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Old 07-17-2018, 08:59 AM
alexlinftw alexlinftw is offline
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Default NPR article about carriers’ pricing

https://www.npr.org/sections/health-...ise-your-rates

Wondering if anyone has read this article and for healthcare professionals, what are your thoughts?

Has anyone else who has worked in health heard about pricing using such granular data cuts (race, income, granular geographic data, shopping data)? From what I understand a lot of this is illegal as you can’t discriminate by certain characteristics, and the pricing methodology must be filed with the states and can’t be deviated from.
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Old 07-17-2018, 12:49 PM
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YetAnotherCareerChanger YetAnotherCareerChanger is offline
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Quote:
Originally Posted by alexlinftw View Post
https://www.npr.org/sections/health-...ise-your-rates

Wondering if anyone has read this article and for healthcare professionals, what are your thoughts?

Has anyone else who has worked in health heard about pricing using such granular data cuts (race, income, granular geographic data, shopping data)? From what I understand a lot of this is illegal as you can’t discriminate by certain characteristics, and the pricing methodology must be filed with the states and can’t be deviated from.
When I worked in health a few years ago at a small regional carrier we started bringing in more and more of this data. We didn't bring in racial information but we did bring in a lot of other factors.

There were a lot of discussions at my company about how the data was (and wasn't) to be used, who had access to it, and that we'd not acquire data on our Medicaid covered individuals. The idea being that we were mostly using this for marketing, market segmentation, and further identifying our book/target markets. It was never used in rating. It also was pretty bad data with so many null/default/zipcode level values that it wasn't particularly worthwhile.

I'm not sure how you'd set prices beyond individual policy re-rating with this additional data (of questionable quality a lot of the time) and backing into a rate that matches at the aggregate levels. This would still have to be justified to a DOI and in a lot of cases there is a TON of scrutiny on healthcare pricing. If you don't have a solid justification, you're not getting the rates. In reality, even with amazing justification, you're probably not getting the rates. I'd not be surprised to see the DOI questioning whether or not these data sources were used in informing pricing decisions in the future either.

Large group pricing is a different animal all together and this case would really only help your company if it was a renewal business & it showed you could lower rates. Otherwise you're competing pretty heavily on price in the large group/association space.

I'd say that after reading the article I think it's likely a bit on the dramatic end, but really does point out that there is a lot of ethical grey area with the data insurers are purchasing these days. There is also a the question of how much information are they having to send to these vendors to get a "match" and are those transactions happening securely? Is their reliance on the data based on a detailed evaluation of the data's veracity?

I'd also caution people painting every insurer with the same brush, or reading Propublica stories as the gospel truth. Propublica has some history of misinterpreting insurance pricing in P&C and doubling down on their flawed analyses. This article isn't particularly bad but there is a lot of speculation baked in and sold as fact.
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Old 07-17-2018, 02:22 PM
Dr T Non-Fan Dr T Non-Fan is offline
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Quote:
Originally Posted by alexlinftw View Post
https://www.npr.org/sections/health-...ise-your-rates

Wondering if anyone has read this article and for healthcare professionals, what are your thoughts?

Has anyone else who has worked in health heard about pricing using such granular data cuts (race, income, granular geographic data, shopping data)? From what I understand a lot of this is illegal as you can’t discriminate by certain characteristics, and the pricing methodology must be filed with the states and can’t be deviated from.
Even pre-ACA that usually (mostly? always?) was illegal. Even if it were legal, many DOI/BOI/OCI would require some analysis as proof.

I would guess that the worst thing a company could come up with (based on my own brain's ideas) is to steer the suspected unhealthy health insurance applicant toward another competing insurer. Slowing down the "underwriting" process. Thing is, all the companies would do this.

Currently, some insurers are trying to game the risk adjusters, finding the conditions that are "overpriced" and taking on those afflicted applicants. and trying to convince whoever sets the adjuster that other conditions are expensive to treat.

Life insurance? Maybe. They're the real cheats. Go after them!

After reading the article, I can see how an insurer would use aggregated data by, say, region to decide whether to market in that region or not. However, that decision might be based more on costs of hospitals and providers than on the sickiness of the people there. Nearby nuclear power plants notwithstanding.
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Old 07-17-2018, 03:15 PM
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Old 07-17-2018, 03:29 PM
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McCulley, LexisNexis' director of strategic solutions, said predictions made by the algorithms about patients are based on the combination of the personal attributes. He gave a hypothetical example: A high school dropout who had a recent income loss and doesn't have a relative nearby might have higher-than-expected health costs.

But couldn't that same type of person be healthy?

"Sure," McCulley said, with no apparent dismay at the possibility that the predictions could be wrong.
This is why journalism has failed.
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Old 07-17-2018, 04:25 PM
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I remember an ASA professor talking about how even though it's illegal to charge different rates for these kinds of things, a carrier might try to 'give rebates' based on these kinds of criteria, hoping to attract a certain demographic. However, I think that was just speculation / used as a broad hypothetical example, since there's a lot more than meets the eye when it comes to getting rates approved. I would think if a carrier were to try to game the system the way I mentioned to get healthier people, they'd have to raise their rates across the board before offering discounts/rebates, and that kind of thing would get shut down pretty early I imagine.
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Old 07-18-2018, 02:54 PM
jerrytuttle jerrytuttle is offline
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Most state rating statutes say that rates must not be unfairly discriminatory. The statute may or may not further define unfair discrimination, but one definition is that a rate is unfairly discriminatory related to another rate if the rates do not reflect differences in expected losses, expenses, or the degree of risk. http://actuarialstandardsboard.org/w...icationSOP.pdf

Some states list factors that are prohibited in pricing. According to the article cited below, Federal laws do not prohibit use of race, religion, national origin, gender in pricing (except in Homeowners insurance). Only a few states prohibit these. Companies generally do not use these (except gender) for public relations reasons, but not for statutory reasons.

https://repository.law.umich.edu/cgi...w_econ_current
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Old 07-18-2018, 03:04 PM
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Originally Posted by jerrytuttle View Post
According to the article cited below, Federal laws do not prohibit use of race, religion, national origin, gender in pricing (except in Homeowners insurance). Only a few states prohibit these. Companies generally do not use these (except gender) for public relations reasons, but not for statutory reasons.
Interesting - I did not realize this.
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