The Actuarial Society of Hong Kong

Global Medical Trends

Celine Ng Tong

October 13, 2017

Copyright © 2017 The Actuarial Society of Hong Kong. All Rights Reserved.

Introduction to Medical Trend

Copyright © 2017 The Actuarial Society of Hong Kong. All Rights Reserved.

Inflation in unit prices

Increasing utilization of medical care

services

Improved medical care technology

Changes in demographics

(aging population)

MEDICAL TREND DEFINITION

M E D I CA L T R E N D

D R I V E RS

Trend is an annual factor

used to project the cost of

healthcare for a future

rating period.

DEFINING GLOBAL MEDICAL TREND

Y E A R ‐ O V E R ‐Y E A R C O S T I N C R E A S E F O R M E D I C A L C L A I M S O N A P E R - P E R S O N B A S I S

Medical inflation (increase in cost

for services /supplies; can be

driven by currency fluctuations)

Changes in treatment mix

(potentially more expensive

options being

administered)

Utilization changes

(more/less of certain age

groups leveraging

health services)

+ + +

=

Regulatory changes

Data provided by 220 insurers

across 63 countries.

Conducted between March and

May 2017.

Medical trend data percentages

are available for 48 countries for

which an acceptable number of

responses were submitted

Insurers were asked about future

expectations and main drivers on

their portfolio

Asia

Europe

LATAM

MEA

North America

26%

42%

17%

12%

1%

2%

Pacific

MMB GLOBAL MEDICAL TRENDS SURVEY

MMB GLOBAL MEDICAL TRENDS

3.6%

2.8% 2.6% 2.0%

5.6%

9.7% 10.2%

6.7%

11.0%

13.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Global Asia Europe North America Latin America

2015 Inflation 2016 Inflation 2017 Inflation 2015 Medical Trend 2016 Medical Trend 2017 Medical Trend #REF!

C H I N A

2016: 10.0%

2017 Proj: 11.0%

I N D O N E S I A

2016: 13.1%

2017 Proj: 13.1%

I N D I A

2016: 15.3%

2017 Proj: 14.0%

M A L A Y S I A

2016: 11.5%

2017 Proj: 12.7%

P H I L I P P I N E S

2016: 11.8%

2017 Proj: 11.1%

S O U T H K O R E A

2016: 7.6%

2017 Proj: 6.0%

S I N G A P O R E

2016: 10.0%

2017 Proj: 9.4%

T A I W A N

2016: 7.7%

2017 Proj: 9.2%

T H A I L A N D

2016: 9.4%

2017 Proj: 9.5%

V I E T N A M

2016: 12.5%

2017 Proj: 7.9%

ASIA MEDICAL TRENDS

H O N G K O N G

2016: 8.4%

2017 Proj: 8.3%

Breakdown:

Outpatient: 7.5%

Hospitalization: 9.3%

Trend impacts medical claims costs on a compounded basis

For future projection purposes, medical annual trend rate is converted to a compounded trend rate,.

( C U R R E N T P E P M ) * ( 1 + A N N UA L T R E N D ) ^

( T R E N D P E R I O D )

IS THIS SUSTAINABLE?

Impact of trend on claims costs: As an example, Hong Kong GP costs are expected to increase by 44% by 2022 assuming medical trend remains as is

IS THE INSURANCE INDUSTRY ADEQUATELY PREPARED TO MANAGE THE IMPACT OF MEDICAL TREND IN THE LONG-RUN?

Approaches to Manage Medical Trend

Copyright © 2017 The Actuarial Society of Hong Kong. All Rights Reserved.

COMPONENTS OF FUTURE MEDICAL CLAIMS COSTS

Current Claims

Large Claims

Future Claims PEPM Current

Claims PEPM Trend

Claims Adjustments

above reinsurance point

includes portion of large claims below the reinsurance point

WHERE TO START? THE DATA IN YOUR PORTFOLIO WILL TELL YOU

D E M O G R A P H I C S I N P A T I E N T C L A I M S H E A L T H C H E C K - U P

How did the member profile change year-on-year (age,

gender)?

How did the health profile of the members today compare to three

years ago?

How many of the members are in the high risk category?

M A T E R N I T Y W E L L N E S S P R O G R A M S O U T P A T I E N T C L A I M S

How many of the members may be predisposed to pregnancy

complications?

What wellness interventions are in place and offered to members?

Were there any changes in GP/SP visit patterns of members

(number of visits, type of SPs)

Copyright © 2017 The Actuarial Society of Hong Kong. All Rights Reserved.

SAMPLE COST DRIVER ANALYSIS

High Cost Illnesses

How to address the precursors to these claims, mitigate high-cost care and create incentives

for prevention

Lifestyle Risk

Risk of poor health and illness due to unhealthy lifestyles

Utilization risk

Increasing use of care by members leading to increasing

healthcare cost

Growing controllable disease claims represent an opportunity for employers need to redefine their role and shape the healthcare market to meet their strategic objectives.

A S C O S T S R I S E , I N S U R E R S A N D E M P L O Y E R S R E C O G N I Z E M O R E M U S T B E D O N E

THREE AREAS OF FOCUS

63%

86%

50%

44%

67%

60%

67%

33%

78%

50%

25%

57%

67%

50%

100%

67%

67%

89%

75%

57%

50%

56%

33%

100%

100%

100%

11%

25%

43%

50%

22%

83%

100%

33%

33%

67%

22%

25%

50%

56%

33%

44%

100%

25%

11%

40%

33%

50%

100%

11%

33%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

China

Hong Kong

India

Indonesia

Malaysia

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

Based on (dollar) amount claimed, what were the top 3 causes of claims cost in 2016 based on your book of group or overall business?

Gastro-Intestinal Diseases Respiratory Conditions

Cancer Diseases of the circulatory system

Infectious Diseases Endocrine and metabolic diseases

Obstetrics and pregnancy

50%

100%

50%

78%

67%

100%

67%

67%

67%

100%

63%

86%

50%

67%

50%

20%

67%

33%

100%

50%

38%

50%

78%

50%

60%

33%

67%

56%

100%

25%

14%

50%

100%

33%

67%

11%

50%

38%

33%

33%

33%

33%

67%

11%

29%

17%

33%

67%

11%

25%

11%

20%

33%

33%

0% 20% 40% 60% 80% 100%

China

Hong Kong

India

Indonesia

Malaysia

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

Based on (frequency) incidence of claims, what were the top 3 causes of claims in 2016 based on your book of group or overall business?

Respiratory Conditions Gastro-Intestinal Diseases

Infectious Diseases Diseases of the circulatory system

Cancer Osteomuscular diseases

Endocrine and metabolic diseases

HIGH COST ILLNESSES

*Insurers were asked to select the top three risk factors (out of a set of 10 options). The above data reflect the top five responses selected.

INSURERS WERE ASKED TO SELECT THE TOP THREE HEALTHCARE RISK FACTORS THEY BELIEVE INFLUENCE GROUP MEDICAL COSTS THE MOST:

1

Metabolic risk

High blood pressure, high cholesterol,

high blood glucose

2

Dietary risk

High carb consumption, low fiber and vegetables,

overweight/obesity, physical inactivity

5

Environmental risk

Urban indoor/outdoor air pollution, ozone,

water sanitation, climate change

Occupational risk

Work-related risks, ergonomics, occupational carcinogens

4

Emotional/ mental risks

Stress, sleeping disorders

3

MANAGING LIFESTYLE RISKS

Global

Asia

Europe

Middle East/Africa

Latin America

93%

91%

93%

96%

95%

48%

53%

38%

41%

74%

41%

25%

58%

30%

26%

36%

42%

38%

22%

32%

30%

53%

18%

41%

21%

Smoking

Pregnancy / Family

Condition Management

Behavioral Health

Weight / Nutrition

Sleep

Financial Wellbeing

Physical Activity / Wellness

Medical Devices

Pharmacy

CSR

Telehealth

2nd Opinion

MEMBER

Advocacy – Navigation – Incentives – Challenges Assessments – Testing – Communication

MANAGING HIGH COST & LIFESTYLE RISKS

P R E F E R R E D P R O V I D E R S /

N A R R O W N E T W O R K S

P E R F O R M A N C E -B A S E D / V A L U E -

B A S E D C A R E M O D E L

O N S I T E C L I N I C S A N D V E N D O R S

S H I F T T O C O N S U M E R I S M

C E N T E R S O F E X C E L L E N C E

E X P E R T M E D I C A L O P I N I O N

T E L E H E A L T H & O T H E R H E A L T H

A P P S

M A N A G I N G A B U S E O F

M E D I C A L C A R E

E M P L O Y E E S

P R O V I D E R S

B A L A N C E Q U A L I T Y O F C A R E A N D C O S T

C AT E R T O E M P L O Y E E P R O F I L E

A D M I N I S T R AT I O N E F F I C I E N C Y

SAMPLE INTERVENTIONS TO MANAGE UTILIZATION RISK

Design Solutions

• Flexible benefits and

defined contribution

structures

• Coverage and benefits

scope

• Cost sharing

• Individual worksite

programs

• Eligibility

Financing Solutions

• Insurance pricing

and negotiations

• Health vendor pricing

and negotiations

• Self insurance and

profit sharing

• Captives

• Cash flow

management

Delivery Solutions

• Administration

outsourcing

• Vendor management

• Claims management

• Consumerism

education

Health Management

Solutions

• Wellness

• Health risk

management

• Disease management

• High cost case

management

• Absence management

• On or near-site clinics

Cost Shifting

(to Employees) Cost Management

SAMPLE EMPLOYER INTERVENTIONS

THANK YOU!