When plan benefits are modified, the effects thereof will appear at once in funding levels, stop-loss premiums, COBRA premiums etc. The measure of such plan costs changes are not measurable by the claims experience method; they are usually measured by a benefit content comparison. Actuaries are frequently called upon to make such comparisons.
Benefit content comparisons deal also with these cost issues:
- Effect on plan costs where a cafeteria choice plan design such as a high v. low benefit is involved.
- Effect on plan costs of the introduction of an indemnity v. managed care option (HMO, EPO, PPO, e.g.)
- Effect on plan costs of wellness, behavior changing programs, etc.
- Effect on plan costs of a decrease (plant closing ) or an increase (merger or acquisition) of plan participants.
The work product is the comparison of the economic value of Benefit A with the economic value of Benefit B. Experience studies of the historical claims experience of known benefits (hospital, outpatient surgery, Rx, e.g.) provides the actuarial basis for comparing dissimilar benefits. The work product expresses the value of A as 100 and the value of B as 88, e.g. So called penetration, or usage, factors are used where both in and out of network benefits are found. The work product may be modified by actual claims between A and B but most commonly is not so used.
The usual data provided for such Analyses is the Schedule of Benefits for A and B. If claims experience is relevant and significant it’s availability should be useful and may be used.