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Aon actuary briefs SFHSS on underwriting, funding types and trend methods
Summary
Aon actuary Mike Clark reviewed self-funded, flex-funded and fully insured plan approaches, underwriting steps and experience‑versus‑community rating methods and answered board questions about regional trends and small‑population plans.
Mike Clark, the Aon actuary, gave the Health Service System board an overview of health‑plan underwriting and funding approaches. He described three funding types used by SFHSS — self‑funded (trust pays claims and admin fees), flex‑funded (trust pays most claims with some insured elements and large‑claim pooling) and fully insured (fixed premiums set by plans) — and explained the advantages, disadvantages and risk exposures associated with each.
Clark outlined a standard five‑step underwriting process: analyze prior‑period claims, apply a health‑care trend factor (reflecting price and utilization changes), account for design and head‑count changes, add administrative fees and other program elements (including a $3 health sustainability charge), and produce rate recommendations that Aon and plan actuaries reconcile.
He explained differences between experience‑rating (using plan‑specific experience) and community‑rating (using a plan's book of business), noting experience rating is typical for large plan populations and community rating is used for small groups. Clark said Aon uses a national trend team that also tracks regional and local variations and that Aon will present more detailed plan experience during the rates cycle.
Board members asked how Aon determines trend assumptions, how regional pockets with limited provider access are handled (for example in Tuolumne/Hetch Hetchy), and whether enrollment shifts are incorporated into projections. Clark said Aon combines national trend resources with regional adjustments, evaluates enrollment and demographic shifts, and has asked UnitedHealthcare to assess provider access for Medicare Advantage retirees in outlying geographies.
"We tap into national trend resources but also evaluate regional and local variations," Clark said, describing how Aon balances multiple data sources and plan renewal discussions to reconcile differences between Aon's recommended trend and health plans' proposals.
The board did not take formal action during this presentation; members signaled they appreciated adding experience presentations on individual plans during the coming rates cycle.
