The Actuaries Behind Your Insurance Premium

If you manage your company’s insurance program, you know that policies are more than just a stack of documents. They represent a system for managing risk and making claims more affordable. Insurers pool their insureds’ premiums. They set aside funds to pay covered claims as they arise. Agents, brokers, underwriters, and other professionals work together to provide the policies your company needs. Long before these professionals do their jobs, an actuary considers multiple rating factors to determine what your insurance premium should be.

More Than a Number Cruncher

As the American Academy of Actuaries explains, actuaries “…put a price tag on risk..“ That’s a simple description of the complex tasks they perform. Actuaries solve problems using multiple areas of expertise such as mathematics, finance, and economics. Companies, governments, and organizations, rely on their expertise to determine policy and to predict, evaluate, and manage future risks.

Insurance company actuaries analyze the data that determines your health insurance premium. They must remain in compliance with the Affordable Care Act, so they start with plan-year experience from two years prior to the year they’re rating. To accurately reflect the true exposure, they make adjustments based on actual and projected differences. As actuaries develop rates for 2021 health insurance premiums, they look at the following:

• Loss experience from 2019
• Actual differences occurring during 2020
• Projected variations predicted for 2021

Differences and Variations That Affect Your Insurance Premiums

Each year, actuaries reevaluate data from a long list of rating factors. These often include increases in the cost of healthcare, medical services used, geographical considerations, the overall health of the insured risk pool, and other factors. Statutory and regulatory shifts sometimes require that insurers provide compulsory benefits which often generate rate adjustments.

• Recent presidential executive orders affected short term policies, Associated Health Plans, and Health Reimbursement plans. These coverage expansions require rate adjustments.
• The effects of the 2019 ACA mandate elimination will change the insured pool as healthy people reconsider their coverage.
• The elimination of federal cost-sharing supports triggered insurance premium increases.
• State actions such as requiring an individual mandate, implementing reinsurance, and other health modifications also affect premiums.

COVID-19 and Anticipated 2021 Premium Changes

As actuaries analyze 2021 insurance premium rates, they’ve theorized that the virus might not substantially increase insurance premiums. The American Academy of Actuaries explained their thought process in the issue brief, “Drivers of 2021 Health Insurance Premium Changes: The Effects of COVID-19.”

COVID-19-related medical services and the resultant high-dollar costs are a continuing challenge. Patients have monopolized hospitals and healthcare services. That and self-isolation have caused a corresponding reduction in routine and emergency medical care. As providers open their practices to their regular patients, no one knows when or if they will return for treatment.

There’s a good deal of uncertainty, but current trends will likely affect your 2021 health insurance premium.

• The number of new COVID-19 cases, new virus therapies, telehealth services, vaccination development, antibody analysis, etc.
• Increased need for mental health services due to depression, anxiety, PTSD, and other virus-related mental health issues
• Increased need for substance abuse treatment based on projected increases in alcohol and drug consumption
• Delayed patient treatment causing increased medical issues
• Regional variations in COVID-19 cases
• A second wave of COVID-19 infections

Actuaries are still reviewing 2020 healthcare data. Their research will determine how current and past events will affect your insurance premium rates in 2021.

Contact Health Consultants Group

Contact HCG to learn more about actuaries and how they determine your insurance premium. Give us a call at (800) 367-2482 to schedule a consultation.