Rob Lieberthal, PhD
Faculty, Jefferson School of Population Health
Readers of this blog are familiar with my efforts to get members of the Society of Actuaries more engaged in population health. I have also been getting more involved with the Casualty Actuarial Society, which focuses on property and casualty insurance. The casualty actuaries participate in several lines of business that involve healthcare: workers’ compensation insurance, medical malpractice, and auto insurance.
I am used to thinking of medical costs as being in our control as long as we are willing to make hard choices. Researchers have identified countless examples of high and low value medical care. I also know that there is a strong emotional component to medical care. Large employers just don’t want to say no to low value (cost-ineffective) care that their employees want and that other employers are willing to pay for. In my mind, cost control can occur as long as we can change peoples’ attitudes about medical care—a tall order to be sure!
The casualty actuaries I have worked with create models with the assumption that medical spending growth is out of their control—they take the level and growth of spending for any condition as a given. Medical spending growth is a result of outside factors. For example, as standards of care change, a workers’ compensation insurer may have to provide benefits that meet the current standard of medical care, even if it is much more expensive than care that was available at the time the policy was written, an effect called “social inflation.” Casualty actuaries often work on lines of insurance where insurers will be paying claims in 2014 for a contract written in 2011. The long tail of claims means that casualty actuaries have always worried about uncertainty regarding future spending even if they couldn’t affect it.
Casualty actuaries are now realizing that they have a part to play in bending the cost curve. The Casualty Actuarial Society is engaging in research to figure out how to deal with the cost curve problem through a new Health Economics Working Party. The current goal is to educate their members, but the long-term goal is to “…address behavioral issues of casualty carriers in response to U.S. health care reform.”
The working group is still in its early stages, and I am excited about this new actuarial endeavor. Widespread experimentation in different approaches is the best way to find the solution to our vexing cost curve problem. Local efforts, such as the Camden Coalition of Healthcare Providers and the Special Care Center of Atlantic City, NJ, are examples of different people trying to lead by trying something new. Casualty actuaries have a unique expertise and they manage insured populations that may not have had access to innovative models of care in the past. The decision by casualty actuaries to become more actively involved in health reform is a change for the better.