October 2016

Education and Research Section Sessions at the Spring Health

By Ian Duncan

The Education and Research (E&R) Section sponsored two sessions at the 2016 SOA Health meeting in June along with a breakfast.

The breakfast was standing room only, and more chairs, tables and silverware had to be imported from a less-well-attended section next door! We saw a presentation about the forthcoming Actuarial Research Conference in Minneapolis, hosted by University of Minnesota and University of St. Thomas (I am sure that all who attended would say it was a great event: congratulations to Laurie and the team who produced the conference!) We also discussed upcoming changes in the ASA syllabus, and opportunities for actuaries in predictive analytics and big data.

Our first session was derived from a committee, headed by Joan Barrett, which had been looking into the requirements for the “Health Actuary of the Future” over the last year. A report will be presented to the Society of Actuaries Board of Directors in the near future with recommendations for ongoing education of health actuaries. In addition there are some other recommendations relevant to academics. One concern (addressed to some degree by the ASA Curriculum Review Task Force) is the heavy emphasis in the ASA syllabus on long-term insurance, and significantly less coverage of short-term coverage (both General Insurance and Health). They are covered to some degree in the Fundamentals of Actuarial Practice modules but the ASA Curriculum Review Task Force felt that there is a need to restore some balance between short- and long-term coverages. Proposed changes can be found in the Society of Actuaries’ communications.  Another concern is that university students are not being sufficiently exposed to health actuarial work. While many universities have outside speakers on health topics, there are very few academic actuaries pursuing research and teaching courses in health actuarial topics.

In addition to discussion of the topics required for the health actuary of the future, Mike Miele, FSA, MAAA, president of the New York region for the Gallagher brokerage company, spoke about the need for actuaries to become more entrepreneurial. Actuaries often compete with non-actuaries who have MBA degrees that increasingly contain an entrepreneurship component. Mike discussed the meaning of entrepreneurship for an actuary and how to acquire the necessary skills.

The second E&R section session was entitled “Can this marriage be saved [1]? Risk adjustment and Revenue Transfers under the Affordable Care Act.” The session was another standing room only event, indicating the importance that health actuaries attach to the topic. Kelsey Stevens from the Wakely Consulting group addressed problems that have emerged in Massachusetts that have led a number of Massachusetts insurers to begin a campaign to change the risk adjustment and revenue transfer process. These perceived problems include the start-up co-op plan, Minuteman Health, owing some 70 percent of its premium in revenue transfer payments, and the bulk of transfer payments being owed to Blue Cross Blue Shield of Massachusetts. The problems that Kelsey addressed are not, however, limited to Massachusetts. Hsin-Ting (Tina) Liu of Accenture, formerly senior vice president of Health Republic of New York, spoke about some of the similar problems that led to the insolvency and closure of Health Republic in October 2015 (largely as a result of problems with risk adjustment and revenue transfers). Finally, I spoke briefly about some of my research into bias in the risk adjustment process.

Risk Adjustment is something that actuaries “own” and are responsible for in health plans. There are clearly significant emerging problems with the application of the process; health actuaries (and academics interested in the topic) need to increase their research into methods to improve the application of what is, in theory, an elegant solution but which is proving in practice to be a major headache for many companies.

The Education and Research Section will be sponsoring a webcast in November which will cover the material from “Can this marriage be saved? Risk adjustment and Revenue Transfers under the Affordable Care Act.” More information on this webcast is forthcoming.

Ian Duncan, FSA, FCA, FCIA, FIA, MAAA, is adjunct associate professor at the University of California, Santa Barbara. He can be reached at duncan@pstat.ucsb.edu.

[1]The title is taken from a long-running series in the Ladies Home Journal. It addressed problems of couples who, frequently, were arguing about money!