Insurance claim forecasting system

• US 7,392,201 B1
• Filed: 05/18/2001
• Issued: 06/24/2008
• Est. Priority Date: 11/15/2000
• Status: Active Grant

• Current Assignee: Trurish LLC
• Original Assignee: Trurisk LLC
• Inventors: Binns, Gregory S., Blumberg, Mark Stuart
• Primary Examiner(s): Thomas; Joseph
• Assistant Examiner(s): Porter; Rachel L
• Application Number:
  US09/861,379
• Time in Patent Office: 2,594 Days
• Field of Search: 705/4
• US Class Current: 705/4
• CPC Class Codes: G06Q 10/04 Forecasting or optimisation specially adapted for administrative or management purposes, e.g. linear programming or "cutting stock problem" market predictions or forecasting for commercial activities G06Q30/0202
• CPC Class Codes: G06Q 10/10 Office automation; Time management
• CPC Class Codes: G06Q 40/08 Insurance

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.

Claims

1. A computer-implemented process for developing models for forecasting future person-level health care costs for use in underwriting health insurance comprising the steps of:

storing in a computer readable memory historical health care claims data and enrollment data for a plurality of people for each of a base period and a next period separated by a lag period, where the person-level health care claims data comprise at least a claim code and a claim amount;

programming a computer processor associated the computer readable memory with risk factor definitions that assign risk factors;

processing with the programmed computer processor the base period health care claims data and enrollment data to for each of the plurality of people to assign at least one claim based risk factor from the base period claim codes and at least one enrollment based risk factor from the base period enrollment data;

storing the risk factors assigned to each of the plurality of people in the computer readable memory;

programming a computer processor associated with the computer readable memory with at least one interaction capturing technique;

processing with the programmed computer processor the risk factors assigned to the plurality of people with the interaction capturing technique to determine the ability of individual risk factors and combinations of risk factors to forecast the health care costs associated with the plurality of people in the next period;

storing the determined abilities in the computer readable memory;

programming a computer processor associated with the computer readable memory to select a plurality of risk factors having the greatest ability to forecast next period person-level health care costs;

storing the selected risk factors; and

processing with the computer processor selected risk factors to generate a model comprising a combination of the selected base period risk factors and the associated logical and mathematical operations that when applied to those risk factors predicts person-level health care costs in the next period.

2. The computer-implemented process of claim 1, wherein the interaction capturing technique is selected from the group consisting of median regression tree techniques, least square regression tree techniques, rule induction techniques, ordinary least squares regression techniques, median regression techniques, robust regression techniques, genetic algorithms, rule induction, clustering techniques and neural network techniques.

3. The computer implemented process of claim 1 wherein the data used by the interaction capturing technique consist essentially of the claim-based and enrollment-based risk factors, the claim amount is a standardized cost of services provided, and the model is configured to allocate prospective payments to health care providers.

4. The computer implemented process of claim 1 wherein the data used from the claims data consist essentially of the claim code for selected mandatory procedures, the claim amount is a standardized cost of services provided during the same time period as the base period, and the model is configured to evaluate the efficiency of health care providers.

5. The computer implemented process of claim 1, further comprising a computer implemented process of forecasting future claim amounts attributable to claims from people to be insured for an actual policy period, further comprising:

storing in a computer readable memory historical health care claims data and enrollment data for a plurality of people for an underwriting period, where the underwriting period health care claims data comprise at least a claim code and a claim amount;

programming a computer processor associated with the computer readable memory with the model comprising a combination of the selected base period risk factors and associated logical and mathematical operations;

processing the actual underwriting period person-level data of each of the people to be insured to generate a person-level actual policy period cost forecast for each of the people to be insured;

storing the costs forecasts for each of the people to be insured;

programming a computer processor to total the person-level actual policy period costs forecasts for the plurality of people; and

processing the person-level actual policy period cost forecasts to produce a group-level forecast for the actual underwriting period by totaling the person-level actual policy period cost forecasts.

6. The computer implemented process of claim 5, where person-level health care data claim amounts comprise a mix of fee for service payments and capitation payments, the base period and underwriting period risk factors are appended with dummy variables for the presence of capitation payments by provider type, and the cost estimate in the next period and actual policy period is a fee for service cost that must be supplemented with the capitation payments.

7. The computer implemented process of claim 5 for forecasting short term disability (STD) costs wherein a dependent measure for generating the cost forecasting model is the number of STD days in the policy period and is the dependent measure weighted by the expected cost per day for the STD to produce the person-level forecast STD costs and totaled across the plurality of people to produce the forecast STD cost.

8. The computer-implemented process of claim 5, further comprising:

storing in a computer readable memory an expected health care cost inflation factor;

programming a computer processor associated with the computer readable memory adjust the actual policy period forecasts by the expected health care cost inflation factor;

processing with the computer processor to adjust the actual policy period forecasts by the expected health care cost inflation from the underwriting period to the actual policy period to provide an adjusted policy period forecasts;

storing in a computer readable memory the adjusted policy period forecasts.

9. The computer implemented process of claim 1, wherein the cost forecast is produced for first-dollar health insurance.

10. The computer implemented process of claim 1, wherein the cost forecast produced is for aggregate-only stop loss health insurance.

11. The computer implemented process of claim 1, wherein the cost forecast produced is for specific stop loss health insurance.

12. The computer-implemented process of claim 11, where the dependant measure for generating the forecasting model is the probability of a person'"'"'s total claims exceeding a specified threshold during the next period and that probability is weighted by the average amount that claims are above that threshold for all people in the development universe with claims above that threshold during the next period.

13. The computer implemented process of claim 1, wherein each of the claim-based risk factors is independent of the sequence in time of the other claim-based risk factors.

14. The computer implemented process of claim 1, for forecasting a probability of long term disability (LTD) claims wherein a dependent measure for generating the cost forecasting model is the probability of a LTD claim in the next period where the probability is weighted by the net present value of the LTD claim amount and comprises in addition producing person-level expected LTD costs and totaling person-level expected LTD costs across the plurality of people to produce an expected LTD cost.

15. The computer implemented process of claim 1 for forecasting group term life insurance costs wherein a dependent measure for generating the forecasting model is the expected probability of death weighted by the amount of life insurance to produce the person-level expected term life insurance cost which is totaled across the plurality of people to produce the expected term life insurance cost.

16. The computer implemented process of claim 1, wherein person-level claim amounts are a mix of fee for service payments and capitation payments so that the base period risk factors are appended to include dummy variables for the presence of capitation payments by provider type.

17. A computer-implemented process of forecasting a claim amount attributable to claims from members of a book of business during an actual policy period, comprising the steps of:

storing in a computer readable memory person-level data, comprising enrollment data for members of a book of business to be insured for an actual underwriting period that is not contiguous with the actual policy period;

storing in a computer readable memory a model development universe of person-level data, comprising enrollment data from the historical base period and historical next period heath care claims data for a plurality of individuals;

storing in a computer readable memory enrollment-based risk factors for each historical base period member and next period claim amounts for each historical base period member;

programming a computer processor associated with the computer readable memory with an interaction capturing technique;

processing the risk factors with the computer processor to capture the predictive ability of main effects and interactions of the enrollment-based risk factors through the application of the interaction capturing technique to the model development universe;

storing in the computer readable memory the predictive ability of the main effects and interactions of the enrollment-based risk factors;

programming a computer processor associated with the compute readable memory to generate a person-level cost forecast by applying the predictive ability of the main effects and interactions of the enrollment-based risk factors;

processing with the computer processor the person-level underwriting period enrollment data of each of the members of the book of business to generate a person-level expected cost forecast for the policy period for each member of the book of business;

storing in the computer readable memory the person-level costs forecasts;

programming a computer processor associated with the computer readable memory to total the person-level cost forecasts; and

processing with the computer processor to total the person-level forecasts of each person of the group produce a group-level forecast for the expected cost of the policy period.

18. A computer-implemented process of forecasting costs attributable to claims from members of a book of business during an actual policy period, comprising the steps of:

storing in a computer readable memory person-level data, comprising enrollment data and actual underwriting period health care claims data, for members of a book of business, where the person-level data on a health care claim comprises at least a claim amount and a claim code and the actual underwriting period is not contiguous with the actual policy period;

storing in a computer readable memory a model development universe of person-level data, comprising enrollment data, historical base period health care claims data and historical next period claim data for a plurality of individuals, where the person-level data on a base period health care claim includes at least a claim amount and a claim code;

storing in a computer readable memory claim-based risk factors for each historical base period based on the claim code associated with the health care claim and providing at least one enrollment risk factor based on the enrollment data;

programming a computer processor associated with the computer readable memory with an interaction capturing technique;

processing the model development universe to develop a cost-forecasting model by capturing the predictive ability of main effects and interactions of risk factors through the application of the interaction capturing technique;

storing the cost forecasting model in the computer readable memory;

programming a computer processor associated with the computer readable memory to apply the cost-forecasting model to the person-level data of each of the individuals or members of a group to generate a person-level actual policy period expected cost forecast for each member of the group; and

processing with the computer processor the person-level forecasts of each individual or member of the group to produce a group-level forecast for the actual policy period by totaling the person-level cost forecasts for the actual policy period.

19. The computer implemented process of claim 18 for forecasting short term disability costs wherein the interaction capturing technique uses a dependent measure from the next period and policy period comprising the number of STD days in the policy period and weights the dependent measure by the expected cost per day for the STD to produce the person-level expected STD costs and summed across the group to produce the group'"'"'s expected STD cost.

20. The computer implemented process of claim 18, for forecasting a probability of long term disability (LTD) claims wherein a dependent measure for generating the cost forecasting model is the probability of a LTD claim in the policy period where the probability is weighted by the net present value of the LTD and applying the cost forecasting model to the person-level data produces person-level expected LTD costs wherein summing the person-level expected LTD costs across the group to produce a group'"'"'s expected LTD cost for an actual policy period.

21. The computer implemented process of claim 18, wherein the cost forecast is produced for first-dollar health insurance.

22. The computer implemented process of claim 18, wherein the cost forecast is produced for specific plus aggregate stop loss health insurance.

23. The computer implemented process of claim 18, wherein the cost forecast produced is for aggregate-only stop loss health insurance.

24. The computer implemented process of claim 18, wherein the cost forecast produced is for specific stop loss health insurance.

25. The computer-implemented process of claim 24, where the dependant measure for generating the forecasting model is the probability of a person'"'"'s total claims exceeding a specified threshold during the next period and that probability is weighted by the average amount that claims are above that threshold for all people in the development universe with claims above that threshold during the next period.

26. The computer implemented process of claim 18 for forecasting group term life insurance costs wherein a dependent measure for generating the cost forecasting model is the expected probability of death weighted by the amount of life insurance to produce the person-level expected term life insurance cost which is summed across the group to produce the group'"'"'s expected term life insurance cost.

27. The computer implemented process of claim 18, wherein claim amounts are a mix of fee for service payments and capitation payments so that the base and underwriting periods risk factors are appended to include dummy variables for the presence of capitation payments by provider type and the cost estimate in the next and policy periods is the fee for service cost that must be supplemented with the capitation payments.

28. The process of claim 18 further comprising developing group-level cost-forecasting model for groups in the book of business by capturing the predictive ability of main effects and interactions of group-level risk factors which include groups historical claim amounts, group-level sum or average of the person-level forecasts, SIC code or industry type, characteristics of the benefit plan design, geographic locale, and number of people and length of time covered by the insurance through the application of an interaction capturing technique to the model development universe of groups.

29. The computer implemented process of claim 28, comprising in addition the step of:

setting medical insurance reserves based on the group-level forecast, wherein the next period is a reserving period for claims that have not occurred or that have occurred but not been reported.

30. The computer implemented process of claim 28 for forecasting short term disability costs wherein the interaction capturing technique uses a group-level dependent measure of residual STD days at the group-level calculate forecast STD costs by weighting by the group'"'"'s expected STD cost per day.

31. The computer implemented process of claim 28, wherein medical claim amounts are a mix of fee for service payments and capitation payments so that the base and underwriting periods group-level risk factors are appended to include dummy variables for the presence of capitation payments by provider type and the cost estimate in the next and policy periods is the fee for service cost that must be supplemented with the expected capitation payments.

32. The process of claim 18 comprising in addition the steps of:

storing in the computer readable memory a provider type cost trend forecast adjustment to be utilized by at least one member of the group to be insured;

programming a computer processor to adjust the person-level next period cost forecast for each member using the health care provider type with the provider type cost trend forecast adjustment.

33. An automated system for forecasting future costs attributable to claims from members of a book of business during an actual policy period comprising:

a central processing unit;

an insured person database, accessible by the processing unit, wherein the database comprises person-level enrollment data and actual underwriting period health care claims data, for members of a book of business to be insured, where the person-level data on a health care claim comprises at least a claim amount and a claim code;

a model development universe database, accessible by the processing unit, where the second database comprises model development universe of person-level data, comprising enrollment data, historical base period health care claims data and historical next period claim amount data for a plurality of individuals, where the person-level data on the base period health care claim includes at least a claim amount and a claim code;

a risk factor encoder, accessible by the processing unit, wherein the risk factor encoder encodes claim-based risk factors for each historical base period claim based on the claim code associated with the health care claim and the risk factor encoder encodes at least one enrollment risk factor based on the enrollment data;

a model generator, accessible by the processing unit, that generates a cost-forecasting model by capturing the predictive capacity of the main effects and the interaction of the risk factors assigned by the risk factor encoder to forecast the historical next period of the model development universe data using the historical base period data;

a person-level cost generator that applies the cost-forecasting model to the person-level actual underwriting period health care claims data of each of the members of the book of business to generate a person-level actual policy period claim amount forecast for each member of the book of business; and

an actual policy period group-level cost forecast generator that totals the person-level actual next period forecasts for each member of the group to generate an actual policy period group-level cost forecast.

34. The system of claim 33 wherein the model generator captures the predictive ability of main effects and interactions of group-level risk factors which include but are not limited to groups historical claim amounts, group-level sum of the person-level forecasts, SIC code or industry type, characteristics of the benefit plan design, geographic locale, and the number of people and length of time covered by the insurance through the application of an interaction capturing technique to the model development universe of groups.

35. A computer-implemented system of forecasting costs attributable to claims from members of a book of business during an actual policy period, comprising:

means for providing person-level data, comprising enrollment data and actual underwriting period health care claims data, for members of a book of business, where the person-level data on a health care claim comprises at least a claim amount and a claim code and the actual underwriting period is not contiguous with the actual policy period;

means for providing a model development universe of person-level data, comprising enrollment data, historical base period health care claims data and historical next period claim amount data for a plurality of individuals, where the person-level data on a base period health care claim includes at least a claim amount and a claim code;

means for providing claim-based risk factors for each historical base period based on the claim code associated with the health care claim and providing at least one enrollment risk factor based on the enrollment data;

means for developing a cost-forecasting model by capturing the predictive ability of main effects and interactions of risk factors through the application of an interaction capturing technique to the model development universe;

means for applying the cost-forecasting model to the person-level data of each of the individuals or members of a group to generate a person-level actual policy period expected cost forecast for each member of the group; and

means for producing a group-level forecast for the actual policy period from the person-level forecasts of each individual or member of the group by totaling the person-level cost forecasts for the actual policy period.

36. The system recited in claim 35 wherein the system further is automated such that when actual underwriting period data is provided the system automatically provides an actual policy period claim amount forecast.

37. The system recited in claim 35 for use by a client having data and an Internet client application, further comprising an Internet server application such that when the client provides actual underwriting period data to the Internet server application, the Internet server application automatically provides an actual policy period claim amount forecast.

38. A method of underwriting a health insurance product comprising the steps of

storing in a computer readable memory an identification of the coverage of the insurance product which identifies the conditions of payment under the product during a policy period;

storing in a computer readable memory person-level health care claim information comprising enrollment data, and base period, next period and underwriting period claim data, the claim data comprising claim codes having associated claim costs;

programming a computer processor associated with the computer readable memory with an interaction capturing technique;

processing the person-level health care claim information with the interaction capturing technique to capture the predictive ability of the person-level health care claim and eligibility information;

storing the captured predictive ability of the person-level health care claim information

programming a computer processor to forecast a predicted cost of the insurance product; and

processing with the computer processor the identification of the coverage of the insurance product and the captured predictive ability of the person-level health care claim and eligibility information to forecast a predicted cost of the insurance product during the policy period.

39. The method of underwriting an insurance product of claim 38, for insuring short term disability costs wherein the interaction capturing technique uses a dependent measure from the next period and policy period comprising the number of STD days in the policy period and weights the dependent measure by the expected cost per day for the STD to produce the person-level expected STD costs and summed across the group to produce the group'"'"'s expected STD cost.

40. The method of underwriting a insurance product of claim 38, for insuring long term disability (LTD) claims wherein a dependent measure for generating predicted cost is the probability of a LTD claim in the policy period where the probability is weighted by the net present value of the LTD and applying the cost forecasting model to the person-level data produces person-level expected LTD costs wherein summing the person-level expected LTD costs across the group to produce a group'"'"'s expected LTD cost for an actual policy period.

41. The method of underwriting a insurance product of claim 38, wherein the cost forecast is produced for first-dollar health insurance.

42. The method of underwriting a insurance product of claim 38, wherein the cost forecast is produced for stop loss health insurance.

43. The method of underwriting a insurance product of claim 38 wherein the cost forecast produced is for aggregate-only stop loss health insurance.

44. The method of underwriting a insurance product of claim 38 wherein the cost forecast produced is for specific stop loss health insurance.

45. The method of underwriting an insurance product of claim 44, where the dependant measure for generating the forecasting model is the probability of a person'"'"'s total claims exceeding a specified threshold during the next period and that probability is weighted by the average amount that claims are above that threshold for all people in the development universe with claims above that threshold during the next period.

46. The method of underwriting a insurance product of claim 38 for insuring group term life insurance costs wherein a dependent measure for generating the cost forecasting model is the expected probability of death weighted by the amount of life insurance to produce the person-level expected term life insurance cost.

47. The method of underwriting a insurance product of claim 38 comprising renewal underwriting, wherein the person-level health care claim information further comprises claim data from the members of a group in the book of business to be insured.