June, 2005 Cogent ME International Insurance & Reinsurance Brokers Welcome.
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Transcript of June, 2005 Cogent ME International Insurance & Reinsurance Brokers Welcome.
June, 2005 Cogent ME
Cogent MEInternational Insurance & Reinsurance Brokers
Welcome
June, 2005 Cogent ME
Medical Insurance
Product Development,Pricing and Reinsurance
Presented bySameer Gammoh
Cogent MEJune 2005
Agenda
Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance
Cogent MEJune 2005
Introduction
Causes Behind Health Insurance Losses
Importance of Maths in Health Insurance
Data Recording and Classification Continuance Monitoring
Cogent MEJune 2005
Causes of Loss Inability to Identify Legitimate Insured Members
Fraudulent claims – Insured members abuse No control mainly in out-patient claims
Inability to Control Extensive Procedures by HCPs Health Care Providers abuse of benefits No control mainly in out-patient claims
Growth Limitation Personnel needed Huge number of claims – consistency
No Accurate Recording of Data Inaccurate utilization rate by incident , type of illness and procedures Inaccurate premiums that aren’t driven according to benefit design Improper underwriting which isn’t based on accumulation of know-
how
Cogent MEJune 2005
Importance of Maths
Mathematical Modeling and Prototyping Based on Market Info Provides Better Understanding of Medex Insurance Business in any Market. Statistical Data Related To :
Average Cost Per In Patient Visit Average Cost Per Out Patient Visit Average Length Of Stay in Hospital Average Cost Per Night Average Utilization PPPA for In Patient Average Utilization PPPA for Out Patient Exposed Population in a Specific Underwriting Year
Cogent MEJune 2005
Importance of Maths
In Preparation to Calculate: Average B/C PPPA for In Patient Average B/C PPPA for Out Patient Average B/C PPPA for Each Benefit Type
Testing the Reliability of the Collected Data Testing the Reliability of the Mathematical Model
Based on The Collected Data.
Cogent MEJune 2005
Agenda
Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance
Cogent MEJune 2005
Benefit Design
In Patient Benefits Out Patient Benefits Maternity Benefit Dental Benefit Optical Benefit Others
Repatriation Assistance Evacuation Travel and accommodation Long Term Care
Cogent MEJune 2005
Considerations
Limits Coverage Limits
Covered cases Excluded cases
Frequency Limits In-Patient Out-Patient Other Limits
Financial Limits Maximum limits Deductibles Co-insurance
Cogent MEJune 2005
Considerations
Coverage Duration Short term Annual Long term
Age, Gender and other Risk Factors Pre-Existing Conditions Eligibility Conditions Dependency Type Nationality Contributions
Cogent MEJune 2005
Agenda
Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance
Cogent MEJune 2005
Pricing & Feasibility Data Availability
Underwriting Info Global – Related to the employer Specific – Related to insured member
Past Claims Profile and Experience
Guessing Game Compared to Similar Situations Market Trend Special Deviation Margins The rule of Thumb
Cogent MEJune 2005
Pricing & Feasibility Pure Premium ( NRP )
Expected Actual Cost of Claims According to Benefit Contingency Margins Inflation
Gross Premium Pure Premium Other Loadings
Profit Commission Other overhead expenses TPA fees Stamps duty and Taxes
Cogent MEJune 2005
Expected Cost Calculation Utilization Rate According to Benefit Type
In Patient Out Patient Dental … Optical …..
Average Cost per Incident According to Benefit Type In Patient Out Patient Dental … Optical …..
Exposed Insured Population By Class of Coverage Age Sex Benefit Type
Cogent MEJune 2005
Utilization Rate Calculation In Patient
For a Specific Insurance year (No. of Admissions) Exposed Population According to Age , Sex and Class of Cover Length of Stay per Admission According to In Patient Type of Benefit
Utilization = No. of Cases/ Exposed Population Out Patient
For a Specific Insurance Year (No. of visits) Exposed Population According to Age , Sex and Class of Cover According to Out Patient Type of Benefit
Utilization = No. of Visits/ Exposed Population
Cogent MEJune 2005
Average Cost Per Incident Calculation In Patient
For a Specific Insurance Year (No. of Hosp Admissions) For a Specific Insurance Year (Total In Patient Costs) Average Cost per Case Average Cost per Hospitalization Night According to In Patient Type of Benefit
Out Patient For a Specific Insurance Year (No. of Visits) For a Specific Insurance Year (Total Out Patient Costs) Average Cost per Visit According to Out Patient Type of Benefit
Cogent MEJune 2005
Exposed Population Calculation Total Insured Members
Total Members At Inception Added Members During the Insurance Year Deleted Members During the Insurance Year According to Actual Transaction Date (Enrollment date) Calculate Total Number of Insurance Days Calculate Total Insured Members That Were Exposed to Insurance
for 365 Days At Any given Moment During the Insurance Year Extrapolated for 12 Month (365 days)
Cogent MEJune 2005
Agenda
Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance
Cogent MEJune 2005
Experience Rating (Pricing)
Historical Data Needed Min. 2 to 3 Years Claims Statistics According to Type of Benefit,
Age, Sex and Dependency Type The Exposed Population Corresponding to Claims Statistics for
Each Insurance Year Coverage Specifications Corresponding to Claims Statistics for
Each Insurance Year (Any Coverage Change Must be Accommodated and Accounted for)
Cogent MEJune 2005
Experience Rating (Pricing)
Calculate the Following B/C Burring Cost by Benefit Type per Insured Member (Age
Group, Sex & Dependency) In Patient
B/C PPP = ((Exposed population * Utilization Rate)*(Average Cost per Visit))/Exposed Population
Out Patient B/C PPP = ((Exposed population * Utilization
Rate)*(Average Cost per Visit))/Exposed Population All other Benefits – The same
Cogent MEJune 2005
Experience Rating (Pricing)
Calculate the following Extrapolate a 12 months B/C out of the historical data
available In Patient
B/C PPPA = (B/C PPP /Period in study in days)* 365 Out Patient
B/C PPPA = (B/C PPP/Period in study in days)* 365 All Other Benefits – The same
Cogent MEJune 2005
Experience Rating (Pricing)
Calculate the Following Load for Deviation
% Normally 5% to 10% 3 Years experience 5% 2 Years experience 7.5% 1 Year experience 10%
Cogent MEJune 2005
Experience Rating (Pricing) Calculate the Following
Load for Inflation 2 Inflation loadings ( Value – Frequency )
Value Inflation :% According to the changes in price lists, however in some country price lists are fixed by different bodies and dose not change often.
Frequency Inflation :More health awareness increases frequency of claims therefore a % of increased health awareness must be added .
Cogent MEJune 2005
Agenda
Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance
Cogent MEJune 2005
Outstanding & IBNR Definition
Outstanding Losses: Are the Claims That are Received and Notified for But not Yet Paid
Actual counting of claims. Actual amounting of claimed values (conservative) Actual amounting of estimated adjudicated payable
value Outstanding = Total value of claims under process
Cogent MEJune 2005
Outstanding & IBNR Definition
IBNR: Stands for (Incurred But Not Reported) The Claims that Took Place but not Yet Notified for Nor Paid.
Depends on the (TAT) Turn Around Time for a claim from the moment it incurred until it’s reported, booked, accounted for and paid. (PMS) Performance Measurement System for claims.
Depends on the (ACPD) Average Claims Per Day (Adjudicated Value)
IBNR = TAT * ACPD
Cogent MEJune 2005
Agenda
Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance
Cogent MEJune 2005
Situation = No TPA
Insures
Is insured
CoveredCovers
Pays
Pays
Reinsurers Insureds
InsurersHealthcareProviders
VisitsRI Broker
Cogent MEJune 2005
Insurance Company’s Problems
High cost of Health Care Insured Members and Providers Abuse of Benefits Processing Claims are “After the Fact” Insured Members & Providers are Unhappy Cost of in-House Administration Waste in Time and Material Lack of Specialized Technology, Expertise
Cogent MEJune 2005
Reinsurers Problems
Unavailable Statistical Info No Accurate Recording of Vital Data Reporting Delay
Inability to Propose Corrections on Time Higher Involvement – Higher Admin Costs
Files Open for Tremendous Period of Time Ends up With Very Low Margin / Losses Departing From Market and Use Capacity in Other
Markets
Cogent MEJune 2005
Insured Company (Employer) Problems
Unsatisfied Employee Drop in Productivity Giving Advance on Salaries Management Waste of Time (Solving Insurance
Problems ) Changing Insurance Companies Seeking Better
Product. Unavailable Important Personnel Statistics
Cogent MEJune 2005
Insured Members Problems
Need Pre-Authorization Forms
- Weekends and Holidays Need to fill out Paper Claims Limited Healthcare Provider Network Might Pay and Later Claim Lack of Vital Medical History In Emergencies Lack of a Common Medical Record Vague Exclusions (Poor Satisfaction)
Cogent MEJune 2005
Healthcare Providers Problems
Delays in Payment Reimbursement Losses Due to:
Fraud Vagueness of Coverage
Handling Different Polices and Plans Identifying Legitimate Insured Members
Cogent MEJune 2005
ReinsurersInsureds
Insurers HealthcareProviders
3rd PartyAdmin.
Situation = With TPA
RI Broker
Payers
Ideal -TPA ConceptIdeal -TPA Concept
Employers
Ins. Co / RI
TPA IT Cluster
3rd Party Administrator - TPA
Insureds
Healthcare Provider Network
Insurance Policy
Medical Record
Financial Claims$
Ad
jud
icat
e
Submit
$
ReviewEnterTreatment Plan
Visit
Network Agreement
Management Agreement
$
EOB
Cogent ME 37June 2005
Ideal Communication System
HC Provider
Insureds
Reinsurer
Insurer
TPA InternetInternetInsured Co.
Cogent MEJune 2005
Agenda
Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance
Cogent MEJune 2005
Medex Reinsurance Types
Treaty Facultative
Proportional Non-Proportional Proportional Non-Proportional
Q.S
Surplus
X.L
Stop Loss
Spec.Agg.
Q.S
Surplus
X.L
Stop Loss
Spec.Agg.
Cogent MEJune 2005
When And Why
Proportional1- Small Portfolio2- High Volatility3- Individual Business4- Small Groups5- Lack/Poor Experience6- Transfer of Know-how7- Untested Pricing Structure8- Untested Claims Handling9- Developing Stage
Non-Proportional1- Huge Portfolio2- Low Volatility3- Homogenous Portfolio4- Long Experience5- Acquired the Needed Know-
how6- Reliable Pricing Structure7- Reliable Claims Handling
System8- Maturity Stage
Cogent MEJune 2005
The Role of a Good Broker
Understanding of the Business and Acquiring the Needed know-how
Becoming a Consultant to the Client Rather Than Placing the Business Only
Working With all Concerned Parties (The Client, The TPA and The Underwriter)
Simply Acting More that a P.O. Box Between the Client and the Underwriter
Being Able to Deliver on Time A Good Broker’s Job Starts After the Signing of a
Reinsurance Contract
June, 2005 Cogent ME
Q&A
June, 2005 Cogent ME
Thank you for your time