Tag Archives: Healthcare

Five ways the Amazon/Berkshire Hathaway/JPMorgan Chase deal could change healthcare in the U.S.


This week, Amazon, Berkshire Hathaway, and JPMorgan Chase announced plans to join forces in order to provide their U.S. employees with healthcare solutions that are “simplified, high-quality and transparent.” Large employers are growing increasingly frustrated with the challenge of providing their employees with affordable, high quality healthcare, and the announcement has many speculating that the partnership could disrupt the U.S. market.

Amazon, Berkshire Hathaway, and Chase bring a fascinating blend of perspectives to this area. And while we don’t know exactly how they will transform healthcare, we do have ideas of what could be possible (imagine a world where insurance claims might be a thing of the past). In this article, Milliman experts explore the ways in which healthcare could change as a result of this venture.

Top 15 global articles and reports for 2017

Milliman’s most viewed articles worldwide in 2017 covered topics related to healthcare in the United States, the rise of InsurTech, and the challenges of IFRS 17. (For summaries and links to all of the articles, click here.)

Here is the list of the top global articles and reports for the year:

15. MACRA: Key Considerations for health plans, By Colleen Norris and Mary van der Heijde

14. Multiemployer Pension Funding Study, By Kevin Campe

13. The American Health Care Act, By Jason Karcher

12. MACRA and Medicare Advantage plans: Synergies and potential opportunities, By Christopher Kunkel, Drew Osborne, Lynn Dong, Michael Polakowski, Noah Champagne, and Charlie Mills

11. Effective employee communication: The benefits of best practices, By Jessica Gonchar, Heidi tenBroek, and Sharon Stocker

10. Building blocks: Block grants, per capita caps, and Medicaid reform, By Justin Birrell, Jennifer Gerstorff, Nicholas Johnson, and Brad Armstrong

9. Overview and practical considerations of the new insurance contract standard: IFRS 17, By Gillian Tucker and Andrew Kay

8. InsurTech: Innovation in the P&C insurance space, By Thomas Ryan

7. The employer stop-loss insurance marketplace since the Affordable Care Act, By Mehb Khoja

6. 2017 Public Pension Funding Study, By Rebecca Sielman

5. Summary of individual market enrollment and Affordable Care Act subsidies, By Paul Houchens, Jason Clarkson, and Zachary Fohl

4. Impact of the transition from RAPS to EDS on Medicare Advantage risk scores, By Deana Bell, David Koenig, and Charlie Mills

3. Corporate Pension Funding Study, By Zorast Wadia, Alan Perry, and Charles Clark

2. Pension Funding Index, By Zorast Wadia and Charles Clark

1. Milliman Medical Index, By Christopher Girod, Susan Hart, and Scott Weltz

Maximize digital health funding with an actuary

There has been tremendous venture capital investment in the digital health market in the last few years. However, investors are concerned about the uncertainty surrounding return on investment (ROI) in these digital health start-ups. Actuarial expertise can help venture capitalists gauge the risk or benefit of a potential investment. Milliman’s Darin Muse, Jose Carlo, and Jason Cai provide more perspective in their article “‘A’ is for actuary.”

Here is an excerpt:

Actuaries play a number of key roles within this coalition. Our expertise in healthcare data analytics is currently being leveraged by digital health start-ups in developing business plans, products, and data analytics. Through our experience navigating the regulatory maelstroms of Medicare, Medicaid, and the Patient Protection and Affordable Care Act (ACA), actuaries have also become accustomed to reviewing and interpreting regulations as the landscape rapidly changes. Our familiarity working with state and federal regulatory agencies has matured from necessity, and we use this knowledge to help guide new companies in this space.

However, in order to maximize the funding dollars that are pouring into this industry, actuaries also need to be sitting on the other side of the (funding) table. Lisa Suennen, managing partner at Venture Valkyrie LLC, estimates that nearly 60% of companies that receive funding eventually go bust, yielding zero return on investment. She is certainly not referring just to digital health start-ups, but let us assume for the sake of argument that the $4.2 billion in 2014 digital health funding was funded uniformly across all companies. It does not take an actuary to determine that this results in roughly $2.5 billion that will soon cease its contribution to innovation due to start-up failure. It does, however, take an actuary to help determine how to shrink that number in the years to come.

Enter comparative analysis through the standardization of measurement and evaluation. The actuarial discipline has invested considerable resources in developing best practices to objectively evaluate healthcare intervention programs using vetted, standard measures. So how important are these studies to maximizing digital health funding? Assume you are the managing partner at a VC firm, and you have two digital health start-ups that have caught your eye for a potential seven-figure investment. Each of them has made it through a fair amount of due diligence already, and now you are comparing their purported returns on investments (ROIs). How do you know that the 5:1 ROI is truly better than the 3:1 ROI if the method of measurement is not the same—if it is not standardized in some way? The answer is that you don’t unless you have the time and expertise to dig into both numbers and the assumptions backing them.

S&P: Healthcare expenditures for commercial plans up 3.2% in the year ending February 2014

Data released today for the S&P Healthcare Claims Indices shows that healthcare costs rose 3.5% in the 12 months ended February 2014 compared to the 4.9% rise for the 12 months ended February 2013. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.1% and prescription drugs rose 3.5% over the same period. All but prescription drugs rose at a slower pace than a year earlier.

Among the key components of medical costs, inpatient fee-for-service rose 2.6% compared to 4.3% in the earlier period while outpatient fee-for-service costs rose 4.9% compared to 6.3% in the earlier period. Prescription drugs expenditures were up 3.5% versus 1.5% one year ago. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended February 2014.

“With the exception of prescription drugs, healthcare expenditures are growing more slowly than a year ago,” says David Blitzer, Managing Director and Chairman of the Index Committee and S&P Dow Jones Indices. “The overall trends in healthcare costs are lower than that seen a year or two ago, but remain one to two percentage points above the overall rate of inflation. The greater growth in prescription drug costs reflects a combination of higher prices for both generic and branded pharmaceuticals and shifting market shares between generic and branded.

“Among the principal lines of business, expenditures for large and small groups and administrative services only (ASO) plans show stable growth rates. Individual plans, where a participant is not part of a group plan based on employment, are the smallest segment as well as the most volatile. While the growth in costs moved down through 2013, the most recent data suggests a jump in expenditures for this category. Because this is the segment that the will be most affected by Obamacare going forward, it is likely to be closely watched as the new healthcare law is implemented in coming years.

“The rise in total healthcare costs at 3.2% over the 12 months ended with February 2014 is slightly greater than the increase in current dollar GDP from the first quarter of 2013 to the first quarter of 2014 of 2.9%. Moreover, the 2014 first quarter GDP was weakened by unusually severe winter weather and a small decline in consumer spending on health services. With healthcare cost trends moderating, the share of GDP devoted to healthcare may be stabilizing as well.”

Milliman organizing actuarial and underwriting seminar

Milliman is conducting an Actuarial and Underwriting Training Seminar in San Diego, Calif., from June 9 to 12. The seminar will be held at the Andaz San Diego.

Each day will feature two distinguished speakers (one speaker on Thursday) with considerable experience in the following topics:

• Claim liabilities and trend analysis
• Underwriting principles
• Basic rating principles
• Healthcare reform—a wide-angle view
• Large group rating and underwriting
• Zooming in on healthcare reform
• Financial forecasting, reporting, and monitoring

Some faculty members will be available throughout the week to interact with attendees and answer questions. For more information about the seminar, including hotel accommodations, visit the registration site.

S&P: Healthcare expenditures for commercial plans up 3.5% in the 12 months ended November 2013

Data released today for the S&P Healthcare Claims Indices show healthcare costs rose 3.5% in the 12 months ended November 2013 compared to the 4.9% rise for the 12 months ended November 2012. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.7% and prescription drugs rose 2.6% over the same period. All rose at a slower pace than a year earlier.

Among the key components of medical costs, inpatient fee-for-service rose 3.5% compared to 4.5% in the earlier period while outpatient fee-for-service costs rose 5.2% compared to 8.0% in the earlier period. Prescription drug expenditures were up 2.6% versus 2.9% one year ago. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended November 2013.

Because of standard industry lags in invoicing claims and resolving disputed charges, it is not possible for the indices to be calculated without a lag. Trends in healthcare expenditures are calculated as the average index level in the 12 months ended November 2013 compared to the average index level in the 12 months ended November 2012 and stated as a percentage, in accordance with the usual practice with healthcare cost analyses.

“The growth in healthcare spending continues to slow,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The key question in the slowdown is whether we are seeing a shift in healthcare cost trends that is sustainable or whether we are merely observing the slower pace of overall inflation and weak economic growth. One way to gain some insight is to look at unit cost measures for healthcare derived from the S&P Healthcare Claims Indices.”

“The data show that prescription drug trends tend to lag shifts in inflation while trends in inpatient unit costs don’t show any obvious relation to inflation shifts,” continues Blitzer. “The pattern in prescriptions may reflect consumer preferences towards generic drugs. While the general rate of inflation may affect trends in inpatient medical care, it is probably not the dominant factor. The current low inflation rate is a factor in slowing growth in healthcare expenditures, but low inflation alone will not control the growth in healthcare costs.”