Category Archives: Issuers

Obtaining and employing data for insurance innovation

Insurers that innovate typically have a significant advantage over those whose products blend into the background. Data is a key component when attempting to identify opportunities and quantify the impact of innovative ideas. Whether pricing new benefits or trying to understand the effectiveness of new services and tools, data is necessary to assess value.

In her article “Harnessing the power of data,” Milliman consultant Ashlee Borcan discusses where insurers can get public and private sources of data. She also provides perspective on what happens if that data is imperfect or not what carriers are looking for.

The article is part of Milliman’s Innovate to Win series.

How can medical management teams help enhance their health plan’s COVID-19 response?

The COVID-19 pandemic has the potential to significantly disrupt and challenge the healthcare delivery system, including health payers. It also presents opportunities for payers to leverage internal resources and deliver value for their provider partners and customers.

Traditionally, the U.S. healthcare system is bifurcated into two major types of organizations: those that deliver healthcare services and those that finance or fund the delivery of healthcare services. There are a few areas where there has been some convergence of these key functions. In particular, the introduction of risk contracts has moved provider organizations closer to the financing end of things and the growth of medical management has moved some payers closer to care delivery.

In this brief, Milliman’s Penny Edlund and Maureen Tressel Lewis highlight some areas where a health plan’s medical management team may contribute to the COVID-19 response.

Too high or too low? Health insurers need adequate capital levels

Capital and surplus requirements for a health insurer can change over time based on many internal and external factors. Regulators generally focus on the solvency of health insurers to ensure they meet obligations to consumers. However, a health insurer with capital levels that are significantly above the regulatory minimum may also get a lot of attention from regulators and stakeholders. A health plan’s target capital requirements are generally significantly higher than the regulatory minimums.

In this paper, Milliman’s David Hayes, Rachel Killian, and Shyam Kolli discuss considerations for health plans when determining capital requirements.

Supplemental health benefits considerations for small insurers

Supplemental health products have experienced consistent market growth over the years, most noticeably since the implementation of the Patient Protection and Affordable Care Act (ACA). This growth has been especially strong for hospital indemnity, critical illness, and accident products. There has been a significant increase in the number of insurance companies selling these products. Small companies in this market need to understand the unique challenges these products present in order to compete effectively.

Understanding the market landscape and the assumptions that are required in order to develop premium rates for supplemental health products is important. Three areas that create rate challenges for insurers in supplemental health markets are (1) states with high minimum loss ratio requirements, (2) ongoing monitoring requirements, and (3) the need for rate flexibility. Insurers also need to be aware of the volatile regulatory environment and need to consider issues regarding product flexibility and distribution.

This article by Milliman’s Jennifer Howard and Stacy Koron goes into more detail on the challenges that supplemental products can present.

A review of the ACA’s risk adjustment validation program

The U.S. Department of Health and Human Services established risk adjustment data validation (RADV) as a mechanism to protect risk adjustment integrity by assessing certain data elements supporting risk transfers. Issuers in the individual and small group insurance markets seemed to be optimistic heading into the 2017 audit following the prior years’ RADV pilots. While most achieved a 0% error rate, many still experienced unfavorable 2018 risk adjustment transfers. In this paper, Milliman’s Cameron Gleed, Jason Karcher, and Jason Petroske discuss what happened.

The political landscape and UK private medical insurance (PMI)

Before we consider the impact of potential changes in regulation for the PMI industry, we review the manifestos of six parties for their views on the UK healthcare system and consider the implications for the UK PMI industry. The commentary around healthcare is fairly high-level in all manifestos. We present the sound bites for context and interest, along with our thoughts on what this may mean for the UK PMI industry, in the table below.

Political Party Manifesto ClaimsPotential Implications for UK PMI
Labour Party1
‘Labour will protect our public services, like the NHS, from being opened up to further privatisation.’– A Labour Party government could mean increased taxes and fewer opportunities for the National Health Service (NHS) to collaborate with the private healthcare sector.

– Though not explicitly written in the Labour manifesto, Jeremy Corbyn has made a number of claims on increasing funding for the NHS through various methods, including raising the insurance premium tax. This could directly increase premiums and reduce demand for PMI products.

– It seems unlikely that pilot programmes to use private sector hospital capacity for NHS patients will be expanded, meaning a lost source of revenue for private hospitals. This will further lower private hospital occupancy rates and may lead to increased tariff rates for insurers.

Conservatives/Tory Party2
‘We will increase NHS spending by a minimum of £8 billion in real terms over the next five years.’– The perception of increased spending on the NHS will likely result in reduced demand for PMI products, even if the increased spending is wholly insufficient to create more capacity in the context of an expanding and ageing population. The King’s Fund has suggested that a real-term funding increase of approximately £30 billion a year is needed over the next five years to maintain current services3, much more than the £8 billion promised in the Conservatives/Tory manifesto, as well as the £20 billion a year promised by Theresa May in the budget speech last year4.
‘We will ensure that the NHS and social care system have the nurses, midwives, doctors, carers and other health professionals that it needs…Last year we announced an increase in the number of students in medical training of 1,500 a year; we will continue this investment, doing something the NHS has never done before, and train the doctors our hospitals and surgeries need.’– The BBC reports that 1,500 additional students a year is potentially not enough to meet the growing demand, and replace all those who may be quitting or retiring from the NHS5.

– In 2018 it was reported that an additional 3,000 places on midwifery training courses will be created over the next four years, but there were concerns on whether this would be enough to guarantee that the midwife workforce would grow6. With numbers leaving the NHS reaching 8,900 over a period of five years, the increases that are proposed may still fall short of that required by the NHS to meet growing demands.

‘We will ensure that the NHS has the buildings and technology it needs to deliver care properly and efficiently.’– If more NHS buildings and facilities are created, the use of private medical facilities by the NHS will reduce. This will take a number of years to create though and, given the lack of ring-fenced funding for this development, seems unlikely to be achieved due to other competing priorities.
‘For a country to remain stable, an economy to be strong, a society to stay healthy, we need a partnership between the individual and the wider nation, between private sector and public service, and the strong leadership only government can provide.’– The Tory party is more open towards people using the private sector, though it does not speak specifically about the healthcare system. It is less likely to suggest the use of policies that would directly harm the PMI industry. It is not clear exactly what role it expects the private sector to play in healthcare from the vague manifesto statement.
Brexit Party
No manifesto, but a quote from Nigel Farage: ‘We need to move to an insurance-based system of healthcare.’– A host of possibilities exist depending on the type of insurance system proposed and accepted by parliament. Options include a social insurance scheme, mandatory private insurance scheme or a hybrid model.

– Even in a fully insurance-based system, the government may decide to retain some responsibility for providing healthcare, in which case private healthcare facilities may compete alongside public facilities for insurance reimbursement. This will increase utilisation and limit cost inflation among private healthcare facilities.

– Any insurance plan (social or private) would have to have a defined set of benefits which may be substantially more limited than today. This may encourage the development of complementary and/or supplementary insurance products. This could vastly transform and expand the PMI market. However, our experience from other social insurance schemes is that the benefit package is constantly under pressure due to budget constraints and resetting the benefit package each year is a highly political process.

– Private insurers could redefine their roles as third-party administrators for social insurance schemes, even if they were not taking on any insurance risk directly.

Liberal Democrats7
The Liberal Democrat manifesto is solely focused on remaining within the EU and includes a host of reasons for this, including noting the contributions the EU makes towards healthcare and pharmacy within the UK. Some areas highlighted in the manifesto:

‘The EU also makes it easier for people such as doctors, nurses, vets and architects to work abroad by ensuring that their qualifications are recognised across Europe.’

‘The EU funds research into new treatments for diseases and gives the UK access to cutting-edge treatments at the earliest opportunity.’

– Leaving the EU could cause the prices of certain treatment options and drugs that are accessed from the EU market to increase if there are additional levies or taxes added.

– Under a Liberal Democrat rule, and if Brexit is cancelled, the PMI industry should largely remain similar to the status quo, based on the current pledges within the Liberal/Democrats manifesto. This does not however mean they would not introduce policies that could impact the PMI industry in the future.

Independent Group for Change (previously Change UK8)
Similar to Liberal Democrats, the Independent Group for Change Party is focused on the benefits of remaining within the EU: ‘Brexit will be a disaster for our hospitals, science and research, social care and public health. It will be bad for our health workforce – if they leave the UK, patients and those who are dependent on care will bear the brunt. It will be bad for getting the medicines we need, which have a short shelf-life and which we risk losing if we leave the EU without a deal.’– Like the Liberal Democrats the preference is to remain within the EU, indicating the PMI industry would likely remain similar to the status quo.
Green Party9
‘Roll back privatisation of the NHS to ensure that all health and dental services are always publicly provided and funded, and free at the point of access, via the introduction of an NHS Reinstatement Act. Scrap NHS Sustainability and Transformation Plans.’

And ‘Close the NHS spending gap and provide an immediate cash injection, to ensure everyone can access a GP, hospitals can run properly, and staff are fairly paid.’

– The use of private healthcare providers for NHS-funded admissions would be expected to reduce or potentially end. It is not clear how the increased public provision will be funded, particularly in some areas where there is heavy private provision of NHS-funded services, such as psychiatry.

– Expanding NHS coverage for all health and dental services may dramatically reduce the requirements for some health insurance. The general perception of increased NHS services would deter people from buying PMI and cash plans or encourage existing customers to lapse their policies.

– Under a properly funded NHS many services that are currently paid for by the user, such as dental and optical, would be provided for free. This would likely impact the cash plan market, reducing demand for these products.

– It is not at all clear which funding gap is being referred to, or the cost of this pledge, but it’s likely to be substantial.

‘Major investment in social care for the elderly and all those who need it.’– This suggestion is likely to reduce the current pressure on NHS services, but it does not have obvious implications for PMI.

We expected more detailed and explicit views towards healthcare in the manifestos and ultimately it is difficult to determine the likely steps each party would take if they have the power to action their pledges. For many parties Brexit remains the main focus, with little thought or attention to healthcare within their manifestos.

Over the coming weeks we will keep a close eye on the campaigns of Boris Johnson and Jeremy Hunt for updates and changes in statements relating to healthcare and the PMI industry, following up with our findings in our forthcoming blogs.

Our next blog looks at the impact of potential changes in regulation following Brexit for the PMI industry. Please see our previous blogs on the impact of changes in the market size and medical inflation on the PMI industry.

1See the Labour Party Manifesto at
2See the Conservatives/Tory Party Manifesto at
3The King’s Fund (6 June 2017). Call to strengthen NHS finances: Letter to the editor. Retrieved 25 June 2019 from
4Triggle, N. (17 June 2018). NHS funding: Theresa May unveils £20bn boost. BBC News. Retrieved 25 June 2019 from
5 BBC News (25 March 2018). NHS: Over 3,000 more midwifery training places offered. Retrieved 25 June 2019 from
6 Ibid.
7 See the Liberal Democratic Manifesto at .
8See the Change UK Manifesto at
7See the Green Party Manifesto at