Upload
mervin-lambert
View
213
Download
0
Tags:
Embed Size (px)
Citation preview
Texas State Planning Grant Texas State Planning Grant ConferenceConference
January 31 – February 1, 2002January 31 – February 1, 2002
The Economics of Health InsuranceThe Economics of Health Insurance
Tim D. Lee, FSA, MAAATim D. Lee, FSA, MAAA
Milliman USAMilliman USA
Houston TXHouston TX
(713) 658-8451(713) 658-8451
Source: Milliman USA Health Cost Guidelines Milliman USA
The Economics of Health The Economics of Health InsuranceInsurance
Where Does the Premium Go?
What Drives the Cost of Medical Care?
How Do Insurance Companies Determine Their Premium Rate?
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go?100 Employee Group100 Employee Group
Medical Claims, Administrative Expense & ProfitMedical Claims, Administrative Expense & Profit
$0
$40
$80
$120
$160
$200
Medical ClaimsAdministrative Expense & Profit
80%
20%
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go?100 Employee Group100 Employee Group
Break-down of Medical ClaimsBreak-down of Medical Claims
$0
$40
$80
$120
$160
$200
HospitalPhysicianRXOther MedAdministrative Expense & Profit
20%
5%
15%
30%
30%
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go?100 Employee Group100 Employee Group
Break-down of Administrative Expense & ProfitBreak-down of Administrative Expense & Profit
$0
$40
Provider Relations/Member Services/Financial Mgt.Claims ProcessingCommissionsProfitPremium Tax
7%
5%
3%
3%
2%
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go?100 Employee Group100 Employee Group
Break-down of Medical Claims, Administrative Break-down of Medical Claims, Administrative Expense & ProfitExpense & Profit
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200 Hospital
Physician
RX
Other Med
Provider Relations/Member Services/Financial Mgt.
Claims Processing
Commissions
Profit
Premium Tax
20%
80%
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go?Small Group vs. Medium Group vs. Large GroupSmall Group vs. Medium Group vs. Large Group
$0
$40
$80
$120
$160
$200
$240
10 EmployeeGroup
100 EmployeeGroup
10,000EmployeeGroup
Medical ClaimsAdministrative Expense & Profit
$168
$160
$160
$72$40
$20
70%
30% 20
%
80%
8.3%
91.7%
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go?Individual InsuranceIndividual Insurance
$0
$40
$80
$120
$160
$200
$240
Medical ClaimsProvider Relations/Member Services/Financial Mgt.Claims ProcessingCommissionsProfitPremium Tax
60%
40%
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go? IndividualIndividual vs. Small Group vs. Medium Group vs. vs. Small Group vs. Medium Group vs.
Large GroupLarge Group
$0
$40
$80
$120
$160
$200
$240
Individual 10 EmployeeGroup
100 EmployeeGroup
10,000Employee
Group
Medical Claims
Administrative Expense & Profit
60%
40%
70%
30%
80%
20%
91.7%
8.3%
Source: Milliman USA Health Cost Guidelines Milliman USA
Where Does the Premium Go?Where Does the Premium Go?
Conclusions:Conclusions:
Premium is primarily driven by the cost of medical claims.
Administrative costs are relatively minor and inflexible.
Portion spent on administration shrinks as groups get larger.
Insurer profits are a very small piece of the total premium.
Source: Milliman USA Health Cost Guidelines Milliman USA
What Drives the Cost of What Drives the Cost of Medical Care?Medical Care?
Type of Service Used
Frequency of Use (Utilization)
Provider’s Charge for Service
Source: Milliman USA Health Cost Guidelines Milliman USA
Sample Costs Per MemberSample Costs Per Member
=
=
=
x
x
x
$350$507.0 prescriptions
Pharmacy
$180$603.0 visitsPhysician Visits
$750$2,500 .3 daysInpatient Hospital
Annual Annual CostCost
ChargeCharge
Per ServicePer ServiceAnnual Annual
UtilizationUtilization
Type of Type of
ServiceService
Source: Milliman USA Health Cost Guidelines Milliman USA
New Types of Services
Source: Milliman USA Health Cost Guidelines Milliman USA
How Do Medical Costs Vary How Do Medical Costs Vary By Age and Gender?By Age and Gender?
Annual Average = $2,600 Per MemberAge Male Female
0 – 1 $3,600 $3,600
2 – 18 $1,050 $1,050
19 – 29 $1,150 $2,000
30 – 39 $1,600 $2,900
40 – 49 $2,500 $3,800
50 – 59 $4,600 $5,200
60 – 65 $7,500 $6,900
Source: Milliman USA Health Cost Guidelines Milliman USA
How Do Medical Costs Vary How Do Medical Costs Vary By Age and Gender?By Age and Gender?
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
$7,000
$7,500
0 5 10 15 20 25 30 35 40 45 50 55 60 65
Male
Female
AGEAGE
Source: Milliman USA Health Cost Guidelines Milliman USA
How Do Medical Costs Vary How Do Medical Costs Vary By Geographic Area?By Geographic Area?
National Annual Average = $2,600 Per Member
$2,160Wichita Falls
$2,240Ft. Worth
$2,340El Paso
$2,550Dallas
$2,630Houston
$2,800Tyler
$3,040Galveston
AmountArea
Source: Ingenix MDR Payment System Milliman USA
How Do Medical Costs Vary How Do Medical Costs Vary By Provider?By Provider?
$3,188$2,031Cataract Removal CPT 66984
$3,629$2,117Septoplasty CPT 30520
Hospital Outpatient
$7,092$6,326Coronary Artery Bypass CPT 33534
$56$43Office Visit CPT 99212
Physician
7575thth PercentilePercentile
2525thth PercentilePercentile
ServiceService
2001 Charges in Austin/San Marcos
Source: Milliman USA Health Cost Guidelines Milliman USA
Plan Benefits Copays
Indemnity Plan HMO Plan
How Do Medical Costs How Do Medical Costs Vary Vary
By Benefit Plan?By Benefit Plan?
Plan Benefits = 79% of Changes
Plan Benefits = 93% of Charges
Plan Benefits 20% Coinsurance $500 Deductible
Plan Benefits = 79% of Charges
Source: Milliman USA Health Cost Guidelines Milliman USA
How Do Medical Costs Vary How Do Medical Costs Vary By Insurance Product?By Insurance Product?
Inpatient Hospital Costs Per Member
=
=
=
x
x
x
60%$300$1,500.2 days
Discounts and Utilization Management (HMOs)
$450
$750
Annual Cost
$1,500
$2,500
Charge Per Service
40%.3 daysDiscounts (PPO)
0%.3 daysUnmanaged
SavingsAnnual
Utilization
Type of
Delivery System
Source: Milliman USA Health Cost Guidelines Milliman USA
How Does Underwriting How Does Underwriting Affect Medical Costs?Affect Medical Costs?
0
20
40
60
80
100
120
140
160
180Large Group 1 2 3 4 5 6+ Average
Policy Year
Source: Health Care Financing Administration, Office of Information Services: Data from the Medicare Decision Support System; data development by the Office of Strategic Planning.
Milliman USA
Why Do Insurers Underwrite?Why Do Insurers Underwrite?Percent Distribution of Medicare Persons Served Percent Distribution of Medicare Persons Served
and Program Payments Under Medicare: CY and Program Payments Under Medicare: CY 19971997
Am
ount
of P
rogr
am P
aym
ents
$29.8 Million Persons Served
$175.4 Billion in Program Payments
$25,000 or More
$10,000-$24,999$5,000-$9,999
$2,000-$4,999
$500-$1,999
$1-$499
$25,000 or More
$10,000-$24,999
$5,000-$9,999$2,000-$4,999$500-$1,999$1-$499
6.3%
9.4%
8.3%
13.8%
26.4%
36.0%
50.1%
26.5%
10.2%
1.2%
Percent of Persons Served
Percent of Program Payments
4.7%7.3%
Source: Milliman USA Health Cost Guidelines Milliman USA
How Do Insurance Companies How Do Insurance Companies Determine Their Premium Determine Their Premium
Rate?Rate?
Estimate Medical Costs Using Some Objective Criteria:
•Product (Indemnity, PPO, HMO)
•Plan Benefits
•Age
•Gender
•Geographical Area
Source: Milliman USA Health Cost Guidelines Milliman USA
How Do Insurance Companies How Do Insurance Companies Determine Their Premium Determine Their Premium
Rate?Rate?
Estimate Medical Costs Using Some Objective Criteria:
•Product (Indemnity, PPO, HMO)
•Plan Benefits
•Age
•Gender
•Geographical Area
Adjust the Estimate for Underwriting Information (Objective and Subjective)
Source: Milliman USA Health Cost Guidelines Milliman USA
How Do Insurance Companies How Do Insurance Companies Determine Their Premium Determine Their Premium
Rate?Rate?
Estimate Medical Costs Using Some Objective Criteria:
•Product (Indemnity, PPO, HMO)
•Plan Benefits
•Age
•Gender
•Geographical Area
Adjust the Estimate for Underwriting Information (Objective and Subjective)
Add Expected Administrative Expenses and Profit
•Product
•Group Size
Source: Milliman USA Health Cost Guidelines Milliman USA
The Economics of Health The Economics of Health Insurance Insurance
SummarySummary
Premiums Are High Because the Cost of Medical Care is High
Some Administrative Cost Savings Possible For Small Groups; But Not a Significant Impact On Affordability
Expected Cost of Medical Care Can Vary Significantly Among Small Groups; That’s Why Premiums Will Vary Among Groups
To Make Premiums Affordable, Focus On The Cost of Medical Care