Jason Siegel, FSA, MAAA

If We Knew Then What We Know Now: ACA Enrollment

Utilization & Morbidity

What does morbidity look like in the

in the 2014 commercial markets?

It Depends!

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

Why are we getting mixed messages?

• Varies by state and market

• Depends on what you’re comparing to

• Dependent on whether you normalize for

demographic & other variables

• Data is incomplete and decentralized

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

How did underwriting shape the pre-

ACA markets?

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

$0

$100

$200

$300

$400

$500

$195

$449

$383 $358

$190 $243

$169 $212

$198

$288 $354

$309 $338 $317

$277 $244

$294 $298

Comparison of Individual and Small Group Market 2012 Average Claim Costs

Individual CCs Small Group CCs

How did the individual markets change

in 2014?• Issuers lose ability to underwrite

• Subsidies encourage entry for broad mix if individuals

• High risk pools go away

• Transitional policy keeps healthier out of ACA pool

• 3.8M uninsured enter market comprising 57% of individual exchange

• New market is several years older & slightly more female

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

What is the impact of demographics?

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

• Claim impact ~20% bad compared to pre-ACA

• Profit margin impact 1% to 2% good or bad

compared to pre-ACA in most states

• Profitability impact can be extreme in community

rated states

Profit Margin by State Assuming 3%

Built into Rates & Pre-ACA Demog

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Ve

rmo

nt

(43

.7)

Ne

w Y

ork

(4

2.5

)

Ne

w J

ers

ey

(42

.5)

Min

ne

sota

(4

2.4

)

Mas

sach

use

tts

(38

.5)

Dis

tric

t o

f C

olu

mbi

a (3

7.0

)

Uta

h (

35

.2)

We

st V

irg

inia

(4

6.0

)

Ore

gon

(4

5.2

)

Wis

con

sin

(44

.0)

Was

hin

gto

n (

43.

9)

Ne

w M

exi

co (

43.7

)

Iow

a (4

3.6

)

Mai

ne

(43.

6)

Ark

ansa

s (4

3.5

)

Ne

w H

am

psh

ire

(43

.2)

Co

nn

ecti

cut

(43.

2)

Pen

nsy

lva

nia

(42

.9)

Mo

nta

na

(42.

8)

Ten

ne

sse

e (4

2.8

)

Illin

ois

(4

2.7

)

Oh

io (

42.

5)

Ind

ian

a (4

2.4

)

Rh

od

e Is

lan

d (

42.

4)

Mar

ylan

d (

42.4

)

Flo

rid

a (4

2.3

)

Ala

ba

ma

(42

.2)

Sou

th C

aro

lin

a (4

2.1

)

Mis

siss

ipp

i (4

2.1

)

Mic

hig

an (

42.

1)

Cal

ifo

rnia

(42

.0)

Lou

isia

na (

41.9

)

Ne

vad

a (

41.8

)

Ken

tuck

y (4

1.7

)

Mis

sou

ri (

41

.6)

Ok

laho

ma

(41

.5)

No

rth

Ca

rolin

a (4

1.4

)

Haw

aii

(41.

3)

De

law

are

(41

.3)

Ala

ska

(41

.1)

Kan

sas

(41

.0)

Ge

org

ia (

40.9

)

Sou

th D

ako

ta (

40.8

)

Wyo

min

g (4

0.7

)

Co

lora

do

(40

.4)

Texa

s (4

0.1

)

Vir

gin

ia (

40.0

)

Ne

bra

ska

(39.

4)

Idah

o (

38.

4)

No

rth

Da

kota

(3

7.5

)

Ari

zon

a (

37.5

)

Pro

fit M

arg

in

PMPM % of Prem Diamond = full community-rated

* States are ordered as follows: community-rated, compressed age-curve, then federal age curve with decreasing average age

So What Utilization are We Seeing?

• Express Scripts study shows those on exchange

60% more likely to purchase a specialty drug

• High maternity, elective surgery, ER

• Anecdotal data on catastrophic cases

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

Possible explanations for experience

• Partly explained by pent up demand and

demographics

• Were offset for CSR and Reinsurance included?

• Was pricing conservative or aggressive?

• Rx risk score studies confirms individual market

comparable to small group

• Anecdotal tests from several clients shows

similar results after normalizing experience

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

Conclusion

• Utilization / Morbidity still unknown in many markets

• Individual market appears to be tending towards small group

• Impact of demographics either big or small depending on how you look at it

• Experience will change over initial few years of ACA as market expands

• Not sure if market will stabilize, will removal of reinsurance and risk corridors result in a rate spiral

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

Appendix 1: Uninsured rate

October 28, 2014

Appendix 2: Pent Up Demand

October 28, 2014

• Experience under the Health Indiana Plan: The short-term cost challenges of expanding coverage to the uninsured, Rob Damler, FSA, MAAA

20%

40%

60%

80%

100%

120%

140%

160%

1 2 - 3 4 - 6 7 - 9

% o

f A

ve

rag

e P

MP

M

Enrollment Duration

Relative PMPM Cost By Enrollment Duration

Inpatient

Outpatie

nt

Pharmac

y

Appendix 3: Hospital Admissions

October 28, 2014

This presentation and Q&A is not intended to be an actuarial opinion or advice, nor is it intended

to be legal advice. Any statements made during the presentation and subsequent Q&A shall not

be a representation of the SOA or of Milliman or of their views or opinions, but only of those of the

presenter.

For further information contact

Jason R. Siegel, FSA, MAAA

Actuary

jason.siegel@milliman.com

Milliman

+1 262.796.3414

October 28, 2014

Contact Information