<p>The digital revolution in healthcare, which includes telemedicine, telehealth services, and wearable health technology, is fundamentally changing how health actuaries assess risk and costs. The COVID-19 pandemic acted as a catalyst, accelerating the adoption of telemedicine. What was once a niche option became a norm, with virtual doctor visits and remote patient monitoring now commonplace. In 2019, only about 15% of physicians in the U.S. had used telemedicine; by 2021, that number soared to 86%, as many providers shifted to remote care amidst the pandemic. Similarly, patients&rsquo; use of telehealth services surged by over 150% in early 202 compared to the same time in 2019.</p>
<p>This rapid evolution in healthcare delivery has crucial implications for actuaries. The inputs, assumptions, and methodologies currently used in actuarial models are changing to accommodate new forms of healthcare access and the influx of real-time data from digital sources.</p>
<h2>Telemedicine's Impact on Healthcare Utilization and Costs</h2>
<ul>
<li>Frequency of Visits: One of the primary benefits of virtual care is that it breaks down barriers to accessing medical advice. Patients can consult with a doctor from the comfort of their home at any time, which likely increases the frequency of consultations&mdash;especially for minor or follow-up issues. Actuaries must consider whether this uptick in virtual visitations could lead to a higher frequency of claims. However, early interventions through telemedicine may prevent more severe, costly complications later on, potentially reducing expensive hospital claims.</li>
<li>Cost per Visit: Telehealth visits generally come at a lower cost than in-person appointments. A video consultation often carries a lower fee than a visit to a clinic. If telemedicine becomes a substitute for in-person care and effectively meets patient needs, it can help lower overall healthcare costs. However, if virtual visits become an additional layer rather than a replacement, this could push overall costs higher. Actuaries need to model both scenarios with care.</li>
<li>Selection and Access: Telemedicine might attract different demographics to health insurance plans. Younger, tech-savvy individuals may prioritize plans offering comprehensive telehealth options, while rural or underserved populations may gain improved access to care. This shift could lead actuaries to model higher telehealth utilization in these areas, enhancing health outcomes and altering claim patterns.</li>
</ul>
<p>Understanding these dynamics is essential for actuaries. By analyzing emerging telehealth data, they can gauge its impact on claim frequency, severity, and costs. This knowledge helps insurers hone their pricing and care management strategies, pinpointing where telemedicine truly delivers savings and where it may not.</p>
<h2>Digital Health Data and Actuarial Modeling</h2>
<p>Beyond telemedicine visits, the broader digital health landscape&mdash;including wearable devices, health apps, and remote patient monitoring&mdash;generates vast amounts of data, offering both new opportunities and challenges for health insurance modeling.</p>
<ul>
<li>Wearables and Remote Monitoring: Devices like fitness trackers and smartwatches continuously monitor metrics such as heart rate, activity levels, and sleep patterns. Insurers have started using this data in wellness programs, providing premium discounts to policyholders who hit specific activity targets. Actuaries can leverage this behavior-based data to enhance underwriting and risk assessment processes.</li>
<li>Big Data and Predictive Modeling: Digital health data is often large and unstructured. As a result, actuaries are increasingly collaborating with data scientists to utilize machine learning and predictive analytics, uncovering patterns that can forecast high-cost events before they arise.</li>
<li>Data Privacy and Quality: It&rsquo;s crucial for actuaries to ensure that any use of personal health data complies with privacy regulations and that the data's quality is sufficient to support pricing or reserving decisions. Techniques like credibility theory help determine how much weight to give new digital data sources.</li>
</ul>
<p>This integration of digital health data has prompted actuaries to adopt advanced analytical tools. Many are becoming proficient in programming languages like Python and R to handle large datasets.</p>
<h2>Changes in Actuarial Assumptions and Products</h2>
<ul>
<li>Morbidity Assumptions: The typically lower cost of telemedicine compared to in-person visits may influence how actuaries approach morbidity assumptions in pricing models.</li>
<li>Selection and Anti-selection: Plans focused on digital health may attract different risk profiles, leading actuaries to monitor adverse selection risks and adjust their models accordingly.</li>
<li>New Product Designs: Innovative &ldquo;virtual-first&rdquo; plans and wearables-integrated policies are beginning to emerge. Actuaries play a vital role in pricing these products, estimating utilization rates, and ensuring financial sustainability. For instance, incorporating continuous glucose monitoring for diabetic patients could lead to a reduction in severe complications, which actuaries would model as decreased long-term claim costs.</li>
</ul>
<h2>Implications for Actuaries</h2>
<p>As the landscape evolves, actuaries must:</p>
<ul>
<li>Collaborate more with healthcare professionals, including clinicians and IT specialists, to design and assess telehealth-focused products effectively.</li>
<li>Engage in continuous learning to stay updated on telehealth outcomes, predictive analytics, and regulatory developments.</li>
<li>Embrace an enhanced strategic role. By analyzing the return on investment (ROI) for telemedicine and wellness programs, actuaries can influence insurers&rsquo; strategic direction beyond just pricing and reserving.</li>
</ul>
<h2>Conclusion</h2>
<p>Digital health and telemedicine are not fleeting trends&mdash;they're here to stay, and actuarial models must evolve in kind. <a href="https://www.actuarylist.com/sectors/health">Health actuaries</a> who embrace these transformations, integrating telehealth utilization, wearable data, and innovative product designs into their work, will play a crucial role in shaping sustainable, forward-thinking health insurance offerings.</p>

Discover how telemedicine, wearables, and digital health data are redefining actuarial models, risk assessment, and insurance product design.

How Telemedicine and Digital Health Are Transforming Actuarial Models