1. Accountable Care Organization Pricing Model
Josh Miller, FSA
Head of Actuarial – Americas, Aetna International
Gao Niu, Ph.D., ACAS, MAAA
Assistant Director, Goldenson Center for Actuarial Research

2. Table of Content What is Accountable Care Organization (ACO)?
One Funding Approach – Fixed Payment
Why Accountable Care Organization?
Pricing Example
Experience Data and Practical Perspective
Pricing Model
A/E Analysis
What’s Next?

3. 1. What is Accountable Care Organization?
Health Care Provider led coordination around their local population designed to:
Improve the quality of care provided
Reduce the overall cost burden of care provided
Improve patient/community satisfaction
A major component necessary for Accountable Care Organizations to execute these goals is the financial mechanism used to incentivize behavior changes.

4. 2. One Funding Approach–Fixed Payments
Patients
Insurance
Patients
Insurance 1 1
Pay Premium
Pay Premium
Bill Insurance Company for Excess Loss 3
Bill Insurance Company 2 4
Provide Health Care Services
Provide Health Care Services 2
Get Paid by fixed amount for each assigned patient 3 4
Get Paid
Get Paid for Excess Loss 5
Health Care Provider
Health Care Provider
Accountable Care Organization

5. 3. Why Accountable Care Organization?
Doctors Perspective:
Less Incentive for Over Treatment
No financial pressure to become a businessman
Protected by large losses or complicated surgeries
Policyholder/Customer Perspective
Ultimate Premium Reduction
Avoid Unnecessary Treatment
Insurance Perspective:
Significant Risk Transfer
Loss Control

6. 4. Pricing Example

7. 5. Experience Data and Practical Perspective
2013, 2014 and 2015 claim data and exposure data
7.2 millions records in the 2013 claim data alone

8. 5. Experience Data – Medical Cost Category

9. 5. Experience Data - Specialty

10. 6. Pricing Model - Clustering
Specialty Grouping
Specialty1
Cardiothoracic Surgery
Specialty2
Neurosurgery
Specialty3
Vascular Surgery
Specialty4
Cardiology, Pulmonary/Critical Care
Specialty5
Cardiology Surgery
Specialty6
Other
Specialty7
Obstetrics/Gynecology
Specialty8
Surgery, Plastic Surgery, Nephrology, Infectious Disease
Specialty9
Orthopedics, Neurology, Urology, Otolaryngology, Gastroenterology
Specialty10
Dermatology, Endocrinology
Specialty11
Rheumatology, Ophthalmology, Allergy/Immunology

11. 7. Pricing Model – A/E

12. 8. What’s Next
Data Mining on both medical and pharmaceutical claims data
Claims Tracking and Monitoring
Morbidity based Mortality for Life Insurance