Looking Ahead to 2020: Insights From An Actuarial Perspective€¦ · Looking Ahead to 2020: Insights From An Actuarial Perspective Sec. 401 (1) IN GENERAL.—Notwithstanding any

Looking Ahead to 2020: Insights From An Actuarial Perspective

Andrew Ryba FSA, MAAA Jared Strock FSA, MAAA

CSG Actuarial, LLC www.csgactuarial.com

2016 Issues & Trends in Medicare Supplement Insurance # medsupp2016


Agenda

• Looking ahead to 2020

• Impact on Medicare Supplement Pricing

• Future of Medicare Supplement

2 2016 Issues & Trends in Medicare Supplement Insurance # medsupp2016


Looking Ahead to 2020



Public Law 114-10 – April 16, 2015

• Referred to as “MACRA” • Medicare Access and CHIP Reauthorization Act of

2015

• Section 401. Limitation on certain Medigap policies for newly eligible Medicare Beneficiaries

*https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf



Sec. 401 ‘‘(1) IN GENERAL.—Notwithstanding any other provision of this section, on or after January 1, 2020, a medicare supplemental policy that provides coverage of the part B deductible, including any such policy (or rider to such a policy) issued under a waiver granted under subsection (p)(6), may not be sold or issued to a newly eligible Medicare beneficiary.

*https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf



Sec. 401 ‘‘(2) NEWLY ELIGIBLE MEDICARE BENEFICIARY DEFINED.— In this subsection, the term ‘newly eligible Medicare beneficiary’ means an individual who is neither of the following: ‘‘(A) An individual who has attained age 65 before January 1, 2020. ‘‘(B) An individual who was entitled to benefits under part A pursuant to section 226(b) or 226A, or deemed to be eligible for benefits under section 226(a), before January 1, 2020. *https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf



What is the key implication of Subsections 1 & 2?

• Beginning in 2020, Med Supp Plans C & F can not be sold or issued to newly eligible Medicare beneficiaries



How will this be implemented?

• Model Regulation 651, Sections 9.1 and 9.2

• Key additional details:

• New eligibles can elect Plans D & G in GI situations

• Changes are required in all states

• Carriers can offer a High Deductible Plan G



Impact of Plan C & F Limitations

• What plan(s) will take Plan F’s place?

• How could this effect pricing?




0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2010 2011 2012 2013 2014 2015

Medicare Supplement Enrollment by Plan (Total)

Plans C, F & J Plans G & N All Other



0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2010 2011 2012 2013 2014 2015

Medicare Supplement Enrollment by Plan (Most Recent 3 Years)

Plans C, F & J Plans G & N All Other



0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2010 2011 2012 2013 2014 2015

Medicare Supplement Enrollment by Plan (Most Recent 3 Years) Excludes: United Healthcare and BCBS Organizations

Plans C, F & J Plan G Plan N All Other


Current Plan G vs. Plan F

• Only benefit difference is Part B Deductible ($166)

• For companies offering both, Plan G premium rates average $420 less than Plan F premium rates, $325 if extreme differences are excluded

• Current Plan G experience and pricing reflects both benefit differences and plan G positive selection (healthier individuals)




60.00%

65.00%

70.00%

75.00%

80.00%

85.00%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Loss Ratios by Plan (Most Recent 3 Years)

F G

*NAIC data excluding United Healthcare


One likely scenario: • Plan G will become the most popular plan for

newly eligibles • Current level of positive selection will not be

sustained • Plan N (or another cost-sharing plan)will

become plan of choice for healthier newly eligibles

2015 Issues & Trends in Medicare Supplement Insurance 15



Plan G Pricing Example


Plan F Plan G Difference G/F Ratio

Claim Cost 1,520 1,354 166 89%

Positive Selection 0% 0%

Loss Ratio 75% 75%

Att. Age Premium 2,027 1,805 221 89%





Claim Cost 1,520 1,354 166 89%


Loss Ratio 75% 75%

Att. Age Premium 2,027 1,625 402 80%





Claim Cost 1,520 1,354 166 89%


Loss Ratio 75% 75%

Att. Age Premium 2,027 1,715 312 85%


• Plan G new business premium rate may need to go up 5-15% • Will vary by carrier due to current rate level and

mix of business • Does not include trend

• Need to consider impact on inforce block

19


How will total Annualized New Business Premium be affected?



Not Much! • Those eligible for Medicare prior to 1/1/2020

will still be able to purchase Plans C and F • The impact on the 2020 Newly Eligible

Beneficiaries won’t be significant



Potential impact on the newly eligible market

22

Current Market

Policy Mix Avg Premium ANBP

Plan F 4,500 2,350 10,575,000

Plan G 3,500 1,880 6,580,000

Plan N 2,000 1,645 3,290,000

Sales: 10,000 20,445,000

2020 New Eligible Market

Policy Mix Avg Premium ANBP

Plan F 0 2,350 0

Plan G 7,500 2,115 15,862,500

Plan N 2,500 1,645 4,112,500

Sales: 10,000 19,975,000 -2%


Future of Medicare Supplement


Medicare Supplement Market Update

United States Births

2016 Issues & Trends in Medicare Supplement Insurance # medsupp2016 24

The chart is from National Vital Statistics Reports, Vol. 64, No. 12, December 23, 2015, page 3


Turning Age 65 by Year


Source: census.gov – 2000 and 2010 census information


Mortality Improvements


Source: SSA Mortality Rates for the period 1900-2007

40.00

45.00

50.00

55.00

60.00

65.00

70.00

75.00

80.00

1900 1920 1940 1960 1980 2000 2007

United States Life Expectancy

Life Expectancy


Age 65+ Population

27

Source: census.gov



Medicare Enrollment Past and Future

28

Source: 2015 Medicare Trustees Report


0

20,000

40,000

60,000

80,000

100,000

120,000

Medicare Enrollment (1000s)


Based on these underlying demographics, and no major changes to Medicare Supplement regulations, CSG projects….



Past & Projected Medicare Supplement Enrollment

30 Sources: NAIC Med Supp study with projection from CSG Actuarial


-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Medicare Supplement Enrollment (1000s)


Past & Projected Medicare Supplement & Medicare Advantage Enrollment

31 Sources: NAIC Med Supp study and cms.gov with projection by CSG Actuarial


-

5,000

10,000

15,000

20,000

25,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Medicare Supplement Enrollment (1000s) Medicare Advantage Enrollment (1000s)


Past & Projected Medicare Supplement Annualized New Premiums


-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Medicare Supplement Annualized New Premium (1000s)


Projected 2015 Medicare Supplement Annualized New Premiums by Source



Past & Projected Medicare Supplement Earned Premiums

34 Sources: NAIC Med Supp study with projection by CSG Actuarial


-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

Medicare Supplement Earned Premium (1000s)


What about future Medicare Supplement rate increases?





Total Medicare Supplement Loss Ratios


76.0%

76.5%

77.0%

77.5%

78.0%

78.5%

79.0%

79.5%

80.0%

80.5%

81.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Sources: NAIC Med Supp study


• Technology

• Being used in the entire product life cycle

• Consumer Education

• Lead Generation

• Applications

• Underwriting

• Claims Processing

• Retention



Medicare Supplement Household Discounts

• More than 50 different companies using HHDs

• Discount percentages have increased, norm has increased from 5% to 7%, some above 10%

• 26 companies now using looser “cohabitation” definition in at least some of the states

• State insurance departments are starting to pay closer attention to these discounts

• Expect this trend to continue to expand in future



Positive signs in the Medicare Supplement market are attracting continued “new” activity

• New rates (rate decreases / adding household discounts, etc)

• New companies in pipeline

• New paper



• For more information:

• csgactuarial.com

• 6th Annual Medicare Supplement Market Projection paper coming this summer

• and much more ……..



Questions?

Andrew Ryba FSA, MAAA

Consulting Actuary

402-502-7747 [email protected]

Jared Strock FSA, MAAA

Consulting Actuary

402-502-7747

[email protected]

42


mailto:[email protected]

mailto:[email protected]

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Looking Ahead to 2020: Insights From An Actuarial Perspective€¦ · Looking Ahead to 2020: Insights From An Actuarial Perspective Sec. 401 (1) IN GENERAL.—Notwithstanding any