Insurance claim forecasting system

Abstract

A computer-implemented process of developing a person-level cost model for forecasting future costs attributable to claims from members of a book of business, where person-level data are available for a substantial portion of the members of the book of business for an actual underwriting period, and the forecast of interest is for a policy period is disclosed. The process uses development universe data comprising person-level enrollment data, historical base period health care claims data and historical next period claim amount data for a statistically meaningful number of individuals. The process also provides at least one claim-based risk factor for each historical base period claim based on the claim code associated with the health care claim and provides at least one enrollment-based risk factor based on the enrollment data. The process also develops a cost forecasting model by capturing the predictive ability of the main effects and interactions of claim based risk factors and enrollment-based risk factors, with the development universe data through the application of an interaction capturing technique to the development universe data.

Description

CROSS-REFERENCE TO RELATED APPLICATIONS[0001]This application is based on provisional applications 60 / 249,060, filed Nov. 15, 2000, and 60 / 267,131 filed Feb. 7, 2001, which are incorporated by reference herein.REFERENCE TO PROGRAM LISTINGS[0002]A computer program listing appendix has been submitted on compact disc for this disclosure. The material on that compact disc is incorporated by reference herein. The compact disc was filed with 2 copies, and contains the following files with:NAME OF FILEDATE OF CREATIONSIZE IN BYTESAPPENDIX.TXTMay 14, 2001281,991The names above are the names of the files on the compact disc, the dates are the dates the files were created on the compact disk, and the size in bytes is the size of the file. Please note that there is a glossary of terms included at the end of the Background section.BACKGROUND OF THE INVENTION[0003]This invention pertains to health, disability and life insurance systems, particularly including processing data (in the business of ...

AI Technical Summary

Benefits of technology

"The invention is a computer-implemented process for developing a person-level cost model for predicting future health care claims for members of a book of business. The process involves using data from the book of business, such as enrollment data and historical health care claim data, to develop a model that can predict the future costs associated with claims. The model takes into account various factors such as claim code, claim amount, and enrollment-based risk factors to capture the main effects and interactions of these factors. The process can also adjust the future costs based on expected changes in the economy. The invention can be used to set insurance reserves for the future and evaluate the efficiency of health care providers."

Problems solved by technology

These standard actuarial methods do not account for person-level trends in historical costs nor medical information about the person.

Manual underwriting is expensive due to the labor intensity and is prone to variability among underwriters as their experience varies.

These “risk adjustment” methods do not use procedures or historical person-level costs as the governments do not want incentives for increased utilization of services and spending more money.

However, historical cost is the single best predictor of future medical cost for credible groups.

Not using it as part of the forecasting method decreases the accuracy of the forecast.

It also may limit use of demographic variables.

Manual medical underwriting for specific stop loss has the same problems as manual underwriting for small group medical insurance; it is expensive and prone to underwriter variability.

Price is usually determined by competitive pressure but the inventors are not familiar with proprietary techniques used by the insurers.

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