As insurers face fierce competition and pricing pressure, many are looking to innovative ways of doing business to drive revenue and growth or risk falling behind. Today’s technologically savvy consumers demand personalized offerings, responsive customer service, a wider range of options, and the ability to research and engage with carriers online.
For insurers, innovation is a key factor to increasing
market share and improving customer retention. Innovative products and
solutions enable companies to service client needs in new ways that competitors
have not considered or been able to provide.
Successful insurance innovations are thoroughly tested, feasible to administer, and compliant with laws and regulations. To innovate rapidly and effectively, companies need a road map that helps them continuously evolve processes and offerings to better serve clients and ultimately gain competitive advantage. Milliman consultant Ashlee Borcan provides more perspective in her article “Innovate to win: Insurance industry roadmap to success.”
Gene therapies, CAR T-cell therapies, and other innovative therapies are beginning to enter the market and are making waves with their record-setting prices. These therapies are curing, extending life, or providing increased quality of life to patients who—in many cases—had exhausted all other options. From the patient’s perspective, it is clear that the drug is worth it. But from the payer’s perspective, there are risks and benefits to be taken into consideration.
There are only a handful of gene and cell therapies approved for use in the United States today, and they are currently indicated for rare diseases. However, a large number of these therapies are currently in development worldwide. The aggregate effect of these therapies entering the market impacts both small and large insurers, and will increase the need for viable solutions to mitigate their risks and uncertainties.
Some gene and cell therapies differ from most traditional treatments in that they have limited administration periods, but have the potential for ongoing clinical benefits. There are four key uncertainties related to these therapies from the payer’s perspective: initial performance, durability and efficacy, cost offsets, and price. Understanding these risks will influence how a payer perceives the value of the therapy.
Because gene and cell therapies are a fairly new paradigm of treatment, there is considerable uncertainty around their efficacy and long-term durability. From the financial perspective, the drug itself is likely to have a substantial price tag, but there are additional financial risks.
In this paper, Milliman’s Anne Jackson and Jessica Naber discuss in more detail the sources of uncertainty regarding gene and cell therapies. They also discuss what will affect appropriate solutions for mitigating these risks.
An employer’s decision regarding whether to insure its short-term disability (STD) plan depends on several factors, including the employer’s size, risk appetite, historical STD experience, desired plan design, cost considerations, and available resources. Milliman’s Tasha Khan provides more perspective in her article “Short-term disability: To be or not to be (self-funded)?”
Here is an excerpt:
STD plans typically pay a portion of lost income when an employee is disabled due to illness or injury. Usually STD covers the period of time between when sick leave/paid time off runs out and when long-term disability (LTD) benefits begin. Compared with life insurance or LTD insurance, STD is a high-frequency and low-severity benefit (i.e., there are many claims with relatively low benefit amounts, similar to most medical claims). This means that even smaller employers can quickly develop meaningful historical experience. Insurers generally consider STD claims experience to be fully credible at roughly 500 to 1,000 lives (varying by insurer and by benefit waiting period). This means that for a group with 500 or more employees, the insurance company will estimate the group’s future claims based primarily on that group’s past paid claims. This does not mean that future claims will be exactly equal to past claims; it means only that past claims are stable enough to be a useful predictor of future claims.
Due in part to this stability in claims experience over time, larger employers tend to be more likely to self-fund their STD benefits than smaller employers. For an employer with, say, 50 lives, STD claim payments could swing dramatically from year to year, making budgeting for these costs difficult. An employer with 5,000 lives, on the other hand, may expect claim payments to remain fairly stable from year to year.
Another consideration is the employer’s tolerance for risk. Even with a large and fully credible group, STD claims experience will change from year to year due to random volatility (as well as for other reasons, such as a particularly nasty flu season). With an insured plan, on the other hand, the premium to be paid is determined in advance, so the employer knows exactly what it will pay for STD coverage. The annual volatility risk is borne by the insurance company (although longer-term experience trends will ultimately be reflected in the premium rates charged by the insurer).
When choosing to self-fund, an employer should monitor its STD plan experience over time. Periodic experience studies help the employer understand how its plan is performing and make adjustments as needed. Such modifications may include revising the rates charged to employees or groups for the coverage, adjusting the liability calculations for claims that have been incurred but not yet fully paid, and reevaluating plan design and claim management practices. These types of studies may require the help of actuarial and financial resources. With an insured plan, the insurance company handles these functions….
Global relative value units (GlobalRVUs) allow measurement of unit price and efficiency across physician groups for accountable care organizations (ACOs), shared saving and total cost of care programs, and bundled payment and other capitated arrangements. GlobalRVUs are essentially an extension of Medicare’s resource-based relative value scale (RBRVS) so that every medical service has an RVU. The RVUs are based on Healthcare Common Procedure Coding System (HCPCS), diagnosis-related group (DRG), or National Drug Code (NDC) Pharmacy classifications and are not affected by the contractual allowed amount.
Milliman’s Will Fox offers perspective in this MedInsight blog post where he provides an example for the comparison of delivery systems.
For a more detailed account of Milliman GlobalRVUs download the white paper here.
A new article in Health Leaders looks at the recent Milliman study commissioned by the National Business Group on Health, which identifies cities where hospitals are able to provide value on both Medicare and commercial business. In this article, Elliot Fisher of the Dartmouth Atlas weighs in:
Elliott S. Fisher, MD, director of Population Health and Policy for the Dartmouth Institute, said research focuses on reducing unnecessary hospital stays.
“This important study from NBGH confirms that communities that are able to care for Medicare patients with fewer hospitalizations are able to do the same for their under-65 population. But to slow the growth of spending, we also need to address the problem of prices.”
A new audiocast with Bruce Pyenson weighs this question, considering the value of wellness and disease management programs. An accompanying article also considers the question. Here is an excerpt:
Health management programs are not without their critics. Research by the Centers for Medicare & Medicaid Services shows some health management programs don’t live up to their promises of reducing health care expenses.
“As an actuary, I run the formulas of disease management companies on large databases and understand why they can show an ROI increase in their formulas and what the flaws are within those formulas,” said Bruce Pyenson, a principal and consulting actuary with Milliman, a New York-based actuarial and consulting firm.
Pyenson pointed out that Americans are living longer, disability rates are lower and events associated with some chronic conditions are at an all-time low. “Americans are healthier than ever, despite the obesity epidemic,” Pyenson contended.