The Patient Protection and Affordable Care Act (ACA) brought extensive changes to the health insurance market. Accolades as well as concerns have been raised by stakeholders as the marketplace evolves under the new structure. While policy-makers and politicians analyze the strengths and weaknesses of the individual health insurance marketplace, the Robert Wood Johnson Foundation is working with Milliman, among the world’s largest providers of actuarial services, to identify potential improvements to increase its stability.
In partnership with the American Academy of Actuaries and the Society of Actuaries (SOA), the Actuarial Challenge urges health actuaries to propose new ideas and different approaches to increase stability in the individual health insurance market, further moving the market toward universal access to quality, affordable health services. The potential Challenge participants include, but are not necessarily limited to, actuaries employed by:
• Health insurance companies and health maintenance organizations (HMOs)
• Healthcare providers (health systems, hospitals, physician groups)
• Pharmaceutical companies and pharmacy benefit managers (PBMs)
• Actuarial professional organizations
• Health actuarial consultants
• Colleges and universities with actuarial science programs
But before proposals are developed, teams compete, and finalists are
selected for simulations, potential Challenge participants are invited to join the #ActuarialChallenge Twitter chat on Friday, October 21, 1 p.m. ET.
• Joel Ario, Managing Director, Manatt Health
• Kathy Hempstead (@KHemp64), Senior Advisor, Robert Wood Johnson Foundation
• Stacey Muller (@StaceyMullerFSA), Principal and Consulting Actuary, Milliman
• Jim O’Connor (@JimOConnorFSA), Principal and Consulting Actuary, Milliman
Despite millions of Americans gaining health insurance coverage in the last several years, healthcare costs have continued to increase, provider choice has become increasingly restricted, and, in some cases, the quality of provider networks have come into question. You can help explore new approaches that can increase stability in the health insurance marketplace during the Twitter chat on October 21. Follow the Twitter hashtag #ActuarialChallenge.
A new Milliman analysis shows that the percentage of transitional policy members in a state’s health exchange market appears to correlate with higher medical loss ratios. In the analysis, Milliman consultants Erik Huth and Jason Karcher quantify the effect that transitional policies had on issuers’ 2014 individual market performances and how it may result in 2017 rate increases for transitional states.
Here’s an excerpt:
The table in Figure 3 shows that issuers in transitional states had higher 2014 loss ratios but appear to not have taken large enough 2015 and 2016 rate increases to achieve profitable 2016 loss ratios (assuming 2014 to 2016 significant cost savings are not realized in other ways). Although issuers’ 2017 rate increases will reflect their 2015 experience and updated projections, there is potential for transitional states to see higher rate increases in 2017.
The graph in Figure 4 shows the 2014 ACA loss ratio and the average 2014 to 2016 statewide QHP base rate change for each state. The gray line represents an illustrative 2014 to 2016 rate increase needed to target an 85% 2016 loss ratio given the 2014 loss ratio and assuming a 5% annual claim trend. For example, a state with an 85% 2014 loss ratio would require a 10.25% 2014 to 2016 rate increase to target an 85% 2016 loss ratio (i.e., 5% annual rate increases to cover the 5% annual claim trend to maintain the 85% loss ratio). States well underneath the line indicate a possible need for higher 2017 increases than states closer to the line. Keep in mind that projected 2016 loss ratios are merely illustrative. There are many factors that will affect a state’s overall 2016 loss ratio and required 2016 and 2017 rate increases, such as, but not limited to, changes in experience and statewide morbidity levels, wear-off of pent-up demand, provider contracting, claim trends, population migration and characteristics, and product and issuer mix. These values also represent a statewide composite, while specific issuers could have materially different results than the average.
Risk adjustment may influence insurers’ profitability in the health insurance marketplace, and the volatility of profit results may be highly linked to insurers’ plan size. In this analysis, Milliman consultants examine how risk adjustment might influence profitability patterns and whether those patterns change with the size of a health plan. The authors also address main concepts behind two sets of proposals that have emerged to improve the risk adjustment program, with the aim of reducing financial volatility.
What patterns in plan design offerings have been seen in the marketplace during the first three years after the implementation of the Patient Protection and Affordable Care Act (ACA)? Individual market member projections exhibited a preference for lower-cost plans with health maintenance organization (HMO) plans and plans at the lower end of the allowable actuarial value (AV) range being the most popular. In contrast, small group membership projections shifted toward higher AV ranges within metallic tiers, which illustrates different preferences in the small group market.
By looking at trends in plan offerings, even at a macro level, insurers may be able to gain insight from emerging patterns in the market to help frame marketplace strategies in future years. Milliman’s Abigail Caldwell and Jordan Paulus offer more perspective in this paper.
Health insurers may increase their risk scores on the commercial health exchange by investing resources to ensure that their diagnosis coding efforts are accurate and complete. In this article, Milliman’s Corey Berger illustrates how the return on investment (ROI) associated with more comprehensive coding efforts is mostly independent of the actions taken by other carriers.