Milliman announced today that it has released the latest version of its Arius® solutions, a family of state-of-the-art reserve analysis systems for property and casualty insurers. This update provides significant enhancements to the systems’ analytical, reporting, and data management tools.
This release provides expanded cash flow analysis and reporting to help actuaries and insurance analysts more easily address IFRS 17, Solvency II, and other management requirements. It also provides enhanced interpolation and extrapolation capabilities so that actuaries can take full advantage of valuable historical and industry data.
In addition, the new release of Arius Enterprise® – Milliman’s reserving solution designed specifically for larger insurers and self-insureds – now takes advantage of Microsoft’s Azure Data Explorer (ADX) for high-performance processing of very large datasets. ADX is a new Azure-based database technology that provides significant performance improvements over traditional technologies for the vast amounts of data available to insurers. With ADX, Arius can execute complex data queries up to 30 times faster than traditional database solutions, aggregating large volumes of claims data – even billions of records – without incurring performance costs.
Our clients are continually finding additional ways that Arius can improve the efficiency and reliability of their overall reserving process. These latest enhancements in analysis, reporting, and data handling will allow actuaries to analyze their results in more detail and provide richer reporting and more informed management decision-making.
COVID-19 requires companies with
self-insured or high-deductible programs to take a new look at their
operations, which may vastly reshape their risk profiles. The degree to which
risk managers can come to new understandings of their changing exposure levels
could have significant effects on current and future liability estimates.
Estimating outstanding claim
liabilities for a self-insured or large deductible program depends heavily on the
exposure levels for the present and recent past. A change in operations alters
a company’s risk profile and can have a significant impact on reserving and
loss projections for the next quarter or year. The larger the change in
operations, the greater the impact on a company’s exposures and claim reserves.
In today’s climate, it is extremely
important to make sure exposure estimates reflect the latest information
available and that any changes in operations have been clearly communicated.
Likewise, when life returns to normal, it will be important to frequently
monitor the resulting increases in exposure levels.
In this article, Milliman’s David Lang explains why estimating the new exposure levels is likely to be difficult for many risk managers.
A well-designed allocation structure can help hospitals lower self-insurance costs by distributing costs at a departmental or employee level more effectively. This article, authored by Milliman consultant Richard Frese, highlights some features that hospitals should consider when designing and implementing an allocation structure.
When implementing an allocation, it is first necessary to achieve buy-in from members or departments and to define the goals. Allocations often apportion expected future insurance costs, historical unpaid claim liabilities, and tail liabilities (claims that have occurred but have not yet been reported). The finance managers should establish the goals of the allocation process to ensure program needs are met.
These goals should include ensuring that the allocation system encompasses five key features:
• A loss-control incentive that encourages safety among members
• Stability, with no significant fluctuation in annual contributions and liabilities
• Equity, as reflected in the fair treatment of all members (which does not mean that they all pay the same amount or rate)
• Intelligibility, ensuring the allocation is easily understood and readily accepted by members
• Ease of administration, allowing managers to carry out the allocation without difficulty….
Designing a Basic Structure
Allocations commonly are built on exposure, losses, or a blend of the two. Exposure often is defined as “bed equivalents” for professional liability and as payroll for workers’ compensation. Proper weights (i.e., conversion factors) translate – for example – occupied beds, outpatient surgeries, emergency department visits, and physicians into bed – equivalents. Different risk classes in payroll, such as nurses and clerical workers, also should be adjusted for. An allocation based purely on exposure is easily administered and may help keep the allocation amounts smoother over time.
An allocation using losses will encourage members to minimize losses, but may be more of a challenge to administer and design for several reasons.
The population of Baby Boomers age 85 and over is expected to triple by 2050, according to the U.S. Census Bureau. This growth may result in a greater need for nursing home care services—increasing the industry’s risk exposure. In their recent Captive Review article entitled “Preparing for the Boomers,” Milliman consultants Jill Rosenblum and Tony Bloemer answer several questions nursing home management should consider related to their insurance programs.
Here is an excerpt from the article:
Am I big enough to self-insure?
According to the US Centers for Disease Control and Prevention, the average nursing home houses approximately 88 residents. Generally speaking, a single 88-bed nursing home is not big enough to take on much risk or start a captive. For a larger nursing home or system, the decision to retain risk is dependent on the financial stability and risk appetite of the insured. A [well-capitalized] nursing home system should consider a large-deductible plan and based on its annual insurance expense could consider forming a captive. Several concerns specific to nursing homes, such as the large variance of claim costs by state and the impact of Medicaid residents on claim frequency and severity, are important to consider when assessing the overall size of the [program] and the ability to self-insure. An annual insurance expense of $500,000 across all casualty coverages is a rough starting point when considering a large-deductible [program] or formation of a traditional single-parent captive. Forming an 831(b) captive, popular as of late, can be considered if the annual insurance expense is less than $1.2m.
What are the advantages and disadvantages of retaining risk?
Purchasing insurance provides financial stability in the short term but is less cost-effective in the long term. It is no surprise that insurance companies charge more than the expected cost of claims in order to generate a profit. Most small insureds are willing to pay the insurer a profit margin in order to [stabilize] their own results. However, when an insured becomes large enough to absorb some of its own volatility, it makes sense to start retaining some risk to keep the insurer’s embedded profit in-house. An easy way to do this is by taking on a large deductible. With the baby boomer generation on the long-term care horizon, now is a great time for nursing home systems in particular to reassess their insurance [program].
The long-tail nature of professional liabilities and workers’ compensation claims make it difficult to gauge the effect that healthcare reform will have on self-insurance. A plan of action is needed though to help organizations value their self-insurance programs. Milliman’s Richard Frese recently authored an article in HFM magazine offering five strategies for lessening the impact of the Patient Protection and Affordable Care Act (ACA) on self-insureds.
Here is an excerpt:
Healthcare leaders will be better prepared to ensure that actuarial estimates will meet loss accruals and forecast needs by implementing these strategies.
Inform all parties of legislation updates and implementation. Although the components of the ACA have been determined, implementation has hit a few snags. Even with a strong effort to explain the proposed changes to the public, there have been multiple interpretations. Further clarification and revisions—and even repeal—are possible. Healthcare leaders should focus on keeping all parties—including the broker, actuary, auditor, third-party administrator, outside defense counsel, and captive management—involved in the self-insurance program apprised of any changes. In return, these parties also should communicate any changes with each other and with the organization’s senior leaders.
Gather opinions from various sources. Senior leaders of each provider organization may not share the same views as leaders of other organizations regarding how the ACA may affect their organization’s role and function. The leaders of each organization will want to ensure the organization’s service providers are on the same page and are working toward its goals and directions, particularly if strategic goals and directions have been revised because of the ACA. During these conversations, leaders also should share their interpretation of what is occurring in the industry.
Monitor loss activity. Healthcare leaders should work closely with risk managers, third-party administrators, and other claims personnel to track any changes in frequency and severity of reported claims. Service providers should be alerted immediately about any noticeable changes. It should be noted whether such changes are believed to be due to the ACA or a different cause, such as a change in claims handling. It will be critical to determine whether any loss change reflects an actual trend and is expected to continue or whether the change is related to a one-time event. Internal meetings also might be held more frequently to better monitor activity.