Actuarial modelling of post-retirement private medical insurance case study:Armed forces medical insurance scheme

Abstract

In health care insurance the main question is 'how much? It may require information that is relatively simple and straightforward like the financing provisions of existing schemes. At the other end of the spectrum, it may be complex analyses - for example, regarding possible future scenarios. Some typical questions from policy makers include: 1. What would be the aggregate yearly inflation of medical expenses for aging individuals of a certain country or geographical area? 2. What techniques are involved in coming up with a model the will produce a sustainable health insurance product to effectively reallocate the financial burden? 3. How much should one contribute presently to a medical insurance scheme to cover for the future costs of medical claims after retirement? This work considers taking into account how the medical expenses of a salaried person from an arbitrary age of 45 years expected to retire at age 60 and live up to an age of 100 years. It has come up with a workable model for projection of individual medical expenses after retirement till death and those of his dependants where the dependants are limited to four. The conclusion of this work brings in a mathematical estimation of the contribution rate as a percentage of the salary of the individual during the employment which will work towards covering the medical costs after retirement without having to pay any contribution to the scheme after retirement.