Healthcare Actuary – A Day in the Life

Ever wondered how healthcare insurance companies assess risk and calculate their premium costs? As most consumers know, a more expensive health insurance plan will mean paying less out of pocket for future medical expenses compared to a lower-cost health insurance plan which will require paying more later if care is needed in the future. So who is the person who crunches the numbers and determines the future risk and potential cost of health insurance plans? The answer is healthcare actuaries.

Actuaries are employed in all insurance companies and are responsible for helping them assess financial risk and calculate premium costs. For example, an actuary working for a home insurance company may predict how much money an insurance company would need to pay out in case of damage to homes caused by wildfires.

In the health insurance sector, healthcare actuaries use data and statistics to estimate financial uncertainty and calculate the cost of health insurance premiums based on reported health data. Overall, a healthcare actuary develops and implements solutions to elaborate financial challenges within the health insurance industry.

There are as many specializations of actuaries as there are types of insurance, but generally, actuaries can be sorted into one of two categories: life insurance (e.g. life and health insurance) and non-life insurance (e.g. auto, home, and business insurance). A healthcare actuary serves the life insurance sector and is led by the professional organization of the Society of Actuaries (SOA).

Actuaries are one of the fastest-growing professions in the United States. According to the U.S. Bureau of Labor Statistics (BLS), opportunities for actuaries are expected to increase 18 percent nationally between 2019 and 2029—the addition of 4,800 new positions (BLS 2021). The average salary for an actuary is $123,180 per year.

Using a blend of mathematics, statistics, and financial theory, a healthcare actuary is responsible for assessing future financial risk for health insurance companies. The majority of healthcare actuaries are employed by insurance companies and the rest by government health agencies. They make financial predictions of expected costs and profits using patient health data, including family history, geographical location, occupational risk factors, and age.

In addition to making data-informed financial estimates, healthcare actuaries design healthcare plans and identify the reasons for cost increases for health insurance consumers. In 2018, the American Academy of Actuaries (AAA) released a brief identifying the reasons for increased costs in healthcare and the effects that public policy changes will have on health insurance consumers in the United States in 2019. This advocacy work is an example of how healthcare actuaries serve the needs of insurance companies and health insurance consumers by advising public health policymakers in matters related to healthcare coverage.

Without the services of healthcare actuaries, insurance companies would not be able to remain financially solvent nor provide adequate healthcare coverage to meet the variety of care needs for healthcare subscribers. Read on to learn more about a typical day in the life of a healthcare actuary.

The majority of healthcare actuaries work in office-based settings. According to data reported from BLS, 71 percent of actuary positions are with finance and insurance companies and three percent of positions are with government offices (BLS 2021). Travel may be required for healthcare actuaries working for consulting firms in order to meet with clients. Most actuaries are employed full-time, and working more than 40 hours per week is common.

The multifaceted nature of the actuary profession means that healthcare actuaries work with diverse teams of professionals in order to find, analyze, and share information. Actuaries often work in teams comprised of related professionals: accountants, financial analysts, and market research analysts. Healthcare actuaries with five or more years of experience are generally eligible for managerial roles, requiring them to delegate tasks to teams of employees and report to senior-level management. Actuaries with expertise in policy analysis may be asked to participate in matters related to providing government-sponsored health insurance.

The daily responsibilities of healthcare actuaries can be divided into two parts: administrative and communicative tasks.

In an office setting, healthcare actuaries use electronic health records data collected from national databases to analyze and condense information. They are responsible for creating and filing monthly, quarterly, and annual financial reports. They study trends related to healthcare to stay informed of new opportunities and potential risks associated with the formation of current and newly proposed insurance policies and premiums.

Healthcare actuaries must also be aware of proposed legislation at the federal and state level and use this information to predict and draft new company policies. They are typically tasked with researching and authoring new proposals for offering additional services or premiums, such as the possible implications of the addition of chiropractic services or mental health coverage to a health insurance policy.

Communicative tasks for healthcare actuaries typically involve consulting with management teams who train employees on best practices for collecting, calculating, and storing data. They may travel to consult and train colleagues at different branches or in related financial risk management industries.

Healthcare actuaries may be asked to testify in court as experts in financial trends relating to healthcare. They may be tasked with creating and delivering corporate courses to train health insurance employees on topics such as best practices for using, storing, and calculating analyses with health records stored in an electronic database.

A bachelor’s degree is the minimum educational requirement for healthcare actuary positions. Students aspiring to become healthcare actuaries should aim to major in actuarial science or include multidisciplinary coursework in their related degree programs. Degrees such as business administration, statistics, or any academic discipline combining courses such as mathematics, statistics, probability, economics, finance, computer science, and business administration are ideal preparatory courses to provide a solid theoretical knowledge background.

A degree in actuarial science is not necessary, but having a bachelor’s degree with coursework comprising instruction in business, mathematics, and statistics is a basic requirement.

Some colleges and universities offer degrees in actuarial science, a field of study focused on preparing students with solid knowledge of mathematical and economic concepts, statistical analysis, and business administration. Students in these programs take classes in business law, microeconomics and macroeconomics, industry ethics, information management, calculus, communication, and risk management.

An example of an actuarial science degree program is the bachelor of business administration actuarial science offered at Temple University. Graduates of this program are given a solid analytical and mathematical framework to prepare them to take certification exams and specialize in evaluating risk in a variety of industries.

The School of Mathematical and Statistical Sciences at Arizona State University also offers a bachelor’s of science in actuarial science. This four-year 120 credit hour program prepares graduates to sit for either the Society of Actuaries (SOA) and Casualty Actuarial Society (CAS). Skills students learn while completing this degree include estimating the likelihood of future events using data, crafting creative solutions for potential adverse events, and creating plans to mitigate damage when adverse events happen.

While not required, a master’s degree in actuarial science can be beneficial. Not only does this demonstrate a high level of competence in this field, but it is also highly sought after by many employers. The University of Iowa College of Liberal Arts and Sciences offers a master’s of science in actuarial science that teaches both the theory behind risk processes and the skills to put the theory into practice.

In addition to either a bachelor’s or master’s degree in one of the aforementioned fields, most employers are looking to hire healthcare actuaries who have previous experience working in accounting, health informatics, and state or federal-regulated healthcare industries.

Healthcare actuaries must possess the following skills, gained from either work experience or education, in order to perform their jobs effectively:

• Analytical skills to sort and identify trends with massive amounts of data in order to make financial recommendations.
• Communication skills in order to listen carefully, deliver and write reports clearly, explain and simplify technical information to employees outside of the fields of business and finance, advise senior-level management, and manage teams with clear written and spoken communication abilities.
• Mathematics skills to calculate and quantify potential risk using calculus, probability, and statistical analysis.
• Technical skills, including database operations, statistical analysis, and spreadsheets.
• Risk management skills to identify and predict potential risks and determine ways to avoid or mitigate risk.

While earning a degree in actuarial science is not required in order to become an actuary, passing a series of certification exams is necessary. In order to work as a healthcare actuary, an Associate of the Society of Actuaries (ASA) designation must be earned through the Society of Actuaries (SOA), the world’s largest actuarial professional organization.

In addition to the five required certification examinations, prospective ASAs must take an e-learning course, submit a proctored project assessment, provide a list of validation of educational experiences (VEEs), and attend a professionalism seminar. This process can take several years, and most professionals enter the field with just one or two completed exams and work towards completing the rest of the requirements while gaining work experience.

Other credentials offered through SOA include Chartered Enterprise Risk Analyst (CERA) and Fellow of the Society of Actuaries (FSA).