Med Sup Claims in 2009, is the economy driving an uptick?

[bubba_joe]

We are a mid size Med Sup company ~200MM in premium. We are experiencing a higher claims trend this year than expected (taking seasonality into account). We thought it might drop off after Q1, but it really hasn't. Has anyone else seen this too? Is is just our company or is the economy driving higher claims experience?

Thanks,
BJ

[Andy Medina]

I work in pricing and our loss ratios for this year look terrible and every month gets worse. We're talking over 90% for most of the products and a good number in the 100's. June 2009 was especially bad.

There are a couple reasons why this is happening. One is COBRA. The unhealthy will purchase insurance through COBRA once their job is lost while the healthy will be less likely to. This causes anti-selection. I think UBS did a study saying the loss ratios of COBRA insured members are in the 150-200% range.

A person may also be using their health insurance more because they are afraid they will lose their job soon and along it will go the health benefits.

Another reason is that a bad economy may cause those who have jobs to work even harder and longer hours resulting in more sickness, depression, etc.

[Dr T Non-Fan]

Rhetorical questions, should not be answered in such a public forum:
1. What are you your sales and lapses like? Anything different from last year?
2. What about "Under 65" population? Maybe it's grown over the last year? these folks have exceptionally higher claim averages than regular Medicare folks.
3. Has your claims processing unit become more efficient, paying claims faster than your IBNR process expects, making your three most recent months (already not very credible) look higher than normal?

[ActuaryGuy23]

I think this is a very interesting topic. I work for a rather large company and have been wondering about the very thing the OP has posted. It seems like every pricing discussion we've had this year (for 2010, many states) has surrounded whether or not we buy into the claims trends we are seeing at the end of 2008 and in 2009. Discarding the most recent three months may be valid, but how do you account for the upticks in the last quarter of 2008 and the first quarter of 2009?