Research Highlights How Health Economics Evaluation Framework Can Help Inform Health Insurance Rate Setting

January 30, 2025, Chicago, IL — The Society of Actuaries (SOA) Research Institute released a new research paper examining how actuaries can evaluate the incorporation of important health care technologies to reduce the cost of care. This research looks at approaches to lower payer and patient out-of-pocket costs by using new technologies associated with chronic diseases, such as diabetes and musculoskeletal disease. This analysis was made possible with support from Peterson Health Technology Institute (PHTI).

The research paper -- “Closing the Analytic Loop: Technology Assessments and Actuarial Methods,” reviewed evaluations published by PHTI and found that this unique health economics evaluation framework can inform premium rate setting and risk analysis when combined with standard actuarial techniques.

Authored by actuaries from Axene Health Partners, in collaboration with PHTI and the SOA Research Institute, the research provides analysis of the health economics framework developed by PHTI and the Institute for Clinical and Economic Review (ICER). The assessments provide guidance to payers and others to evaluate evidence about the clinical benefits and economic impact of groups of health technologies. Specifically, the paper provides a gap analysis between standard actuarial techniques and health economics, for both digital diabetes management solutions and virtually-enabled musculoskeletal care.

“This research focuses on using assessments developed by PHTI to help health actuaries and others evaluate how best to reduce the cost of care and increase value,” said Joan C. Barrett, FSA, MAAA., Partner, Axene Health Partners, LLC. “We ask the question of how actuaries could work with these concepts, identify similarities to what they do, and inquire on what type of overlap and/or differences in thinking around these concepts might strengthen their work.”

Gregory Warren, FSA, FCA, MAAA, Partner and Consulting Actuary, Axene Health Partners, LLC, said, “This research helps highlight how actuaries could be consulted by payers and manufacturers earlier in the technology development process to get the most out of these market opportunities. There are many lessons to be learned from studying the answers to those questions using evaluation techniques that have been around for a while. Throughout this paper, we see the theme of cross-disciplinary collaboration to increase transparency and better align stakeholder incentives.”

The research examined current evaluation techniques to serve the needs of key decision-makers. This research provides guidance to actuaries on how to apply the various techniques during the decision-making process. The industry would benefit from further research and education within the health economics community that would help bridge PHTI’s work to the actuarial approaches upon which payer decision-making often depends.

This research is part of the SOA Research Institute’s s Health Care Cost Trends Strategic Research Program, which provides insights on the forces that shape health care cost, use and changes over time. For more resources and additional health care reports, visit www.soa.org/programs/health-care-cost-trends/  

About the SOA

With roots dating back to 1889, the Society of Actuaries (SOA) is the world’s largest actuarial professional organization with more than 33,000 actuaries as members. Through research and education, the SOA’s mission is to advance actuarial knowledge and enhance actuaries’ ability to provide expert advice and relevant solutions for financial, business and societal challenges. The SOA’s vision is for actuaries to be the leading professionals in measuring and managing risk. To learn more, visit soa.org.