Transcript Canadian Institute of Actuaries L’Institut canadien des

Canadian
Institute
of
Actuaries
L’Institut
canadien
des
actuaires
2007 Annual Meeting ● Assemblée annuelle 2007
Montreal
PART I
HEALTH AND DENTAL
PRICING AND COST
CONTROL
Pricing and Cost Control
Prescription drugs – Outside Quebec
2007 Annual Meeting
Assemblée annuelle 2007
1.
•
Trend assumption generally set to provide for both utilization
and inflation
•
•
•
•
•
Inflation driven by new drugs
Utilization driven by aging
As population ages, need to separate utilization from inflation and
test separately
Requires separate analysis for each and perhaps new
considerations e.g. should factor vary by age or gender?
Bill102 in Ontario affects private plans
•
•
•
•
ODB now lists Generics at 50% of reference brand price (down
from 70% or 63%)
Private insurers who use the ODB as a reference may see cost
reductions
Interchangeability is extended to non formulary listed drugs (used
to be ODB listed drugs only)
Reductions in allowable mark-up for ODB drugs – possible
savings
3
Pricing and Cost Control (continued)
Prescription drugs – Outside Quebec (cont’d)
1.
2007 Annual Meeting
Assemblée annuelle 2007
•
In pricing, might begin to consider whether different
adjudicators produce predictably different claim costs
•
•
•
2.
If so, how can this be measured and built into pricing of new
groups?
Is it big enough to matter, given new group pricing practices?
Possibility of steering high claimants back to public plans
Medical costs
•
Many carriers are seeing rapid increases in ancillary benefits
e.g. paramedicals, orthotics
Strict application of COB for cost control
Plan design is being reconsidered in light of such increases
•
•
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•
Internal maximums can limit exposure
Have you considered the possibility of fraud?
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Could be provider fraud or insured employee fraud
Develop means of identifying possible fraud and investigating
Where recoveries result, need to define a protocol for returning to ASO
or retention clients
4
Pricing and Cost Control (continued)
2.
Aggregate stop-loss
Little use of aggregate stop-loss at present
Seems odd, given the possibility of very large drug or medical
claims
Sponsors might be interested – there appears to be a need
2007 Annual Meeting
Assemblée annuelle 2007
•
•
•
•
3.
Why is it not being met?
Health Care Spending Accounts
Require less stringent adjudication than insured plans
•
•
•
•
4.
Why are adjudication charges not reduced?
Is it costs of tracking the HCSA amounts?
HCSA's shift costs to employees – will there be any backlash?
Some carriers are breaking experience down into medical
sub-benefits for pricing purposes
•
How is credibility assigned to sub-benefits?
Does it differ from that applicable to the benefit as a whole?
•
If so, should it differ?
•
5
Pricing and Cost Control (continued)
5.
Prescription drugs – Québec RAMQ/ SCAM pooling results
•
Evolution in number of large drug claims
•
Found at www.pooling.ca
20K-50K
50K-100K
100K-150K
150K+
2002
226
8
0
0
234
2003
336
16
0
0
352
2004
458
18
1
1
478
2005
550
18
3
0
571
2006 p
651
42
1
0
694
6
Pricing and Cost Control (continued)
5.
Prescription drugs – Québec RAMQ/ SCAM pooling results
•
Evolution in threshold per cert
SCAM-evolution of threshold per certificates
Group Size (10 yrs
annual rate of growth)
20 000 $
18 000 $
16 000 $
14 000 $
Less than 10 (12.3%)
12 000 $
10 to 24 (12.2%)
10 000 $
25 to 49 (12.6%)
8 000 $
50 to 124 (12.2%)
6 000 $
4 000 $
2 000 $
0$
1999
2002
2005
2007
2008
7
Pricing and Cost Control (continued)
5.
Prescription drugs – Québec RAMQ/ SCAM pooling results
•
Evolution in threshold in pooling charge
SCAM-Increase in single cert annual pool charge
Less than 10 (11.9%)
25 to 49 (20.4%)
180 $
10 to 24 (13.2%)
50 to 124 (21.5%)
160 $
140 $
Group Size (10 yrs
annual rate of growth)
120 $
100 $
80 $
60 $
40 $
20 $
0$
1999
2002
2005
2007
2008
8
Pricing and Cost Control (continued)
2007 Annual Meeting
Assemblée annuelle 2007
6.
Impact of the new prescription drugs policy
– Four main themes:
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Access to drugs
Establishment of fair and reasonable drug
prices
Maximize drug utilization
Maintenance of a dynamic
biopharmaceutical industry in Québec
– Implementation plan over three years
9
6. Qc new drug policy
Immediate effects
Policy and Guidelines
• Drug advisory panel
• No reference pricing
policy
• Permanent
discussion forum
between the
industry and the
government
Financial
• Indexation of drug prices
• Implementation of a
maximum payable price
• Reduction of generic drug
prices
• From 70%-63% to 60%54%
• Negotiation of agreements
10
6.Qc new drug policy (cont’d)
Indexation of Drug Prices
• Effective April 18, 2007
• Listed on the drug formulary ≥ 2 years
• Maximum allowable increase = CPI
increase (2.03% for 2007)
• Obligation to provide Quebec with the
best price available in Canada
• Must enter into a contribution agreement
to mitigate the impact of price increases
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6.Qc new drug policy (cont’d)
Maximum Payable Price (MPP)
• Difference between (price paid vs MPP) paid by
patient
• Difference not accounted for in the calculation of
the maximum contribution
• Exceptional measure if price increase exceeds
the allowable rate
• Possibility of exceptional grounds to justify an
increase exceeding the allowable rate
• If accepted, included in calculation of the
maximum
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6.Qc new drug policy (cont’d)
Medium-Term Financial Effects
• Facilitate the “Limited Use” medication process
– Grouping of RX
– Coding
– Online request
• Drugs acquired in ambulatory care and administered at
the hospital (except chemotherapy)
• Access to drug after research
• Rare genetic metabolic diseases
– Evaluation framework
• Commitment by manufacturers and wholesalers
• Management of wholesalers’ maximum mark-ups
• Priority evaluation if significant potential savings for the
public plan
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Pricing and Cost Control (continued)
2007 Annual Meeting
Assemblée annuelle 2007
7.
Dental Care
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Rate increases exceed Fee Guide – is it utilization?
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In a Fee Guide-ruled world, dentists are subject to different
pressures than medical care providers
New techniques are being developed
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Watch for "diagnosis creep"
New = more expensive
Carriers may contemplate more use of dental predetermination to reduce exposure
Fraud issues
Strict application of COB for cost control
14
Post-Retirement Assumptions
2007 Annual Meeting
Assemblée annuelle 2007
1.
Market practices-Gaps
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Combination of inflation and aging may fall short of factors
used by carriers at renewal
Little detailed guidance for selection of assumption(s) (CIA
sub-committee is investigating the need for guidance)
Historical record does not support immediate grading down
(nor the ultimate level)
Market practices – concerns
2.
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Little explicit guidance from CIA
CICA 3461 states that assumptions are to be "management's
best estimate"
•
In practice, sponsors rely on consultants to define
acceptable assumptions
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Post-Retirement Assumptions
Market practices – concerns (continued)
2007 Annual Meeting
Assemblée annuelle 2007
2.
•
CICA 3461 states that assumptions are to be "management's
best estimate"
•
Assumptions vary by consultant, so changing consultant
can change assumptions
•
So do they really constitute "management's best
estimate"?
16
Experience Trends
2007 Annual Meeting
Assemblée annuelle 2007
1.
Non-emergency health
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Services by hospitals, physicians and other medical
professionals, (so services covered by provincial plan)
Reflects experience within a single province
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Trends vary by age, type of service and gender, (but variance is
not large)
For working ages, annual trend varies from about 5.25% to nearly
8% for hospital and from 7.5% to about 9.5% for other expenses
Experience trends show variance by province, as well as by
age, gender and type of service
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Variation is large – highest provincial trends net of CPI may be as
much as 5 or 6 times lowest
Highest tend to be experienced in remote areas e.g. the
Territories, (but from since 1997, many of the western provinces
have experienced higher than average trends in these costs)
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PART II
GROUP HOT TOPICS
Group Hot topics
2007 Annual Meeting
Assemblée annuelle 2007
Group OOCM trends
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Higher dollar maximums
Less number of days
Impact of currency at par with the USA
Trend to “individualizing” the benefit: for
example:
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pre-ex stability clauses
Including “symptoms” as well as treatment
Alcohol abuse to be excluded
Must call within 24 hours or else benefits
reduced
19
Group Hot topics (cont’d)
Social and demographics
• Boomers dangerously close to
retirement age will lead to shortage
of human resources.
• Effect of removal of mandatory
retirement at age 65 on Life and
LTD
• Both phenomenon will require Group
to offer/ extend LTD benefits past
age 65
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Cost increase Life vs LTD
(relative scale only)
LTD
25
30
35
Life
40
45
50
55
60
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Impact of delayed retirement vs Group
size- Example of one key employee
age 61 staying vs retiring
Life (rate per 1000)
Group
size
Employee
staying
Employee
retiring
LTD (rate per 100)
impact
Employee
staying
Employee
retiring
impact
10
0,32
0,19
168,4%
1,11
0,89
124,7%
20
0,48
0,43
111,6%
1,44
1,32
109,1%
50
0,40
0,38
105,3%
1,78
1,73
102,9%
100
0,38
0,37
102,7%
2,00
1,98
101,0%
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Hot topics (cont’d)
Life Concentration of Risk
• The Canadian insurance industry,
led by Manulife, have introduced a
standard template for the gathering
of concentration of risk data for
groups over 500 lives.
• Manulife has recently started using
the tool.
• Other insurers are waiting to follow.
25
Hot topics (cont’d)
2007 New MCCSR
requirements
• May not be appropriate for Group
Life
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Hot topics (cont’d)
More health care privatization
• Inclusion to EHC of certain
benefits already theoretically
already covered by Medicare
(Cat-Scans, MRI, orthopedics
surgery, etc)
• LTD cost containment: insurers
pay more to get faster medical
access to treatment/ surgery to
stop disability payments quicker
27
Hot topics (cont’d)
AD&D Legal Issues
• Recent court decisions have widened the
definition of "accident".
– Being paralyzed as a result of a mosquito
bite carrying the West Nile virus;
– Being paralyzed after acquiring Herpes
Simplex Virus through unprotected sex with
three women;
– Heart attack while playing basketball
• Will have implications on AD&D pricing
and plan design
28
Hot topics (cont’d)
Group Critical Illness
• Employers seem to have finally
understood the value of this product
• May be a solution to AD&D legal
issues
29