Monte Carlo Simulations II - Economic Value of Plan Benefits and Managed Care Arrangements
Work-Product Described
The parameters needed to determine the economic benefit of a plan (or plan option) (Gold Plan, e.g.) are these:
- Estimates of Annual Plan Benefits (Examples)
Up to three networks may be considered where the required data is as follows:
| Network |
Annualized Plan Benefit Costs if All
Participants Used Only This Network |
| A |
$4,000 |
| B |
4,806 |
C
|
5,200
|
- Estimates of Network Usage (Examples)
The usage of each network is shown as follows:
| Network |
Usage Percent |
| A |
68% |
| B |
20 |
| C |
12 |
| Total |
100% |
- Plan Benefits (Examples)
Such plan benefits are described as follows:
| Participant Related |
A |
Network
B |
C |
| Annual Deductible |
$500 |
$1,000 |
$2,000 |
| Copay |
20% |
30% |
40% |
Out-of-Pocket
|
$2,000
|
$4,000
|
$8,000
|
- Specific Stop-Loss (Examples)
| Network |
Specific Stop-Loss Limit |
| A |
$75,000 |
| B |
75,000 |
| C |
75,000 |
The end result of applying Monte Carlo simulation to such inputted data is the following:
| Benefit Payer |
Annual Cost of
Plan Benefits |
Percent
of Total |
| Participant |
$1,036 |
38% |
| Plan Sponsor |
2,780 |
54 |
| Stop-Loss Carrier |
489 |
8 |
| Total |
$4,4305 |
100% |
The practical application is to repeat the above-described simulation for variations for any/all of the parameters and compare the results using the Plan Sponsor costs as the index. For example:
| Plan or Plan Option |
Cost Index |
| Gold |
2,780* |
| Silver |
1,800 |
| Bronze |
2,600 |
* Presuming the plan in the above analysis is the Gold Plan.
