Growing Pains S election E ffects in Private Health Ins urance - - PowerPoint PPT Presentation

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Growing Pains S election E ffects in Private Health Ins urance - - PowerPoint PPT Presentation

Feb 03, 2023 8 likes •215 views

Growing Pains S election E ffects in Private Health Ins urance Andrew Gale Growing Pains Selection in Private Health Insurance Growth Stories Measuring Selection Financial Impacts of Selection S election Claims experience

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SLIDE 1

Growing Pains

S election E ffects in Private Health Ins urance Andrew Gale

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SLIDE 2

Growing Pains

  • Selection in Private Health Insurance
  • Growth Stories
  • Measuring Selection
  • Financial Impacts of Selection
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SLIDE 3

S election

  • Claims experience of a select group

is higher / lower than the non-select group with the same characteristics q[x]+k <> qx+k

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SLIDE 4

S election in Private Health Ins urance

Waiting Periods – Hospital Cover

  • Pre-existing conditions

12 months

  • Obstetrics

12 months

  • Psychiatric, rehabilitation, palliative care

2 months

  • Other treatments

2 months

  • Accidents

usually nil

  • Benefit Limitation Periods

1-2 years

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SLIDE 5

S election in Private Health Ins urance

Waiting Periods – Ancillary Cover

  • Major dental, orthodontic & endodontic

up to 12 months

  • Optical

up to 12 months

  • Psychology

up to 12 months

  • Blood glucose monitors

up to 24 months

  • Hearing aids

up to 36 months

  • Other benefits

generally 2 months

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SLIDE 6

Waiting Periods

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SLIDE 7

Industry

0% 4% 8% 12% 16%

  • 8%
  • 4%

0% 4% 8% 12% 16% 20% Change in Hospital Contributors Hospital Drawing Rate Growth

=02/03 =09/10

  • 0% - 5% growth
  • Strong inverse

correlation between drawing rate growth and membership growth

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SLIDE 8

Insurer A

0% 4% 8% 12% 16%

  • 8%
  • 4%

0% 4% 8% 12% 16% 20% Change in Hospital Contributors Hospital Drawing Rate Growth

=02/03 =09/10

Insurer B

0% 4% 8% 12% 16%

  • 8%
  • 4%

0% 4% 8% 12% 16% 20% Change in Hospital Contributors Hospital Drawing Rate Growth

=02/03 =09/10

Growth S tories

  • Rapid growth and decline in membership, spikes in hospital drawing rate
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SLIDE 9

Insurer C

0% 4% 8% 12% 16%

  • 8%
  • 4%

0% 4% 8% 12% 16% 20% Change in Hospital Contributors Hospital Drawing Rate Growth

=02/03 =09/10

Growth S tories

Insurer E

0% 4% 8% 12% 16%

  • 8%
  • 4%

0% 4% 8% 12% 16% 20% Change in Hospital Contributors Hospital Drawing Rate Growth

=02/03 =09/10

  • Sustained above average membership growth, wide range of

drawing rate outcomes

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SLIDE 10

Growth S tories

Insurer D

0% 4% 8% 12% 16%

  • 8%
  • 4%

0% 4% 8% 12% 16% 20% Change in Hospital Contributors Hospital Drawing Rate Growth

=02/03 =09/10

  • Wide range of membership growth, above average drawing

rate growth

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SLIDE 11

Meas uring S election

  • Study of membership and claims data by

duration for a large health insurer

  • Drawing rate ratio for duration k to duration 6+
  • Calculated by age, sex and product
  • Aggregate result standardised
  • Includes all new entrants (uninsured & transfers)
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SLIDE 12

Hospital Relative Drawing Rate by policy duration

0% 20% 40% 60% 80% 100% 120% 140% 160% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6+ Membership Year Standardised Drawing Rate ratio

Meas uring S election

  • first year low
  • second year high
  • deferral of claims
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SLIDE 13

Standardised Drawing Rate ratio by duration - Hospital cover Age Group Year 1 Year 2 Year 3 Year 4 Year 5 Year 6+ 20 to 34 65% 133% 112% 115% 114% 100% 35 to 49 57% 168% 111% 106% 106% 100% 50 to 64 62% 170% 129% 119% 106% 100% All Ages 62% 147% 112% 111% 109% 100%

Meas uring S election

  • Year 2 claims spike, greater at older ages, select period

increases with age?

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SLIDE 14

Ancillary Relative Drawing Rate by policy duration

0% 20% 40% 60% 80% 100% 120% 140% 160% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6+ Membership Year

Standardised Drawing Rate ratio

Meas uring S election

  • Year 1 small

selection effect

  • No year 2 spike
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SLIDE 15

Standardised Drawing Rate ratio by duration - Ancillary cover Age Group Year 1 Year 2 Year 3 Year 4 Year 5 Year 6+ 20 to 34 93% 102% 102% 106% 111% 100% 35 to 49 89% 100% 101% 106% 110% 100% 50 to 64 90% 98% 97% 102% 107% 100% All Ages 89% 99% 100% 105% 110% 100%

Meas uring S election

  • Little variation by age
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SLIDE 16

Growth and Selection example

Time Growth Rate Membership Drawing rate Claims

Financial Impact of S election

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SLIDE 17

Modified Hos pital Drawing R ates

Cn Dn =

  • 0.34 Mn-2 + 0.68 Mn-1 + 0.66 Mn

where Cn = claims cost in period n Mn = average membership in period n

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SLIDE 18

Growth and S election: a powerful combination! Managing high growth requires skill and knowledge

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SLIDE 19

Financial Impact of S election

  • Changes in claims experience – anticipated or a

surprise?

  • Makes forecasting a challenge during periods of

membership change

  • Claims time lag: claims growth follows

membership growth

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SLIDE 20

Conclus ion

  • Understand the impact of durational selection
  • Hospital claims: low in year 1, high in year 2
  • Understand financial impact of membership growth changes
  • Caution with product profitability and drawing rate trends
  • Do your own selection experience investigation