Group Chpt38 Medical Trend Analysis

Question 1

External sources of trend/information

Answer 1

1. Medicare - good measure of over age 65 and disabled under age 65
2. GDP-National Health Expenditures (NHE)
   
   2. 1 Published after lapse of time generally not helpful for current monitoring
3. Medical CPI/PPI - prices for fixed basket of good
4. Trend Surveys Complied by consultants

Question 2

Trend analysis tools

Answer 2

1. Actuarial models
   
   1. 1 claim cost experience broken into details categories
   2. 2 Result similar to historical average approach
2. Linear regression
   
   2. 1 adv: recent random fluctuations are adjusted for implicitly
   3. 2 DISADV: cyclical factor treated as ignored
3. Auto-Regressive Integrated Moving Average (ARIMA)
   
   3. 1 Does not deal well with changes in trend level
   4. 2 add value beyond linear regression model
4. External Indicator models

Question 3

Common Problems in Trend analysis

Answer 3

1. Seasonality
2. One-time events
3. Margins
4. Changes in prior period estimates
5. Legislative changes: ACA affects almost all components of medical trend

Question 4

Reasons for trend analysis

Answer 4

1. Goal to predict future claim costs for rating
2. Predict of claim costs also key in (IBNR) calculations
3. Competitive analysis
4. Measuring impact of changes in provider reimbursement
5. Determining the impact of managed care initiatives