Medical Insurance Risks and Mitigants Amiad BenMeir, Swiss Reinsurance Company Medical insurance Risks and Mitigants • Healthcare and PMI Challenges • Medical Insurance Risks • How to Mitigate these Risks • Risk Management • Reinsurance • Q&A Medical insurance Risks and Mitigants Healthcare challenges • Ageing populations • increasing complexity of diseases and health care needs • Increase in Chronic diseases • environmental and socioeconomic factors as well as increasingly by lifestyle • Structural challenges • increasing economic burden of preserving high quality, comprehensive care without undue financial barriers to access against…. • …. ever more intense public expectations of what healthcare can and should deliver Medical insurance Risks and Mitigants Private Medical Insurance challenges • Rapid Increase in Healthcare Costs • General Inflation • Specific Inflation: Expensive New Technology • Growth Trend in Utilization • Higher Consumer Awareness • Aging Population • Ability to Treat more • Political issue • Heavily regulated, on political focus • Regulatory changes encouraging Private Medical Insurance (PMI) • Increase in demand for insurance expertise • product design and claims management • capital invested Medical insurance Risks and Mitigants Demand side statistics Global PMI utilisation patterns Medical insurance Risks and Mitigants Supply side statistics Number of hospital beds per 10,000 population ADICIONE O TÍTULO Medical insurance Risks and Mitigants Medical Insurance Risks • Medical technologies • Ageing • Costs per service • Demand/Awareness • Political (regulations) • Catastrophic risk (pandemics,forex, govt) • Expense risk (TPAs) • Selective lapse risk Medical insurance Risks and Mitigants Scenarios for high inflation • Medical inflation (US example and others). above CPI! Medical insurance Risks and Mitigants Risks of covering medical over the long run • Ageing population => increased Costs • Renewal Guarantee • Rate Guarantee • Scope Guarantee (minimum benefit) => Need to set-up reserves => What can we do to reduce risks? Medical insurance Risks and Mitigants Risk Management • AVOID • ACCEPT • REDUCE • TRANSFER Medical insurance Risks and Mitigants Risk Management - REDUCE • By Design • u/w terms , limits, exclusions • co-payment (shares risk with the insured) • By Management • Claims control, pre authorisation, protocols, Managed Care • Portfolio management (risks, lapses), concentration of risks (groups) • Monitoring, Controls, Premium increases • By Structure • Alignment of interests • Risk-based premiums and reviews • Medical Providers Network Medical insurance Risks and Mitigants Risk Management - TRANSFER: Reinsurance solutions (R/I) • Quota Share (Q/S) • Specific Stop Loss (i.e. specific XoL) • (Working) Specific Stop Loss+ Aggregate Deductible • CataXL • Stop Loss • Structured Solutions (tailor-made) Medical insurance Risks and Mitigants R/I example: Quota Share $100,000 Reinsurance: $140,000 $85,000 ($15,000+$32,500+$42,500+$50,000) $65,000 50% retention $30,000 Retention: $140,000 ($15,000+$ $32,500+$42,500+$50,000) A copyright 2010 Swiss Re B C D Total annual claims of four individuals R/I example: Specific Stop Loss $100,000 Specific SL: $100,000 $85,000 ($15,000+$35.000+$50,000) $65,000 $50,000 retention $30,000 Retention: $180,000 $30,000 +$50,000 X 3 A copyright 2010 Swiss Re B C D Total annual claims of four individuals R/I example: Aggregating Specific Stop Loss $100,000 Specific SL: $70,000 $85,000 ($20.000+$50,000) $65,000 Aggregate Satisfied with Claimants B & C Aggregating Specific: $30,000 $50,000 retention $30,000 Retention: $180,000 $30,000 +$50,000 X 3 A copyright 2010 Swiss Re B C D Total annual claims of four individuals Specific Stop Loss coverage: Leveraged Trend • A higher rate of increase (trend) than underlying medical trend • Leveraged Discounts (Network discount) work in a similar way to leveraged trend. Example 2011 experience From Ground up Claim 1 Claim 2 Claim 3 Claim 4 Total Increase 500 1,000 1,500 2,000 5,000 2012 projection (+10%) Excess 1,000 500 1,000 1,500 From Ground up 550 1,100 1,650 2,200 5,500 10% Excess 1,000 100 650 1,200 1,950 30% Medical insurance Risks and Mitigants Excess 1,100 550 1,100 1,650 10% Consideration in choosing R/I • Risk appetite • Capital needs • Diversification (i.e. mono-line insurer, self funded groups) • Exposure and Volatility of risks (i.e. what is covered) • Size • Other constraints Medical insurance Risks and Mitigants Medical Insurance Risks – R/I SOLUTION • Medical technologies / Costs per service high cost claims/Medical inflation – Q/S & Specific XoL • Ageing/ Long-term risk - capital solutions. • Demand/Awareness – utilization trend – Q/S • Political (regulations) – misprice lock-in – Q/S • Catastrophic risk – Stop Loss, (CatXL cover) • Expense risk (TPAs) – operational issue • Selective lapse risk – operational & design issue Medical insurance Risks and Mitigants Swiss Re's Global medical reach SR in Europe • Health proposition across all Europe. SR in Asia • A health R/I leader in China, India, Japan, Hong Kong, Malaysia & Korea • Strong presence in Thailand, Singapore, SR in the US Swiss Re specialises in insuring the excess medical risks of self-funded, employer-sponsored health plans SR in Latin America • Strong focus currently on Mexico & Brazil • Diversified presence in Central America SR in Middle East • Largest books in UAE, Lebanon and KSA • TPA partnerships Swiss Re Value Proposition for Medical Insurance SERVICES RISK CARRIE R Risk transfer Capital solutions UW SUPORT & TOOLS ACTUARIAL MONITORING CLAIMS SUPPORT Product design Risk management Data management Medical insurance Risks and Mitigants SALES MARKETING Customer service Portfolio admin Claims Admin THANK YOU OBRIGADO Q&A contato: Amiad BenMeir | Product Actuary, Life & Health Swiss Reinsurance Company | Mythenquai 50 / 60, 8022 Zurich, Switzerland Direct: +41 43 285 79 64 E-mail: [email protected] Legal notice ©2012 Swiss Re. All rights reserved. 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