IAAHS Colloquium

PLENARY SESSION

MONDAY, 14 MAY
08H30 – 10H15

Professor Tim Noakes

Change is the only constant

Presentation to come.

Adrian Gore

Consumer-driven healthcare

Adrian Gore (2000Kb Presentation)

PLENARY SESSION

MONDAY, 14 MAY
11H00 – 11H45

Emile Stipp

Modelling the demographic impact of an Avian Flu epidemic

The presentation will be on the use of a multi-state model used to determine the potential demographic impact of an Avian Flu epidemic in South Africa. We used 3 different scenarios to project the impact of Avian Flu, using experience from flu epidemics in the 20th century (called mild, base and worst case scenarios – the latter assuming “w-shape mortality”). A multi-state model was specifically adopted as it was necessary to take into account the fact that there are limited resources (particularly ICU facilities with ventilators) in South Africa, and this in itself will influence the mortality rate. Hence, we had to determine the time spent in each state (healthy, asymptomatic, mild symptoms with no need to seek medical treatment, more severe symptoms seeking out-of-hospital treatment, severe symptoms requiring hospitalisation but not ICU, requiring ICU and death) by various sections of the population under each scenario, and then compare this against the resources available. We also removed time homogeneity to take into account the impact of herd immunity, assuming that vaccinations would not be available for the first wave of the epidemic. On the basis of this, the impact of limited resources is clearly demonstrated, where all available ICU facilities will be occupied by week 4 of the epidemic, and only again become available by week 7, even in a mild scenario. In the worst case scenario, 1.2 million flu deaths are predicted out of a total population of just over 47 million. In the mild scenario, the mortality rate is predicted to be 0.13%, whereas in the base scenario it is higher at 1.5%. However, allowing for limited ICU facilities increases this rate to 2.1%. Under the worst case scenario, taking into account limited ICU facilities, the mortality rate increases to 2.5%.

Emile Stipp (811Kb Presentation)

Andre Dreyer, Grete Kritzinger

Assessing the impact of a pandemic on the life insurance industry in South Africa

In a presentation by the American Council of Life Insurers (ACLI) at the United States Congress in June 2006, statements were made that "The life insurance industry, with over $4 trillion in assets, is well-positioned to absorb the impact of an influenza pandemic without jeopardizing its commitments to policyholders and their beneficiaries..." and "...they [insurers] can predict with considerable accuracy how many of those insured people will die the next year. Insurers also know with near certainty that someday another disaster will occur."

The statement by the ACLI continues to say that "Financial planning for high impact, low frequency disasters, such as a possible bird influenza pandemic, is an integral part of our business processes".

To date, the South African life insurance industry has not officially responded to the threat presented by this new form of pandemic, let alone whether our industry will be able to withstand such a disaster. Could it be that our attention is so fixed on the OTHER pandemic, ie HIV/AIDS that we could be missing the threat that is posed by avian flu, XDR TB (Extra Drug Resistant Tuberculosis, an extremely virulent form of TB that emerged in South Africa in 2006) or any other disease?

In this paper, we investigate the history of pandemics, with a particular focus on influenza (flu) pandemics. We attempt to understand the frequency of such pandemics and assess the industry's readiness for another such pandemic, also paying attention to the possible impact on disability and health insurance. Our paper also attempts to quantify the potential impact of such a pandemic on the life insurance industry and how this is different from the current AIDS pandemic, the impact of which is already evident in the insurance industry.

Andre Dreyer, Grete Kritzinger (744Kb Presentation)

Andre Dreyer, Grete Kritzinger (537Kb Paper)

PARALLEL SESSIONS – PAPERS

MONDAY, 14 MAY
12H00 – 12H45

George Orros

Risk sharing models for private healthcare insurance

The risk sharing models used by private healthcare insurers and their medical service providers are diverse and have resulted in a range of economic and patient outcomes across the healthcare value chain. They can involve the insurers and their suppliers, key stakeholders and medical service providers. They sometimes seek to mitigate downside risks and improve the likelihood of achieving benefits from the upside potential, leading to market development opportunities. The paper discusses the patient’s role, responsibilities and capability to make informed choices about their healthcare treatment options, as the patient’s behaviour can influence the likely outcomes. In some countries (eg UK), the rights of private healthcare insurance beneficiaries have been recognised in the regulatory concept of TCF (Treating Customers Fairly). ERM (Enterprise Risk Management) concepts and techniques can be used by private healthcare insurers and medical service providers, in conjunction with their suppliers and key stakeholders. A holistic view will be proposed, aligned with recent developments in ERM thinking and its applicability to the private healthcare arena.

George Orros (1,175Kb Paper)

George Orros (1,035Kb Presentation)

Ian Duncan

A comparative analysis of chronic and nonchronic insured commercial member cost trends

Disease management (DM) is increasingly encountered in health plans and employer groups as a health care intervention targeted to individuals with chronic diseases (‘‘Chronics’’). To justify the investment by payers in DM, it is important to demonstrate beneficial clinical and financial outcomes. In the absence of randomized control studies, financial results are often estimated in a pre/post-study in which the cost of Chronics in the absence of DM can be predicted by their pre-DM year cost (on a per member per month basis) adjusted for the Nonchronic population’s cost trend. The assumption made, not previously tested, is that absent DM, the Chronic and Nonchronic trends are identical.

We calculated Chronic and Nonchronic trends between 1999 and 2002 and compared them under different assumptions regarding identification of chronic disease and medical services. Qualification for the Chronic group was defined as having coronary artery disease, heart failure, diabetes, asthma, or chronic obstructive lung disease. Our base case used an algorithm that identified a member as Chronic prospectively (that is, from the point of identification forward), with one or more of the chronic conditions. We used a data set of 1.5 million commercially insured members.

When Chronic and Nonchronic members are identified and included in the population prospectively, the average three-year trend over the study period for chronic and nonchronic members adjusted for high cost outliers were 4.9% and 13.9%, respectively. Adjusting the population experience for differences in service mix had little effect on the divergence in trends. However, altering the Chronic selection algorithm to eliminate migration between groups (thus classifying a member as always Chronic if identified as Chronic at any point in the four years) caused the trends to converge (Chronics, 16.3%; Nonchronics 17.2%; total 16.0%). Using the original selection algorithm but risk-adjusting the populations annually also caused their trends to converge (Chronics, 12.5%; Nonchronics 11.9%). Finally, applying an annual ‘‘requalification’’ process (in which members who qualify as Chronic in one year but not the next are excluded in the year in which they fail to qualify), we see some, although not complete, convergence of trends.

Estimating DM program financial outcomes based on the assumption that absent the program, the Chronic population would have had the same trend as the Nonchronic population can lead to erroneous conclusions. Identification of a Chronic member and the point at which that member is reclassified from one subpopulation to another can significantly affect the observed trends in both subpopulations, implying that great care must be taken over classification and interpretation of the resulting trends, and their use in DM savings calculations. Trends calculated using a prospective identification methodology introduce a bias into estimates of outcomes. We refer to this effect, which has not previously been described or discussed in the literature, as ‘‘migration bias.’’ It is critical to understand how trends in a reference population can vary according to selection criteria for disease in the chronic population, service mix, and changes in risk over time.

Ian Duncan (104Kb Presentation)

Ian Duncan (138Kb Paper)

Johann DuToit, Paul Brett

A Critical Table

Accurate pricing of morbidity risk is heavily dependent on having a suitable insured lives table. There isn’t currently a publicly available industrywide insured lives table in the UK and pricing and reserving is mostly done against the CIBT93 population table. The CIBT93 table is inadequate since it:

In December 2006, an updated population table was published called CIBT02 that is centred around 2002.

The Continuous Mortality Investigation Bureau (CMIB) has made available the CI insured industry data for the period 1999 to 2002. The CMIB has been very cautious not to publish an insured table, since the data is still immature and suffers from reporting delays. On the other hand, the CI insured data includes a very credible 11,803 claims between 1999 and 2002.

The difficulties encountered by using a population table place a greater urgency on the production of an insured lives table that the industry can use until more data is available. The main aim of this paper is to propose an insured lives table that is derived from the latest CIBT02 table and would be more appropriate for pricing and reserving.

We will also comment on how well the insured lives table fits anonymised client data. This will provide a good test for the reliability of the insured lives table and is an additional benefit that Gen Re is in a unique position to provide.

In addition and in order to provide a wider perspective of the CI market, we will briefly cover the major changes in UK market over the last few years.

Johan DuToit, Paul Brett (718Kb Paper)

Johan DuToit, Paul Brett (444Kb Presentation)

Roseanne da Silva

Indexation of medical costs for South African medical schemes

Changes in medical scheme contributions from year to year are impacted by a number of factors including changes in prices for medical goods and services, utilisation, benefits, demographic profile and solvency requirements. A medical price index aims to isolate the trends in the costs of medical goods and services (incurred by medical scheme beneficiaries) and track these over the time. This paper discusses a methodology for developing such an index and describes the results of a pilot development.

Roseanne da Silva (426Kb Presentation)

Roseanne da Silva (425Kb Paper)

PARALLEL SESSIONS – TOPIC TEAMS

MONDAY, 14 MAY
14H00 – 15H30

Health Risk Adjustment

Gary Nidds

Advanced methods for managing medical risks

It is becoming increasingly important for health insurers to quantify and manage medical risk. High medical trend and an aging population continue to drive healthcare cost increases well above general inflation. Medical technology, direct-to-consumer medical service advertising and a savvier healthcare consumer are changing the dynamics of healthcare financing with no relief in sight. Coupled with these trends, global competitive pressures are forcing health insurers to improve the way they select, price and manage medical risk. Risk takers that don’t stay ahead of the technology curve will be selected against and left to insure the costliest lives.

This session will cover solutions available to insurers and reinsurers to manage their risk in this changing landscape. Predictive modeling, disease management, data mining and new product designs are just a few solutions available to insurers to maintain a competitive edge.

Gary Nidds (147Kb Presentation)

Critical Illness Insurance

Dr Marius Barnard

CI insurance was developed in 1983 by a medical doctor who witnessed the financial plight and disasters faced by his patients after diagnosis and treatment of a critical illness. In spite of the seriousness of their conditions his patients did not all die – many survived. After a heart attack 50% will survive 13 years and longer, 70% survive a stroke and 50% survive 5 years or longer following cancer treatment. And survival rates are improving all the time.

Unfortunately these excellent results only measured years (quantity) but as their health failed they experienced increased medical costs and a deterioration in their ability to earn money needed to survive financially (quality of life). It became obvious that his patients needed money desperately from the moment the critical illness was diagnosed and not only on the diagnosis of disability or death.

The protection policy needed depends on the diseases of the day, the medical knowledge and the outcome of the diseases. The incidence of the most common and severe critical illnesses will be discussed, the treatment and survival after treatment stressed. The cost of survival will be emphasised.

The first CI policy launched in 1983 covered only 4 conditions: heart attack, cancer, stroke and coronary bypass surgery. This is because statistics showed that 80% of claims will be for these 4 conditions. From South Africa a CI policy was launched in England in 1986 and most countries now offer it. The number of conditions covered has increased and most policies today cover approximately 20+ conditions.

Today CI insurance is recognised as the protection policy for the new millennium, and sales are still increasing, but claims experience has been a problem. When the policy was launched the criticism was that the definitions were so strict that the policy would never pay out. Now the criticism is that there are more claims than expected due to non-disclosure and disease claimed for not fitting definitions. It is also perceived to be too expensive which has resulted in bad publicity and litigation.

The need for CI insurance is now greater than ever due to rapid advances in modern medical treatment and earlier diagnoses, better results after treatment, and increasing costs. It is imperative that the mistakes of the past be recognised and corrected. The future of CI and new policies will be suggested.

Dr Marius Barnard (1,364KB Presentation)

Critical Illness Insurance

Sue Elliott, Gary Mooney, Peter Temple

A global market overview

• A general overview of the Canadian experience, including design of return of premium riders (eg on death, surrender or maturity).
• A general overview of the South African experience and South African product development.
• An update on UK claims experience and an overview and the key messages of the SIAS paper "Exploring the Critical Path".

Sue Elliott (175Kb Presentation)

Gary Mooney (63Kb Presentation)

Peter Temple (35Kb Presentation)

Public-Private Partnerships in Healthcare Systems

Howard Bolnick, Lisa Beichl

As healthcare costs continue to consume larger percentages of developed nations' GDPs, social insurance systems have found it increasingly difficult to continue offering expansive universal medical care benefits. Governments have responded to this pressure with a variety of tactics including: increasing funding for medical care; rationing or limiting access to care; shifting costs to patients; and encouraging the growth of private health insurance. This session explores the important question of whether or not a strategy of encouraging more robust public-private partnerships to fund healthcare costs is good public policy and the potential benefits and problems of following such a strategy. We explore this question by uncovering the causes for worldwide healthcare system stress; by using this knowledge to consider potential futures for health, healthcare, and healthcare expenses; and by applying these analyses to the potential for a variety of strategies for healthcare systems evolution. We also discuss an important study done on this subject by the OECD and IAAHS's response to their work.

Lisa Beichl (721Kb Presentation)

Howard Bolnick (138Kb Presentation)

Income Protection Insurance

Dan Skwire, Paul Murray, Brent Walker

Underwriting and morbidity trends in income protection

The panellists in this session will summarise current developments in the income protection market in their countries. Specific topics will include trends in claim frequency and recovery rates, areas of focus for underwriting new business, and a comparison of favourable and unfavourable market segments. This presentation will include the results of a detailed inter-company study completed on the US market in 2005, as well as data from other countries.

Dan Skwire (73Kb Presentation)

Paul Murray (298Kb Presentation)

Brent Walker (125Kb Presentation)

PARALLEL SESSIONS – TOPIC TEAMS

MONDAY, 14 MAY
16H00 – 17H30

Health Risk Adjustment

Dr Kathryn Antioch

Risk adjustment in health financing internationally: implications for reforms by Australian Federal and State Governments and the health industry

This paper provides an overview of international applications of risk adjustment methodologies and classification systems in health financing, health insurance, population-based funding, hospital financing, assessing health needs and disease management analysis. Applications in Australia by Federal and State governments and the health industry are considered. Federally, risk adjustment methodologies using classification systems such as Diagnostic Cost Groups (DGCs) have the potential to increase equity in payments from Federal to State governments under the Australian Health Care Agreements (AHCA). They may also improve national health insurance arrangements. Risk adjustment has been applied in successful negotiations between Australian hospitals and State governments under casemix funding arrangements. New risk adjusted capitation population-based funding models have been considered. The results of studies used in such negotiations will be presented. The econometric and policy framework for new policy options under consideration for hospital payment formulae and negotiations between the Health Department in Victoria and State Treasury will be presented. A Victorian government State-wide Risk Adjustment Working Group (RAWG), chaired by Dr Kathryn Antioch, addressed these issues from 2002 to 2005, in collaboration with international leaders. Seminal work by van de Ven and Ellis (2000) and their more recent work on risk adjustment in the USA and Europe have been central to the risk adjustment reform agenda in Australia.

Dr Kathryn Antioch (334Kb Presentation)

Traditional, Complementary and Alternative Medicine

Professor Heather McLeod, Pramilla Vassen, Dr David Nye, Dr Barry Kistnasamy

While there has always been significant use of Traditional Medicine (TM) in many parts of the world, in recent decades there has been a huge increase in the use of Complementary and Alternative Medicine (CAM) by consumers.

The World Health Organization has a Traditional Medicines Directorate which promotes co-operation between TM/CAM and bio-medicine. Despite its widespread use, TM/CAM is rarely covered in social or national health programmes or by healthcare funders and is mainly funded out-of-pocket or paid in-kind.

This session aims to expand the understanding of actuaries about health, disease and modalities of healing from multiple world views. Ms Vassen will give an overview of traditional systems of healing, using Ayurveda (the Indian system of medicine) as an example. She will describe the strides made in South Africa to licence and train practitioners from 11 healing modalities.

Dr Kistnasamy will discuss the role of Traditional Medicine using South Africa as an example. He will discuss examples of the integration of TM into medical education and research.

Dr Nye will describe the science of homeopathy and link it to an understanding of what is being called energy medicine or vibrational medicine. Forward-thinking doctors are calling vibrational medicine the “medicine of the new century” and we will expose actuaries to this new understanding of disease and healing.

The session will conclude with an agenda for enhancing holism in health, healing and society.

Dr David Nye (1,220Kb Presentation)

Dr Barry Kistnasamy (633Kb Presentation)

Pramilla Vassen (1000Kb Presentation)

Income Protection Insurance

Dan Skwire, Douw de Jongh, Sue Elliott

Income Protection trends by cause of disability

One of the most important factors driving morbidity experience for income protection products is the distribution of claims by cause of disability. Some types of disability have high frequencies but short durations, while others are much less common but can last longer and be very difficult to manage. In this session, the panellists will address a variety of issues related to cause of disability that are of concern in their countries. Specific issues to be covered include psychiatric claims, HIV and AIDS, and “subjective” disabilities. The presentations will include summaries of recent research in several countries.

Douw de Jongh (217Kb Presentation)

Dan Skwire (322Kb Presentation)

Sue Elliott (85Kb Presentation)

Medical Expense Insurance

Gary Nidds

Overview of uses of predictive models in the US

Predictive models have been used for years by financial engineers, economists, meteorologists and other professionals to forecast outcomes. Only in the last decade has predictive modelling caught on in the field of healthcare. Actuaries and clinicians use these models to predict patient outcomes, estimate future costs and direct medical management efforts. Use and application of these models among health insurance companies continues to grow. This session will cover traditional and non-traditional uses of predictive models in the healthcare environment. Quantitative and qualitative criteria used to help select a model will also be discussed.

Gary Nidds (92Kb Presentation)

Medical Expense Insurance

Professor Dr Jürgen Weyer

Cost-calibrated risk assessment and machine underwriting

Extensive statistical studies conducted on benefit payments and anamnestic databases of health insurance companies demonstrate that the standard assessment of the risks which previous illness involve from primaly medical aspects deviate from the risk loadings which are actually required, and in some cases considerably so. In particular, a claims-adjusted risk assessment demonstrates that illness which, though apparently harmless, develop along chronic lines, are often seriously underestimated in underwriting practice.

The extent of the loading must be based logically upon the actual additional benefit payments, which are received in the past by insureds who have suffered from some previous illness. To this end benefit payments and anamnestic databases of several important health insurance companies encompassing numerous observation years were evaluated digitally on the basis of individual settlements by the methods of multivariate statistics as advanced discriminat analysis and scoring-techniques. The results of this analysis are condensed in the actuarial underwriting-system AktuarMed® which contains a large database of medical and biometric data as well as detailed information on the considered tariffs. The unique combination of economic and medical score-data allows the instantaneous calculation of adequate loadings (or rejections) of any combination of medical anamnestic conditions for arbitray tariffs in health insurance.

The use of such methods in the underwriting process leads to transparent and standardized decisions for clients and sales departments. However, the most important advantage of claims-calibrated loadings is the greater premium stability in the medium term since good risks no longer subsidize bad risks.

Professor Dr Jürgen Weyer (539Kb Presentation)

PLENARY SESSION

TUESDAY, 15 MAY
08H00 – 10H15

Dr Wynand van de Ven

A comparison of the risk equalisation systems and the policy context in 5 European countries

In this presentation we compare the risk equalisation systems and the policy context in Belgium, Germany, Israel, the Netherlands and Switzerland. Since 2000 two major trends can be observed in these 5 European countries. On the one hand the risk equalisation systems have been improved, and on the other hand in all 5 countries there is evidence of increasing risk selection which increasingly becomes a problem, in particular in Germany and Switzerland. Some potential explanations are given for these seemingly contradictory observations.

When looking at managed care there are some weak signals of increasing managed care activities by individual insurers in all countries (except Belgium). However, with imperfect risk equalisation – as is the case in all 5 countries – insurers will integrate their managed care activities with their selection activities, which may have adverse effects for society, even if all insurers are equally successful in selection.

We therefore recommend that policy makers give top priority to the improvement of the system of risk equalisation.

Dr Wynand van de Ven (909Kb Presentation)

Roseanne da Silva

Making health insurance markets work for the poor (in South Africa)

The South African healthcare sector is characterised by extreme inequality in access to healthcare resources. Part of this arises from the inequality in access to health insurance mechanisms where there is pooling of risk. Another part is the availability of resources themselves. Equitable access suggests that individuals should be able to find appropriate resources (for their requirements) within a reasonable distance. The costs associated with these resources needs to be reasonable relative to their means and the individuals need to have some level of understanding of their healthcare requirements in order to access them appropriately. This paper presents an analysis of the South African health care sector and considers needs of lower income earners. This paper aims to lay the groundwork for further research into policy and infrastructural development that can improve access to health insurance for the poor.

Roseanne da Silva (382Kb Presentation)

Helen Riding, Adrian Baskir, Emile Stipp

Actuarial developments in South African healthcare

Emile Stipp (69Kb Presentation)

Helen Riding

Retirement health care issues, particularly differences from the US approach

Although SA actuaries have been valuing largely unfunded retirement health care liabilities for US-owned companies since the mid-1990s, local recognition only became mandatory in 2001 with employee benefits accounting statement AC116 (now named IAS19 (AC116)).

Main differences between the SA and US valuation approaches:

SA developments:

Helen Riding (44Kb Presentation)

Adrian Baskir

The development of a South African actuarial qualification

ASSA is working towards a South African actuarial qualification to be established by 2010, and this will replace the current use of the British actuarial qualifications. The key reason for this is to ensure actuaries qualifying in South Africa have a detailed understanding of the local environment, legislation and taxation so that they are able to offer professional advice and services. It will also enable the actuarial profession in South Africa to become a learning profession, enhance research and stimulate growth in emerging areas of actuarial practice relevant to this country. A business plan has been set up demonstrating the feasibility of the South African qualification, and significant work has already been done in putting the plan into operation. The immediate focus going forward will be to set up the structures that will run the education system and ensure high standards, and to gain stakeholder commitment towards this process, both within South Africa and internationally.

Adrian Baskir (75Kb Presentation)

Emile Stipp

The development of health care actuarial advice in South Africa

Since 1993 actuaries in South Africa have become increasingly involved in providing health care actuarial advice. Advice on post-retirement medical assistance arrangements and the development of the ASSA AIDS model have been areas of intense actuarial involvement. Several regulatory and market developments in the South African medical scheme environment have also increased the need for actuarial advice, particularly in the areas of pricing, benefit design and reserving. Actuaries have also over the last number of years played an instrumental role in the development of the Risk Equalisation Fund proposals for South African medical schemes. With the availability of better clinical coding, there is also increasing development of actuarial tools taking into account detailed clinical analysis, both in terms of risks and health outcomes.

PARALLEL SESSIONS – TOPIC TEAMS

TUESDAY, 15 MAY
10H45 – 12H15

Long Term Care Insurance

Ulrich Pasdika

Private LTC insurance – markets, products and actuarial issues

The term “Grey Revolution” is often used to describe demographic changes taking place in many countries such as increasing life expectancy, decreasing birth rates and shrinking net reproduction rates. As a result, the active generation which can support and care for the elderly population gradually decreases in size, while the elderly population increases. Funding the care for the elderly is a much-debated issue. Public budgets for LTC are under increasing pressure, so the levels of public support, and determining which beneficiaries should get support has to be decided.

Therefore private LTC insurance is widely recognised as a much-needed product to supplement the protection provided by the state. It helps to protect assets so that wealth accumulated in a long, hard working life does not melt away within a short period due to LTC expenditure, and can keep the elderly from becoming financially dependent on family. Despite the fact that the LTC product concept has existed for more than 25 years, it is still a fairly new product in many markets. In this presentation we will look at recent developments in various international LTC insurance markets with a focus on product design and actuarial challenges.

Ulrich Pasdika (1,189Kb Presentation)

Public-Private Partnerships in Healthcare Systems

Howard Bolnick, Brent Walker, Jaroslav Molik, Andres Webersinke

Many countries have embarked on the strategy of evolving their healthcare systems based on robust public-private partnerships to fund healthcare costs. This session draws on experiences from 3 notable examples to demonstrate a range of potential paths: Australia, Switzerland, and Singapore. Presentations cover highlights of each country’s healthcare system; analyses of the public policy and political reasons for public-private partnerships; and successes and problems with these systems. While each country's healthcare system follows a unique path based on its social, political, and healthcare characteristics, this session provides important lessons for all countries faced with the worldwide problem of healthcare costs consuming increasing percentages of GDP.

Brent Walker (338KB Presentation)

Jaroslav Molik (74Kb Presentation)

Health Risk Adjustment

Professor Heather McLeod

A scheme for a national health service broadly similar to the British model was proposed in South Africa in 1944 but was not implemented. It took until 1994 for the question of a national health system to be put back on the agenda by the new democratically elected government. Now, 13 years later, the key structural element of the new Social Health Insurance system, the Risk Equalisation Fund, is ready to be legislated in Parliament.

This case study will use data gathered for the 2007 risk equalisation table to illustrate the impact of moving from a voluntary risk-rated environment to a mandatory system with social solidarity and protection for vulnerable groups, including the elderly and those with chronic disease. The role of income cross-subsidies in protecting the low income group will also be illustrated.

The session will also highlight the South African approach to risk adjustment that was endorsed by Dr Wynand van de Ven and a team of international colleagues. The risk adjustment process identifies those with 25 chronic diseases and those receiving treatment for HIV/AIDS. This results in a rich source of data on the prevalence by age and gender of chronic diseases such as asthma, diabetes, hypertension and other cardiac conditions.

Heather McLeod (75Kb Presentation)

Critical Illness Insurance
Global market emerging issues

Sue Elliott, Gary Mooney, Peter Temple

The panel will discuss emerging issues in the global market, covering:

• Global experience of durational impact, anti-selection, impact of claim delays, and international experience investigation
• Guaranteed vs reviewable premium rates: risk relative to the "Big 3", external influences (eg medical advances, legal challenges, increasing consumer awareness), and issues with respect to reviewable premiums
• Standardised definitions
• Severity-based definitions

Sue Elliott (53KB Presentation)

Critical Illness Insurance

Andres Webersinke, Dr Wolfgang Droste

Critical Illness experience around the world: results of the Dread Disease Survey 2000-2004

Dread Disease continues to pose many challenges for actuaries, underwriters, and claim assessors. Gen Re has conducted Dread Disease surveys in Asia since 1996 and the 4th survey covers the period 2000-2004. In addition to portfolio and claims data from Singapore, Malaysia and Hong Kong, data from the UK, South Africa and China is included in this survey. 48 insurance companies provided data covering more than 100 million life years. More than 140 000 Dread Disease claims have been analysed looking, inter alia, at claims declinature and causes for declinature as well as claims incidence and trends. Particular focus is placed on the analysis of cancer claims and specific cancer sites. Further the study identifies selection and anti-selection effects for specific diseases. We derive incidence rates and geographic comparisons as well as useful pointers for future product modifications.

PLENARY SESSION

WEDNESDAY, 16 MAY
08H30 – 09H15

Rodney Lester

Providing health services to the poor

There is now a huge amount of evidence that health-related events are the major reason people fall into poverty, both in developing and some industrial countries. Finding a funding mechanism that will address this issue has occupied the attention of legions of health economists for the last 2 decades, however, there is little progress to show on the ground to date. A key reason for this in developing countries, especially those with a high incidence of HIV/AIDS, is the gap between the cost of delivering even a basic health service and available funds.

More recently the insurance sector (including HMOs), certain members of the medical profession, some international development organisations and a small number of actuaries have begun to look at grassroots models for healthcare delivery and funding, motivated in part by the abovementioned evidence. Many of these come under the generic heading Community-Based Health Insurance (CBHI).

Some of the more interesting experiments are being carried out in Africa and this paper will describe these and draw some tentative conclusions.

Rodney Lester (306Kb Presentation)

PARALLEL SESSIONS - PAPERS

WEDNESDAY, 16 MAY
09H30 – 10H15

Doug Andrews

Assessing alternative financing methods for the Canadian healthcare system in view of population aging

The cost of the Canadian healthcare system is approximately 10% of GDP. Survey evidence suggests that Canadians do not wish to have additional funds spent on healthcare but believe that the system should be able to deliver better quality care. Due to declining fertility rates and increased life expectancy, the Canadian population is aging. Over the next 25 years, the dependency ratio will increase dramatically, primarily due to the “baby boom generation” reaching age 65. This will place twofold cost pressures on governments responsible for maintaining the health care system:

In Section I, this paper attempts to quantify these factors. A single measure combining cost and quality is developed to demonstrate the magnitude of the challenge.

In Section II, this paper examines a number of different approaches to health care financing including user fees and alternative compensation methods for physicians. The paper highlights documented information from Canada and international experience on the implementation issues involved. The paper evaluates the desirability of implementing these approaches in Canada.

Doug Andrews (264Kb Paper)

Doug Andrews (67Kb Presentation)

Roseanne da Silva, Lara Wayburne

The impact of HIV/AIDS on medical schemes in South Africa

With the mounting HIV epidemic in South Africa, medical schemes continue to be at risk. Risk management strategies need to take into account that the disease is not notifiable and that there is legislated open enrolment, community rating of contributions and Prescribed Minimum Benefits for HIV/AIDS. As a result, many schemes have introduced HIV disease management and awareness programmes that are aimed at improving the health of HIV-positive beneficiaries and preventing new infections. This paper provides an analysis of current developments in the medical scheme industry with respect to HIV/AIDS. For a sample of the medical scheme membership, HIV prevalence estimates are presented with the associated cost impacts. The opportunity to lower these costs through proactive risk management is investigated.

Roseanne da Silva, Lara Wayburne (410Kb Paper)

Roseanne da Silva, Lara Wayburne (126Kb Presentation)

Matthew Myers, Henri Gonin, Christoff Raath

Industry-wide scenario modelling for medical schemes based on statutory industry data

This paper discusses a number of modelling techniques and algorithms specifically designed to infer detailed results on an industry-wide basis from limited, aggregated statutory data submitted to regulatory bodies by medical schemes. These techniques are proposed to address the challenges faced in collecting appropriate data to populate a model to be utilised as a scenario testing tool on an industry-wide basis.

Unlike the detailed demographic and claims data that individual schemes have available to populate their own scheme-specific models, publicly available statutory data tends only to be available in an aggregated (high-level) form. Recognising that more detailed data cannot realistically be obtained on an industry-wide basis in a developing country such as South Africa, the techniques described in this paper are suggested as a means to superimpose relationships and structures prevalent in detailed samples of medical scheme data over available aggregated statutory data.

The resulting information can be imported into a model such as the Health Monitor computer model, a stochastic computer-based actuarial risk management model that was developed to assist medical schemes to model and monitor, on an ongoing basis, the risks facing these schemes within the South African regulatory environment. The model enables the projection of contributions, claims, underwriting results and solvency levels with the ability to incorporate real or hypothetical changes in demographic composition, benefit structure and underlying claim patterns.

Populating an industry-wide model through these techniques provides the user with a credible and representative basis from which scenarios can be generated.

Matthew Myers, Henri Gonin, Christoff Raath (173Kb Paper)

Lisa Beichl

Health systems in developing countries

Lisa Beichl (173Kb Presentation)

PLENARY SESSION

WEDNESDAY, 16 MAY
10H45 – 12H45

Jon Shreve

IAAHS survey on actuarial issues and practices

To improve the sharing of actuarial best practices in medical expense policies internationally, the International Actuarial Association Health Section (IAAHS) has sponsored a survey to gather input on key international actuarial practices (eg projection of claim costs) and issues (eg regulatory limits on rating). The survey included two parts, with first gathering the most important items, and then conducting interviews about the approaches used to address these items. The results of this survey will be published and available to all members of the international community. A large number of IAAHS members volunteered their time and efforts to help perform this survey.

Jon Shreve (80Kb Presentation)

CLOSING PLENARY SESSION

WEDNESDAY, 16 MAY
14H00 – 15H30

Professor Angus Macdonald

Genetics and health insurance

About a decade ago, the actuarial implications of genetics began to be debated. The focus was on severe single-gene disorders because they were relatively well-understood, but for that reason held few surprises. Future genetic research was expected to bring novel insights into common, complex diseases, leading to better diagnoses and new treatments. Ten years on, how much of this has come true, and does it say anything to actuaries?

Professor Angus Macdonald (127Kb Presentation)