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AMERICAN ACADEMY of ACTUARIES Medicare Supplement Insurance Claim Cost Trends Report to the National Association of Insurance Commissioners American Academy.

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Presentation on theme: "AMERICAN ACADEMY of ACTUARIES Medicare Supplement Insurance Claim Cost Trends Report to the National Association of Insurance Commissioners American Academy."— Presentation transcript:

1 AMERICAN ACADEMY of ACTUARIES Medicare Supplement Insurance Claim Cost Trends Report to the National Association of Insurance Commissioners American Academy of Actuaries Medicare Supplement Insurance Work Group Mike Abroe, Chairperson

2 AMERICAN ACADEMY of ACTUARIES Members of the Academy Medicare Supplement Work Group ïMike Abroe,Chairperson, Milliman&Robertson, Inc. ïDavid Bahn,Blue Cross/Blue Shield of FL ïMark Billingsley,Pyramid Life Insurance Company ïJohn Bryson,Blue Cross and Blue Shield of Conn. ïGina Calise,Blue Cross and Blue Shield of RI ïWilliam Cashion,Capital Blue Cross ïSusan Clark,Blue Cross and Blue Shield of KS ïRich Coyle,Health Care Finaning Administration ïRandy Edwards,Blue Cross and Blue Shield of KS ïDoug Feekin,Mutual/United of Omaha Insurance Co. ïPatrick Fleming,Bankers Life and Casualty Co. ïWilliam Gilmore, Blue Cross and Blue Shield of MS ïDave Hitchins,Blue Cross and Blue Shield of KS ïNancy King,Physicians Mutual Insurance Co. ïGail Lawrence,American Republic Insurance Co. ïTom Lindquist,United HealthCare Insurance Co. ïDoug Littleton,United Health Care Insurance Co. ïDiana Long,Blue Cross and Blue Shield of FL ïAmberLubeck, Mutual/ United of Omaha Insurance ïDon Martin,Blue Cross and Blue Shield of AR ïRobert McCarty,Milliman and Robertson, Inc. ïMike Murray,Blue Cross and Blue Shield of DL ïDotti Outland,United Health Care Insurance Co. ïCarol Pawlak,Blue Cross and Blue Shield RI ïMike Recorvits,Blue Cross and Blue Shield RI ïDon Roll,Anthem Blue Cross and Blue Shield ïDavid Shea,Trigon Blue Cross Blue Shield ïDonald Sheak,United HealthCare Insurance Co. ïJamie Trimble,Milliman and Robertson, Inc. ïJohn Troy,Blue Cross Blue Shield Association ïDave Tuomala, Wellmark, Inc. ïChris Walke,Physicians Mutual Insurance Co. ïDavid Walker,United HealthCare Insurance Co. ïBill Weller,Health Insurance Association of America ïTom Wilder,American Academy of Actuaries ïByron Wingo,Blue Cross/ and Blue Shield of MS ïDiana Wright,National Association of Insurance Commissioners

3 AMERICAN ACADEMY of ACTUARIES Companies That Shared Data for the Academy Study Bankers Life and Casualty Blue Cross and Blue Shield of Arkansas Blue Cross and Blue Shield of Connecticut Blue Cross and Blue Shield of Florida Blue Cross and Blue Shield of Kansas Blue Cross and Blue Shield of Mississippi Blue Cross and Blue Shield of Rhode Island United/ Mutual of Omaha Physicians Mutual United Health Care Wellmark

4 AMERICAN ACADEMY of ACTUARIES Issues Discussed ïAnnual claim cost trend nationwide, by geographic area, plan and state ïHospital outpatient costs ïCoverage for beneficiaries under age 65 ïRating methods mandated by states ïPrescription drug coverage

5 AMERICAN ACADEMY of ACTUARIES Issues Discussed Continued ïGuaranteed issue and Medicare+Choice plans ïFraudulent claims ïIncreasing average age of insured individuals

6 AMERICAN ACADEMY of ACTUARIES Aggregate nationwide annual claim trend from 1996 through 1998 was 11.2% for plans A through G combined Plans A and B Combined 1996/1998 Plan A17.6% Plan C10.9% Plan F 9.0% Plans BDEG 12.8% Plans ABCDEFG 11.2%

7 AMERICAN ACADEMY of ACTUARIES Hospital Outpatient Costs Major Impact ïFrom 1995 to 1998, the increase in outpatient claim costs caused overall trend to be 2.9% higher per year than it would have been if the outpatient trend had equaled the average of the other components ïAdding 2.9% to an annual trend rate over an 8 year period (the number of years since standardization) would cause a 25% additional increase in claim costs

8 AMERICAN ACADEMY of ACTUARIES Hospital Outpatient Medicare Supplement Study

9 AMERICAN ACADEMY of ACTUARIES Medicareís New Prospective Payment Methodology for Outpatient Services ïOne-time reduction in aggregate coinsurance costs nationwide ïWide variance by state ñWinners- 25% reduction in claims costs: Alabama, California, Florida, Louisiana, Texas ñLosers -10% increase in claims costs: Alaska, Idaho, Montana, New York, Oregon,Utah, Washington ñBig Loser-47% increase: Vermont

10 AMERICAN ACADEMY of ACTUARIES Plans H-J with Rx Benefits ïAnnual trend for Rx benefits 15% ñCap on benefits ïNon-Rx trend 8.7% versus 11.2% ñDifferent company mix ñStill lower after adjustment for company mix ïStudy of Massachusetts unlimited Rx plan ñ25% annual trend ñ Rx benefit ñ16.5% annual trend ñ all benefits combined

11 AMERICAN ACADEMY of ACTUARIES Disability Contributes More Than Age ïDisabled-eligible beneficiaries have significantly higher Med Supp claim costs than age-eligible beneficiaries ïIncreases in the % of a disabled-eligible Med Supp block will lead to increased overall trend ïThe claim cost trend for the disabled-eligible may be different from the claim cost trend for the age- eligible

12 AMERICAN ACADEMY of ACTUARIES Benefit Relativities By Plan Disabled-Eligible and Age-Eligible Annual Claim Costs

13 AMERICAN ACADEMY of ACTUARIES Observations over Period ïAverage age of enrollment increased 1 year ïCommunity rated was 1.4 years older than entry age rated business ïEntry age rated was 2.6 years older than attained age rated ïAverage issue age increased 1 year for community and attained age rated, but remained constant for entry age rated ïAverage age for current year issues for all rating methods was in excess of 70 years

14 AMERICAN ACADEMY of ACTUARIES Other Findings ïEffects of Fraud-not quantifiable ñNot shared with beneficiary ñFraudulent claims not screened by intermediary ïEffect of different rating methodologies-no definitive answer if rating method affects claims levels ïImpact of state rating mandates-data limitations ïSignificant volatility of claim trend exhibited at state level- more research would be needed

15 AMERICAN ACADEMY of ACTUARIES Guaranteed Issue Med Supp and Medicare+Choice Plans Probable Implications of Implementation (Limitations of Early Evaluation ïMed Supp carriers likely to experience anti- selection ïDegree of Anti-selection uncertain due to varying availability of options for coverage

16 AMERICAN ACADEMY of ACTUARIES Conclusions ïMedigap trends continue to be well in excess of Medicare trends ïHospital outpatient claims primary driver of excess trend ïExpectation of adverse hospital outpatient trend decrease needs verification

17 AMERICAN ACADEMY of ACTUARIES What it All Means

18 AMERICAN ACADEMY of ACTUARIES Ongoing Work of the NAIC


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