How Do Actuaries Model Healthcare Costs?

How Do Actuaries Model Healthcare Costs? Learn the Step-by-Step Process to Project an Employer-Sponsored Health Plan's Spend. Step 1: Gather Historical Data... 24-36 months of claims data (both paid and pending claims) along with monthly plan member enrollment data Step 2: Calculate the Historical Per Member Per Month (PMPM) Cost Step 3: Apply Trend incorporating medical cost inflation, utilization changes, new treatments/drugs and regulatory changes Step 4: Adjust for Plan Design Changes such as changing the deductible and total cost share, using a narrow network or benefit enhancements Step 5: Exclude High Cost Claimants Step 6: Adjust for Demographic Changes within the population Step 7: Add a Risk Margin of 2-5% to allow for error Step 8: Benchmark the PMPM against other similar groups and create three final PMPMs: High, Mid and Low estimates of healthcare costs. Sources: https://www.soa.org/resources/researc... https://www.soa.org/4a0244/globalasse... https://axenehp.com/building-actuaria... https://www.alseib.org/PDF/Open/Retir... https://us.milliman.com/en/insight/ph... ChatGPT Perplexity.ai AHealthcareZ is 400+ Healthcare Finance Educational Videos. 💥 BOOK: Check out Dr. Bricker’s Book 16 Lessons in the Business of Healing here: https://www.ahealthcarez.com/healthca... AHealthcareZ Viewers Include: Employee Benefits Professionals, HR, CFOs, Insurance Brokers, Benefits Consultants, Doctors and Nurses in Leadership Roles, Hospital and Health System Administrators, Health Insurance Carrier and PBM Professionals, Pharma and Med Device Professionals, Academic Professors and Students in Healthcare Administration and Public Health. 90,000+ Views Per Month Across All Platforms. Visit AHealthcareZ.com to Subscribe to the Healthcare Finance Video Newsletter.