cogent me international insurance & reinsurance brokers

June, 2005 Cogent ME

Cogent MEInternational Insurance & Reinsurance Brokers

Welcome


Medical Insurance

Product Development,Pricing and Reinsurance

Presented bySameer Gammoh

Cogent MEJune 2005

Agenda

Introduction Product Development &Benefit Design Pricing & Feasibility Experience Pricing Outstanding & IBNR The Role of TPAs Reinsurance

Cogent MEJune 2005

Introduction

Causes Behind Health Insurance Losses

Importance of Maths in Health Insurance

Data Recording and Classification Continuance Monitoring

Cogent MEJune 2005

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 MEJune 2005

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 MEJune 2005

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 MEJune 2005

Agenda


Cogent MEJune 2005

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 MEJune 2005

Considerations

Limits Coverage Limits

Covered cases Excluded cases

Frequency Limits In-Patient Out-Patient Other Limits

Financial Limits Maximum limits Deductibles Co-insurance

Cogent MEJune 2005

Considerations

Coverage Duration Short term Annual Long term

Age, Gender and other Risk Factors Pre-Existing Conditions Eligibility Conditions Dependency Type Nationality Contributions

Cogent MEJune 2005

Agenda


Cogent MEJune 2005

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 MEJune 2005

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 MEJune 2005

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 MEJune 2005

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 MEJune 2005

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 MEJune 2005

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 MEJune 2005

Agenda


Cogent MEJune 2005

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 MEJune 2005


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 MEJune 2005


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 MEJune 2005


Calculate the Following Load for Deviation

% Normally 5% to 10% 3 Years experience 5% 2 Years experience 7.5% 1 Year experience 10%

Cogent MEJune 2005

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 MEJune 2005

Agenda


Cogent MEJune 2005

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 MEJune 2005

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 MEJune 2005

Agenda


Cogent MEJune 2005

Situation = No TPA

Insures

Is insured

CoveredCovers

Pays

Pays

Reinsurers Insureds

InsurersHealthcareProviders

VisitsRI Broker

Cogent MEJune 2005

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 MEJune 2005

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 MEJune 2005

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 MEJune 2005

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 MEJune 2005

Healthcare Providers Problems

Delays in Payment Reimbursement Losses Due to:

Fraud Vagueness of Coverage

Handling Different Polices and Plans Identifying Legitimate Insured Members

Cogent MEJune 2005

ReinsurersInsureds

Insurers HealthcareProviders

3rd PartyAdmin.

Situation = With TPA

RI Broker

Payers

Ideal -TPA ConceptIdeal -TPA Concept

Employers

Ins. Co / RI

TPA IT Cluster

3rd Party Administrator - TPA

Insureds

Healthcare Provider Network

Insurance Policy

Medical Record

Financial Claims$

Ad

jud

icat

e

Submit

$

ReviewEnterTreatment Plan

Visit

Network Agreement

Management Agreement

$

EOB

Cogent ME 37June 2005

Ideal Communication System

HC Provider

Insureds

Reinsurer

Insurer

TPA InternetInternetInsured Co.

Cogent MEJune 2005

Agenda


Cogent MEJune 2005

Medex Reinsurance Types

Treaty Facultative

Proportional Non-Proportional Proportional Non-Proportional

Q.S

Surplus

X.L

Stop Loss

Spec.Agg.

Q.S

Surplus

X.L

Stop Loss

Spec.Agg.

Cogent MEJune 2005

When And Why

Proportional1- Small Portfolio2- High Volatility3- Individual Business4- Small Groups5- Lack/Poor Experience6- Transfer of Know-how7- Untested Pricing Structure8- Untested Claims Handling9- Developing Stage

Non-Proportional1- Huge Portfolio2- Low Volatility3- Homogenous Portfolio4- Long Experience5- Acquired the Needed Know-

how6- Reliable Pricing Structure7- Reliable Claims Handling

System8- Maturity Stage

Cogent MEJune 2005

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


Q&A


Thank you for your time

cogent me international insurance & reinsurance brokers

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