scenarios intended to illustrate a range of potential outcomes on 2021 MA and PD risk scores. 

Survey reveals pandemic’s effect on individual disability income insurance

Milliman conducted a survey of individual disability income (IDI) insurance companies pertaining to the potential impact of COVID-19 on IDI business. The purpose was to capture how COVID-19 has affected IDI carriers’ new sales and claims to date and what these companies expect will happen in the future.  

Although the ultimate impact of the pandemic on IDI insurance in the United States will not be known for a few years, it’s clear that it will be material, and in ways that go far beyond disability claims specific to COVID-19. 

To read the survey by Milliman’s Robert Beal and Dan Skwire, click here

How will COVID-19 affect medical loss ratios?

The medical loss ratio (MLR) measures a health plan’s spending on medical claims and allowable quality investments as a portion of total premium revenue net of taxes and allowable deductions. As a result of the COVID-19 pandemic, many healthcare services have been deferred and/or eliminated in 2020, leading to a reduction in 2020 claims relative to prior years. The claims reduction for the second quarter of 2020 was more pronounced due to lockdowns in most states.

Health plans have critical decisions to make in the upcoming months with limited data available and wide uncertainty on how the pandemic will transition toward the end of 2020 and into 2021.

In this paper, Milliman’s Andrew Bochner, Jennifer Carioto, and Luis Maldonado explore how COVID-19 can affect a health plan’s MLR requirements. They also provide specific considerations for the commercial, Medicare Advantage, and Medicaid markets in 2020 and beyond.

How has COVID-19 affected home and community-based services in the U.S.?

Millions of Americans with chronic or disabling conditions rely on home and community-based services (HCBS) to meet daily self-care and independent living needs. These services enable participants to remain safely in their homes and communities rather than moving to a nursing home or other institutional setting. State Medicaid programs are the largest payer for HCBS across the United States. The COVID-19 pandemic has presented numerous challenges and had a significant impact on the provision of HCBS.

In this paper, Milliman’s Jill Herbold and Nick Johnson discuss some challenges faced, actions taken, and the impact that the COVID-19 pandemic may have on HCBS for years to come.

International private medical insurance strategies and the impact of COVID-19

The international private medical insurance (IPMI) market has recorded significant growth in recent years. Several trends have led to a USD 16 billion industry, headed by a number of established insurance players and an increasing number of new entrants looking to grab market share in this highly specialised insurance market.

As most players in this sector have come to realise, winning in this highly competitive segment requires very specific skill sets and capabilities in order to ensure competitive offerings, pricing, medical servicing and supporting infrastructure. The COVID-19 pandemic adds additional levels of uncertainty to IPMI market participants, given the high dependency of the sector on international mobility and travel as well as related effects on health claims costs and expenditures.

In this paper, Milliman’s Joanne Buckle and Peter Gregor examine the strategies and business models adopted by leading players in IPMI as well as the key success factors and capabilities required to win and to sustain profitable growth in a post-COVID-19 world.