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ASHK_MedicalReform_PSC_RFC_20150417.pptx
Actuarial Society of Hong Kong
Better Use of Data for Health Insurance Management and VHIS Implementation
17 April 2015
Fred Choi FCAS, MASHK
1
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Agenda
Overview
VHIS minimum requirement for standard plan
VHIS impact on pricing, Data use and refinement
Data Field Checklist
Questions and Answers
2
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Overview
3
Food and Health Bureau issued the Voluntary Health Insurance Scheme (“VHIS”) Consultation Paper in December 2014.
Generally speaking, insurers are required to provide more comprehensive coverage with more restrictive terms and conditions after implementation of VHIS.
The bill and subsidiary legislation for VHIS is expected to be introduced in 2015/16. Actual implementation of VHIS will probably be a few years after that.
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Overview
4
In-patient Severity Index (2011=100):
Hong Kong in-patient severity is about 5% over the last years.
We recommend actuaries to use latest two or three years’ severity in estimation of in-patient burning costs.
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Overview
5
As VHIS is generally more comprehensive and restrictive than current practice, migration to VHIS implied that existing system may be inadequate for the challenge.
In this presentation, we would like to:
Identify impact on health insurance cost and pricing due to VHISimplementation
Discuss what and how data can be use to prepare for VHIS pricing
Propose data adjustment and judgment
Propose additional data field and possible data refinement
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Agenda
Overview
VHIS Minimum Requirement for Standard Plan
VHIS Impact on Pricing, Data Use and Refinement
Data Field Checklist
Questions and Answers
6
ASHK_MedicalReform_PSC_RFC_20150417.pptx
VHIS Minimum Requirement for Standard Plan
7
There are 12 minimum requirements proposed for VHIS Standard Plan:
ASHK_MedicalReform_PSC_RFC_20150417.pptx
VHIS Minimum Requirement for Standard Plan
8
We would discuss those expected to have impact on insurance cost and pricing:
1. Guaranteed renewal
3. Coverage of pre-existing conditions
4. Guaranteed acceptance with premium loading cap
5. Portable insurance policy
6. Coverage of hospitalization and prescribed ambulatory procedures
7. Coverage of prescribed advanced diagnostic imaging tests and non-surgical cancer treatments
8. Minimum benefit limits
10. Budget certainty
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Agenda
Overview
VHIS Minimum Requirement for Standard Plan
VHIS Impact on Pricing, Data Use and Refinement
Data Field Checklist
Questions and Answers
9
ASHK_MedicalReform_PSC_RFC_20150417.pptx
VHIS impact on pricing – Pre-Existing Condition, Guaranteed acceptance and renewal
10
Coverage of pre-existing conditions:
Increase claim cost
Actuaries need to determine additional premium loading.
Guaranteed acceptance and renewal:
Cannot reject poor insureds, e.g. with pre-existing conditions
Cannot refine the insurance pool by non-renewing poor insureds
Increase risks to insurers
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data use and refinement – Guaranteed acceptance and renewal
11
Frequency:Historical experience of insured with change in health condition after inception. Accumulate experience for poor risk after VHIS implemented
Severity:
Historical experience of insured with change in health condition after inception. Accumulate experience for poor risk after VHIS implemented
Data adjustment / judgement:
Own data may not be sufficient and credible. May perform industrial study for grouping.
Data Refinement:
Standardize diagnosis code, e.g. ICD-9 or ICD-10, to enhance own data reliability
Guaranteed acceptance and renewal / Coverage of pre-existing conditions:
Need to estimate additional claim cost and premium loading factors for various situations
ASHK_MedicalReform_PSC_RFC_20150417.pptx
VHIS impact on pricing – Portable
12
Portable insurance policy:
Cannot reject poor risk / with pre-existing conditions for Standard Plan
Cannot re-underwrite if no claims were made in a certain period
Increase risk for insurers
We suggest insurers to capture and record underwriting classes of previous insurer or other existing insurers when they accept new policies
ASHK_MedicalReform_PSC_RFC_20150417.pptx
VHIS impact on pricing – Hospitalization & ambulatory procedures
13
Coverage of hospitalization and prescribed ambulatory procedures:
Encourage ambulatory procedures, reduce unnecessary hospitalization
Reduction in severity and claim cost
Severity become more certain and stable
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data use and refinement – Prescribed ambulatory procedures
14
Coverage of prescribed ambulatory procedures:
Minor procedure shift from hospitalization to ambulatory setting
Expect severity decrease and more certain
Frequency:Need to consider shift from hospitalization to ambulatory setting due to VHIS
Severity:
For hospitalization, reference to historical claim costs. For ambulatory setting, reference to prescribed benefit limits
Data adjustment / judgement:
Need to consider the impact due to budget certainty, i.e. higher proportion of panel claims
Data Refinement:
Have specific indicator for ambulatory settings. Clinics and doctors information should also be recorded.
ASHK_MedicalReform_PSC_RFC_20150417.pptx
VHIS impact on pricing – Diagnostic tests and cancer treatments
15
Coverage of prescribed advanced diagnostic imaging tests and non-surgical cancer treatments:
Typically included in hospital expense or with very low benefit limits
Coverage significantly enhanced in VHIS
Increase claim cost, perhaps materially
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data use and refinement – Advanced diagnostic imaging tests
16
Coverage of prescribed advanced diagnostic imaging tests:
30% co-insurance to combat moral hazard
Most current market product do not have separate benefit for this coverage
Part of miscellaneous hospital expenses
Frequency:Data may not by readily available, need to start accumulate or adopt benchmark frequency for specific tests
Severity:
Based on current market fee or packaged fees
Data adjustment / judgement:
May need to apply loading factors as current benefit limits may not capture all incidents
Data Refinement:
Separate record hospital expenses about advanced diagnostic tests in database. Type of test should also be recorded.
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data use and refinement – Non-surgical cancer treatments
17
Coverage of non-surgical cancer treatments:
Proposed higher limit of HK$150,000, which is similar to current private LoA products
Frequency:Similar approach as current pricing
Severity:
Reference to higher limit product; or adopt increase limit factor based on claims profile; ormake assumption for total loss
Data adjustment / judgement:
Higher benefit limit may increase frequency due to adverse selection, need to cross check with market cancer rate
Data Refinement:
Nil
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data use and refinement – Minimum Benefit Limits
18
Frequency:Similar approach as current pricing
Severity:
Similar approach as current pricing
Data adjustment / judgement:
If the Standard Plan limit is higher than existing product, may need to make reference to data with similar limit
Data Refinement:
Nil
For typical benefit items like Room & Board, Physician’s visit, Specialist’s visit and Surgical:
Proposed benefit limits similar or slightly lower than current ward products
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data use and refinement – Minimum Benefit Limits
19
Frequency:Similar approach as current pricing
Severity:
Need to exclude those expense covered by separate benefit items
Data adjustment / judgement:
Need to consider unreported bill amount due to exhaustion of benefit limit in previous experience
Data Refinement:
Separate records for items like advance diagnostic test and non-surgical cancer treatment
Hospital Expenses benefit item:
Currently all unclassified expenses will be included in this benefit item
Under VHIS, some of the expenses (e.g. CT scan) currently included in HE will be listed separately
ASHK_MedicalReform_PSC_RFC_20150417.pptx
VHIS impact on pricing – Budget certainty
20
Budget certainty:
Severity become more certain and stable
Higher utilization of panel doctor and hospital
Impact on claim cost depends on network size and bargaining power
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data use and refinement – Budget certainty
21
Frequency:Similar approach as current pricing
Severity:
Non-panel: current practice;Panel: based on contractual fee for prescribed procedures and doctors
Data adjustment / judgement:
Need to make assumption for the migration of non-panel to panel doctors
Data Refinement:
Include doctor, clinic and test information in claim records
“No-gap/known-gap” arrangement applicable to specific:
Procedures / Tests
Hospitals / Clinics
Doctors
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Agenda
Overview
VHIS Minimum Requirement for Standard Plan
VHIS Impact on Pricing, Data Use and Refinement
Data Field Checklist
Questions and Answers
22
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data Field Checklist
23
Data is vital for actuaries to estimate burning costs properly.
However, good data has to be accumulated over time.
Fortunately, medical claims are short-tailed and we still have time to accumulate credible data before implementation of VHIS.
Please compare your current data structure with the checklist and make necessary changes if the current structure is less comprehensive than the checklist.
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data Field Checklist
24
Policy database:
Indicators of pre-existing conditions (e.g. circulatory, renal, liver) Previous insurer or other existing insurers Respective underwriting classes
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Data Field Checklist
25
Claims database: Panel / Non-Panel service provider Hospitalization / ambulatory setting Clinic’s name Doctor’s name Standardize surgical code, e.g. CPT Standardize diagnosis code, e.g. ICD-9 or ICD-10 Hospital expenses - advance diagnostic test Type of advance diagnostic test, e.g. CT, PET, MRI Hospital expenses - non-surgical cancer treatment Type of non-surgical cancer treatment, e.g. Gamma knife, chemotherapy
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Agenda
Overview
VHIS minimum requirement for standard plan
VHIS impact on pricing, Data use and refinement
Data Field Checklist
Questions and Answers
26
ASHK_MedicalReform_PSC_RFC_20150417.pptx
Please feel free to contact me if you have any questions:
Mr. Fred Choi, S. Yu & Partners Ltd. at 2590 9896 or via [email protected]
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