Multistate Models in Health Insurance

We illustrate how multistate Markov and semi-Markov models can be used for the actuarial modeling of health insurance policies, focussing on health insurances that are pursued on a similar technical basis to that of life insurance. On the basis of the general modeling framework of Helwich (2008), we study examples of permanent health insurance, critical illness insurance, long term care insurance, and German private health insurance and discuss the calculation of premiums and reserves on the safe side. In view of the rising popularity of stochastic mortality rate modeling, we present a theoretical foundation for stochastic transition rates and explain why there is a need for future statistical research.