When we think of predictive analytics in insurance, perhaps it calls to mind weather risks, earthquake exposures or other types of disasters, but newly-reported research indicates that a form of predictive analytics will be of great use to health insurers, who should be able to geographically localize the spread of diseases, and in turn, better assess health risks.

This annual report from PwC on medical cost trends was published in June 2010 and factored the impact of many variables including the US economy, which continues to emerge from a deep recession, as well as healthcare reform, which has phased-in milestones that begin in 2011. Increases in medical costs are expected to be slightly less than last year but still are projected to significantly outpace the rate of inflation raising questions about sustainability and if health reform can truly create greater efficiencies and cut costs.

Topics include:

• What Does the Future Hold for Underwriting?
• USA Health Reform: What USA Actuaries Can Learn from Experiences in Other Countries
• Enterprise Risk Management for a Health Insurer: Like Life, Like Casualty, or Something Completely Different? A Cross-Pollination of Thought
• Avoiding Statistical Pitfalls in Actuarial Work
• Actuarially Sound Rates vs State Budget Reality: What's an Actuary to do?
• The Economics of Obesity
• Mortality Issues for Group Life Insurance
• Disability Experience Studies

...and more.

Witnesses tell House committee that cross-state sales would reduce the number of uninsured.

The annual Milliman Medical Index (MMI) measures the total cost of healthcare for a typical family of four covered by a preferred provider plan (PPO). The 2011 MMI cost is $19,393, an increase of $1,319, or 7.3% over 2010. Even though the rate of increase is slowing from prior years, it has taken fewer than nine years for such costs to more than double. In 2002, the cost of healthcare for the typical family of four was $9,235.

As some in the insurance industry vent their frustration over new policies, a MetLife poll notes reform is also the reason more employers are turning to benefits brokers, agents and consultants for help. In fact, according to the poll, roughly half of small and large employers say they'll be relying on benefits professionals now more than ever.

The United States spends $650 billion more on health care than expected, even when adjusting for the economy's relative wealth. MGI examines the underlying trends and key drivers of these higher costs.

Karine Peres presents the current trends of disability worldwide from an epidemiological perspective with a focus on dementia.

According to a new report issued today by Fitch Ratings, the U.S. healthcare sector experienced an eventful but stable 2010 as the Patient Protection and Affordable Care Act (ACA) was enacted and implementation of certain provisions of the bill began. Macroeconomic conditions remain weak and top-line pressures persist; however, financial flexibility stemming from strong liquidity profiles and aided by management cost-cutting efforts and low cost inflation supported ratings in 2010. Overall, Fitch expects similar trends in credit profiles in 2011, with credit metrics trending near 2010 levels.

Requiring individual and small group plans to offer “actuarially equivalent” benefits packages may not be enough to prevent adverse selection in the U.S. health insurance market in 2014, Karl Ideman says.

Ideman, president of Pool Administrators Inc., Glastonbury, Conn., wrote to the Exchanges Subgroup at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., about PPACA toolkit subgroup efforts to prevent adverse selection once a new health insurance exchange system comes to life.

If the federal government decides to get rid of the Affordable Care Act individual health insurance ownership mandate, maybe it should rethink the objectives for its health reform efforts, state insurance regulators say.

The National Association of Insurance Commissioners (NAIC), Kansas City, Mo., has issued a statement about the matter in response to a U.S. Government Accountability Office report on possible alternatives to using an individual health coverage ownership mandate as a method for controlling adverse selection in the universal health coverage access system that is supposed to be created by the Patient Protection and Affordable Care Act (PPACA).

States can consider merging their individual and small group health insurance markets or imposing new rules to limit distinctions between plans offered inside and outside of coming insurance exchanges, according to guidelines drafted by a National Association of Insurance Commissioners panel.

In order to create a financially self-supporting healthcare exchange, a state needs to make a number of critical decisions, such as whether to make the exchange mandatory or voluntary and whether to merge the individual and small group markets. Each state will need to address its own priorities based on its own specific situation and healthcare environment. This article discusses the top 10 actuarial concerns surrounding the formation of a healthcare exchange.

Of the many complicated reforms in the Patient Protection and Affordable Care Act (PPACA), four in particular present near-term strategic issues. Two of them require immediate attention in 2011:

• Meeting the new medical loss ratio (MLR) requirements
• Changes in premium rate regulation

Two others do not come into full effect until 2014, but insurers need to be planning for them now:

• Guaranteed issue and related rating limitations
• State health insurance exchanges

America’s history of heavy smoking is showing up in the nation’s health report, with gains in life expectancy trailing most high-income countries that spend less on care, a report commissioned by the U.S. government found.

The cost of treating heart disease and stroke in the United States is expected to triple by 2030, jumping from $273 billion to $818 billion annually, according to a report published Monday by the American Heart Association. High blood pressure will be largely responsible for the rise, the authors predict.

According to a new analysis by the Department of Health and Human Services, 50 to 129 million (19 to 50 percent of) non-elderly Americans have some type of pre-existing health condition. Up to one in five non-elderly Americans with a pre-existing condition – 25 million individuals – is uninsured. Under the Affordable Care Act, starting in 2014, these Americans cannot be denied coverage, be charged significantly higher premiums, be subjected to an extended waiting period, or have their benefits curtailed by insurance companies.

While public health care benefits continue to be scaled back in many markets, employer-sponsored health plans have grown exponentially. As the demand for these benefits has grown, so has the cost of providing them — our survey found that the cost has risen rapidly since 2006 in nearly all markets, and trends for 2011 are projected to be even higher than last year. The rise in medical costs is rapidly becoming one of the greatest financial challenges for multinational companies.

Health insurers fared poorly in annual ASCI customer satisfaction survey, rating only marginally better than airlines, newspapers and the government.

As the New Year dawns, a new set of PPACA provisions prepares to kick in. Whether you support reform or not, and whether the courts turn down all or parts of it or not, here’s what you may have to look forward to in the coming 12 months.

A Federal judge in Virginia has ruled that a central tenant of the Patient Protection and Affordable Care Act is unconstitutional. Judge Henry Hudson deemed that the Minimal Essential Care Coverage provision, which mandates that most Americans carry health insurance starting in 2014, oversteps “the constitutional boundaries” of the commerce clause. “The unchecked expansion of congressional power to the limits suggested by the Minimum Essential Coverage Provision would invite unbridled exercise of federal police powers,” Hudson’s ruling states. "At its core, this dispute is not simply about regulating the business of insurance - or crafting a scheme of universal health insurance coverage – it’s about an individual's right to choose to participate."

Managing the changes resulting from health care reform is seen as a very important or critical business issue by U.S. employers, yet many report they have not undertaken what they consider to be a full analysis of the financial impact of the law, according to a report recently released by Ernst & Young LLP.

The willingness of federal and state administrators to make adjustments to their plans in response to consumer need and program experience bodes well for future development of the exchanges. Given the enormous changes that are taking place in a relatively short period of time, such adjustments should be expected and will be integral in assuring that plans fill the spectrum of needs among people who may currently be uninsured.

Welcome improvements in many areas of America’s health status are offset by continuing declines in others, according to the 2010 America’s Heath Rankings®. The nation’s overall health improved one percentage point last year, but reductions in smoking, preventable hospitalizations and infectious disease were offset by continued increases in obesity, children in poverty, and lack of health insurance. The report also shows a 19 percent increase since the 2005 Edition in the percentage of adults who had been diagnosed with diabetes.

A recent study found medical expenses are a major contributing factor in bankruptcy filings among older Americans. The study, conducted by John Pottow of the University of Michigan Law School, revealed overall the elderly make up a relatively small percentage of those filing for bankruptcy; however, their numbers are growing at a startling rate.

The Patient Protection and Affordable Care Act (PPACA) mandates that states establish one or more health insurance exchanges by January 2014. Under this business paradigm, private health insurance carriers will compete on price and quality in order to attract this new pool of insured consumers. People who have previously been under- or uninsured may find exchanges an attractive option when purchasing health insurance. But claim experience, including cost and utilization patterns, of the under- and uninsured population are mostly unknown to private health insurers at this time. This paper examines the adequacy of current risk adjustment systems when applied to a wholly new type of enrollment—the "all-population risk pool"—and offers considerations and explores options for exchange designers.

Can offering morbidly obese patients bariatric surgery as a covered procedure reduce their future health costs?

The Patient Protection and Affordable Care Act requires health plans to report their medical loss ratios (MLRs) and meet minimum MLR requirements. Some of these changes may take a few years to materialize, but health plans in the group markets have an immediate challenge - setting their rates for 2011 - even as the specific regulatory requirements and technical definition of MLR remain unclear. Learn more about the MLR regulatory change and what health plans should be thinking about today as they move into the 2011 rate-setting process.

This issue looks at parity, bundled reimbursement, PPACA and more.

With the passing of the Patient Protection and Affordable Care Act, the environment for health insurers has drastically changed. Undoubtedly, the wheels of progress move slowly and we have only begun to understand the full impact that the reforms will have on our industry. What we do know is that these changes will have a significant and immediate impact on every organization conducting business in the health care arena.

In order to assess the current situation, brokers throughout Guy Carpenter & Company, LLC reached out to our business partners in all segments of the health care industry.

Among industrialized countries, Japan has the lowest per capita spending on healthcare and the highest life expectancy. What are the Japanese doing right?

A volatile new health care environment is emerging in the United States. These are times of trouble—and opportunity—for the payers’ CIOs.

The health reform bill and changing demographics are helping drive carriers' offerings and strategies.

Presentation from the SOA '10 Health Meeting, held on June 28–30, in Orlando, FL.

Diabetes is a major health cost driver, and people with the condition are at higher risk for developing severe complications. The authors' modeling indicates that a 50% improvement in type 2 diabetes management would have immediate positive results, and in 20 years would lead to a lower rate of diabetes-related complications and deaths as well as a reduction in associated medical costs.

The state healthcare exchanges that will be created as part of the Patient Protection and Affordable Care Act are intended to bring buyers and sellers together in a single marketplace for qualified healthcare insurance. While the idea of a single marketplace is relatively straightforward, there are numerous underlying complexities, including plan cost, affordability, access, group size, participant age, marketing and education, eligibility, plan qualification, and risk adjustment. States that plan to establish exchanges should be well aware of these issues and should determine the best course of action depending on their specific circumstances.

Presentation from the SOA '10 Health Meeting, held on June 28–30, in Orlando, FL.

Despite having the most costly health system in the world, the United States consistently underperforms on most dimensions of performance, relative to other countries. This report—an update to three earlier editions—includes data from seven countries and incorporates patients' and physicians' survey results on care experiences and ratings on dimensions of care. Compared with six other nations—Australia, Canada, Germany, the Netherlands, New Zealand, and the United Kingdom—the U.S. health care system ranks last or next-to-last on five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives. Newly enacted health reform legislation in the U.S. will start to address these problems by extending coverage to those without and helping to close gaps in coverage—leading to improved disease management, care coordination, and better outcomes over time.

KPMG article is focused exclusively on the individual health insurance market and the reform-stimulated change that is expected.

The fourth in a series about global health-care issues, looking at how aging populations will impact health-care systems and social policies across the world. This article focuses on Hong Kong.

More than a year after the enactment of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), the Departments of Labor, Health and Human Services, and Treasury issued interim final rules (IFR) prohibiting group health plans and insurance from applying more restrictions on mental health or substance use disorder benefits than they do for medical/surgical benefits. In the absence of formal guidance until the publication of the IFR and with the MHPAEA requiring compliance for plan years starting on or after October 3, 2009, many group health plans have been operating under a good-faith compliance standard. The IFR from the federal agencies provides significant guidance in some areas, and several of the requirements will necessitate additional steps to ensure compliance. Understanding how the IFR may affect the business of behavioral healthcare and the decisions that follow will be of great importance to all interested parties, including health insurance companies, health plans, employers, providers, and consumers of behavioral healthcare.

While most of the regulations necessary to implement healthcare reform have yet to be issued, it is clear that the health insurance industry will face a new layer of regulatory complexity. Health plans will be more heavily scrutinized at both the state and federal levels.

This paper outlines the scope of the changes facing health insurers in the individual, small group, and large group markets.

Intensive care patients who did not have health insurance were 21 percent more likely to die than insured patients, U.S. researchers report.

2010 healthcare costs increase $1,303 for family of four.

Charting provided by The Commonwealth Fund.

States will play a major role in creating interim high-risk pools, controlling health insurance rates and managing other health reform implementation efforts, according to Kathleen Sebelius.

Also see HHS Secretary Sebelius Sees More Combat With Insurers.

In standard medical benefit designs, intravenous/injected chemotherapy drugs are usually covered through medical benefits, while oral chemotherapy drugs are covered through pharmacy benefits. Some pharmacy benefit designs require unlimited cost sharing and thus can make high-cost oral cancer treatment medications unaffordable. This report examines the concept of creating parity between oral and intravenous drugs by equalizing patient cost-sharing for all chemotherapy drugs, and also addresses the cost implications of proposed drug parity legislation.

Health care reform legislation—the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act—includes numerous provisions to expand access to health insurance, improve the quality and comprehensiveness of coverage, and make coverage more affordable for all Americans. This timeline from The Commonwealth Fund outlines when the various health insurance provisions will go into effect; click on the dates to see the provisions that will be implemented during that year.

Article in the Society of Actuaries Health Watch Newsletter - February 2010, starting on p. 28.

Raymond Yeung looks at the new health reform in China and its implication on the development of Chinese health insurance industry.

In this guest editorial for The Geneva Association's Health and Ageing newsletter, Howard Gleckman reviews the current long-term care financing model in the U.S., as well as several potential alternatives, including the CLASS Act.

From The Commonwealth Fund Charts.

With health care costs increasing at six percent per year for the next decade, and medical tourism offering savings of up to 70 percent after travel expenses, the Deloitte Center for Health Solutions estimates that the medical tourism industry will recover from the current economic downturn and attain 35 percent annual growth in coming years. This growth holds important implications for U.S. health care providers, health plans, consumers and the government.

A new study, “Medical Tourism: Update and Implications,” updates the Center’s 2008 report on the industry and examines the many factors that have influenced the growth and regulation of patients traveling for medical care, including Washington’s search for ways to control the country’s soaring health care costs. This timely study already has generated coverage by news media, including the Associated Press and USA Today.

This interactive U.S. map draws from The Commonwealth Fund State Scorecard, 2009. Use the map to view state-specific rankings and results compared to benchmarks, and to view the number of lives and dollars each state could save by achieving benchmark levels of performance. Use the tool on the right to select years, performance indicators, and states for comparison and then generate custom, downloadable tables and bar charts.

As the recession takes its toll, what are organizations in Europe doing to manage cost while supporting their employees in looking after their own most important asset – their health? (Mercer)

Cost management, which took a back seat in Canada during the heady days of the last decade, is back. Although benefits still represent a small percentage of payroll, given the country’s accompanying medicare system, Canada was not immune to the effects of the global economic recession. Plan cost management is now a priority. Short-term economic survival is the imperative – long-term financial stability and affordability is the goal.

A senior executive in the German Ministry of Health describes approaches the country is using to control health care costs in this McKinsey Quarterly article.

An analysis of insurance and financial stability from The Geneva Association Systemic Risk Working Group.

Personalized medicine promises to increase the quality of clinical care and, in some cases, to decrease health care costs. The biggest hurdles are economic, not scientific.

In order to launch new health microinsurance products, actuaries and other healthcare professionals will be involved at the pricing stage as technical advisors. This Milliman paper provides technical advisors with some guidelines and a tool for collecting healthcare pricing data where none exists or where what exists is unreliable. These tools are provided to the reader as a set of appendices.

Actuaries bring a crucial and unique perspective to the health care reform dialogue. The role of the American Academy of Actuaries' Health Practice Council is to bring that actuarial perspective to the attention and aid of policymakers through the introduction of a new series of policy statements: Critical Issues in Health Reform. On this page you’ll find links to each of those informative statements, as well as other thought-provoking pieces on the wide-ranging subject of health care reform.

This Commonwealth Fund survey finds an overwhelming majority of young adults think it is important for Congress and the President to pass health reform legislation. The survey found that nearly half—45 percent—or approximately 20 million young adults between the ages of 19 and 29 were uninsured at some time during the past year.

Statistics show an encouraging pattern of increased life expectancy that will trigger increased consumption patterns in the population for medical services and pharmaceuticals, says this Milliman Pharmaco-Actuarial Advisor article.

In an effort to get its healthcare reform legislation back on track, the Obama administration today issued a report maintaining that insurer premiums will continue to skyrocket without reform.

America’s Health Insurance Plans reacted swiftly.

CIGNA has released the findings of a new study that reveal an unmistakable trend: Integrating disability with health care programs has the potential to lower employers' total benefits costs and help disabled employees get back to work sooner and stay at work. As a result of the positive results found in the study, CIGNA is lowering its prices on disability benefits purchased with CIGNA medical coverage.

Essays on healthcare reform from the Society of Actuaries.

Most proposals for reforming the U.S. health care system of today focus on reducing the high cost of care. The standard thought process assumes that reducing costs will increase access to care by improving the affordability of health care and perhaps funding more care for the uninsured. An endless number of proposals focus on this issue. In fact, most of today’s initiatives are based upon lowering costs and/or “bending the trend.” Too few proposals address the core of this essay, “How do we capture those savings?”

The term 'medical tourism' seems to be cropping up everywhere these days. From trade and business journals to the popular press, traveling to another country specifically to obtain medical care is a significant new trend. In this challenging economy, where the cost of healthcare continues to spiral up and hundreds of thousands have lost their health insurance along with their jobs, it's not surprising to see keen interest in less expensive resources, especially because the savings are often substantial.

Among the components of the Baucus plan for healthcare reform: Interstate Sale of Insurance: Starting in 2015, states may form “health care choice compacts” to allow for the purchase of non-group health insurance across state lines. Insurers selling policies through a compact would only be subject to the laws and regulations of the state where the policy is written or issued. More on the Baucus plan...

QuickStats from the CDC's Morbidity and Mortality Weekly Report.

You can check out the latest on the global spread of influenza here.

Presentation at Institute of Actuaries Australia 2009. (Audio, slides and synopsis available.)

Current instability in the financial markets has many wondering if a systemic failure could happen in other industries. American International Group’s (AIG) difficulties shifted the spotlight toward the insurance arena. Those that wish to see the insurance industry regulated on a national level are using the current economic crisis as an opportunity to revisit insurance reform legislation. Just last week, Therese Vaughan, chief executive officer of the National Association of Insurance Commissioners (NAIC), gave testimony before the U.S.

From the March 2009 issue of Gen Re's Risk Insights.

According to the Business Roundtable Health Care Value Comparability Study, a new measure of the “value” (cost and performance) of the U.S. health care system relative to our competitors’ systems on a weighted scale, the workers and employers of the United States face a 23% “value gap” relative to five leading economic competitors and a 46% “value gap” compared with emerging competitors.

Assessment tools that assign risk scores to insureds—or potential insureds—based on their prescription histories are increasingly used by actuaries and others within health insurance organizations to assess future health risk.

More Americans will lose their health insurance as the economy weakens, health care becomes more expensive and fewer employers offer coverage, the U.S. Institute of Medicine said in a report on Tuesday.

A thorny question lies at the heart of meaningful health care reform. How much is human life worth?

Research from Wharton and Stanford based on Medicare kidney dialysis data shows that the average figure -- $129,090 per additional year of quality life -- is higher than prior studies have shown. Perhaps more important, the study also puts a value on the cost-effectiveness of treatment across percentiles of the entire dialysis population in an attempt to develop a benchmark for health care coverage decisions.

A.M. Best Co. recently completed its annual review of public data (pd) financial strength ratings (FSRs) for health maintenance organizations (HMOs). A.M. Best has upgraded the FSRs of 21 HMOs, downgraded 19 HMO FSRs, affirmed 107 HMO FSRs and assigned seven HMO FSRs.

Presentation by Kathy Thomas at the SOA Individual and Small Group Health Insurance Underwriting Seminar, September 2008.

Presentation by Tia Sawhney at the September 2008 SOA Individual and Small Group Health Insurance Underwriting Seminar.

Presentation at the SOA Annual Meeting & Exhibit, October 2008.

Without underwriting, individual coverage applicants on average cost 40% more than applicants for small group coverage. While the individual market provides insurers more opportunities to take rating actions and to improve their competitive positions, it also presents more risks than group insurance since individual health insurance applicants are collectively less healthy and have greater variance in their claim costs than applicants in other markets. For these reasons, the individual market is especially susceptible to adverse selection.

June 2008 – Around 70 representatives of primary insurance companies from all over Europe, and some from further afield, came together on 23 – 24 June 2008 at the Swiss Re Centre for Global Dialogue for a packed agenda of presentations, discussions and networking. Leading expert key note speakers addressed delegates, together with senior management from Swiss Re. All were focused on a single theme – growth opportunities, together with their accompanying risks, for life and health insurance markets in Europe.

According to a recent Associated Press review of agency programs, the Environmental Protection Agency (EPA) values an American life at $6.9 million-a figure that environmental advocates point out is actually 11% lower than it was five years ago.

Executives should treat them as programs, not products. Article from the McKinsey Quarterly (registration required - free).

Attached is a letter that Tia Goss Sawhney wrote to America's Health Insurance Plans regarding research reports that they published in 2007 and 2005. For reasons detailed in the letter, Sawhney feels that the reports do not give our government leaders and members of the public the quality information that they need as we engage in healthcare debate.