Description: According to the Actuarial Standards Board’s Actuarial Standard of Practice No. 49 (ASOP 49), actuarially sound Medicaid managed care capitation rates will include a provision for underwriting gain in order to provide compensation for the risks assumed by an MCO. However, there is no generally accepted method for quantifying underwriting gain in managed Medicaid capitation rates. This article discusses a new model developed to address this void and calculate underwriting gain. The model was developed by researching existing financial literature and performing a statistical analysis of industry data to build out a framework that can be leveraged to estimate underwriting gain.

Description: Given the limits of classical actuarial modeling and forecasting techniques, this newsletter contains articles discussing several ways to supplement your toolset.

Description: While many know that machine learning is a big deal and even have a general idea of what it is, many do not know what machine learning can do for them. As an alternative to citing achievements or explaining algorithms, this article outlines the challenges that occur in statistics and the solutions that machine learning offers. Some of those challenges include correlated predictors, missing data, data interaction, and prediction intervals. Corresponding solutions include regularization technics, missing value imputation with KNN, tree based models, and cluster analysis for backtesting.