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Novel Technologies -- A Health Insurance Cost Projection Challenge

Novel Technologies -- A Health Insurance Cost Projection Challenge. John Bertko, FSA, MAAA 2008 National Health Policy Conference February 5, 2008. Primer on Actuarial Trend. Trend (next year’s premium increase) includes: Unit cost increases Determined by contract changes (mostly)

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Novel Technologies -- A Health Insurance Cost Projection Challenge

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  1. Novel Technologies -- A Health Insurance Cost Projection Challenge John Bertko, FSA, MAAA 2008 National Health Policy Conference February 5, 2008 Bertko - Novel Technology's Effects

  2. Primer on Actuarial Trend • Trend (next year’s premium increase) includes: • Unit cost increases • Determined by contract changes (mostly) • Influenced by cost-shifting among payors • Utilization changes • Like last year, except where care coordination and disease management have an effect • New technology effects on unit costs and utilization • Residual effect but necessary to look at the “pipeline” of new technology Bertko - Novel Technology's Effects

  3. Recent Private Sector Premium Trends (2006 Mercer Survey) Bertko - Novel Technology's Effects

  4. Lessons from Historical Trend • Trend is not “immutable” • Pressure from Managed Care • Reduced unit costs • Probably minimized the dost effect of new technology (Project Hope study) in the mid-1990s • Actuaries must forecast trend factors • New technology can be estimated from the drug and device pipeline • Much harder to forecast physician behavior • Differences between seniors and pre-65 usage Bertko - Novel Technology's Effects

  5. “Pipeline” Forecasting By Insurers • Several services monitor new drugs and devices • Through trials • Likely uptake assessed by clinical staff • Drugs monitored • Over 30 new drugs closely monitored • Any blockbusters? The BIG question • How much generic substitution • Placement on formularies related to both effectiveness and discounts/rebates • Example: macular degeneration drugs -- which ones, how much, etc? • Some cynicism can be warranted -- e.g., statin recommendation was not fully implemented Bertko - Novel Technology's Effects

  6. “Pipeline” Forecasting • Devices • Costly new devices and the usage • Stents • Lower back fusion devices • Procedures • Gastric bypass • How many? Will the uptake change? Will marketing make a big difference? • Breast cancer screening using MRIs Bertko - Novel Technology's Effects

  7. Example: Breast Cancer Screening with MRIs • New March 2007 Am. Cancer Society (ACS) guidelines • Annually for women with: • BRCA genetic mutation • First-degree relative BRCA carrier • High family risk model score • Against MRI screening for women with <15% lifetime risk • No recommendation for some women Bertko - Novel Technology's Effects

  8. Example: Breast Cancer Screening with MRIs • Could mean 1.4 million to 1.7 million breast MRI scans per year • Cost of $800-$2000 per scan • Cost of $56,000 per additional cancer detected • Cost effective for women at high risk for breast cancer • Peak PMPM cost of ~$2.00 • Around 1% of total health insurance cost • First impact in 2Q07 Bertko - Novel Technology's Effects

  9. Actuarial Adjustment to Trend • Actuaries “look in the rearview mirror” to set trend • Next year’s trend will be like this year, UNLESS: • Blockbuster drugs emerge • Important drugs have generic competitors • New procedures and devices are marketed and “extended” to new types of patients • Mostly an UPWARD adjustment, except for generic drug substitution • Is there a minimum technology trend factor? Bertko - Novel Technology's Effects

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