Health Pricing Project
Diabetes Management Program
We took on a new client seeking to implement a chronic disease management program in the region, starting with the UAE. We were tasked with analysing the internal data available to identify eligible members for the program along with their associated medical spending split by chronic, non-chronic and comorbidity costs. The client also wanted Lux to build an ROI model that would demonstrate the savings that could be achieved by implementing this model in the UAE.
The main challenges we faced were the lack of granularity in the data in terms of identifying the risk and therapy profile of patients as well as the deficiency of studies in the region regarding the financial impact of such programs. It was initially difficult to get the client on board with designing the product for a specific segment of the market with the highest medical costs.
However, once we showed them that the savings are not as substantial as expected if the product is offered to all patients with the chronic condition, it was easier to convince them. The client is facing challenges in determining the pricing for the product given that the savings resulting from the program are smaller than expected whilst the costs are quite significant. We have been engaging in several discussions with the client in order to set assumptions regarding the reduction in medical costs as a result of the program.
The level of engagement with the client as well as the product design means that this project is quite different from our usual pricing exercises.
Lux performs an annual statutory medical pricing exercise for its Saudi clients in compliance with the SAMA Actuarial Work Regulation for Insurance and/or Reinsurance Companies. The medical pricing exercise for one such client resulted in an overall increase of 18% in the recommended rates.
As expected, there was pushback from the Company since an increase of 18% in recommended rates in less than a year from the last pricing exercise is material, especially given that the Company confirmed that they were facing difficulties in writing new business with the current rates.
There were multiple layers of management that Lux had to convince to accept the new rates, first being the head of the medical department (“MH”). The MH detailed the many changes that the Company had made and is continuing to make to improve their underwriting practices and claims management processes.
He argued that these recent improvements should be accounted for and the recommended rates should be decreased, however the Appointed Actuary did not change the recommendation and flew to Saudi to present the results to the head of the Medical department in person and give a more detailed analysis of the current performance and the reasons behind this rate increase.
The meeting was successful, and the Appointed Actuary convinced the MH of the necessity of increasing the rates. In addition, another meeting was arranged with the senior management to present the results at the same detailed level. The Company finally agreed to accept the rate increase after a lot of back and forth and multiple meetings with Lux.
The saving grace is that all of the industry is experiencing this change, and those whose actuary signed off on lower rates, will face losses and lower quality business on their medical book.
Since the introduction of mandatory health insurance in Dubai, Lux has completed several Actuarial Pricing Reports for the DHA Essential Benefits Plan. Analysing client exposure and claims information and conducting a full experience analysis to determine a suitable premium to charge for the DHA Basic Product formed our key objective for our client submissions. Models were created to test the impact of changes to benefits and benchmarked for consistency. We are proud that one of our clients was successfully approved and appointed by the DHA as a participating insurer.
Customised Rating Engine
We have developed a comprehensive market report on burning cost levels for different product types and different networks. We have reviewed over 1,000,000 lives worth of annual exposure and corresponding claims and determined suitable burning costs by sub-benefit across the GCC.
Our pricing results are embedded in our proprietary Customised Rating Engines (CRE), allowing the underwriter to offer flexible benefits based on actuarially determined rates. Models are created to ensure all permutations of benefits are accurately priced. Utilisation patterns and demographic risk patterns are actuarially analysed in order to calibrate the CRE which is reviewed constantly to ensure assumptions continue to reflect current and expected future experience.
Bespoke New Products
Given the changing landscape of insurance benefits we have developed a suite of value adding UAE Medical insurance products based on analyzing drivers of burning costs. Benefits have been derived for our clients based on meeting specific claims cost targets. Our products were actuarially priced, taking into account the business objectives of our clients and results are monitored continually.