Untapped Opportunities for Actuaries in the Health Industry

Untapped Opportunities for Actuaries in the Health Industry

Jennifer Gillespie, Sara Teppema and Meg Weber

 

A lack of ACTUARIES IN THE HEALTH INDUSTRY has been clearly identified. Here's how the SOA plans to help fill the void.

In 2006 and 2007, two separate surveys, as well as interviews with actuaries in senior level positions in the health industry, pointed out a significant risk to our profession: actuaries with health actuarial technical skills, and especially those with comprehensive health care knowledge, are in short supply. This is a risk to the profession because employers will likely turn to people with other credentials to fill the void if they can't find enough suitable actuaries.

In addition to the existing strains on the supply, SOA members believe that health actuaries could be adding value in many more sectors of the growing and changing health care marketplace. The new presidential administration's focus on health reform only magnifies the already mammoth opportunity for actuaries to lend their voices to the debate.

In the April/May 2008 issue of The Actuary, Jim Toole wrote, "With employment in the health care industry poised to grow another 30 percent in the next 10 years, there is clearly opportunity for growth in the health discipline. ... Should we choose as an organization to try to tap it, we increase employer and member satisfaction, produce a positive impact for the public and enhanced visibility for the profession. If we are successful, we will position the profession to be an active participant in the health discussion in this country, to the benefit of all."

These untapped opportunities for actuaries in health care—including the existing high demand for our services, and the open horizon for expanding what we can and should be doing in the health industry—have motivated the SOA to respond by making this issue a top strategic priority for 2009.

This article provides an update on where we have been with this issue, where we are today, and most importantly, where we plan to go in the future to address the untapped opportunities for actuaries in health care.

BACKGROUND

Throughout 2007 a team of volunteer members and SOA staff explored the issue of demand for actuaries in the health industry. Since 2007, members of the Health Section leadership have been working with SOA staff to formulate the SOA's response and implement an action plan.

In June 2008, the SOA Board of Directors voted to focus on four priority directions that could/should be explored in order to determine where additional SOA resources could make the most impact. They are:

1. Create recommended paths for credentialed actuaries to transition to the health practice area.
2. Create or recommend courses of study or on—the—job experiences for health actuaries to compete effectively in new and traditional markets.
3. Sponsor original research to support penetration into new markets.
4. Ensure SOA basic education responds to changing (i.e., health opportunities) market needs.

Last fall, we researched direction No. 1 to see if by having SOA level involvement, a smoother, more well defined path could be identified that would allow greater numbers of actuaries to make the transition. Interviews were conducted with actuaries who had transitioned into the health practice area and their employers.

As of the time of this writing we are preparing to move ahead with directions No. 2 and No. 3 by partnering with the SOA's Marketing and staff to conduct market research on future jobs for actuaries in the health industry. The thought is that we don't know what we don't know. The jobs may be in niche fields with a small number of actuaries working in them today, but there is good potential for expansion. Or, the opportunities may be fields where people with similar skill sets are working. Or, they may be in fields where risk analysis has been missing but would be beneficial.

And while direction No. 4 describes work that is already being done by a team of capable health actuaries/basic education experts, we would change the level or speed of impact.

THE FINAL FOUR DIRECTIONS

In this section, we will go into greater detail about the four directions to pursue, as recommended by the Board in June 2008.

DIRECTION NO. 1: Create recommended paths for credentialed actuaries to transition to the health practice area.

Does it make sense to find ways to retrain actuaries in other practice areas to become experts in health? From a high level, in 2007, this did make sense. It seemed especially possible and relevant when looking at the supply of actuaries who are pension specialists. Over the course of the recent several years, large corporations have terminated defined benefit pension plans in favor of defined contribution plans, presumably leaving pension actuaries with less work to do than in the past.

2008, SOA staff conducted interviews of actuaries and their employers, in order to understand success stories and barriers to actuaries from different backgrounds making the transition into the health specialty. The team conducted marketplace research with members of the Health Section. There were two sets of interviews:

• Individuals who had transitioned practice areas—to find common experiences or coursework that enabled the successful transition.
• Employers of these actuaries—to determine if they had had success hiring or training non—health actuaries to health actuary positions.

The team's plan was to use the outcomes to document successful pathways, particularly when professional development was involved.The interviews unearthed the following conclusions regarding transitions from another practice area into the health practice area:

• Transitions from one practice area to another can definitely be a worthwhile investment on the part of the actuary and the employer.
• The success of these transitions varies widely by individual.
• Significant on—the—job training and mentoring is required.
• Employers generally must invest in the transition, because of the trade—off between compensation and productive value. This can be especially pronounced in consulting firms where the transitioning actuary's compensation requires a billing rate that is higher than project budgets can afford for the work being done.
• The transition is easier to manage and afford when the actuary is at a lower or middle experience level. Yet, actuaries with several years of health experience are most in demand.

The common threads to ensure success were a strong commitment from both the actuary and the employer, and the fact that lateral moves were more likely to result in a positive outcome versus promotional moves.

The Untapped Opportunities Team concluded that the SOA can best support these successful transitions by continuing with existing education, and research content and methods which will in turn support employers and actuaries who invest in training and mentoring. Since these situations are so individualized and cannot be standardized, it would be almost impossible to develop educational content to specifically address training actuaries to move from other practice areas. We could not identify a repeatable shortcut to train a health actuary.

These conclusions coincided with the two other events that called to question any excess supply of pension actuarial services. First, the Pension Protection Act created increased need for new strategies in retirement plans; and second, the 2008 financial market crisis drove many corporations with newly underfunded pension plans to evaluate and reset strategies.

The results of the interviews, combined with the reduced urgency around any excess supply of pension practitioners, caused the team to re—prioritize the four directions identified by the Board in 2008.

DIRECTION NO. 2:Create or recommend courses of study or on—the—job experiences for health actuaries to compete effectively in new and traditional markets.

We view the need for future professional development (PD) in three major categories. First, the SOA must offer PD for traditional health work, and it has been enhancing PD programs over the past few years. In addition to extensive health content at the SOA's Spring Health Meeting and Annual Meeting, in 2008 the Health Section began offering a Health Pricing and Valuation Boot Camp, geared at building fundamentals in these two specific areas. The Health Section will once again cosponsor a Predictive Modeling Symposium this year. And, the SOA and Health Section volunteers are keeping professional development content current by adding webinars and breaking news sessions at our meetings.

Second, actuaries need to continually push the limits of how we do our traditional health actuarial work. Health care is evolving quickly, and traditional health work is subject to technology enhancements—for example, new statistical methods or data warehousing opportunities. Health actuaries are also starting to compete with new types of professionals—for example, informatics specialists and health economists.

Finally, we know that the health industry offers a significant opportunity for actuaries, in either new roles for current employers, or traditional roles for employers that have not historically hired actuaries. If the SOA wishes to inform our members about these new roles, and train our members to succeed at these roles, we clearly need to invest in understanding exactly what these new roles will be. A first step is simply educating our members on existing "nontraditional" roles, which will help actuaries view their full potential and start them down the path of expanding their horizons.

To this end, the SOA's Health Section is partnering with the SOA's MMDP in a comprehensive market research project on potential roles and jobs for actuaries in the health industry in the future. See more about this in the Market Research Turbo Boost section on page 22.

The issue of health care reform inevitably arises in the context of jobs for actuaries in health. The Obama administration is more likely to promote reform than its predecessor, but it is likely that commercial/private health insurance will still factor prominently into any health reform that may emerge. In fact, if we are flexible and able to adapt to a changing environment, reform will create new opportunities for actuaries in health care. The buzzwords in the new administration are health IT, quality programs, comparative effectiveness, provider reimbursement and risk, and chronic disease and wellness management. Change in all of these areas will call for actuarial skills.

DIRECTION NO. 3: Sponsor original research to support penetration into new markets.

The planned market research project will not only support future PD content, but also future health research. Better identification of new markets will help guide existing and future research projects to make them germane for the health actuary of the future. In fact, the SOA has already started down the path of sponsoring research to support new roles for actuaries, and more funding means more frequent or larger projects.

Another route to new technical research is via partnerships with other organizations for specific research. The Health Section has identified potential research projects that could be shared with external organizations.

The Health Section has had long–term relationships with both actuarial and nonactuarial groups such as the American Academy of Actuaries (Academy), Casualty Actuarial Society (CAS), Centers for Medicare & Medicaid Services (CMS) and the Disease Management Association of America (DMAA). These relationships have typically resulted in mutual advertising of events and contributions to publications or cosponsoring professional development. Recently, the Section has expanded its relationships to include the American Society of Health Economists (ASHE) and the American Society for Healthcare Risk Management (ASHRM) and the scope of activities is growing—including joint research projects.

Several research projects with particular future relevance are currently planned, and can be categorized as follows:

• Partnerships with other organizations—for example, a medical malpractice joint research project with the CAS.
• Topical research in less traditional areas, such as Health ERM and a call for papers on quality and efficiency.
• Topical research with the potential to bring exposure from outside the actuarial world, such as a call for essays on the U.S. Health System.

As we begin to identify new opportunities in new methodologies and new jobs, research will begin to fill in around where we see the health actuarial profession going. This will happen naturally, but may also occur somewhat unnaturally since we will need to step out of our comfort zone—partnering with other organizations is new territory, and may seem a little risky. Research may not feel relevant for today, but will be relevant for next year.

Health Care Industry Growth Area Examples  

DIRECTION NO. 4: Ensure SOA basic education responds to changing (i.e., health opportunities) market needs.In 2008, the SOA established Basic Education liaisons for each Section. Re–invigorating the health track basic education content is an ongoing priority and is moving forward within the SOA's strategic Basic Education initiatives. The Health Section's Basic Education liaison, Joan Barrett, has been working with SOA Education staff under the framework of ongoing basic education design. Barrett will be working to ensure that the SOA's Basic Education priorities are aligned with the Untapped Opportunities initiative and to determine where applying more resources (paid staff or technology support, etc.) could make a difference.

MINING THE OPPORTUNITIES—MARKET RESEARCH TURBO BOOST

If we are to provide research and professional development for the health actuary of the future, it is imperative that we get some feel for how those roles will differ from the jobs we do today. Our members will help us understand how we can help them push the limits on traditional health work. We will need to look beyond our current members to understand the new roles and jobs that actuaries in the health industry can potentially fill.

Therefore, we need to call in reinforcements for a turbo boost from the SOA. The MMDP's 2009 priorities include the Untapped Opportunities for Actuaries in Health project, and will join these resources with additional funding from elsewhere in the SOA and from the Health Section.

As of the writing of this article, the SOA is finalizing a formal Request for Proposal (RFP). The RFP will be issued to external vendor partners, and one vendor will be selected to assist with market research on future jobs for actuaries in the health industry. The RFP is receiving significant input from a team of health care Subject Matter Experts (SMEs). We anticipate that our partner vendor will begin by interviewing actuaries in nontraditional health roles—and if you consider yourself in a nontraditional role, we encourage you to reach out to us so that we may include your input in this important market research!¹

The market research will take place throughout the summer of 2009, with a final report issued in the fall of 2009. The Market Research RFP outlines the following objectives:

• Understand current roles of actuaries working in the health industry.
• Match potential roles with traditional actuarial skills (and compensation).
• Find other roles within the health care industry related to risk assessment and risk management.
• Identify future needs, anticipating beyond where we practice today, including the skills that will be needed, the number and growth potential of the roles, and the employers who will hire these new jobs.
• Assess the current role, and anticipate the future role, of consultants filling in the niches that hold potential for growth in their number of full–time jobs in the future.

The specific scope of the market research project will be to compile current roles, and then identify future roles based on several criteria, including overlap of traditional skills, degree and education requirements, compensation, and career growth potential.

The research will scan the horizon for three types of new roles. First, what are new roles that actuaries can perform for their traditional employers? Examples of this might be chief risk officer for a health insurance company, or sales leader at a consulting firm. These kinds of roles require the solid foundation of health care quantitative expertise that health actuaries already have, but may also require new or non–actuarial skills such as risk management, macroeconomics, marketing, etc.

Second, what are the roles for new employers in which actuaries can use their traditional skills? Examples of this might be health care trend analyses for a pharmaceutical manufacturer, savings analyses for a disease/wellness management company or reimbursement management for a health care provider organization. These roles also require a solid quantitative foundation, but require actuaries to adapt their knowledge for new areas of growth.

Third, what are the roles and who are the employers that are so cutting edge health actuaries haven't yet been engaged by them? We may not yet know what these roles or who these employers are, but take a look at the emerging sectors diagram on page 22.

These are areas that we believe are likely to have strong growth within the health care industry. All of these will require risk analysis and assessment, and in fact should provide opportunities for actuaries.

One interesting conundrum for those of us working in health is that despite the growing and expanding industry, many of us remain in the trenches, with plenty of traditional work to keep us busy. We are needed in our current roles, and have very little motivation to look outside our offices for the next step in our career. This may keep us from developing an awareness of what else we could be doing to grow in our careers. When the SOA market research identifies new roles, simply communicating the existence of these roles will be a giant step in the direction of expanded opportunities for actuaries. The old adage "knowledge is power" will certainly be appropriate in this regard. It will then be up to individuals to be flexible and adaptable enough to seize opportunities.

And it will also be up to the SOA to take this research and formulate solid educational content and cutting edge research that fits the expanded vision of a health actuary. Although we don't yet know the outcome of the market research, we believe that our needed professional development will probably include skills that expand beyond our traditional scope—both technical and critical business skills.

We are excited about where this market research might lead in terms of new education and research opportunities for health actuaries. But we are especially excited to reach out to SOA members to learn more about what you are doing and how it can help others to learn and advance their own careers. The authors of this article encourage you to reach out to us, other Health Section Council members, or other SOA staff if you have thoughts about the upcoming market research or more generally about the future of actuaries in health.

Jennifer Gillespie FSA, MAAA, is vice president and actuary, Underwriting for Blue Cross/Blue Shield of Minn. She can be contacted at jennifer_gillespie@bluecrossmn.com.

Sara Teppema, FSA, FCA, MAAA, is health staff fellow at the Society of Actuaries. She can be contacted at steppema@soa.org.

Meg Weber is director of Section Services at the Society of Actuaries. She can be contacted at mweber@soa.org.

FOOTNOTES:

1 Please contact Sara Teppema, SOA health staff fellow, if you have a nontraditional health actuarial role, or can add to our market research in new jobs for actuaries in health.