An Actuary’s Role In Health Reform: Making Health Reform Viable

All our actions have consequences.

It seems to be what’s missing often from debate, especially around such emotionally-charged arguments as the health care reform debate, but actuaries deal in repercussions, moving behind the scenes, analyzing risk and the future and what health care reform will actually mean for America 5, 10 or 20 years from now.

Among their findings: Health reform should carry a mandate on individuals to have insurance and a public plan – if adopted – should use the same rules as private ones in order for last reform to work.

Cori Uccello, a senior health fellow with the American Academy of Actuaries, outlined her keys to viable health reform in June at a reporter’s briefing and reflected on the role actuaries are playing in the health overhaul try.

The Academy followed up that briefing with one for legislative staff in late June where several of its members talked about what they think health reform should include.

Moreover, some actuaries have said, Insurance markets must attract sick as well as healthy patients to keep a company’s premiums under control through cost, that competition between a public plan and private ones must be equal and that the growth of health spending must be slowed.

Through suggestions like this, actuaries are playing a unique role in reform.

There’s a lot of noise among the talking heads – all shouting to be heard – but actuaries are the whispers of reason in the roar, working behind the scenes of health reform to make non-partisan recommendations on what reform should look like.

Some actuaries set premiums for health insurance companies, making recommendations on market risks for the government as consultants and even drafting keys to viable health reform.

Central to the points on reform is that mandating individuals carry insurance ensures that not only sick people who need insurance get it, driving up premiums. In markets where coverage is voluntary, healthy people are less likely to buy health insurance increasing premiums for everyone else because most others that do buy insurance need care, Uccello said.

The goal is to limit the growth of premiums through the market, but artificially limiting the growth of insurance premiums for the sick through policy can actually shift the cost to premiums for healthier individuals, causing them to opt out, she added.

This is what Actuaries do, Uccello said – look at all the sides and gather all the sides of an issue to make sense of them for use in the real world for lawmakers, policymakers and others that make decisions.

“Some of these questions are mathematical in a sense, and others really are more philosophy and social-equity types of issues,” she said. “Part of the public plan option, I think, is philosophical in nature,” she added, saying that balancing the interests and goals among the plans is key to getting buy-in for the plan.

The philosophy behind a public plan and ensuring a level playing field for public and private starts with making sure some rules are the same for all of them, that payment rates for providers are the same among the plans and that subsidies are available for both public and private plans, she said.

If these things don’t happen, Uccello said, plans that have rules more advantageous to the sick will attract the sick and vice versa for the healthy. Subsequent premium increases and decreases will threaten the viability of reform, she said. As Congress grapples with the public plan, actuaries wait for their turn to comment further. And As legislation is revealed, Uccello said, actuaries will continue watching

“If and when we get more details, we can actually say things about (it),” she said. “We don’t really have a stake in the game of whether a public plan is offered or not,” she said.

Roger Burton, an independent actuary who works with employers on health care costs, said his clients – smaller firms with less employees to cover – aren’t dropping their health care, even if they’re reducing benefits. Burton said his firm crunches numbers for clients to make them understand what works best for their companies.

Much of what he does is reactionary to employers coming to him to look for ways to cut costs out of their health coverage, Burton said, but being an actuary is a science, often requiring 10 years of study and practice to become accredited.

For now, Burton said he’s keeping a close eye on reform to keep up to date for clients and himself. “We expect health care reform to be coming, but nobody’s sure if it’s going to be a minor or major change at this time,” he said.

Donna Novak, an Arizona-based actuary said she thinks the decision makers listening are the ones who want to get something done.

She said she thinks actuary opinions are respected because their answers are based in the real world.

“You can’t come up with a silver bullet that doesn’t have consequences,” she said. “You just try to keep them to a minimum. So I think in that respect, they are listening to us.”

Novak said that over the years she’s spoken with senators, including Sen. Edward Kennedy’s staff about health reform. She’s also been asked by the Congressional Budget Office for her opinion on what things in health care might cost.

“I’ve been doing this for many years and have always been impressed at how well actuaries can step back from a situation, Ignore kind of the personal impact on their jobs and say ‘I think this is what should do to make this goal in the marketplace.”