Embed Size (px)
Citation preview
Session 70 PD, Trends in Accident and Hospital Indemnity
Insurance
Moderator/Presenter:
Kamran A. Malik, ASA, MAAA
Presenters:
William S. Bade, FSA, MAAA
Benjamin M. Cohen, FSA, MAAA
David J. Vnenchak, FSA, MAAA
1
Trends in Accident and
Hospital Indemnity Insurance
Kamran A. Malik, ASA, MAAA David J. Vnenchak, FSA, MAAA
William S. Bade, FSA, MAAA
Accident and Hospital Indemnity Product
Overview
Kamran A. Malik, ASA, MAAA
3
Types of Supplemental Health Benefits
Hospital Indemnity
Accident
Critical Illness
Long Term Disability
Short Term Disability
Heart and Stroke
Cancer Only Indemnity
Long Term Care
Medicare Supplement
4
Hospital Indemnity - Benefits
Daily Hospital Benefit
Initial Confinement Benefit (aka Lumpsum Benefit)
Emergency Room Benefit
ICU Benefit (Daily or Initial or Both)
Transportation and Lodging Benefit
Ambulance Benefit (Ground / Air / Water)
Outpatient Surgery
Outpatient Diagnostic Exams
5
Hospital Indemnity - Benefits
Pregnancy Coverage
Mental Nervous
Drug/Alcohol Treatment
GPO / Inflation
Return of Premium
Wellness
6
Accident Indemnity Benefits
Accidental Injuries including fractures and dislocations
Daily Hospital Benefit (Accidental Injuries Only)
Initial Confinement Benefit ( Accidental Injuries Only)
Surgery Benefit
Transportation and Lodging Benefit
Accidental Death and Dismemberment Benefit
7
Critical Illness - Benefits
Heart Attack
Stroke
Transplant
Coronary Artery Bypass
Angioplasty / Stent
Cancer
Skin Cancer (Significantly Reduced Benefit)
Other Benefits (blindness, coma, deafness, severe
burns, rocky mountain spotted fever, rabies, scarlet fever, bubonic plague etc)
8
Pricing Assumptions
Voluntary Lapse Rates
Interest Rate
Claim Costs
Reserves
Expenses (% of Premium, % of Claims, Per Policy)
Expense Type (Premium Tax, Overhead, Marketing, Issue Expense, and Maintenance Expense)
9
Pricing Assumptions (Cont’d)
Commissions (Can vary by age and policy year)
Policy Fee
Taxes (FIT and DAC Tax Amortization)
Profit Objectives
Issue Age Distribution
Modal Load
Assumed Units
Type of coverage (Indv, Indv+SP, IPF, 2PF)
10
Product Chassis
Group
Individual
Hybrid
11
Types of Rating
Issue Age
Attained Age
Composite Age
12
Special States
Loss Ratios Vary
Special Actuarial Memos
Durational Loss Ratios by Major Benefits
13
Renewability Clause
Required loss ratios vary by renewability type.
To change photo:
1. Delete the current
image. This will leave
a blank placeholder
with a picture icon.
2. Click the icon to add
a new image. The
photo will be
automatically be
cropped to fit the
placeholder.
NOTE: If you use the
“Change Picture”
function,
the image will be
imported in its original
proportions and won’t
fill the placeholder
completely and will
need to be cropped.
A Reinsurer’s view of the Hospital Indemnity Market
David J. Vnenchak
Vice President & Actuary
Healthcare Reinsurance
June 16, 2016
To change photo:
1. Delete the current
image. This will leave
a blank placeholder
with a picture icon.
2. Click the icon to add
a new image. The
photo will be
automatically be
cropped to fit the
placeholder.
NOTE: If you use the
“Change Picture”
function,
the image will be
imported in its original
proportions and won’t
fill the placeholder
completely and will
need to be cropped.
15
Why Hospital Indemnity?
16
See Appendix for
instructions on how
to change sidebar
photo
Growth in Out of Pocket Health Care Expenditures
Average Employee OOP Expenses vs. CPI rate
$2,420
$2,675 $2,820
$3,005
$3,280 $3,470
$3,600 $3,787
$4,065
$4,316
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EE OOP CPI
Based on Milliman Medical Index report, employee OOP Expenses; 2007 to 2016
17
See Appendix for
instructions on how
to change sidebar
photo
HSA Compliant Plans
IRS Max Family OOP under HDHP
$12,100
$12,500
$12,700
$12,900
$13,100 $13,100
OOP Max
2012 2013 2014 2015 2016 2017
Rise of HDHPs
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
% of Covered EEs enrolled in HDHPs
Source: IRS HDHP Limits 2012 – 2017 Source: Kaiser 2015 Employer Health Benefits
Survey
18
See Appendix for
instructions on how
to change sidebar
photo
Hospital Discharge Data
Trends in Inpatient Utilization
4.00
5.00
6.00
7.00
8.00
9.00
100.0
120.0
140.0
160.0
180.0
1980 1990 2000 2010
Discharge per 1,000 Avg LOS
All Gender, Ages 45-64
Source: National Hospital Discharge Survey, 2010, 2000, 1990 and 1980
19
See Appendix for
instructions on how
to change sidebar
photo
Other Considerations
Producer/Broker interest
• Additional source of revenue
Growth in Private Exchanges
Interest from both Life and Health Insurers
Regulatory environment
To change photo:
1. Delete the current
image. This will leave
a blank placeholder
with a picture icon.
2. Click the icon to add
a new image. The
photo will be
automatically be
cropped to fit the
placeholder.
NOTE: If you use the
“Change Picture”
function,
the image will be
imported in its original
proportions and won’t
fill the placeholder
completely and will
need to be cropped.
20
Reinsurance Structures
21
See Appendix for
instructions on how
to change sidebar
photo
Common HIP Reinsurance Structures
QS Characteristics
Reinsurer is ceded a proportional share of
risk for a proportional share of net
premium (coinsurance)
Reinsurer retains reserves for ceded
business
Ceding allowance ensures that reinsurer
covers their share of insurance company
expenses on the business. Amounts
agreed to in advance
Quota Share/Coinsurance
Financial Statement - 40% coinsurance
($000) Insurer Reinsurer
Revenue:
Premiums:
Gross $10,000 $4,000
Ceded $4,000 0
Net $6,000 $4,000
TOTAL REVENUE $6,000 $4,000
Expenses:
Claims $180 $120
Inc. in Reserves $3,420 $2,280
Commissions $900 $600
Policy & Claim: $720 $480
Premium Tax: $180 $120
General Expense: $180 $120
TOTAL EXPENSES: $5,580 $3,720
GAINS/(LOSSES): $420 $280
Profit Margin 7.0% 7.0%
22
See Appendix for
instructions on how
to change sidebar
photo
Common HIP Reinsurance Structures
YRT Characteristics
Reinsurance premium rates not directly
tied to premium rates on policies issued
Ceding company reinsures the morbidity
risk only
While individual policies are typically entry
age rated, YRT reinsurance is based on
attained age
• YRT premiums are calculated based on a
schedule of rates by attained age rate cell
Yearly Renewable Term (YRT)
Financial Statement - YRT 40% coinsurance
($000) Insurer Reinsurer
Revenue:
Premiums:
Gross $10,000 $222
Ceded $222 0
Net $9,778 $222
TOTAL REVENUE $9,778 $222
Expenses:
Claims $180 $120
Inc. in Reserves $5,620 $80
Commissions $1,500 $0
Policy & Claim: $1,200 $0
Premium Tax: $300 $0
General Expense: $293 $7
TOTAL EXPENSES: $9,093 $207
GAINS/(LOSSES): $684 $16
Profit Margin 7.0% 7.0%
23
See Appendix for
instructions on how
to change sidebar
photo
Impact of YRT vs. QS
Reinsurance Premium Rate by Duration
$0
$20
$40
$60
$80
$100
0 1 2 3 4 5 6 7 8 9 10 11 12
Attained Age Entry Age
Sample Claim Costs for a 52 year old male with a policy to age 65
Entry Age reflects 5% interest assumption and lapse/mortality scale
24
See Appendix for
instructions on how
to change sidebar
photo
Impact of YRT vs. QS
Ceding Insurance Company Cash Flow under 40% coinsurance
$0
$10,000
$20,000
$30,000
$40,000
$50,000
0 1 2 3 4 5 6 7 8 9 10 11 12
QS
Sample Active Life Reserve for a 52 year old male with a policy to age 65
Entry Age reflects 5% interest assumption and lapse/mortality scale
To change photo:
1. Delete the current
image. This will leave
a blank placeholder
with a picture icon.
2. Click the icon to add
a new image. The
photo will be
automatically be
cropped to fit the
placeholder.
NOTE: If you use the
“Change Picture”
function,
the image will be
imported in its original
proportions and won’t
fill the placeholder
completely and will
need to be cropped.
25
Why Reinsurance?
26
See Appendix for
instructions on how
to change sidebar
photo
Benefits of partnering with reinsurer
Risk partner (morbidity/lapse risk transfer)
Expertise in a new market/product
• Product development support
• Underwriting assistance
• Pricing assistance
• Filing experience
Mitigate surplus strain (individual products)
RBC Relief
©2016 RGA. All rights reserved.
No part of this publication may be reproduced in any form without the prior permission of RGA.
The information in this publication is for the exclusive, internal use of the recipient and may not be relied upon by any other party other than the recipient and its affiliates, or
published, quoted or disseminated to any party other than the recipient without the prior written consent of RGA.
Marketing &
Distribution
June 16, 2016 – Bill Bade
29
Intro to Product Implementation
Product Design
Underwriting
Pricing & Reserving
Service & Technology
June 16, 2016 – Bill Bade
30
Worksite Market Timeline 1990s - 2004
A few carriers dominate the
market with individual Accident,
Cancer, and Disability products
Unum merges with Colonial
(1993) and Provident (1999)
2005 - 2007
Several carriers begin
emphasizing group Accident
and Critical Illness marketing
efforts
Carriers begin placing products
on Third Party Platforms
2008 - 2009
Influx of new market
participants in response to the
ACA
AFLAC completes acquisition of
Continental American
Liazon begins enrolling clients
2010 - 2012
Accident and Critical Illness
products dominate product
development due to simplicity
and perceived staying power
with ACA rules
2013 - 2014
Towers Watson acquires Liazon;
Hodges Mace acquires SmartBen
Mercer Marketplace Exchange adds
voluntary products, AON launches
its Corporate Health Exchange, and
Buck introduces the RightOpt
exchange
2015
Willis and Towers Watson merge to
form Willis Towers Watson
Mercer purchases 9.9% stake in
Benefitfocus
Carrier expansion of product
portfolio with ACA certainty
June 16, 2016 – Bill Bade
31
Facts: An employer sponsors a group health plan that provides coverage through an insurance policy. The policy provides benefits for certain services at a fixed
dollar amount per day, but the dollar amount varies by the type of service.
Conclusion: Because the policy provides benefits in a different amount per day depending on the type of service, the policy is not hospital indemnity or other fixed
indemnity insurance that is an excepted benefit.
HI Regulatory Activity¹
Who?
What?
Why?
On June 8, 2016, the Department of Health & Human Services as well as the Department of the Treasury released proposed rules impacting travel, hospital indemnity, and GAP medical
insurance.
A hospital indemnity or other fixed indemnity insurance policy that provides benefits for certain services at a fixed amount per day, but in varying amounts depending on the type of
service, does not meet the condition that benefits be provided on a per day (or per other time period, such as per week) basis.
¹ Department of the Treasury, Department of Labor, and Department of Health and Human Services. Expatriate Health
Plans, Expatriate Health Plan Issuers, and Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits; and Short-
Term, Limited-Duration Insurance (2016)
June 16, 2016 – Bill Bade
32
Contact Information
Kamran A. Malik, ASA, MAAA
David J. Vnenchak, FSA, MAAA
William S. Bade, FSA, MAAA
33
Questions?
34
Don’t be angry, get MaD!
The Marketing and Distribution Section
Research Articles Education
34
Join today! www.soa.org/mad
