Tag Archives: actuary

America’s relationship status with healthcare: It’s complicated

Financing and regulating healthcare in the United States is complicated. Fortunately, actuaries understand the intricacies and can provide unique perspectives to address the system’s complex challenges. In the article “Healthcare: It’s complicated,” Milliman’s Hans Leida and Lindsy Kotecki discuss issues related to reform which actuaries have helped navigate.

Here is an excerpt:

Besides predictability problems caused by regulatory or political factors, two challenges facing health actuaries during these transitional years have been (1) the lag between when market changes are implemented and when data on policies subject to the new rules becomes available, and (2) the difficulty in predicting consumer behaviour in reaction to major changes in market rules such as guaranteed issue and community rating. How many of the uninsured would sign up? How price-sensitive would members be when they renewed their coverage each year? How will changes in other sources of coverage (such as Medicaid expansion) impact the individual market? How will potential actions by competitors affect an insurer’s risk?

Despite the daunting nature of these challenges, actuaries have, out of necessity, found ways to try to address them. For example, faced with the data lag problem, they explored ways to augment traditional claim and enrollment data with new data sources such as marketing databases or pharmacy history data available for purchase. Such sources can be used to develop estimates of the health status of new populations not previously covered by an insurer. Many actuaries also developed agent-based stochastic simulation models that attempted to model the behaviour of consumers, insurers and other stakeholders in these new markets. Such models continue to be used to evaluate the potential outcomes of future changes to the healthcare system, and will probably be essential should efforts to repeal and replace the ACA prove successful.

Results from the Actuarial Challenge: The Individual Health Market

The Robert Wood Johnson Foundation (RWJF) and the actuarial and consulting firm Milliman announce the results of the Actuarial Challenge: The Individual Health Market, a collaborative event for health actuaries to test different approaches to increase stability in the individual health insurance market.

The Actuarial Challenge elicited innovative ideas and proposals from informed actuaries to move the individual health insurance market further toward the goal of universal access to quality health services and providers in a financially secure and stable way. Actuaries considered the costs the solution places upon individuals, employers, healthcare providers, taxpayers, and other health sector stakeholders.

The results of the Challenge are now available. Fourteen proposals were submitted by teams of actuaries. A panel of actuarial judges chose five for which simulation modeling was conducted by Milliman. The results for those five proposals indicate the possibility of a significant drop in the number of uninsured people under four of the proposals and reductions in total out-of-pocket costs (premium and benefit cost-shares) from 6% to 45%.

“The release of the Challenge results is timely, given the current prominence of individual market reform as a policy issue,” said Katherine Hempstead, Senior Advisor at the RWJF. “Actuaries have a unique perspective and expertise, and there are aspects of these proposals that are highly relevant to current policy discussions.”

The analyses illustrate the impact of each proposal on health plan issuers, healthcare providers, employers, and on funds needed from government or other sources to make these reforms successful. Results are shown on both a total dollar basis and a per member basis.

The American Academy of Actuaries and the Society of Actuaries, the two largest professional actuarial organizations in the nation, helped promote the Challenge among their members.

Rebecca Owen, Health Research Actuary with the Society of Actuaries, who also served as one of the judges for the Challenge, stated, “The Actuarial Challenge has been a great opportunity for actuaries to make their voices heard and ideas for reform considered as part of the important national discussion on improving and stabilizing the individual health market.”

Jim O’Connor, a principal with Milliman, cautioned, “In evaluating each proposal, it is important to not only consider how much premiums are reduced, but also how those reductions can be achieved and how other important stakeholders in our healthcare system are affected.”

Those interested in more information about the Actuarial Challenge, the results mentioned above, and the specific proposal papers submitted by each participating team should visit the Actuarial Challenge website or contact the Challenge here.

The proposals expressed in the submitted papers do not necessarily reflect the views of the Robert Wood Johnson Foundation, Milliman, the American Academy of Actuaries, the Society of Actuaries, or the employers of the Actuarial Challenge participants, and should not be viewed as an endorsement by any of these organizations.

Conversations with your actuary: Getting to the right number

Healthcare leaders understand their own organization’s insurance programs better than anyone else does. The challenge lies in effectively communicating a comprehensive description of the program to all parties, including the actuary, auditor, and broker. It is important for healthcare finance leaders to discuss with the actuary any changes to claims management, coverage or retention, financial reporting of losses, management goals, or other insurance or operational areas.

In this article, Richard Frese discusses the actuary’s role in providing and communicating independent estimates that can more accurately reflect the true exposure of an insurance program.

This article was published on hfma.org, the Healthcare Financial Management Association’s website.