By Jeff Adams, February 19, 2015
Health care costs vary depending on the day of the week, which is important whenever trying to estimate incurred claims for periods less than a year, such as monthly claims estimates included in a financial forecast. This article gives general monthly day-of-the-week adjustments for a block of business which includes full medical benefits. It is highly recommended that a full Days’ Study be done for particular blocks of business as days’ impacts may vary by area and by type of benefit.
Why Costs Vary by Day of the Week
Generally, health care costs are greater on weekdays than on weekends. The level of this variation is dependent on the plan. For example, primary care physician costs on Sunday are minimal for full medical plans since doctors’ offices are not usually open on Sunday. Similarly, dental offices are generally closed on Sundays, and many are closed on Saturdays also. Hospital inpatient costs are still incurred on the weekend as patients remain in the hospital. Emergency room visits continue through the weekend, especially considering the closed physician offices. Costs for some items such as surgeries may be performed earlier in the week, causing Monday, Tuesday, and Wednesday to have costs just slightly higher than Thursday and Friday.
A detailed Days’ Study should be performed on the particular block of business for which they will be used, but the table below lists sample factors for a block of comprehensive medical benefits is shown below:
Again, factors for a block of business may differ significantly from those shown above. Even factors for similar comprehensive medical plans may vary depending on the specific environment surrounding provider services for the particular block of business being studied.
Holiday Impact on Health Care Costs
Major holidays may see substantially reduced costs for similar reasons that Saturday and Sunday costs may be low. Provider facilities may be closed on these days, and members may not wish to have procedures done on those days due to travel or other obligation, even if a facility is open. The specifics of the holidays for which costs are affected and the magnitude of the adjustment will vary by region and plan. Sample adjustments would be to reduce costs by 50% for the following holidays: New Year’s Day, Good Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving, and Christmas Day. If the holiday falls on a weekend, the adjustment would be made to incurred claims on the preceding Friday.
An adjustment for a four-day holiday weekend may be warranted in some situations also. For example, generally, the day after Thanksgiving can see a reduction in costs by 50%. If the Fourth of July falls on a Tuesday or Thursday, members tend to have fewer services on the corresponding weekday that would make up a four-day weekend. The four-day weekend would include Monday if the Fourth of July fell on a Tuesday or Friday if the Fourth of July fell on a Thursday. Christmas and New Year’s Days may have a similar four-day weekend effect, although the magnitude may not be as substantial. One 50% reduction may be sufficient if Christmas and New Year’s fall on Tuesdays or Thursdays. Remember that New Year’s Day is exactly one week after Christmas Day, so if December 31 is a Monday, then so is December 31. Due to the subjectivity and possible variation in this four-day adjustment, it is strongly recommended that claims not be adjusted unless a Days’ Study for the particular block of business is performed and the Four-Day Weekend impact verified. If the holiday falls on the weekend, no Four-Day Weekend adjustment would be made.
Impact of Severe Weather on Health Care Costs
Severe weather, such as heavy snowstorms, may affect health care costs. Elective procedures such as some doctor and emergency room visits may be canceled due to severe weather. In some cases, more expensive procedures may be postponed. Although some procedures may be postponed for a few days, other procedures will not be rescheduled and will result in a reduction in overall health care costs. When the severe weather occurs at the end of a month, some of the costs may be put off until the following month. A detailed study should be performed to find adjustment factors for specific areas for severe weather such as snowstorms, hurricanes, etc. As an example, snowstorms in Upstate New York that are 8 inches or greater have the impact of reducing health care costs by roughly 50% of a day if they occur on a weekday. Health care costs on a weekend are low, comparatively, so the impact of severe weather on a weekend may not be significant.
2015 Monthly Factors
The table below shows the monthly attributes and the resulting Days Units for each month:
|Month||5 Days Occurring||Holidays||4-Day Wknd?||Days Units||Average for Month||Days Impact|
|15-Jan||H F S||New Years||Yes||29.8||31||-3.90%|
|15-Feb||U M T||Good Friday||Yes||28||28.25||-0.90%|
|Arp-15||F S U||Fourth of July||30||30||0.00%|
|15-May||M T||Labor Day||29.4||31||-5.20%|
|15-Jun||W H F||Thanksgiving||30.6||30||2.00%|
|15-Jul||S U M||Christmas||31.2||31||0.60%|
|15-Sep||H F S||30.1||30||0.30%|
|15-Nov||T W H||28.6||30||-4.70%|
The table above is helpful in forecasting when used in conjunction with a seasonality study (along with possible other adjustments such as severe weather) in order to break down annual claims into monthly incurred claims. It can also be used in trend analysis if used in conjunction with an updated seasonality study. Note that the Average for Month in the table above is not adjusted for holiday impacts.
The table below gives a month-on-month comparison of current year Days Units to prior year Days Units:
|Month||2015 Days Units||2014 Days Units||% Change|
These impacts can be used if analyzing trends or adjusting trends that are being used to develop incurred claims for a month in the current year by using the same month in the prior year as a base and trending it forward. Remember that impacts can be double in years where a Leap Year is involved in the calculations, such as in 2016 and 2017.
Determination of which of the tables above to be used is dependent on how the impacts will be used in calculations and analyses.
Days Unit impacts are an important part of analyzing and using monthly trends. The impact for a given month in a Leap Year can be as much as 9% or as much as 5% in a non-Leap Year. The mechanics of using these Days impacts may depend on whether an up-to-date seasonality study has been done. Without a seasonality study, the first table above may be impractical to use. Before using Days impacts, a detailed analysis should be performed to determine the actual factors for the block of business for which these factors will be used.
Please contact Adams Actuarial LLC if you have any questions or if you would like a Days Study to be performed on your block of business.