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,
• ne 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,

• perational 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

Focus on insurer Accuracy of claims payment Administration Premium as driver Pressure from providers on insurers Good relationships with providers Utilization management Provider network management Health care cost as driver Pressure from insurers

• n providers

Consumer driven Prevention / patient education Information management /

• utcome orientation / event tracking

Outcome as driver Providers Partnership win / 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)

Indemnity Techniques "Managed” Care Techniques "Managed" Indemnity Techniques ”Future” Techniques

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

• r 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
• ne 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!