Tag Archives: actuary

Using generalised linear modelling to price India’s health products

Traditionally, health actuaries in the Indian insurance market used to consider generalised linear modelling (GLM) to be a “black box” for pricing of health products. However, this perception has changed significantly over time and health actuaries are now willing to employ this technique for pricing of health products.

What are the current and potential uses of GLM in the Indian health market? How is a GLM exercise performed? What are the advantages and disadvantages associated with GLM?

Milliman’s Joanne Buckle, Ankush Aggarwal, and Pravin Harodia conducted a survey to gather some perspective. Their paper “Use of generalised linear modelling in Indian insurance market for pricing health products” attempts to answer the above questions in conjunction with the results of the survey.

Connecting the dots between social determinants and healthcare utilization

Growing recognition that social determinants are significant drivers of health and healthcare utilization patterns has increased the desire to better understand and identify these issues as well as to develop actionable steps at both the population and member levels. There has been a growing focus on developing the ability to identify the presence of social vulnerabilities among population health entities, Medicaid state agencies, risk-taking provider organizations such as accountable care organizations, and any entity with a vested interest in the reduction of healthcare spending. It is not unusual for health actuaries to get involved in this discussion. Milliman’s Ksenia Whittal provides some perspective in this article.

This article was published in the December 2018/January 2019 issue of The Actuary.

Depletion of SSDI benefits presents new actuarial considerations for long-term disability insurers

The disability trust fund is now expected to be depleted in 2032 instead of 2028. This is primarily due to the assumption of lower disability applications and other underlying assumption changes since last year.

According to projections, assuming no legislative changes, only 83% of disability income benefits would be payable after the trust fund is depleted. The projection also shows that the trust fund balance begins to fall in 2019. That means that starting next year, the total cost of the disability income program exceeds the total income on the program, including interest.

Cutting benefits could have substantial impacts to group insurers that would likely need to increase claim reserves for future benefit payments on their policies. Lower Social Security Disability Insurance (SSDI) benefits would mean lower benefit offsets and thus higher long-term disability benefit payments.

It is important that actuaries working with group disability insurance pay attention to changes in the SSDI program which could affect their financial results. Milliman consultant Jennifer Fleck provides some perspective in her article “Social Security disability actuarial status, 2018.”

Medicare Advantage and Part D actuarial compliance considerations

Operating Medicare Part C and Part D plans has become increasingly complicated. The Patient Protection and Affordable Care Act (ACA) and a growing number of rules and regulations added each year have heightened the complexity and associated compliance burden for the health insurance companies that sell and administer these plans.

Actuaries are instrumental in developing the bids that plan sponsors submit annually to the Centers for Medicare and Medicaid Services (CMS). Those bids include a plan benefit package and Part C and Part D bid pricing tools. The bid submission also includes a set of supporting documentation describing how the financial projections were developed and demonstrating compliance with the many bidding rules.

During desk review, CMS independently confirms that the bids pass compliance tests. It is critical that plan sponsors understand the tests and confirm compliance before bids are submitted.

In this paper, Chris Girod and Shyam Kolli discuss a relatively narrow area of rules that is sometimes loosely referred to as actuarial compliance. This information can be useful for actuaries and other professionals who are tasked with understanding and following the many rules and regulations as they relate to Parts C and D.

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 that 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.