Setting premiums for small- and medium-sized groups is a challenging task. Given the regulatory environment and price sensitivity of the groups, underwriters must closely match premiums to future costs in order to retain the competitiveness of their products. Healthy groups may have an incentive to shop for lower rates while unhealthy groups have a disincentive to shop as it is unlikely that they will find rates more favorable than the limited regulated increase of their current plan.
If underwriters cannot provide a competitive rate to healthy groups, the most profitable business is lost and the risk of the remaining pool increases. Health plans have responded to this threat by better determining their risk via resource-intensive claims reviews by medical underwriters. The ACG® System can significantly reduce time spent in this arduous task.
The ACG System automated approach:
- provides a risk assessment for every eligible member based on historical claims,
- reduces underwriting discretion, allowing for greater consistency among underwriters,
- yields reproducible results which are more defensible to customers and regulators and
- incorporates an additional source of risk information by using recent data including prescription claims.
The ACG System contributes to a health-based rating methodology that can improve the objectivity, reliability and efficiency of the medical underwriting process. Premiums based on ACGs, therefore, will be fairer to all parties concerned and allow for more accurate and credible predictions of a group’s utilization. This leads to more competitive renewal rates and improved customer retention.