Webinar on Ayushman Bharat Health Insurance Scheme Date

Webinar on Ayushman Bharat Health Insurance Scheme Date: July 24, 2020 Time: 1600 to 1730 IST Satya Sai Mudigonda Senior Tech Actuarial Consultant and Hon. Professor Email: satyasaibabamudigonda@sssihl. edu. in 1

Welcome Instructions Mute Q&A IAI support C Recording 2 Feedback P D www. actuariesindia. org

Introductory Comments Bharat Venkataramani Chair, Advisory Group on Sustainable Development & Micro Insurance 3 www. actuariesindia. org

Keynote Address Sunil Sharma President, Institute of Actuaries of India 4 www. actuariesindia. org

Speaker’s Profile Sai Mudigonda Senior Tech Actuarial Consultant @techactuarial. com and Hon. Professor@sssihl. edu. in Senior Tech Actuarial Consultant with more than 27 years of consulting in actuarial and tech domains in USA and India. With a wide skill set, he managed numerous multi-million-dollar international assignments for major insurance companies across the globe. He is hon. professor at Sri Sathya Sai Institute of Higher Learning (Deemed University). He has several international journal research publications and book chapters to his credit in the field of Actuarial Data Science and has presented in many international conferences. 5 www. actuariesindia. org

Agenda Ayushman Bharat – Key Features & Actuarial Perspectives Pricing Framework for Ayushman Bharat – In times of Pandemic - COVID 19 Future of Ayushman Bharat 6 www. actuariesindia. org

Agenda Ayushman Bharat – Key Features & Actuarial Perspectives Pricing Framework for Ayushman Bharat – In times of Pandemic - COVID 19 Future of Ayushman Bharat 7 www. actuariesindia. org

Ayushman Bharat - Background Scheme Structure • Group Health Insurance Scheme – 5 lakhs floater cover • Key stakeholders- NHA, SHA, Families covered, Hospitals, Insurers, TPAs • Operates in 3 modes - Trust, Insurance, Hybrid • Contribution - State and Central in a ratio based on State 8 Package Rate Structure • Tertiary care with 2500+ procedures and surgeries • Categorized into 24 specialities • Pre-authorized packages • Include all costs associated with treatment • Additional incentives for hospitals Key Clauses • Expense clause • Loss cap clause • Enrollment of new members • Empanelment of new hospitals • Portability of scheme • Claim investigation and settlement • Fraud Prevention Measures www. actuariesindia. org

Ayushman Bharat in numbers 50 Cr + Covered Population in India Hospitals empaneled 20, 916 + 9 1 Cr + 50% Claims paid till date Contribution to insurance penetration in India Mode of operation Trust (21) Insurance (7) Hybrid (4) www. actuariesindia. org

Insurance Companies Opportunities and Risks Benefits of involving • • Increased visibility and creates cross sell opportunities Sizable amount of yearly premium (250 crore to 1500 crore range) New working relationships with thousands of Hospitals Access to line item data of claims Risks of not involving • Loss of opportunity if Ayushman Bharat is also offered to other segments • Competitive advantage if insurer is already involved Risks of involving • Potential loss if scheme is mis-priced, political interference, claims mis -management and potential abuse / fraud 10 www. actuariesindia. org

Actuarial Professionals Opportunities and Risks Benefits of involving • Opportunity to work for a flagship scheme • Be part of the team of professional implementing world’s largest health insurance scheme Risks of not involving • Lost opportunity of implementing advanced actuarial techniques on big data • Other professionals such as data scientists / economists / statisticians filling for the actuarial skill needed for the scheme Risks of involving • Task demands knowledge of data science, Health surgeries / medical procedures and implementation of actuarial techniques in a non traditional area • This needs greater commitment and involvement to acquire multi-disciplinary knowledge than traditional standard actuarial tasks. 11 www. actuariesindia. org

Poll Question 1 Approximately, how much % of the country’s population do you think is covered by Ayushman Bharat? 12 1 15 -30% 2 40 -60% 3 70% 4 80% www. actuariesindia. org

Agenda Ayushman Bharat – Key Features & Actuarial Perspectives Pricing Framework for Ayushman Bharat – In times of Pandemic - COVID 19 Future of Ayushman Bharat 13 www. actuariesindia. org

Data Other Considerations Assumptions AGENDA Computation of Risk Premium 14 Model www. actuariesindia. org

Data - Analysis of Available Information Count of Families by eligibility category 15 District wise past claims with claims status Count of top 100 procedures Specialty wise claims information Top 100 hospitals www. actuariesindia. org

Arriving at adjusted Risk Premium Frequency Severity Baseline Risk Premium 16 www. actuariesindia. org

Adjust member count for exposed period and IBNR Adjust for claims seasonality Adjust for impact of hospital empanelment Frequency Adjust for change in private-public hospital mix Adjust for change in packages Risk Premium Severity Adjust for claims seasonality Adjust claim amount for IBNR Adjust for changes in private-public hospital mix Adjust for change in packages 17 www. actuariesindia. org

Level 1 Adjust member count for exposed period and IBNR Adjust for claims seasonality Adjust for impact of hospital empanelment Frequency Adjust for change in private-public hospital mix Adjust for change in packages Risk Premium Severity Adjust for claims seasonality Adjust claim amount for IBNR Adjust for changes in private-public hospital mix Adjust for change in packages 18 www. actuariesindia. org

Level 2 Adjust member count for exposed period and IBNR Adjust claims for IBNR delays Earnings for latest month IBNR assessment Portable vs Normal Claims Past IBNR trend Min 19 Future IBNR trend Average Max www. actuariesindia. org

Example Adjust member count for exposed period and IBNR 35, 000 25, 000 20, 000 15, 000 10, 000 5, 000 pt Se ec A ug us t em b O er ct N obe ov r em D be ec r em be Ja r nu Fe ary br ua ry M ar ch A pr il M ay Ju ne ne - D Exposed Families 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 30, 000 Ju be r em be r Ja nu ar Fe y br ua ry M ar ch A pr il M ay er N ov em r O ct ob be em pt Se A ug us t 5, 000 4, 500, 000 4, 000 3, 500, 000 3, 000 2, 500, 000 2, 000 1, 500, 000 1, 000 500, 000 - Claim Count Families covered 14, 000 12. 00% 12, 000 10. 00% 10, 000 8. 00% 8, 000 6. 00% 6, 000 4. 00% 4, 000 2. 00% - 0. 00% Min Average Max Frequency 5% 7% 10% Severity 8, 245 10, 693 12, 023 Risk Premium 431 782 1, 152 pt Se A ug us t em b O er ct N obe ov r em D ber ec em be Ja r nu a Fe ry br ua ry M ar ch A pr il M ay Ju ne To ta l 2, 000 IBNR Factors 20 Severity Frequency www. actuariesindia. org

Level 1 Adjust member count for exposed period and IBNR Adjust for claims seasonality Adjust for impact of hospital empanelment Frequency Adjust for change in private-public hospital mix Adjust for change in packages Risk Premium Severity Adjust for claims seasonality Adjust claim amount for IBNR Adjust for changes in private-public hospital mix Adjust for change in packages 21 www. actuariesindia. org

Level 2 Calendar month wise claim trends in the past period Calendar month wise trends for projected period Average Min Adjust for claims seasonality Max Frequency Severity Seasonality in package consumption Min 22 Average Max www. actuariesindia. org

Example Adjust for claims seasonality 140. 00% 115% 120. 00% 105% 110. 00% 95% 100. 00% 90. 00% 85% 80. 00% 70. 00% Frequency 2017 Frequency 2018 Frequency 2019 10. 00% Severity 2018 Severity 2019 12, 000 8. 00% 11, 000 7. 00% 10, 000 6. 00% 9, 000 5. 00% Se pt ug em b O er ct N obe ov r em b D ec er em b Ja er nu Fe ary br ua ry M ar ch A pr il M ay Ju ne Ju ly To ta l t us ug Se pt us t em b O er ct N obe ov r em D be ec r em be Ja r nu Fe ary br ua ry M ar ch A pr il M ay Ju ne Ju ly To ta l 8, 000 4. 00% A Severity 2017 13, 000 9. 00% Future Projection A ug Se ust pt em be r O ct ob N ov er em D ber ec em be Ja r nu a Fe ry br ua ry M ar ch A pr il M ay Ju ne Ju ly A u Se gus t pt em be r O ct ob N ov er em D ber ec em be Ja r nu a Fe ry br ua ry M ar ch A pr il M ay Ju ne Ju ly 75% A Current Experience 130. 00% Frequency Min 23 Frequency Average Frequency Max Severity Min Frequency Severity Risk Premium Severity Average Min 7% 10, 374 706 Severity Max Average 8% 10, 623 823 Max 9% 10, 886 930 www. actuariesindia. org

Level 1 Adjust member count for exposed period and IBNR Adjust for claims seasonality Adjust for impact of hospital empanelment Frequency Adjust for change in private-public hospital mix Adjust for change in packages Risk Premium Severity Adjust for claims seasonality Adjust claim amount for IBNR Adjust for changes in private-public hospital mix Adjust for change in packages 24 www. actuariesindia. org

Level 2 Beds Past Empanelment trends Claims expected per hospital Adjust for impact of hospital empanelment Min Empanelment future trends Average Max Beds 25 Claims expected per hospital www. actuariesindia. org

Example Adjust for impact of hospital empanelment Number of hospitals Enrolled 900 800 700 600 500 400 300 200 100 Frequency Severity Risk Premium 26 Average Min 7% 10, 374 726 1 21 l-2 Ju Ju -2 ay n- 1 1 -2 M pr A ar -2 1 21 M b- 21 Fe Ja -2 ec D n- 0 0 -2 ov N ct 20 O p- 0 Min Se -2 ug A Ju l-2 0 20 Ju -2 ay n- 0 0 -2 Max M pr A ar -2 0 20 M b- 20 Fe Ja -1 ec D n- 9 9 -1 ov N ct 19 O p. Se A ug -1 9 0 Claims per new hospital Average 8% 10, 623 851 Max 9% 10, 886 980 www. actuariesindia. org

Level 1 Adjust member count for exposed period and IBNR Adjust for claims seasonality Adjust for impact of hospital empanelment Adjust for impact of COVID-19 Frequency Adjust for change in private-public hospital mix Adjust for change in packages Risk Premium Severity Adjust for claims seasonality Adjust claim amount for IBNR Adjust for changes in private-public hospital mix Adjust for change in packages 27 www. actuariesindia. org

Level 2 Future mix expected Experience of Private vs public hospitals Current mix and past trends Adjust for change in private-public hospital mix Max Frequency Severity Package consumption between Private and Public hospitals Future proportion expected Min 28 Average Min Average Max www. actuariesindia. org

Example Adjust for change in privatepublic hospital mix Frequency Severity 14. 00% 14, 000 12. 00% 12, 000 10. 00% 10, 000 8. 00% 8, 000 6. 00% 6, 000 4. 00% 4, 000 2. 00% 2, 000 0. 00% Min Average Public hospital Max Private hospital Private vs Public mix 120% 100% 80% 30% 40% 70% 60% 40% 20% Min Frequency 9% Severity 10, 410 Risk Premium 891 Average 10% 10, 651 1, 038 Max 11% 10, 915 1, 172 0% Past Future Public 29 Private www. actuariesindia. org

Level 1 Adjust member count for exposed period and IBNR Adjust for claims seasonality Adjust for impact of hospital empanelment Frequency Adjust for change in private-public hospital mix Adjust for change in packages Risk Premium Severity Adjust for claims seasonality Adjust claim amount for IBNR Adjust for changes in private-public hospital mix Adjust for change in packages 30 www. actuariesindia. org

Level 2 Past package consumption Adjust for change in packages Differences in packages Future package consumption Min Average Max 31 www. actuariesindia. org

32 Claim Amount t - (To d ou tal) d S bl u H e s em rgi c od al tent P ia a ly sis cka g PT p CA er e s itt - in s g Se Cae ing l v s e s ar er La te ia e pa ro seps n D nt el sc iv op is/S er ep ic C tic y h Co sh ol e ng oc k es cys te tiv To e h cto m ta l H ear y t f ip ai R l u ep la re ce m en t - fie 50, 000 ci m en 100, 000 CA ce la 150, 000 PT 200, 000 pe y 250, 000 ns sh er 300, 000 U es ep e R ne K cy le ho tic iv oc ste k tiv To e h ctom ta y l H eart fa ip ilu R ep re la ce m en t ng Co Se p nt te ng tti e s el D n ia ar gl nt ge ka r s i p e sin - is/ ps C ic op sc ro se re es Ca CA PT sis ac l P ca l) ta st e le To t ( ub do rg i ly ia em od ve Se H d Su - en ce m CA PT fie ci pe ns pa La U la ep e R ne K Example Top 10 procedures 80, 000 70, 000 60, 000 50, 000 40, 000 30, 000 20, 000 10, 000 - Claim Count www. actuariesindia. org

Example Adjust for change in packages Frequency Severity 12. 00% 15000 11. 50% 14000 11. 00% 13000 10. 50% 10. 00% 12000 9. 50% 11000 9. 00% 10000 8. 50% 8. 00% 9000 Min Same Packages Average Increase in Package Rates New Packages 33 Max Min Increase in Packages Frequency Min Average 9% 10% Max 12% Same Packages Average Increase in Package Rates Severity Min 11, 018 Average 12, 493 Max Increase in Packages Max 14, 899 www. actuariesindia. org

Example Risk Premium Calculation 2000 Select input for projecting risk premium Frequency 1800 1600 1400 1200 Severity 1000 800 Frequency Trend 600 400 Severity trend 200 0 Hospital Empanelment Impact Package Rate Changes Package Count Changes 34 Base Risk Premium Adjusted for claims seasonality Min Adjust for impact of hospital empanelment Average Adjust for changes in private-public hospital mix Adjust for change in packages Max Min Base Risk Premium 500 Adjusted for claims seasonality 542 Adjust for impact of hospital empanelment 726 Adjust for changes in private-public hospital mix 891 Adjust for change in packages 971 Average 500 777 851 1, 038 1, 303 Max 500 1, 043 980 1, 172 1, 761 www. actuariesindia. org

Poll Question 2 In 2020, the packages offered in the Ayushman Bharat product have changed. What does this impact? 35 1 Frequency only 2 Severity only 3 Both Frequency and severity 4 Neither frequency nor severity www. actuariesindia. org

Other Considerations Enrollment changes Target Population Changes Emerging Experience 3 1 Portability 7 5 36 2 4 Change in Loss Sharing Clause Experience from Retail health insurance products 8 6 Other government schemes experience Fraud detection www. actuariesindia. org

Agenda Ayushman Bharat – Key Features & Actuarial Perspectives Pricing Framework for Ayushman Bharat – In times of Pandemic - COVID 19 Future of Ayushman Bharat 38 www. actuariesindia. org

COVID-19 Impact Changes in package consumption patterns 01 04 39 02 Upcoming period impact 03 Packages for COVID-19 Scope of claims investigation www. actuariesindia. org

COVID-19 Impact Trends before and during Covid 19 Future COVID-19 experience expected Average Min Impact of COVID-19 Frequency Severity Future COVID-19 experience expected Seasonality in package consumption Min 40 Max Average Max www. actuariesindia. org

Impact of COVID-19 14, 000 12. 00% 12, 000 10. 00% 10, 000 8. 00% 8, 000 6. 00% 6, 000 4. 00% 4, 000 2. 00% 2, 000 - 0. 00% August September October November December January February March Pre-Covid May June July Covid period Severity 41 April Frequency www. actuariesindia. org

Agenda Ayushman Bharat – Key Features & Actuarial Perspectives Pricing Framework for Ayushman Bharat – In times of Pandemic - COVID 19 Future of Ayushman Bharat 42 www. actuariesindia. org

Future of Ayushman Bharat Additional 50 crore people can get this affordable benefit in India through the existing product infrastructure Great opportunity for insurance companies, hospitals, professionals including actuarial experts A pilot is being planned by NHA wherein insurance companies are invited to participate 43 www. actuariesindia. org

DISCLAIMER Ø The premium computation shown is intended for illustration of concepts for education purpose only. In practice, a number of factors outside those described in this presentation are applicable which can possibly affect the risk premium computation in a significant manner. Ø The presenter is not liable for any commercial implications of the methodology shown and the results obtained. 44 www. actuariesindia. org

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WRAP ØUpcoming Webinars UP ØCPD Questions ØFeedback 46 www. actuariesindia. org

Upcoming Webinars Webinar 2 nd Webinar on Risk Management - Webinar on COVID 19 – Response to Basis and Operational risks & championing them! 2 nd Webinar on IFRS 17 2 nd Webinar in Life Insurance 3 rd Webinar on Pension - 17 th CIRB Module 1 - Exempt Provident Fund Actuarial Valuations- Overview of industry opinions and way forward presented by Special Task Force 3 rd Webinar on Pension - 17 th CIRB Module 2 - To Annuity and beyond… 31 July, 2020 6 -7 August, 2020 13 August, 2020 18 August, 2020 19 August, 2020 2 nd Webinar in Health Insurance 27 August, 2020 2 nd Webinar on Banking and Finance 5 September, 2020 3 rd Webinar on Pension - 17 th CIRB Module 3 - Pensions in a low to very low interest rate environment 3 rd Webinar on Pension - 17 th CIRB Module 4 - Latest trends and impacts on ESOP design and valuations 3 rd Webinar in Health Insurance 6 th Webinar in Data Science 4 th Webinar in Health Insurance - Data Science and Health Insurance 47 Date 3 rd Webinar on Banking and Finance 10 September, 2020 11 September, 2020 23 September, 2020 3 October, 2020 29 October, 2020 5 December, 2020 www. actuariesindia. org

CPD Question-1 Who pays the premium for the AB scheme? i. Central government ii. State government iii. Insured family iv. Insurer a. i and ii proportionately d. 48 iv only b. i or ii depending on the state e. c. i, ii and iii proportionately iii only www. actuariesindia. org

CPD Question-2 In the example shown in webinar, what is the package contributing the most to the claims cost? a. Double stent d. 49 b. Caesarean Hemodialysis e. c. Knee Replacement Hip Replacement www. actuariesindia. org