National Association Of Insurance Commissioners Research Articles

Serious misdiagnosis-related harms in malpractice claims: The "Big Three" - vascular events, infections, and cancers.

Background Diagnostic errors cause substantial preventable harm, but national estimates vary widely from 40,000 to 4 million annually. This cross-sectional analysis of a large medical malpractice claims database was the first phase of a three-phase project to estimate the US burden of serious misdiagnosis-related harms. Methods We sought to identify diseases accounting for the majority of serious misdiagnosis-related harms (morbidity/mortality). Diagnostic error cases were identified from Controlled Risk Insurance Company (CRICO)'s Comparative Benchmarking System (CBS) database (2006-2015), representing 28.7% of all US malpractice claims. Diseases were grouped according to the Agency for Healthcare Research and Quality (AHRQ) Clinical Classifications Software (CCS) that aggregates the International Classification of Diseases diagnostic codes into clinically sensible groupings. We analyzed vascular events, infections, and cancers (the "Big Three"), including frequency, severity, and settings. High-severity (serious) harms were defined by scores of 6-9 (serious, permanent disability, or death) on the National Association of Insurance Commissioners (NAIC) Severity of Injury Scale. Results From 55,377 closed claims, we analyzed 11,592 diagnostic error cases [median age 49, interquartile range (IQR) 36-60; 51.7% female]. These included 7379 with high-severity harms (53.0% death). The Big Three diseases accounted for 74.1% of high-severity cases (vascular events 22.8%, infections 13.5%, and cancers 37.8%). In aggregate, the top five from each category (n = 15 diseases) accounted for 47.1% of high-severity cases. The most frequent disease in each category, respectively, was stroke, sepsis, and lung cancer. Causes were disproportionately clinical judgment factors (85.7%) across categories (range 82.0-88.8%). Conclusions The Big Three diseases account for about three-fourths of serious misdiagnosis-related harms. Initial efforts to improve diagnosis should focus on vascular events, infections, and cancers.

ACA Heads Back To Supreme Court.

The high court will consider risk corridors payments as developments continue in areas like HRAs and contraceptive coverage.

Cybersecurity Regulation of Insurance Companies in the United States

While cybersecurity has been an important issue for all business sectors due to the rapid development of and reliance on technology and the increasing sophistication of unlawful actors, it is particularly significant for insurance companies because of the nature of the industry. The internet makes it possible to collect and store massive amounts of data, and this in turn requires the utmost confidence of consumers in the companies collecting this data. The growing concern for cyber risks has compelled insurance regulators to devise and implement frameworks and rules for insurance companies to follow. In the United States, insurance regulation is controlled by the states. Invariably, the enthusiasm and speed of responses have been mixed. New York has implemented the Cybersecurity Requirements for Financial Services Companies, while South Carolina, Ohio, Michigan, and Mississippi have passed laws based on the Insurance Data Security Model Law published by the National Association of Insurance Commissioners (NAIC), a non-governmental entity created and composed of insurance commissioners of each state and territory. The specific provisions within these regulations differ, which creates inconsistencies throughout the United States. As more states adopt cyberspace policies regulating the insurance industry, the divergence could worsen. This paper examines the NAIC Model Law and regulations in various states, as well as advocates for a uniform standard across the United States based on the New York regulations due to its robust nature.

Court Rules Individual Mandate, Entire ACA Unconstitutional.

The holiday season brought a potentially fatal blow to the Affordable Care Act, but enrollment remained steady, and the law remains in place.

Credibility Methods for Individual Life Insurance

Credibility theory is used widely in group health and casualty insurance. However, it is generally not used in individual life and annuity business. With the introduction of principle-based reserving (PBR), which relies more heavily on company-specific experience, credibility theory is becoming increasingly important for life actuaries. In this paper, we review the two most commonly used credibility methods: limited fluctuation and greatest accuracy (Bühlmann) credibility. We apply the limited fluctuation method to M Financial Group’s experience data and describe some general qualitative observations. In addition, we use simulation to generate a universe of data and compute Limited Fluctuation and greatest accuracy credibility factors for actual-to-expected (A/E) mortality ratios. We also compare the two credibility factors to an intuitive benchmark credibility measure. We see that for our simulated data set, the limited fluctuation factors are significantly lower than the greatest accuracy factors, particularly for low numbers of claims. Thus, the limited fluctuation method may understate the credibility for companies with favorable mortality experience. The greatest accuracy method has a stronger mathematical foundation, but it generally cannot be applied in practice because of data constraints. The National Association of Insurance Commissioners (NAIC) recognizes and is addressing the need for life insurance experience data in support of PBR—this is an area of current work.

Driverless Technologies and Their Effects on Insurers and the State: An Initial Assessment

AbstractThis article explores the impacts of new auto technologies and their financial effects on insurance markets, a set of complementary services, and state revenues. We use data from the National Association of Insurance Commissioners, the National Highway Traffic Safety Administration's Fatality Analysis Reporting System, the Bureau of Justice Statistics, and the Census Bureau to create a data set that links industry and state finance variables to a set of variables related to driving. Our purpose in this initial assessment is to estimate the sensitivity of these financial variables to different indices of driving including the number of drivers, the number of cars licensed per year, and the number of vehicle miles driven. The resulting estimates are used to create elasticities to show how sensitive each is to changes brought about by the new technologies.

A Hot Health Policy Summer.

Last summer the administration finalized new rules on short-term plans and approved new state waivers. Litigation continues over the individual mandate, risk adjustment, and ACA "sabotage."

Long-term care partnerships: Are they fit for purpose?

Abstract Long-term care partnership (LTCP) programs were designed to both encourage middle-income individuals to purchase private long-term care insurance, and defer the time when an individual would become eligible for Medicaid to pay her long term care services and supports (LTSS). This paper exploits the timing of state Partnership implementation (including four pilot states) to evaluate the program’s effects on new yearly insurance applications and contract uptake. We draw upon data from the National Association of Insurance Commissioners (NAIC) on new long term care insurance (LTCI) purchases (traditional and Partnership) by US state (weighted by the population over age 65 to make the data comparable). We use a difference-in-differences strategy to obtain estimates of the program effect of the LTCP on the overall uptake of private LTCI, and specifically of LTCP contracts and applications for a subsample of states. Findings suggest no significant effect of LTCP on insurance uptake and an increase in insurance applications. This result points towards a substitution between traditional and partnership contracts.

Why we need more data on the dental insurance market

Why we need more data on the dental insurance market

Enforcement of Parity Law Broadens to Include New Areas of Insurer Violations

Enforcement of Parity Law Broadens to Include New Areas of Insurer Violations

Medical Liability Insurance Premia: 1990–2016 Dataset, with Literature Review and Summary Information

This document and the accompanying dataset provide six things: (1) a dataset covering 27 years (1990–2016) of medical malpractice (med mal) insurance premia, compiled with extensive data cleaning from the only available source for these rates, annual surveys conducted by Medical Liability Monitor (MLM); (2) an accompanying codebook; (3) the Stata code we use to clean the raw data; (4) merger of the MLM data with related datasets from the National Association of Insurance Commissioners and the American Medical Association; (5) a survey of prior uses of the MLM data; and (6) a summary analysis of the data. We hope that the availability of this cleaned dataset will prompt further research on the effects of med mal premiums on provider behavior. We plan, but do not promise, to update the dataset as additional annual releases become available. The dataset, codebook, and code are available on SSRN at http://ssrn.com/abstract=2716911.

Early Experience of Financial Performance and Solvency of Medicaid-Focused Insurers Under ACA Expansion.

To allow for greater coverage of the uninsured, the Affordable Care Act expanded Medicaid coverage in 2014. Accessing financial data of state health insurers from the National Association of Insurance Commissioners, this data trend study compares the financial performance and solvency of Medicaid-focused health insurers prior to and after the first year expansion of Medicaid coverage. After the first year of Medicaid expansion, there was a significant increase in operating profit margin ratio for Medicaid-focused health insurers within expansion states. Lower medical loss ratio as well as no change in administrative costs contributed to this profitable position. The risk-based capital ratio for solvency increased significantly for health insurers in nonexpansion states while there was no change in this ratio for health insurers in expansion states. Conversely, the other important solvency ratio of cash flow margin increased significantly for health insurers in expansion states but not for insurers in nonexpansion states.

A Multivariate Analysis of Intercompany Loss Triangles

AbstractThe prediction of insurance liabilities often requires aggregating experience of loss payment from multiple insurers. The resulting data set of intercompany loss triangles displays a multilevel structure of claim development where a portfolio consists of a group of insurers, each insurer several lines of business, and each line various cohorts of claims. In this article, we propose a Bayesian hierarchical model to analyze intercompany claim triangles. A copula regression is employed to join multiple triangles of each insurer, and a hierarchical structure is specified on major parameters to allow for information pooling across insurers. Numerical analysis is performed for an insurance portfolio of multivariate loss triangles from the National Association of Insurance Commissioners. We show that prediction is improved through borrowing strength within and between insurers based on training and holdout observations.

The Economics and Regulation of Captive Reinsurance in Life Insurance

The use of captive reinsurance arrangements in life insurance has generated significant debate and led to recent adoption of new regulatory requirements by the National Association of Insurance Commissioners (NAIC). This paper provides an overview of the regulatory reserve requirements that spurred growth in captive reinsurance and how captive arrangements are used, including a summary of data on the use of captives made possible by new NAIC reporting requirements for captive reinsurance in 2013. It elaborates potential efficiencies and risks from the arrangements, and how insurers’ financial incentives, previous regulation, rating agency monitoring, and monitoring by non-insurance creditors mitigate those risks. A.M. Best ratings for life insurers with and without captive arrangements are summarized, documenting that most entities using captive reinsurance have relatively high ratings. The new NAIC regulatory framework for captive reinsurance arrangements and specific requirements for the amounts and types of assets permitted to back the arrangements are discussed.

Adverse Selection in Reinsurance Markets

This paper looks for evidence of adverse selection in the relationship between primary insurers and reinsurers. We test the implications of a model in which informational asymmetry—and therefore, its negative consequences—decline over time. Our tests involve a data panel consisting of U.S. property-liability insurance firms that reported to the National Association of Insurance Commissioners during the period 1993–2012. We find that the amount of reinsurance, insurer profitability, and insurer credit quality all increase with the tenure of the insurer–reinsurer relationship.

How Has the Affordable Care Act’s Medical Loss Ratio Regulation Affected Insurer Behavior?

Starting in 2011, the Affordable Care Act stipulates that insurers meet the minimum medical loss ratio (MLR) standards or issue rebates. An MLR is the proportion of premium revenues spent on clinical benefits, and must be at least 80% in the individual and small-group markets. Although some insurers have issued rebates, it is unclear whether they also adjusted MLRs and their components in ways to move toward compliance. To investigate early responses of individual and small-group insurers' MLR-related outcomes to the Affordable Care Act provisions. Descriptive and multivariate analyses using 2010-2011 data from the National Association of Insurance Commissioners and other sources. Outcomes include MLRs, MLR components (claims incurred, premiums earned, quality improvement expenses, and fraud detection/recovery expenses), and administrative expenses. In 2010, only 44.3% of individual market insurers reported MLRs of at least the stipulated level; by 2011, this percentage was 63.2%. Among small-group insurers, 74.9% had 2010 MLRs at or above the stipulated level, with little change in 2011. Individual insurers with 2010 MLRs >10 percentage points below the minimum exhibited the largest increases in MLRs, with changes occurring through increases in claims and indirectly through decreases in administrative expenses. Early responses to MLR regulation seem more pronounced in the individual versus small-group market, with insurers using both direct and indirect strategies for compliance. Because insurers learned of final MLR regulations only in late 2010, early responses may be limited and skewed more toward greater use of rebates than other adjustments.

A note on the appropriate choice of risk measures in the solvency assessment of insurance companies

Purpose – The concept of value at risk is used in the risk-based calculation of solvency capital requirements in the Basel II/III banking regulations and in the planned Solvency II insurance regulation framework planned in the European Union. While this measure controls the ruin probability of a financial institution, the expected policyholder deficit (EPD) and expected shortfall (ES) measures, which are relevant from the customer's perspective as they value the amount of the shortfall, are not controlled at the same time. Hence, if there are variations in or changes to the asset-liability situation, financial companies may still comply with the capital requirement, while the EPD or ES reach unsatisfactory levels. This is a significant drawback to the solvency frameworks. The paper aims to discuss these issues. Design/methodology/approach – The author has developed a model framework wherein the author evaluates the relevant risk measures using the distribution-free approach of the normal power approximation. This allows the author to derive analytical approximations of the risk measures solely through the use of the first three central moments of the underlying distributions. For the case of a reference insurance company, the author calculates the required capital using the ruin probability and EPD approaches. For this, the author performs sensitivity analyses considering different asset allocations and different liability characteristics. Findings – The author concludes that only a simultaneous monitoring of the ruin probability and EPD can lead to satisfactory results guaranteeing a constant level of customer protection. For the reference firm, the author evaluates the relative changes in the capital requirement when applying the EPD approach next to the ruin probability approach. Depending on the development of the assets and liabilities, and in the cases the author illustrates, the reference company would need to provide substantial amounts of additional equity capital. Originality/value – A comparative assessment of alternative risk measures is relevant given the debate among regulators, industry representatives and academics about how adequately they are used. The author borrows the approach in parts from the work of Barth. Barth compares the ruin probability and EPD approach when discussing the RBC formulas of the US National Association of Insurance Commissioners introduced in the 1990s. The author reconsiders several of these findings and discusses them in the light of the new regulatory frameworks. More precisely, the author first performs sensitivity analyses for the risk measures using different parameter configurations. Such analyses are relevant since in practice parameter values may differ from estimates used in the model and have a significant impact on the values of the risk measures. Second, the author goes beyond a simple discussion of the outcomes for each risk measure, by deriving the firm conclusion that both the frequency and magnitude of shortfalls need to be controlled.

IS THE MEDICAL LOSS RATIO A GOOD TARGET MEASURE FOR REGULATION IN THE INDIVIDUAL MARKET FOR HEALTH INSURANCE?

Effective January 1, 2011, individual market health insurers must meet a minimum medical loss ratio (MLR) of 80%. This law aims to encourage 'productive' forms of competition by increasing the proportion of premium dollars spent on clinical benefits. To date, very little is known about the performance of firms in the individual health insurance market, including how MLRs are related to insurer and market characteristics. The MLR comprises one component of the price-cost margin, a traditional gauge of market power; the other component is percent of premiums spent on administrative expenses. We use data from the National Association of Insurance Commissioners (2001-2009) to evaluate whether the MLR is a good target measure for regulation by comparing the two components of the price-cost margin between markets that are more competitive versus those that are not, accounting for firm and market characteristics. We find that insurers with monopoly power have lower MLRs. Moreover, we find no evidence suggesting that insurers' administrative expenses are lower in more concentrated insurance markets. Thus, our results are largely consistent with the interpretation that the MLR could serve as a target measure of market power in regulating the individual market for health insurance but with notable limited ability to capture product and firm heterogeneity.

Advisor Beliefs Regarding Effective Life Insurance Disclosure

Since 1997, and where designated, state regulation dictates the content and structure of the life insurance illustration. Based on the model regulation the National Association of Insurance Commissioners adopted in 1995, illustrations have a mandated purpose of to educate and protect the consumer during and after purchasing life insurance. Using data collected in 2012 through an online survey targeting financial advisors providing life insurance advice, we examine advisor beliefs about life insurance illustration effectiveness and find that over one-third of survey respondents believe the mandated illustration is a less than effective consumer education and protection tool while less than 15 percent rated the tool as more than effective. We find the agency relationships between advisors and insurers as well as between advisors and consumers significantly impact advisor opinions about illustrations. We find no significant evidence that advisor compensation method shapes their opinions about illustration effectiveness.

Solvency Assessment for Insurance Groups in the United States and Europe—A Comparison of Regulatory Frameworks

As a reaction to the increasing trend of insurers forming and participating in financial conglomerates and insurance groups, supervisory authorities are currently developing group-wide solvency regulations. The International Association of Insurance Supervisors (IAIS) recently published an issues paper that discusses the challenges to group supervision and defines criteria for a thorough group solvency framework. Based on these criteria, this article provides an overview and comparison of three important approaches—the U.S. solo-plus approach of the National Association of Insurance Commissioners, Switzerland’s group structure model and the Solvency II Directive on Group Solvency Assessment. The analysis reveals various deficits within the group regulation of the United States implying the need for future regulatory work. By contrast, the performance of the European frameworks with regard to the IAIS criteria is good. In particular, the Swiss framework can be seen as a prime example of an innovative and solid group solvency assessment.