Challenges with Managed Care Tools in Supplementary Health Markets - PowerPoint PPT Presentation

Challenges with Managed Care Tools in Supplementary Health Markets Lisa Beichl Allianz Group

Contents • Complexities of the supplementary market • Why health insurance is more of a transaction- based business than an insurance business • Challenges and Opportunities • Some examples

Complexities of the supplementary market • Definition: Private health insurance side by side with public OR private health insurance on top of private health coverage (also referred to as complementary cover) • Germany (supplementary and complementary), France (complementary), Colombia (complementary) • Challenges include: changing public coverage (cost shifting to private sector), inability to influence public coverage, government involvement, data security.

Complexities faced by Insurers • Governments: regulate the environment • Providers: increasing in number, improving technology, defensive medicine, target income • Members: want lower taxes but increased coverage, aging population, fear of becoming ill • Employers: want low premiums, quick return to work • Insurers/Reinsurers: often insufficient infrastructure, may underprice, pressure for more flexible products • Brokers/Agents: seek more and flexible products, want high commission (used to life commission schedules), health products tend to be complex Result: Some incompatibility exists.

Most insurers in supplementary health began with life • Health insurance is different from Life Insurance: – Health Care services are generally pre-paid services and are not single life events – Health Care claims are for many different types of services where Life claims are a single event – Doctors and Policyholders define triggers for health claims (cancer incidence rates versus doctor visits for a cold) • Insurability means that a loss is definable, fortuitous, one of a large number of exposures, and that carries a premium reasonable in relation to exposure.

Reason for development of supplementary insurance • To supplement/complement the public coverage available (“perceived” as insufficient). – As medical costs increase, raising taxes to support the costs becomes difficult, so coverage is often shifted to the private sector. • To access private providers and get “perceived” better care. Considered prestigious. • To avert potential financial risk of a catastrophic event. • As an employer, to attract and maintain employees. • To meet the increasing public demand for more coverage.

Often the technical results of the business are negative • Many insurance carriers make losses or are slightly unprofitable because they: – don‘t manage stakeholders effectively – face high competition, sales often dominates – are operating in a highly regulated market – face absence of government regulation (pricing) – do not have the right tools (e.g., claims system, operational processes) for information – consider the accounting rather than technical results – mistakenly believe that “critical mass” is enough • Providers (doctors and hospitals) normally make good returns whether or not insurance in available.

Health insurance is a transaction- based business • Even in supplementary/complementary coverage, claims volume can run from 2-5 claims per person per year. 25.000 members = 125.000 claims annually or 625 claims a day! • Positive cash flow is the main focus (exception Germany, Austria, and some individual business in Belgium) • To manage transaction businesses, the focus is different from true insurance: – Express Mail services – Banks – Supermarkets

So what? • Traditional financial responses to increasing claims costs have a limited life (good risks exit). • Transaction based programs require a deeper management of specifics (i.e., how much of a certain good is someone willing to buy for a certain price). • By understanding more specifically the motivations of the various stakeholders, programs to manage can be developed. • Managed care programs (integration of the financing and delivery of care) are a method of managing the stakeholders.

Challenges faced by Insurers • Complexity of business (coordination of claims across public/private domain) • Life language is transferred to the health policies (“event” wording, absent definitions of medical necessity, accident, etc.) • Small membership size is insufficient for managed care programs designed to reduce medical costs. • IT investment is critical, but often companies too small to introduce (hence the use of TPAs) • Difficult to work with provider community, absent incentives sometimes due to regulation. • With complementary coverage, claim reimbursements are based on government acceptance of the claim (often without medical necessity). Difficult to deny.

Opportunities for Insurers • By understanding the stakeholder preferences, development of programs to attract members and manage other stakeholders can begin. • Selecting appropriate financial or “soft” targets provide an opportunity to measure effectiveness of ideas in the short term. • Developing pilot programs to test the effectiveness of ideas allows “quick change” opportunities. • Locating either direct or indirect data sources to help prove effectiveness of programs will help in the development of IT. • Development of Key Performance Indicators (KPIs) allows for ongoing analysis of current procedures.

Development of Managed Care Techniques "Managed" "Managed” Indemnity ”Future” Indemnity Care Techniques Techniques Techniques Techniques Focus on insurer Good relationships with providers Consumer driven Accuracy of claims payment Utilization management Prevention / patient education Administration Provider network management Information management / outcome orientation / event tracking Premium as driver Health care cost as driver Outcome as driver Pressure from Pressure from insurers Providers Partnership win / providers on insurers on providers poor performers lose ⇒ There is a trend from traditional techniques to active health risk management to manage costs rather than react to them financially (i.e., just increase premiums)

Example in Europe An insurer offering supplementary cover in Europe, with significant data security restrictions, wants to introduce a disease management program for diabetics to reduce medical costs. • Obstacles: data security, gaining acceptance from local physicians, absence of appropriate data to monitor impact on financial results. • Selected Approach: Write to physicians and ask them to submit names of diabetics with their supplementary insurance coverage; prescribe method of managing diabetes, request lab results from providers.

Example in Europe (continued) • Result: – Difficult for physicians to locate diabetics with the specific supplementary insurance – General reluctance from physicians to be told how to manage diabetes – Lack of communication between insurance company and physician community • Another Alternative: – Define the specific financial/utilization goal of the approach (i.e., reduced emergency admissions, reduced complications). If data not available to support, create work-arounds. – Modify goal to improve member awareness or increase communication with providers.

Example in Latin America An insurer in Latin America offering complementary coverage has introduced pre- authorization to help manage claims proactively. • Obstacles: claim is an event, multiple authorizations for one claim, difficult to determine when public coverage ends and private begins. • Selected Approach: Pre-authorize all inpatient admissions, automatically authorize all inpatient claims for 3 days, without medical guidelines, try to medically manage each case after the 3 day window.

Example in Latin America (cont‘d) • Result: – Increase in inpatient utilization without guidelines for hospital admission – Increase in administrative handling (increased costs) – Both public and private facilities disinterested in working with company • Another Alternative: – Define precise goal of technique (80/20). Perhaps to focus on pre-authorizing certain complex cases or procedures or only claims from a certain facility. – Modify product wording to manage the event better (i.e., event is any care within a certain window of time), define “medical necessity.”

Summary • Ensure that the challenges of offering supplementary or complementary coverage are well understood. • Introduce effective “health insurance” product language. • Determine what aspects of the coverage can be managed. • Identify Key Performance Indicators (KPIs) • Select small targets, and grow them with improved data capture!