How did Milliman’s podcast get its name? In this episode of Critical Point, Hans Leida and Doug Norris—both health actuaries and math PhDs—discuss how they decided on “Critical Point” for the name of the podcast. Hans and Doug talk about various aspects of mathematics, including topology, optimization theory, and chaos—and why the term “critical point” is so relevant in the actuarial world today.
To listen to this episode of Critical Point, click here.
Netflix’s new series Altered Carbon is set more than 300 years in the future. In between the science fiction action and special effects, the series also touches on some of the thorny ethical and legal issues related to life extension technologies.
Today, a burgeoning longevity science industry—backed by significant venture capital and other funding—is actively working on solving the problem of senescence, whether by preventing aging or reversing its effects. Some of these researchers are making rather startling claims in the media about how near we may be to achieving radical increases in life expectancy and increased quality of life during our later years. These claims make for good headlines, but it can be difficult to gauge how realistic they are. Justifications for these statements often tend to rely on faith in anticipated (often unspecified) technological advancements or on optimistically extending a graph of historical changes in life expectancy to reach “actuarial escape velocity”— the point at which life expectancy is increasing by more than one year per year.
Changes in life expectancy are complex and generally occur because of multiple underlying factors. To date, most of the observed increases in life expectancy stem from decreases in mortality at various demographic points below the maximum observed age rather than extensions of maximum lifetime itself. Under that paradigm, there are diminishing returns to increased life expectancy.
Life extension technologies would require a reengineering of many financial and insurance products on a grand scale. In this paper, Milliman’s Hans Leida discusses what actuaries and others are to make of these extraordinary claims and visions of the future.
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.
We generally consider living a long life an important goal, and it certainly does beat the alternative. But one side effect of getting older is that, as we age, we typically acquire additional acute and chronic medical conditions, and the prevalence of many common chronic medical conditions increases significantly. Age/gender rating is an area in which actuarial considerations are often in direct tension with social or public policy considerations: there is a natural tension between the policy goals of making coverage more affordable for older people (with higher average costs) and the goal of encouraging younger people (with lower average costs) to purchase health insurance coverage.
In an article first published in the magazine The Actuary, Milliman consultants Doug Norris, Hans Leida, Erica Rode, and Travis (T.J.) Gray explore how age and gender affect costs and premiums in commercial healthcare.
Any upcoming changes to the Patient Protection and Affordable Care Act (ACA) will not likely be fully implemented until 2019 or 2020. The stability of the individual and small group health insurance markets during this period of transition will depend on the regulatory changes that are made in the interim and the transparency of those changes.
A new paper by Milliman’s Lindsy Kotecki and Hans Leida presents five key considerations for promoting market stability for the 2018 and 2019 benefit years under the assumption that they are transitional years with many current ACA rules in effect.
1. Don’t collapse the stool.
2. Extend risk mitigation programs.
3. Extending the transitional policy.
4. Consider interim rule changes carefully.
5. Transparency is key.
As 2016 approaches, healthcare insurers should already be thinking about the 2017 premium rates they will need to file for their Patient Protection and Affordable Care Act (ACA) business. In the article “Ten potential drivers of ACA premium rates in 2017,” Milliman’s Aaron Wright, Hans Leida, and Lindsy Kotecki discuss several factors that may influence ACA plan rates moving forward. The factors are listed below.
2. Changes to essential health benefits and the Centers for Medicare and Medicaid Services (CMS) Actuarial Value Calculator.
3. Additional data.
4. Continued migrations.
5. Carrier shuffling.
6. Ongoing political uncertainty: Court cases and elections.
7. Transitional reinsurance.
8. Risk corridors.
9. Risk adjustment.
10. Changes in fees and taxes.