ACTUARIAL ASSUMPTIONS MEET CLAIM REALITIES

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ACTUARIAL ASSUMPTIONSMEET CLAIM REALITIES
Session 34 February 28, 2006 Session
Producer Stephen LaPierre Senior Vice
President Penn Treaty Network America
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PANEL

• Stephen R. LaPierre, Senior Vice-President, Penn
  Treaty Network America
• John Timmerburg, President, Timmerberg
  Associates, Inc.
• Don Trexler, Assistant Vice-President, Penn
  Treaty Network America

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There was Man Woman
And So The Need Was Created
And they began to Age
And they became disabled
And Needed Long Term Care
In the Beginning
But Had No Way to Pay
And Then Came
For Long Term Care Insurance
The Actuary
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The Cycle
Actuary
Sales
Pricing
Active Life Reserve
IBNR
Claims
Claim reserve
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Introduction- The Actuarys Work

• Pricing
• Reserving
• Projections
• Reporting
• Modeling

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Introduction- The Actuarys Work

• Pricing assumptions
• Claim experience
• Mortality
• Morbidity
• Continuance tables
• Lapse rates
• Persistency

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Introduction- The Actuarys Work

• Reserving Assumptions
• Claim experience
• Claim details
• Age / Sex / Type of policy / DBA / MBP
• Historic behavior of similar claim types
• IBNR
• Projected future costs of healthcare
• Policy inflation considerations

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Introduction- The Actuarys Work

• Financial Reporting
• Modeling Projections
• Developed through analysis of internal claim
  experience, established industry data and with a
  particular expectation regarding how policy
  provisions are being interpreted and administered.

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Introduction The Claim Examiners Work

• Interprets policy language
• Evaluates eligibility
• Individual
• Provider
• Services
• Approves or denies
• Processes payments
• Captures and records the data
• Impacts all claim data that is fed to Actuary

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In this session we will . . .

• Review the pool of claim generated data
• Discuss the claim practices and policy language
  that impact the data
• Review actuarial utilization of claim data for
  assumptions and reporting
• Discuss how changes in claim protocol can impact
  the accuracy of actuarial assumptions and
  reporting.

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Claim Generated Data

• Claim counts
• Open, paid, pending
• Triggers
• Medically Necessary
• Cognitive Impairment
• Activities of Daily Living
• Level of care/care provider
• NF, ALF, HHC

DON
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Claim Generated Data

• Paid claim dollars
• Coding of benefit payment
• Straight benefit
• Bedhold
• WOP
• EP
• Restoration of benefits
• Inflation
• Interest

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Claim Generated Data

• Respite care
• Demographics
• Age
• Sex
• Diagnoses
• Primary
• Secondary

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Claim Protocol

• Eligibility decisions
• Strict trigger interpretations?
• Liberal trigger interpretations?
• Benefit payments
• Accuracy?
• Paying indemnity/cost incurred correctly?
• Exceed maxes, not exceeding maxes?
• Covered services/non-covered services?
• Inflation
• Calculation accuracy?
• Apply correctly in a split billing period
• Interest
• Calculation accuracy?
• Applying only to applicable invoices?

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Claim Protocol

• Elimination period
• Varying language from policy to policy
• Using correct definition?
• Applying DOS correctly?
• Waiver of Premium
• Varying definitions?
• Using correct definition?
• Timely removal from WOP?
• Care Management provisions
• Early notification provision properly enforced?
• Waive EP?
• Increase or decrease in benefit with use/non-use
  of cm?
• Credentials of cm staff aligned with intent of
  policy?
• Restoration of Benefits
• Proactively determined?
• Retroactively determined?

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Claim Protocol File Management

• Pending claims
• Documents required by policy vs. actually
  obtained
• Aggressively managed / passively managed
• Open claims
• Frequent touch / high status awareness
• Infrequent touch / low status awareness
• Closing practices
• Aggressive
• Passive

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Claim Protocol Case Management

• Benchmarking
• Duration projections?
• Managed to the projection?
• Set it, forget it?
• Plan of care
• Independence focused?
• Compliance monitored?
• Alternate plan of care
• Available?
• Properly administered?
• Aggressively/ passively utilized?

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So, do I need to worry about the changes I make
in my claim processes?
Is there any reason I
need to communicate outside of my area or can I
just focus on getting the work done?
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Actuarial Perspective

• Communication
• Understanding the Claims Operation
• Discussions with Claims Manager
• Hands-on review of Claims Files

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Actuarial Perspective Two Areas

• Claim Adjudication
• Processes and Data

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Why do Actuaries Care?

• Stability of Financial Results
• Losses are bad news
• New product development
• Filing rate increases

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Stability of Financial Results Examples

• Mail
• End of Quarter Initiatives
• New Staff, contract staff

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Stability of Financial Results Examples

• Competing Priorities
• New manager

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Claim Adjudication Actuarial Perspective

• Influence
• Expected Profit
• Consequences and quantification

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Who is Affected? Who wins? Who loses?

• LTCI Policyholders
• Other Policyholders
• Stockholders
• Senior Management
• Actuaries
• Claim Area Managers
• Service Providers

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HURDLES

• Expenses
• No quantification of financial consequences
• Someone will file a lawsuit

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HURDLES

• Someone said
• in 1999, our Chief Counsel said
• a claims manager said
• an agent said
• a Sales VP said
• Todays claim volume vs. 3 yrs ago

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HURDLES

• More work
• policy complexities
• More headaches
• Minimal rewards?

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How a Claim Begins

• Reality
• policyholder chooses Service Provider
• when does policyholder call insurance company?
• Care Management
• Plan of Care
• Expectations have been set

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How a Claim Begins

• Service Provider Perspective
• Managing contracted staff
• Helping Policyholders

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Case Study I

• Bathing and Dressing as ADLs
• Minimum Service Threshold
• Potential Savings
• Influence

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Case Study II

• Service providing interpretation of ADLs
• Homemaker services, IADLs
• Potential Savings
• Influence

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Case Study III

• Eligibility
• Eligible for what, exactly?
• Potential Savings
• Influence

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Case Study IV

• Restoration of Benefits
• Complexity
• Expenses
• Potential Savings
• Influence

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Summary

• Stakeholders
• Processes and Data vs. Claim Adjudication
• Motivations to overcome hurdles
• Case Studies

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Summary AVOID THE CLASH

Claim reality vs. Actuarial Assumptions

• First things first
• Ensure accuracy in calculations and
  payments
• Establish written claim protocols
• Consistency in policy administration
• Address all variations

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Summary AVOID THE CLASH
Claim reality vs. Actuarial Assumptions

• Establish regular claim/actuary communication
• Existing provision specific claim protocol
• Identify Discuss
• Claim/Actuary interpretations aligned?
• Implementation of new claim protocol
• Prior review with actuary a must
• Fully understand data ramifications

TBD