## 1 Introduction
### Problem Description  
In healthcare insurance, the sum insured and premium are directly proportional to each other. Whenever the sum insured amount is increased premium amount also increases accordingly.  
The four main problems in health insurance are: moral hazard, adverse selection, healthcare fraud [2] and excess sum insured amounts as shown in Figure 1. Moral hazard is the term used for the situation, once an employee gets insurance coverage, he/she tries to get treatment for a long-standing health condition like hernia, etc. The adverse selection is the case when groups with poor health conditions, got insurance coverage. Pre-existing member groups with a fewer number of healthy members, join an insurance scheme results in monetary losses for these schemes because the insurance claims are more than the total premium collected. The third main problem is healthcare fraud which is the misutilization of available funds. The fourth important problem is that organizations are paying more premium amounts for their employee's health insurance. If there are 10,000 employees in any organization, there is a possibility that only 5000 employees are visiting the hospital for availing health services whereas the remaining never avail services. In some cases, the premium amount is greater than the total computed medical benefit utilization. Therefore, there is a need to optimize the premium amount according to the medical benefit utilization amount.  
The main goal is to keep a balance between two important factors: Employee need (sum insured amount) and employer budget (budget limits (premium)). The imbalance between these two factors results in overburdened employers or stressful employees as shown in Figure 1.  
\begin{table}
\begin{tabular}{l l} \hline \hline
**Terminology** & **Description** \\ \hline Insured & The employee and his family members, who are availing the insurance policy. \\ \hline Sum amount & A maximum amount paid by the insurance company in case \\  & the insured person gets hospitalized. \\  & For example, the sum insurance of an employee is \\  & PKR 3 Lacs and got hospitalized three times in a year. \\  & On his first treatment, the billed amount is 50 thousands PKR, \\  & on his second and third treatments, the amount is of PKR 1 Lac and \\  & 2 Lacs, respectively. The total bill amount for the year is PKR 3.5 Lacs \\  & which exceeds the sum insured of the employee hence, paid by the insured person. \\ \hline Premium amount & The fixed annual amount paid by the insured. \\  & In the case of organizations or employers, insured are \\  & employees who are availing insurance policy, and their \\  & employers are the payer of premium amounts to insurance companies. \\ \hline Payer & It is the employer/ organization paying the premium. \\ \hline Insurance policy & It is a legal document that includes details \\  & regarding particular insurance coverage for an insured. \\ \hline Contract & It is the legal agreement between the insurer and insured. \\ \hline \hline \end{tabular}
\end{table}
Table 1: Important Terminologies.  
The objective is to develop a dynamic premium amount calculation technique for different groups within each category of employees in an organization using machine learning. Employees can be transferred from one group to another depending upon their needs. These packages are useful for employers as well as for insurance companies or employers.  
Solution based on rigorous and systematic methodology is required, which can minimize the financial crisis of employees and enterprises. To the best of our knowledge, none of the existing designs used machine learning techniques to generate need-based insured packages as well as the data driven analysis on real enterprise record using probability distribution model. In the proposed methodology, optimization refers to the amount of medical benefit performed. The existing medical benefits amount is optimized by using the need-based packages evaluated using machine learning techniques.