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Welcome. Cogent ME International Insurance & Reinsurance Brokers. Medical Insurance Product Development, Pricing and Reinsurance Presented by Sameer Gammoh. Agenda. Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR
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Welcome Cogent ME International Insurance & Reinsurance Brokers
Medical Insurance Product Development,Pricing and ReinsurancePresented bySameer Gammoh
Agenda • Introduction • Product Development &Benefit Design • Pricing & Feasibility • Experience Pricing • Outstanding & IBNR • The Role of TPAs • Reinsurance Cogent ME
Introduction • Causes Behind Health Insurance Losses • Importance of Maths in Health Insurance • Data Recording and Classification • Continuance Monitoring Cogent ME
Causes of Loss • Inability to Identify Legitimate Insured Members • Fraudulent claims – Insured members abuse • No control mainly in out-patient claims • Inability to Control Extensive Procedures by HCPs • Health Care Providers abuse of benefits • No control mainly in out-patient claims • Growth Limitation • Personnel needed • Huge number of claims – consistency • No Accurate Recording of Data • Inaccurate utilization rate by incident , type of illness and procedures • Inaccurate premiums that aren’t driven according to benefit design • Improper underwriting which isn’t based on accumulation of know-how Cogent ME
Importance of Maths • Mathematical Modeling and Prototyping Based on Market Info Provides Better Understanding of Medex Insurance Business in any Market. • Statistical Data Related To : • Average Cost Per In Patient Visit • Average Cost Per Out Patient Visit • Average Length Of Stay in Hospital • Average Cost Per Night • Average Utilization PPPA for In Patient • Average Utilization PPPA for Out Patient • Exposed Population in a Specific Underwriting Year Cogent ME
Importance of Maths • In Preparation to Calculate: • Average B/C PPPA for In Patient • Average B/C PPPA for Out Patient • Average B/C PPPA for Each Benefit Type • Testing the Reliability of the Collected Data • Testing the Reliability of the Mathematical Model Based on The Collected Data. Cogent ME
Agenda • Introduction • Product Development &Benefit Design • Pricing & Feasibility • Experience Pricing • Outstanding & IBNR • The Role of TPAs • Reinsurance Cogent ME
Benefit Design • In Patient Benefits • Out Patient Benefits • Maternity Benefit • Dental Benefit • Optical Benefit • Others • Repatriation • Assistance • Evacuation • Travel and accommodation • Long Term Care Cogent ME
Considerations • Limits • Coverage Limits • Covered cases • Excluded cases • Frequency Limits • In-Patient • Out-Patient • Other Limits • Financial Limits • Maximum limits • Deductibles • Co-insurance Cogent ME
Considerations • Coverage Duration • Short term • Annual • Long term • Age, Gender and other Risk Factors • Pre-Existing Conditions • Eligibility Conditions • Dependency Type • Nationality • Contributions Cogent ME
Agenda • Introduction • Product Development &Benefit Design • Pricing & Feasibility • Experience Pricing • Outstanding & IBNR • The Role of TPAs • Reinsurance Cogent ME
Pricing & Feasibility • Data Availability • Underwriting Info • Global – Related to the employer • Specific – Related to insured member • Past Claims Profile and Experience • Guessing Game • Compared to Similar Situations • Market Trend • Special Deviation Margins • The rule of Thumb Cogent ME
Pricing & Feasibility • Pure Premium ( NRP ) • Expected Actual Cost of Claims According to Benefit • Contingency Margins • Inflation • Gross Premium • Pure Premium • Other Loadings • Profit • Commission • Other overhead expenses • TPA fees • Stamps duty and Taxes Cogent ME
Expected Cost Calculation • Utilization Rate According to Benefit Type • In Patient • Out Patient • Dental … Optical ….. • Average Cost per Incident According to Benefit Type • In Patient • Out Patient • Dental … Optical ….. • Exposed Insured Population By • Class of Coverage • Age • Sex • Benefit Type Cogent ME
Utilization Rate Calculation • In Patient • For a Specific Insurance year (No. of Admissions) • Exposed Population According to Age , Sex and Class of Cover • Length of Stay per Admission • According to In Patient Type of Benefit • Utilization = No. of Cases/ Exposed Population • Out Patient • For a Specific Insurance Year (No. of visits) • Exposed Population According to Age , Sex and Class of Cover • According to Out Patient Type of Benefit • Utilization = No. of Visits/ Exposed Population Cogent ME
Average Cost Per Incident Calculation • In Patient • For a Specific Insurance Year (No. of Hosp Admissions) • For a Specific Insurance Year (Total In Patient Costs) • Average Cost per Case • Average Cost per Hospitalization Night • According to In Patient Type of Benefit • Out Patient • For a Specific Insurance Year (No. of Visits) • For a Specific Insurance Year (Total Out Patient Costs) • Average Cost per Visit • According to Out Patient Type of Benefit Cogent ME
Exposed Population Calculation • Total Insured Members • Total Members At Inception • Added Members During the Insurance Year • Deleted Members During the Insurance Year • According to Actual Transaction Date (Enrollment date) • Calculate Total Number of Insurance Days • Calculate Total Insured Members That Were Exposed to Insurance for 365 Days • At Any given Moment During the Insurance Year • Extrapolated for 12 Month (365 days) Cogent ME
Agenda • Introduction • Product Development &Benefit Design • Pricing & Feasibility • Experience Pricing • Outstanding & IBNR • The Role of TPAs • Reinsurance Cogent ME
Experience Rating (Pricing) • Historical Data Needed • Min. 2 to 3 Years Claims Statistics According to Type of Benefit, Age, Sex and Dependency Type • The Exposed Population Corresponding to Claims Statistics for Each Insurance Year • Coverage Specifications Corresponding to Claims Statistics for Each Insurance Year (Any Coverage Change Must be Accommodated and Accounted for) Cogent ME
Experience Rating (Pricing) • Calculate the Following • B/C Burring Cost by Benefit Type per Insured Member (Age Group, Sex & Dependency) • In Patient • B/C PPP= ((Exposed population * Utilization Rate)*(Average Cost per Visit))/Exposed Population • Out Patient • B/C PPP= ((Exposed population * Utilization Rate)*(Average Cost per Visit))/Exposed Population • All other Benefits – The same Cogent ME
Experience Rating (Pricing) • Calculate the following • Extrapolate a 12 months B/C out of the historical data available • In Patient • B/C PPPA = (B/C PPP /Period in study in days)* 365 • Out Patient • B/C PPPA = (B/C PPP/Period in study in days)* 365 • All Other Benefits – The same Cogent ME
Experience Rating (Pricing) • Calculate the Following • Load for Deviation • % Normally 5% to 10% • 3 Years experience 5% • 2 Years experience 7.5% • 1 Year experience 10% Cogent ME
Experience Rating (Pricing) • Calculate the Following • Load for Inflation • 2 Inflation loadings ( Value – Frequency ) • Value Inflation :% According to the changes in price lists, however in some country price lists are fixed by different bodies and dose not change often. • Frequency Inflation :More health awareness increases frequency of claims therefore a % of increased health awareness must be added . Cogent ME
Agenda • Introduction • Product Development &Benefit Design • Pricing & Feasibility • Experience Pricing • Outstanding & IBNR • The Role of TPAs • Reinsurance Cogent ME
Outstanding & IBNR • Definition • Outstanding Losses: Are the Claims That are Received and Notified for But not Yet Paid • Actual counting of claims. • Actual amounting of claimed values (conservative) • Actual amounting of estimated adjudicated payable value • Outstanding = Total value of claims under process Cogent ME
Outstanding & IBNR • Definition • IBNR: Stands for (Incurred But Not Reported) The Claims that Took Place but not Yet Notified for Nor Paid. • Depends on the (TAT) Turn Around Time for a claim from the moment it incurred until it’s reported, booked, accounted for and paid. (PMS) Performance Measurement System for claims. • Depends on the (ACPD) Average Claims Per Day (Adjudicated Value) • IBNR = TAT * ACPD Cogent ME
Agenda • Introduction • Product Development &Benefit Design • Pricing & Feasibility • Experience Pricing • Outstanding & IBNR • The Role of TPAs • Reinsurance Cogent ME
Situation = No TPA Covered Covers Insureds Reinsurers Is insured Pays Visits RI Broker Insures Pays Healthcare Providers Insurers Cogent ME
Insurance Company’s Problems • High cost of Health Care • Insured Members and Providers Abuse of Benefits • Processing Claims are “After the Fact” • Insured Members & Providers are Unhappy • Cost of in-House Administration • Waste in Time and Material • Lack of Specialized Technology, Expertise Cogent ME
Reinsurers Problems • Unavailable Statistical Info • No Accurate Recording of Vital Data • Reporting Delay • Inability to Propose Corrections on Time • Higher Involvement – Higher Admin Costs • Files Open for Tremendous Period of Time • Ends up With Very Low Margin / Losses • Departing From Market and Use Capacity in Other Markets Cogent ME
Insured Company (Employer) Problems • Unsatisfied Employee • Drop in Productivity • Giving Advance on Salaries • Management Waste of Time (Solving Insurance Problems ) • Changing Insurance Companies Seeking Better Product. • Unavailable Important Personnel Statistics Cogent ME
Insured Members Problems • Need Pre-Authorization Forms - Weekends and Holidays • Need to fill out Paper Claims • Limited Healthcare Provider Network • Might Pay and Later Claim • Lack of Vital Medical History In Emergencies • Lack of a Common Medical Record • Vague Exclusions (Poor Satisfaction) Cogent ME
Healthcare Providers Problems • Delays in Payment • Reimbursement Losses Due to: • Fraud • Vagueness of Coverage • Handling Different Polices and Plans • Identifying Legitimate Insured Members Cogent ME
Situation = With TPA Reinsurers 3rd Party Admin. Insureds RI Broker Insurers Healthcare Providers Cogent ME
TPA IT Cluster Insureds Visit Employers Review Enter Treatment Plan Submit Financial Claims EOB $ $ $ Ins. Co / RI Healthcare Provider Network 3rd Party Administrator - TPA Ideal -TPA Concept Payers Insurance Policy Medical Record Adjudicate Management Agreement Network Agreement
Insureds HC Provider TPA Insured Co. Insurer Reinsurer Ideal Communication System Internet Cogent ME
Agenda • Introduction • Product Development &Benefit Design • Pricing & Feasibility • Experience Pricing • Outstanding & IBNR • The Role of TPAs • Reinsurance Cogent ME
Medex Reinsurance Types Facultative Treaty Proportional Non-Proportional Non-Proportional Proportional Q.S X.L Q.S X.L Surplus Stop Loss Surplus Stop Loss Spec. Agg. Spec. Agg. Cogent ME
Proportional 1- Small Portfolio 2- High Volatility 3- Individual Business 4- Small Groups 5- Lack/Poor Experience 6- Transfer of Know-how 7- Untested Pricing Structure 8- Untested Claims Handling 9- Developing Stage Non-Proportional 1- Huge Portfolio 2- Low Volatility 3- Homogenous Portfolio 4- Long Experience 5- Acquired the Needed Know-how 6- Reliable Pricing Structure 7- Reliable Claims Handling System 8- Maturity Stage When And Why Cogent ME
The Role of a Good Broker • Understanding of the Business and Acquiring the Needed know-how • Becoming a Consultant to the Client Rather Than Placing the Business Only • Working With all Concerned Parties (The Client, The TPA and The Underwriter) • Simply Acting More that a P.O. Box Between the Client and the Underwriter • Being Able to Deliver on Time • A Good Broker’s Job Starts After the Signing of a Reinsurance Contract Cogent ME