Tuesday, February 5, 2008

Actuaries "versus" Disease Management

The impact of health care actuaries on the disease management industry cannot be underestimated. In fact, their role in assessing population patterns, the calculation of premiums, estimating “incurred but not reported,” pricing new benefit designs and inputting investment income for all corners of the health insurance business is as close as any group will come to fulfilling any conspiracist’s darkest theories including the Illuminati, the Roscrucians and the Matrix . Can any reasonable person deny their involvement in several epic disasters (examples here, here and here)?

Guilty as charged, but do they warrant their reputation as ultraconservative, morose, opaque, mumbling, brainiac, quant party-animals? The disease management blog would like to go on record as categorically rejecting the notion that they mumble. It’s also unfair to compare the average actuary with the best health services researcher. It’s well known that a researcher can never hope to be that smart.

In my experience, health insurance actuaries’ overall future projections of claims expense based on past experience coupled with assessments of temporal trends can be uncannily accurate. Given the millions of dollars at stake for the enrollees of your average health insurance plan, they better be accurate. In addition, the disease management blog has witnessed how good actuaries can mollify a State Insurance Department’s consternation over premium increases. Not only that, if reserves tank or surplus gets taken down, it’s the actuaries who are called to task. Based on that, go ahead, just TRY to justify an additional premium increase on a promise of a decrease in future trend for your enrollees with diabetes.

Bottom line? Actuarial input is a critical ingredient in the health insurance industry and there is nothing that is going to or should change that. So, given their reputation for skepticism, just what accounts for the persistent success of disease management?

Some reasons include:

In the end, it’s not the actuaries who make the final decision about what goes in the insurance benefit and the premium amount, it’s the market. The market likes disease management.

In speaking to my actuary friends, they understand the limits of their science and the reasonableness of believing that patient coaching impacts healthcare utilization. In other words, they are also expert at accommodating uncertainty in their decision-making – if it makes sense. Disease management makes a lot of sense.

Just like in the rest of the disease management industry, important strides are being made in the actuarial sciences in defining chronic populations, calculating expected trend and comparing it to actual trend. While not “published” in the “peer reviewed” literature, there seem to be sufficient supportive data in the real world settings - the kind of real world settings that are outside the star-crossed Medicare Health Support pilot.

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