In China, the Million Medical product, which is generally
defined as a high-limit and high-deductible reimbursement product, has become
the most popular medical product since its launch in August 2016. Million
Medical products have removed a lot of restrictions from the previous medical
reimbursement products. For instance, medical reimbursement is no longer
restricted to the listed items in the social health insurance catalogue, and the
annual limit is much higher than before. Instead, Million Medical products
reimburse all reasonable medical expenses, with a high limit, while keeping the
premium affordable with a higher deductible.
While the Million Medical product has grown in popularity, with more and more insurers beginning to offer this option, its underwriting margin has been narrowing. This trend will likely continue into the future. More effort is needed to better manage the product and make it a more sustainable medical reimbursement product in China. Milliman’s Jiang Guanjun and Qiuwen Peng offer more perspective in this article.
Brexit and its eventual impact on the British economy remain nearly as uncertain today as on the day of the referendum. In this blog series, we consider the effect of Brexit (in its various guises) on business drivers for insurers within the UK private medical insurance (PMI) industry.
In this first post, we consider some of the key factors that affect demand for PMI policies and how they impact the average risk cost per life for an insurer.
Impact from outwards migration
A significant number of reports show that a growing number of corporations are moving their headquarters abroad or rearranging assets to move substantial amounts out of the UK market. These companies range from Dyson and Sony to investment banks such as JP Morgan and Goldman Sachs. If large numbers of jobs and staff are relocated out of the UK, particularly from within the financial sector, PMI insurers may see the size of group policies reducing after Brexit, or potentially a total loss of some contracts if whole firms or subsidiaries are relocated. We can expect the majority of migrating employees will hold mid- to high-level positions, and as such would qualify for employee benefits such as group PMI cover.
Historically, when an overall corporate portfolio has been downsized, we have seen a spike in claims from employees who are aware that they may lose their cover imminently and seek to take advantage of accessing private care while it is still available.
As the British government spends more of its
budget on Brexit at a time of increasing public demand for National Health
Service (NHS) services, individuals may become frustrated with the increasing waiting
times and consider purchasing PMI to meet their healthcare needs.
The government is also currently reviewing the insurance premium tax (IPT) rate. This follows from insurers urging a review of the fairness of the tax, and the potential barriers it creates to accessing healthcare. Lower taxes could help make PMI more affordable and appealing to the public and we may reach a point where the government perceives that making PMI more attractive will remove some pressures from the NHS, leading to a growth in the PMI market. This has been a perennial hope of the PMI industry for 20 years, however, so don’t hold your breath.
Impact due to economic uncertainty
Given the supplementary nature of PMI, it does
not classify as a ‘necessity’ product for the majority, and, in the absence of
changes in government policy, economic cycles can impact demand for the product
If there is a recession, individual customers may find themselves reconsidering a PMI policy renewal and companies may be less inclined to keep the benefit at the expense of other more pressing costs, particularly if they have incurred heavy Brexit-related direct costs, such as exchange rate impacts, tariffs, or just additional internal compliance costs. Following the 2008 global financial crisis, the UK healthcare market for PMI cover reduced by 4.3%, as measured by change in the number of PMI-covered lives. The graph below highlights how, during the height of the global financial crisis (2007-2009), PMI market size and gross domestic product (GDP) growth rate exhibited nearly identical decreases in growth. In the years following the crisis, PMI market size has shown a slower growth rate than GDP.
In the individual market, lapses are more likely if policyholders are in good health and do not foresee use of their policies anytime soon. Those using their cover, or generally in poorer health, are less likely to lapse their policies. Therefore, insurers may experience an acceleration of the selective lapsing many have already been experiencing over the last few years, leading to an increase in medical inflation and overall reduction in total market size. Those who have measures in place to combat selective lapsing will tend to fare better than those who have less attractive offerings for healthier customers. These measures can include reward programmes with wellness benefits such as gym discounts and mobile health apps.
Corporate markets may also experience
increased utilisation, in a fashion similar to migrating employees, from
policyholders wishing to use their cover before it ceases.
The overall impact of all factors affecting
the demand for PMI services on the total market size is difficult to ascertain,
and the direction and magnitude of impact for each factor will certainly
Insurers may experience higher claims from policyholders
about to lose corporate cover, as well as the risk of overall reduction to the
market size due to smaller corporate books.
There is a possible silver lining if demand
increases as a result of tighter government budgets and more delayed access to
the NHS, coupled with possible reductions in IPT. However, the risks from
general market uncertainty are greater. Risks of uncertainty can leave people
less committed to their PMI cover, and companies with a higher risk of
In our next blog we look at key factors impacting
medical inflation, including the availability of medical practitioners and
nurses, as well as speculating on what might happen to the cost of drugs.
PMI market size in terms of PMI covered lives from Laing & Buisson, Health Cover, fourteenth edition. GDP growth rate from the World Bank Group resources, http://www.worldbank.org
Employers are becoming increasingly involved in the movement toward value-based reimbursement, particularly employers that self-fund the healthcare needs of their employees. Two common strategies currently used by providers to reach the employer market segment are:
• Aligning with a health plan to develop an accountable care product, which steers employees to participating providers in the accountable care network.
• Direct contracting with employers. Typically, an employer offers its employees a narrow or tiered network plan alongside a broader network product offering.
A full economic impact analysis is necessary for a provider to make an informed decision about entering a direct contract with an employer. A provider should consider the three main drivers of the contract:
• Potential revenue changes
• Opportunity to reduce cost
• Range of potential outcomes
An increasing number of employers are seeking accountable care-style solutions. This type of arrangement is still evolving, but will likely continue to proliferate, because it aligns the financial incentives of employers and providers. In this article, Milliman’s Simon Moody and Kim Hiemenz answer some key questions for providers as they consider employer-led accountable care.
As the public discourse continues to focus on the high cost of healthcare, an increasing number of payers and healthcare organizations are turning to ride-sharing services such as Uber or Lyft for nonemergency medical transportation (NEMT). In fact, Lyft reports that nearly one-third of its passengers use the service to get to or from a medical-related appointment. The healthcare industry has also seen the emergence of a number of third-party companies, such as Circulation and Roundtrip. These companies aim to manage the NEMT experience between patients and providers like social workers or clinics.
As these options become more mainstream, numerous healthcare organizations—including health insurance plans, hospitals, provider groups, clinics, rehab centers, senior care facilities, home care centers, and physical therapy centers—have started offering ride-sharing services by partnering with these companies, with the goal of providing a meaningful benefit to beneficiaries and improving healthcare outcomes. The infographic below, based on this Milliman article, outlines a number of considerations for healthcare organizations thinking of adding ride-sharing as part of a benefit plan.
Many issuers faced financial challenges in the individual market in the first few years of the Patient Protection and Affordable Care Act (ACA). The continually changing landscape made it difficult to keep up even after significant rate increases, and issuers repeatedly reported medical loss ratios (MLRs) well above sustainable targets.
As experience emerges for plan year 2018, the tides are changing. A number of issuers filed rate decreases across the marketplace for plan year 2019 and new market entrants are appearing once again, a sign of a more stable market with potential for profitability. MLRs are projected to approach, and potentially to drop below, the 80% threshold for the individual market, on average. As the average MLR continues to decrease, the portion of ACA issuers below the MLR threshold continues to increase.
As MLRs decrease, individual ACA issuers need to start thinking about something that has been mostly irrelevant for them until now—MLR rebates. Although MLR rebate requirements have applied in several markets since 2011, the individual ACA market is unique in that high MLRs have prevented rebates from entering the equation for the majority of issuers since the ACA’s inception.
MLR rebates were introduced in the ACA market with the goals of stabilizing the market and providing customer protection by returning money back to policyholders when an issuer’s MLR reflects high profitability, administrative inefficiencies, or low claim levels not otherwise reflected in premium.
As the public discourse continues to focus on the high cost of healthcare, an increasing number of payers and healthcare organizations are turning to ride-sharing services such as Uber or Lyft for nonemergency medical transportation.
With the introduction of services like Uber Health and Lyft Concierge, ride-sharing companies have officially expanded into the area of nonemergency medical transportation (NEMT). The healthcare industry has also seen the emergence of a number of third-party companies, such as Circulation and Roundtrip. These companies aim to manage the NEMT experience between patients and providers like social workers or clinics.
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