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Canadian Institute of Actuaries L’Institut canadien des actuaires 2009 General Meeting ● Assemblée générale 2009 Ottawa, Ontario ● Ottawa (Ontario) Session: Impact of the Recession on Health and Dental Experience Speakers: Charlie Philbrook, Ken Fraser 2009 Annual Meeting Assemblée annuelle 2009 Recession and Medical/Dental Results • Data Sources – Fraser Group • • – Quick Profitability Survey Sources of Profit Survey Statistics Canada • • Gross Domestic Product Unemployment Rate Quick Profitability Survey • Survey of Group carriers Data from 1992 to 2008 • A simple question? 2009 Annual Meeting Assemblée annuelle 2009 • • Were your results satisfactory in Health? – Yes/No • 2008 data from 17 companies, 91% market share Sources of Profit Survey • Survey of Group carriers Data from 1996 to 2008 • Profit as Percent of Revenue 2009 Annual Meeting Assemblée annuelle 2009 • • 2008 data from 12 companies, 81% market share 14% 40000 12% 35000 10% Economic Indicators 30000 GDP per capita 8% 25000 Unemployment Rate 6% 20000 2006 2004 2002 2000 2% 1998 10000 1996 4% 1994 15000 1992 2009 Annual Meeting Assemblée annuelle 2009 45000 2009 Annual Meeting Assemblée annuelle 2009 Health Satisfactory 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Industry Consolidation 2009 Annual Meeting Assemblée annuelle 2009 Total Industry Profit vs Number "Satisfactory" Total Profits Number OK 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Annual Meeting Assemblée annuelle 2009 Health Not Satisfactory 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 Annual Meeting Assemblée annuelle 2009 100% 12% 90% 10% 80% 70% 8% 60% 50% 6% 40% 4% 30% 20% 2% 10% 0% 0% 1992 1994 1996 1998 2000 2002 2004 2006 2008 Health Not OK unemploy ment 2008 2006 2004 2002 2000 1998 1996 1994 1992 2009 Annual Meeting Assemblée annuelle 2009 100% 5% 90% 80% 4% 70% 3% 60% 50% 2% 40% 30% 1% 20% 0% 10% 0% -1% Health OK change in GDP unemployment Health Not OK 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 Negative Posistive 2009 Annual Meeting Assemblée annuelle 2009 Direction of Movement unemployment prior year Health Not OK 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 Negative Posistive 2009 Annual Meeting Assemblée annuelle 2009 Direction of Movement (lagged) 2009 Annual Meeting Assemblée annuelle 2009 Conclusion • No obvious relationship of Medical/Dental results to macro economic 2009 Annual Meeting Assemblée annuelle 2009 • But we all believe there is one. • Why can’t we see it? 2009 Annual Meeting Assemblée annuelle 2009 In summary • Our historical data does not show a causal relationship between macro economic measures and the broad direction of medical/dental financial results. • Internal industry factors, such as consolidation or new pharma products, appear to have a much stronger influence. 2009 Annual Meeting Assemblée annuelle 2009 In summary • However, there is other evidence linking short term changes in economic activity to adverse medical/dental results. Sources – Quick Profitability Survey • Fraser Group – Sources of Profit Survey • Fraser Group – Statistics Canada. Labour Force Historical Review 2007 (Table Cd1T46an). Ottawa, • Statistics Canada, 2008 (Cat. No. 71F0004XCB). – Real Gross Domestic Product (GDP) per capita, Canada, 1981-2007 • HRSDC calculations based on 1) Statistics Canada. Gross Domestic Product (GDP), expenditure-based, provincial economic accounts, annual (CANSIM Table 384-0002). Ottawa: Statistics Canada, 2008; and 2) Statistics Canada. Estimates of population 2009 General Meeting Assemblée générale 2009 One Company’s Experience • Impact of Recession on Dental Claims • Impact of Recession on Health Claims • Digging Deeper • Plan Sponsor Reactions • Fraud in a Recession 2009 General Meeting Assemblée générale 2009 Question • Would layoffs, or even the fear of layoffs, create an environment where plan members & spouses/dependents increased their use of group benefits? 2009 General Meeting Assemblée générale 2009 “Use it before you lose it” The Globe and Mail Feb 9, 2009 • “Job seem precarious these days? Quick! Scramble to the dentist, cram in that last massage and stock up on prescriptions while you still can. Canadian eyeglass companies, masseuses and dentists are reporting a bump in traffic as more people get pink slips, anticipate layoffs or calculate that their employers will soon trim group benefit plans.” • “Some are getting two pairs, three pairs ... they're getting as much as their coverage will allow. They're using it before they lose it.” VP Operations, Hakim Optical Contact Centre Inquiries 2009 General Meeting Assemblée générale 2009 The leading indicator? June Impact to 12-mth rolling avg 2009 General Meeting Assemblée générale 2009 Dental • Claim patterns • Trend 2009 General Meeting Assemblée générale 2009 More Frequent Claims Dental Increase 2009 General Meeting Assemblée générale 2009 No Change in Claim Size Dental Dental Trend is High 2009 General Meeting Assemblée générale 2009 Year-over-Year Trend Sep 2008 Jan 2008 Sep 2009 2009 General Meeting Assemblée générale 2009 Health • Claim patterns • Trend • Health sub-categories More Frequent Claims 2009 General Meeting Assemblée générale 2009 Non-Drug Health Increase 2009 General Meeting Assemblée générale 2009 Smaller Claims? Non-Drug Health Non-Drug Health Trend 2009 General Meeting Assemblée générale 2009 Year-over-Year Trend Sep 2008 Jan 2008 Sep 2009 All Health Trend 2009 General Meeting Assemblée générale 2009 Year-over-Year Trend Sep 2008 Jan 2008 Sep 2009 Vision Trend 2009 General Meeting Assemblée générale 2009 Year-over-Year Trend Sep 2008 Jan 2008 Sep 2009 Drug Trend 2009 General Meeting Assemblée générale 2009 Year-over-Year Trend Sep 2008 Jan 2008 Sep 2009 Hospital Trend 2009 General Meeting Assemblée générale 2009 Year-over-Year Trend Sep 2008 Jan 2008 Sep 2009 2009 General Meeting Assemblée générale 2009 Digging Deeper • Average age • Loss of Co-ordination of Benefits (COB) • Acceleration of benefits • Benefit maximums 2009 General Meeting Assemblée générale 2009 Average Age • In our <25 life segment, average age has increased from 44.98 in June 2008 to 45.75 in June 2009, a 0.76% increase • Statistics Canada data suggests the average age of the working population (ages 20-65) is currently increasing 0.14% per year • We typically see 0.10%-0.20% on our block • 5% of these groups had an increase of 5+ years Rate Impacts LTD Life Drug +1 avg age +6% +10% +2% +5 avg age +35% +50% +9% 2009 General Meeting Assemblée générale 2009 Loss of COB Sep 2008 Sep 2007 Oct 2009 2009 General Meeting Assemblée générale 2009 Loss of COB Sep 2008 Sep 2007 Oct 2009 2009 General Meeting Assemblée générale 2009 Other Contributing Factors • • Acceleration of benefits – People are going for procedures earlier in their plan years – Trend could revert back to normal, or even reverse, if this is the only factor influencing the higher volumes – “People tend to push forward timelines…those who were putting off going back for a recall at their dentist or going to their chiropractor, for example, suddenly schedule them all in.”1 Benefit maximums – As maximums are hit, could we see negative year-over-year trend? – Drugs don’t have maximums 1 – “Use it or lose it”, The Globe and Mail, Feb 9, 2009 2009 General Meeting Assemblée générale 2009 Plan Sponsor Reactions • More groups going to market – Both clients & brokers are initiating • Plan amendments – 10%-15% increase in amendment activity • • • • Higher coinsurance Higher deductibles Removal of Dental Reduction to termination ages 2009 General Meeting Assemblée générale 2009 Fraud in a Recession 2009 General Meeting Assemblée générale 2009 Fraud in a Recession Opportunity Pressure Rationalization • millions of transactions • easy to duplicate receipts • no fear of consequence • not aware of detection measures • already tried small without getting caught • sophisticated schemes reduce the risk of getting caught • job loss notices • fear of job loss • reduction in income • investment losses • providers are trying to make-up for a reduction in noninsured customer volume • everyone does it • not my fault the economy is bad, so I’ll recover my losses thru fraud • victimless crime • just protecting my family • entitlement 2009 General Meeting Assemblée générale 2009 Fraud in a Recession • No noticeable increase in total case counts • Higher cases referred for criminal charges Year Cases referred for criminal charges 2006 10 2007 6 2008 6 2009 (ytd) 21 2009 General Meeting Assemblée générale 2009 Questions?