Health Insurance Kaleidoscope

The Health Insurance Kaleidoscope

(Note: This post was first published by the author on 31 October 2009 at )

 Health insurance business involves managing large repositories of data and information. It is critical to understanding the health profile of the country and plan accordingly. To the insurers, it is critical to designing products in such a way that a large percentage of the insured see it as a security, yet the insurers do not lose on account of product characteristics.
To do analysis of the kind suggested in this article, it is assumed that insurers and their TPAs have the appropriate ERP systems to capture the required data and the BI tools to analyze them. The challenge lies, not in doing this kind of analysis once a year, but in being able to do anytime, from anywhere, in near real time! With ease that can be called as ‘child’s play’ – with ‘Drag & Drop’, ‘Filter’, ‘Select / Unselect’ features of typical BI tools.

 This post will be built over a period through a series of graphical representation of how data, if captured by the health insurance administrators, can be used meaningfully for strategic and operational management purposes. However, the focus will be more on understanding the Claims, Hospitals and Diseases rather than the enrollment profiles.I will take up some questions randomly and show how graphical representation can give the answers.

Note & Disclaimer: The information shown below is based on “hypothetical scenario” and does not claim to be based on real data. The illustrations are to be used as templates for study and understanding the perspectives of health insurance
1. What is the distribution of Major Expense Heads of hospital bills?  (Click on graph for a clear view)
2. How would the above distribution look if we look at only heart related ailments?
3. What is the typical distribution of hospital earnings from various heart ailments?
In the graph: NO = No surgery; YES = With surgeryChronic Ischemic Heart Disease (without surgery) tops the list and is nearly double that of IHD (with surgery). For a detailed description of ICD Codes used on the X-axis in the graph, visit WHO site (link givn at top left of this blog)
(I21-Acute Myocardial Infarction)For complete list, click link to WHO site on top left corner of this blog
4. Are claims generally made by existing or new policy holders?Interpretation: Invariably, claims by new policy holders exceed that of existing policy holders – both in Number and Value – across all diseases. Graphs typically look like the one alongside – year after year!
5. How is the distribution of Claim Amount across Gender and Age Groups?Interpretation: As expected, claim value is higher for males than females across most groups; the higher claims by females in 21-30 age band is due to Maternity Claims
6. How is the distribution of Claims (by Count or Value)based on Length of Stay for major heart diseases such as Chronic IHD (Graph on Left) and Acute Myocardial Infarction (Graph on Right)?
7. For a given body part (say, Circulatory System), how do the claim payouts differ across two types of hospitals, in two different years?Interpretation of Graph: For circulatory system ailments, a higher Length of Stay appears to be more common in Premium Hospitals than Economy Hospitals

7 Pillars Of Health Insurance Administration

(Note: This article was first published at by the author in September 2009)

Since my last post, it has taken a much longer time than I had expected to write about the pillars of health insurance administration.This was mainly due to the fact that as I began to write, I got into a serious dilemma: should these pillars be nouns or verbs – meaning, should they be entities or actions. Finally I felt verbs would make more sense!

The pillars, as I could think of, are:

1. Understand And Manage The Insured
2. Communicate Efectively With All Stakeholders
3. Administer Products And Claims Effectively
4. Train & Anonymize Back End Organization
5. Understand And Manage Providers
6. Convert Data To Information To Knowledge To Results
7. Audit, Audit, Audit

1. Understand & Manage The Insured

Today in India (and probably anywhere else too), to a healthy individual, buying life insurance is much easier and transparent than health insurance. The biggest issue confronting a policy buyer is portability – of health history and claims history across insurers, Other issues are clarity of policy terms and its applicability across different products and policy periods – within and across insurers, the uncertainty of premium over a certain time horizon, the continuance of a product chosen at a certain point of time, the consequences of change in job or health profile of the insured, the consequences of discontinuance of or changes in products by insurers etc.

An effective health insurance administration would be able to take all these factors into consideration and assure the insured that they would be able to plan their health (care and financing) as well as they could plan any other aspect of their lives.

2. Comunicate Effectively With All Stakeholders

The word ‘Call Center’ conjures up images of ‘making a call to a number (toll free or not is immaterial); that is not available 24X7; has an unacceptable hold time; the executive records questions but does not have the

answers; they never call back; and no physical address is available to meet and discuss with a human being; worst of all is that there is no way to escalate the problem!

The touchpoint with a customer, especially in a healthcare financing situation should be through every possible means. With an appropriate escalation matrix that is transparent to all.

3. Administer Products/Claims Efficiently

Health insurance in India is in its infancy. There are a very limited range of products – in width as well as depth. Going forward, we could see a mushrooming of product families and dozens of variants within each family – each variant having its own rules.Good administration of health insurance requires the ability to create/underwrite a large suite of products on the enrollment side and manage them effectively on the claims processing side.

The enterprise application of the administrators should have a rule engine that can support the processes with high degree of automation in adjudication of claims.This is the only way to ensure that products and claims are administered accurately and efficiently.

Documents getting lost/misplaced is not uncommon. To overcome this, scanning of critical documents, including bills, should be an integral part of the process.

If cost is not an issue, smart cards is the way to go. Better still would be to ride on the Credit/Debit cards policyholders may be having. In terms of efficiency, nothing can beat the safety and security of payments through banking channels instead of handwritten or system generated printed cheques which are prone to misuse. Similarly, premium collected at the time of underwriting should be through bank rather than cash.

Banks should be willing to share information on identity of policy holders with insurers, if required.

4. Train And Anonymize Backend Employees

Claims processing is an interesting combination of science and art. The exactness can be automated through software programming. The art lies in the ability to make medical judgements about the diagnosis and the course of treatment provided. Most administrators today manage with half-baked software and ‘just-out-of-teens’ and ‘God-knows-what-qualification’ BPO staff processing thousands of claims every day. Training is a cliche, but its mention is necessary. Rigorous training by experienced personnel is a crucial ingredient for effective administration.

The most worrying aspect of a claims settlement process is the dangerously close connection a claimant can establish with the processing team. In the guise of seeking clarifications, any and every kind of “negotiation” is possible if such direct communication is made possible.

One way to achieve this is to handle a part of the claims process in a geographically different location. Front end personnel should be insulated from the knowledge of “who is handling the claim”. Technology can easily enable such a process. This will minimize the chances of “deals” being struck in the course of claims settlement.

5. Understand & Manage Providers

Today, Providers are the most important entities in the health insurance schema in India. There is a lot of mistrust between the Payers and the Providers. Once insured, the policy holder is least concerned about the

dynamics of the Payer – Provider relationship and is unlikely to contribute in any manner. His ‘entitlement’ is his prized possession! Hopefully, the day will come when the consumer is sensitized to the consequences of ‘overpaying the providers’ and we may find them negotiating hard on the treatment charges.

Effective administration should result in an understanding and appreciation of the needs and concerns of both sides. Clearly a small minority of elite Providers are at an advantage today – to the detriment of every Payer

as well to a majority of other Providers. As a result, a large number of good doctors are languishing in hospitals with inadequate infrastructure, low quality cases and unacceptable work environment.

Unless the right balance is struck between every stakeholder in the healthcare ecosystem, it is unlikely that India can create an effective healthcare financing model where there is an equitable distribution of the burden of health care needs of society at large.

Somebody has to bear the cost of this imbalance – at the moment who else can it be, other than the honest policy buyer and the taxpayer!

The recent developments on tax deduction at source by TPAs on payments to providers is a welcome first step in setting the anomalies right.

6. Convert Data To Information To Knowledge To Results

How strong and effective health insurance administration could be depends on how much data is captured at all stages and how they are put to use in the processes. A lot of information is sought at the time of underwriting. Not much is passed on to the administrators with the result claims are processed in vacuum. Even in cases where the proposal forms are passed on to administrators, the systems with TPAs and their mad rush to meet TAT (turn around time) targets prevent them from making use of it.

Even in the claims settlement process, the data captured vary across the TPAs. Some claim to be capturing a lot of data. Others are candid about not having the resources, systems and margins to capture data even in minimal depth. The capture of ICD coding is inconsistent across TPAs. Most do not capture PCS and CPT codes. Pre-insurance health check information collected by life and health insurers are not easily available to TPAs. There is no mechanism for ‘health and claims data sharing’ across TPAs and insurers.

On the billing side, there are huge inconsistencies in the manner in which TPAs capture data – within as well as across TPAs. In most TPAs, data entry personnel, in their hurry to finish their job, enter macro level billing information with little or no linkage with policy terms and benefits. This makes any kind of analysis meaningless.

As a result, questions such as ‘which hospitals tend to go for surgery for a given ailment’, ‘which hospitals tends to have a high consultation fee for a given ailment’, ‘which are the top hospitals in terms of costs, ethical treatment, customer satisfaction’, ‘what are the billing and length of stay differences between insured and uninsured patients’ etc end up with no answers or wrong answers.

Worse still, all insurers and TPAs are sitting on a datamine. Not many can claim to have an effective data mining application in place. The ones who really have visionary BI systems are unlikely to have enough data with them! With this, medium and long term planning on products, pricing, disease management, patient demographics all go for a toss. One can only hope that IRDA’s plans of sharing data becomes a reality. And in ‘near-real time too’!

It is time the regulators and insurers start using this wealth of data into insights that can educate the consumer of his “rights and duties” in a responsible health insurance system.

7. Audit, Audit, Audit

I have seen insurers deputing auditors to ensure claim settlement processes are in order and no significant errors exist in the transactions. These auditors typically come with limited exposure to technology and begin their audit in the age old fashion of asking for files, documents etc etc. They would also carry a small number of ‘doubtful settlements’. They probably have an acceptable number of discrepancies in their minds.

It is likely that the average TPA is technologically on a higher plane and it is quite easy for them to figure out what and how much info to share. The auditors carry out this “routine”, “annual” “drill”. Given that they are absolutely ill equipped with the right tools and resources to conduct an effective audit, this is a rigmarole everyone has learned to live with, accept and manage.

Auditing should be seen as necessary and integral part of health insurance administration – something to be done on a continuous basis rather than an annual event. This will be the only way to ensure ‘the search for best practices is a journey, not a destination’.