C. Seth Lester, ASA, MAAA

Best quote from the Society of Actuaries Health meeting yesterday. "Medicare Advantage risk deals should be 80/20, so the payers still has skin in the game." To be clear, ACO take 80% of shared savings / loss, not 80% of premium. This keeps the incentives aligned for both the ACO and the payer. Payers have a vast amount of knowledge on the markets, pricing, risk management etc. If the payer / ACO relationship is reduced to an administrative service contract both parties lose.

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You need an actuary in addition to your ACO's data science or analytics teams.    There is a fair amount of overlap between a data scientist and an actuary.    But it is the complement of skills not the intersection that make both valuable in their own right.   (the complement is the non-overlapping part of a venn diagram 🤓)   Actuaries are trained to think about and manage risk, in health care that risk can be:   𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐫𝐢𝐬𝐤 - An ACO has a benchmark of $1000 per beneficiary per month. That benchmark was developed by estimating trend, risk scores, membership mix, regulatory changes, contracting (for MA or commercial).    By taking the $1000, the ACO is saying no matter how each one of these variables changes I will cover my beneficiaries cost.  𝐔𝐧𝐝𝐞𝐫𝐰𝐫𝐢𝐭𝐢𝐧𝐠 𝐫𝐢𝐬𝐤 - is this provider group a good fit for my ACO? What were their historical claims, membership mix, risk scores. What is the probability of positive shared savings?   How much experience in VBC do they have? By including this group in ACO, the ACO is accepting the future performance risk for this ACO.   𝐕𝐚𝐫𝐢𝐚𝐧𝐜𝐞 - Would your ACO take $2500 for 1 beneficiary if there was an equal chance this beneficiary would cost between $0 and $5000 per month?    How many beneficiaries would it take to get comfortable with the variance 100, 10k, 100k? Medical claims distributions have a long right tail. In order to successfully cover the $100,000 beneficiary's cost, you need 100 beneficiaries that only cost $7,500.        Value based contracts are insurance risk. It's easy to think like an actuary at 40,000 feet. Once you get in the weeds the complexities require a trained expert.  

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eHealth (EHTH), a Medicare eBroker, released Q2 '24 results last week. Here are 12 important financial metrics: 1\ MA LTV up 4% YoY -current Q: $927 -prior year same Q: $891 2\ MS LTV up 27% YoY -current Q: $1,112 -prior year same Q: $875 3\ IFP LTV mixed YoY Non-qualified Health Plans up 7%: -current Q: $353 -prior year same Q: $329 Qualified Health Plans down 1%: -current Q: $354 -prior year same Q: $357 Note: “IFP” stands for Individual and Family Plans 4\ Medicare Customer Acquisition Costs (”CAC”) down 4% YoY Made up of 2 components: Customer Care and Enrollment (”CC&E”) per approved policy down 15% -current Q: $599 -prior year same Q: $706 Marketing per approved policy up 15% -current Q: $457 -prior year same Q: $396 5\ IFP Acquisition Costs (”CAC”) up 20% YoY Made up of 2 components: Customer Care and Enrollment (”CC&E”) per approved policy up 23% -current Q: $284 -prior year same Q: $230 Marketing per approved policy up 5% -current Q: $59 -prior year same Q: $56 6\ Total Approved policy counts down 7% YoY -current Q: 56,568 -prior year same Q: 60,768 7\ MA Approved policy counts up 6% YoY -current Q: 37,638 -prior year same Q: 35,597 8\ MS Approved policy count down 33% YoY -current Q: 1,954 -prior year same Q: 2,923 9\ Total Revenue down 1% YoY -current Q: $65.86 million -prior year same Q: $66.77 million -includes $9.0 million non commission revenue 10\ Operating Loss increased 7% YoY -current Q: $(27.96) million -prior year same Q: $(26.15) million 11\ Commission Receivable Balance up 5% -current Q: $832 million -prior year same Q: $790 million 12\ Valuation Metrics -Market Cap: $127 M ____ Like, comment and share! I post Medicare market insights daily. P.S. -> sign up for my free weekly newsletter. Designed to keep busy leaders informed and up-to-date. https://lnkd.in/gmv65ipM

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Why you should not consider a career in actuaries? lots of exams and lots of data can be hard. But if you enjoy diving into numbers and making financial impacts, it might be the right path for you. #careerchoices #aei #actuaries #actuators #actuariescareer #actuarialscience

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You won’t want to miss our next An Actuarial Advantage Book Club! Now is the time to dive into this resource, learn alongside other industry professionals, and strengthen your knowledge of fundamental actuarial topics. Our virtual book club meets via Zoom, and will be identical to our others, so in case you missed our past book clubs, or even individual sessions from past book clubs, now is your time to join us as we dive deeper into each chapter with the books editorial team. For more information about our upcoming book club, to sign up, and to request a copy of this resource, please click the link below: https://lnkd.in/enc2Q9tq #captiveinsurance #captives #riskmanagement #riskmanagementconsulting #srmc #propertyandcasualty #workerscompensation

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Continuing on my review of these care management papers, an early paragraph in Paper 2 stood out to me. Tell me if this sounds familiar: “as health care costs continue to escalate despite many and varied clinical intervention programs, the senior financial managements of health plans have begun to look to the actuarial profession for counsel.”  Twenty years later and it's still true: costs are high and health plans are spending large amounts of money to try and reign in the costs. Why wouldn’t they therefore try and determine the ROI that they’re getting? Here are some other key insights from the paper 2: 🔑 Confounding Variables: It can be a challenging task to try and measure something that did not happen (e.g. avoided ER visits) but actuaries have the skills and expertise to assist.  🔑 Measurement Principles: The paper lists six key principles that should be considered when preparing a care management study: Selecting an appropriate reference, ensuring the reference has equivalence, need to measure the same variables in both populations, avoid confounding variables, accurately determine the exposure, and reconcile the results 🔑 Study Design Issues: In general, we cannot perform a truly randomized control study so instead we need to make sure that groups being studied are equivalent. Additionally, regression to the mean and recidivism are important considerations as well when interpreting results in a study.  🔑 Confounding Variables: The paper lists eight potential confounding variables or risk factors. It’s important to consider these and others in order to properly assess the effect of the intervention on outcomes. Stay tuned for more next week and feel free to reach out if you want to discuss. #ActuarialScience #CareManagement #RiskModeling #Wakely https://lnkd.in/eacEXKWs

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