The impact of emerging cancer drugs on health insurance NZSA - PowerPoint PPT Presentation

The impact of emerging cancer drugs on health insurance NZSA Conference November 2016 Len Elikhis, B.Comm (Hons), FNZSA, FIAA 1

Agenda 1. Background 2. Accounting & reserving practices 3. Developments in cancer care 4. Implications The views here are my own and do not necessarily reflect those of my employers – past or present. 2

Background 3

Role of health insurance in NZ Approval and Funding purchasing MOH ACC PHI MedSafe Some co- 20 DHBs funding Pharmac Healthcare delivery Public Mental GPs / Semi Elective Maternity Hospitals Health primary acute 4

Long-term nature of health insurance Guaranteed renewability Non-cancellable Renewal on original terms 5

Long-term nature of health insurance Pure Self Risk Funding insurance Health insurance 6

Long-term nature of health insurance Cost of renewability option High risk claimants 7

Long-term nature of health insurance Cost of renewability option 1 – 1.5% for each year of portfolio duration Selective lapsation 8

Background Accounting 9

IFRS 4: same contract – different treatment Life insurance Non-life insurance BEL Unearned premium PVFP IBNR IBNR UPR UPR 10

Health insurance reserving in NZ Reserve Statutory Management IBNR 7 7 RBNA 3 3 Catastrophe 0 1 Guarantees / options 1 2 Claims expense 6 6 UPR 7 7 11

Health insurers fund claims costs on a PAYG basis Selective Higher risk lapsation claimants No explicit allowance 4 7 Explicit allowance 3 0 12

By contrast, ACC is fully funded Eliminate the transference of financial responsibilities between generations 13

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Differences in reserving practices: health insurers and ACC Interpretation of the Accounting Standards? Market competition? Industry capitalisation? 15

Developments in cancer care 16

Health insurance coverage: continuum of cancer care Specialist consultations 17

Health insurance coverage: continuum of cancer care Diagnostic scans 18

Health insurance coverage: continuum of cancer care Cancer drugs 19

Health insurance coverage: continuum of cancer care Radiation therapy 20

Health insurance coverage: continuum of cancer care Surgery (therapeutic and reconstructive) 21

Health insurance coverage: continuum of cancer care Other services 22

Chemotherapy: from the trenches to the theatre 23

Chemotherapy: mode of action 24

Chemotherapy: toxicity 25

Chemotherapy: toxicity 26

Immunotherapy: harnessing the immune system Monoclonal antibodies 27

Immunotherapy: harnessing the immune system Immune checkpoint inhibitors 28

Immunotherapy: harnessing the immune system Immune checkpoint inhibitors 29

Immunotherapy: harnessing the immune system Cell based therapies 30

Immunotherapy: lower toxicity 31

Implications Implications 32

Funders should expect increased spending • Longer treatment durations • Patents • Competition • Combination therapies • Policy settings 33

Consumer expectations There are many things patients are willing to do without; however, medication for a fatal disease is not and should not be one of them. The seriousness of a cancer diagnosis plays a role in how much cost patients and physicians are willing to bear for modest incremental benefits. However, high prices for incremental benefits are a recipe for a system with unsustainable costs. - Siddiqui and Rajkumar, Mayo Clinic (2012) 34

Cost trend: US perspective 35

Cost trend: NZ perspective 36

Cost trend: NZ perspective 37

Coverage levels: NZ insurers Retail health policies are pro-consumptive and generally offer wide coverage 38

Responding to emerging claims • Exclusions for experimental treatment • Medical necessity (treatment without curative intent?) • Reasonable charges • Treatment criteria • Affiliated Providers • Ability to vary contract terms • Pricing 39

Pulling the pricing lever: is it fair? The competitive cycle weakens the sustainability of retail health insurance Insurer A gains competitive Insurer A “ring - fences” price advantage Healthy customers transfer to Other insurers follow new product Remaining customers pay Cross-subsidies reduce higher premiums 40

Implications Conclusions • Health insurance is a long-term product • Evidence suggests that cancer costs may expose insurers to even longer-tail claims • Market forces constrain insurers’ ability to pre -fund liabilities – pricing becomes increasingly important 41