1999 cas seminar on health and managed care health care provider excess insurance prepared by:...
TRANSCRIPT
![Page 1: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/1.jpg)
1999 CAS SEMINAR ON HEALTH AND MANAGED CARE
Health Care Provider Excess Insurance
Prepared By:
Milliman & Robertson, Inc.
Arthur L. Wilmes, FSA, MAAA
![Page 2: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/2.jpg)
Prospective Trends in Healthcare
• Healthcare Providers Need to Consider Strategies That Increase Efficiency
• Forces in the Healthcare Market Will Make It Very Difficult for Status Quo Providers to Compete Effectively
• Healthcare Providers Will Need to Develop Their Patient Management Processes as if They Are Being Paid Under Capitation
![Page 3: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/3.jpg)
Health Care Delivery Systems
• Independent Practice Associations (IPAs)• Physician Practice Management Companies
(PPMCs)• Group Practice Without Walls• Medical Group Practice• Physician Hospital Organizations (PHOs)• Medical Service Organization (MSOs)• Foundation Model
![Page 4: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/4.jpg)
Independent Practice Associations• Umbrella Contracting Entity for Multi-Specialty or
Single Specialty Physicians
• Individual Physicians Reimbursed by the IPA
• Composed of Independent Physicians With Only Central Contracting Being Common
• Not Necessarily a Lean Mean Fighting Machine
• Some States will Regulate Like MCOs
![Page 5: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/5.jpg)
Physician Practice Management Companies
• Tend to Be Venture Capitalized Public Companies
• Last Two Years Have Not Been Kind to PPMCs
• Continue to Be a Force in Healthcare Market
• Approximately 27 Publicly Traded PPMCs
• Combined Equity Value Declined 49.3% During 1998
• Several High Profile Collapses
![Page 6: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/6.jpg)
PPMCs Have Experienced Some Recent Equity Improvement
• At the End of 1998, the Aggregate Stock Value of PPMCs is Up 12.8% Over the Last Six Months of 1998.
• S&P Rose 7.5% During the Same Period.
• Total Capitalization of PPMCs was Estimated at Approximately $4.8 Billion.
• Some of the Largest PPMCs Continue to Have Difficulties.
– Medpartners
– FPA Medical Management
![Page 7: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/7.jpg)
Group Practice Without Walls
• Independent Physicians That Aggregate Their Practices Into a Single Legal Entity
• Legal Merging of All Assets of the Individual Physicians
• Individual Physician Incomes are Affected by the Performance of the GPWW as a Whole
• Independent Nature of Practices Within GPWW Means Independent Action
• Difficult to Align Incentives
• Weak Capitalization
![Page 8: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/8.jpg)
Medical Group Practice Model
• Like the GPWW, but Physicians Become a Fully Integrated Medical Group
• No Multi-Site Independent Practice Groups• Tends to be More Integrated Than a GPWW• Be Wary of Top Heavy Groups
![Page 9: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/9.jpg)
Physician Hospital Organizations
• Joint Hospital and Physician Entity That is Primarily a Negotiating Vehicle
• Integration Tends to Be Weak
• Trial Courtship Before a Serious Relationship
• Open vs. Closed PHOs
• MCOs tend to View PHOs as Ugly Cousins
![Page 10: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/10.jpg)
Medical Service Organizations
• Service Bureau and Contracting Entity for Physicians
• Physicians Remain in Independent Practice
• MSO may purchase all or Some of the Physician’s Assets
• Also Viewed as an Ugly Cousin by MCOs
• Purpose Tends to Be Centralized Common Services
![Page 11: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/11.jpg)
Foundation Model
• Generally Created as a Not-For-Profit Organization Which Purchases Physician’s Practices
• Must Provide a Substantial Community Value/Benefit
• Not Generally Formed With an Eye Towards Planned Resources
• Loose Control Over Physician Behavior
![Page 12: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/12.jpg)
Physician Compensation
• Fee-For-Service• Capitation• Withholds and Risk/Bonus Provisions• Carve-Outs• PCP vs. Specialist vs. Hospital• Individual vs. Pooled Risk• Affecting Physician Behavior
– Product
![Page 13: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/13.jpg)
Reimbursement is Key Underwriting Factor
• Usual and Customary Fees• FFS and Discounts• Relative Value Schedules (RVS)• Capitation• Diagnosis-Related Groups (DRGs)• Per Diems (With and Without Outliers)• Case Rates• Ambulatory Patient Groups (APGs)
![Page 14: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/14.jpg)
Example of Effect of Reimbursement on CPDs
• Prudential• The Travelers• NYL Care
![Page 15: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/15.jpg)
Example of Effect of Reimbursement on CPDs
• Prudential• The Travelers• NYL Care
![Page 16: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/16.jpg)
Case Study - Scope of Engagement
• Feasibility of Offering Stop-Loss Coverage to PCPs for Institutional Services
• 12 PCP Care Councils (Practice Groups)
• $100,000 Excess Maintained by MGA
• Care Councils Going to Full Risk, Want Lower Excess Limits
![Page 17: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/17.jpg)
Historic Costs and Variability
![Page 18: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/18.jpg)
Developing a Claims Probability Distribution
• Combined Individual Distributions of Historic Claims
• Trended Historic Costs by Assumed Incurred Trend
• Assumed a Piece-Wise Lognormal Distribution Developed by Minimum Distance Method
![Page 19: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/19.jpg)
Empirical vs. Lognormal Distribution
![Page 20: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/20.jpg)
Effect of Age and Gender
![Page 21: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/21.jpg)
Effect of Group Size and Confidence Intervals
![Page 22: 1999 CAS SEMINAR ON HEALTH AND MANAGED CARE Health Care Provider Excess Insurance Prepared By: Milliman & Robertson, Inc. Arthur L. Wilmes, FSA, MAAA This](https://reader036.vdocuments.us/reader036/viewer/2022062421/56649d9d5503460f94a86784/html5/thumbnails/22.jpg)
Putting it All Together