Ian Thompson, Head of Casualty, Hiscox, looks at some of the issues facing US healthcare insurers.
Typically insurance has not been thought of as a forward thinking sector when it comes to the use of technology, but in the personal lines areas and in life insurance that has changed rapidly over the past decade. Telematic devices tell us how well we are driving our cars; customer preferences lead us to the homeowner’s policy we need, not want; and sharper profiling of wellness apps and genomic data tells life insurers which of us are the good and the bad bets.
Specialty insurers have a tougher job though. We are used to big data underpinning a lot of personal lines conversation, but frequently specialty insurers are forced to deal in little data, or even no data. The crystal ball thus becomes ever more important as underwriters debate what is coming their way, and how they can shape products and analysis.
Healthcare is a class that demands this forward thinking. Whilst the availability of large volumes of data may guide pricing in the here and now – providing some actuarial help to the underwriter when it comes to working out rates for a hospital, nursing home, or physician treaty, or where a policy should attach – forecasting trends in one of the fastest moving sectors with an insurance product that has frankly changed very little in 30 years is an altogether tougher proposition.
Customers driving healthcare change
Much of this industry change is being driven by the customers (i.e. all of us). Everyone has health concerns at some point whether it’s influenza or something worse, so healthcare and how it is delivered is an intensely personal subject, one that leads to opinions and a wish to control it. The treatment experience begins with something that feels like you are transported back to the 1980s. A doctor’s office with tired magazines and some form filling, or an ER with more form filling and the inevitable waiting times. Clearly this is an area that healthcare needs to freshen up, re-think even, and this is beginning to happen. Just as we are being encouraged to take more control in our lifestyle choices (the oddly named ‘population management’ – which actually encourages us to act as individuals and not as a population being managed), consumers are now taking charge of their own care. The development of apps for example where a patient can obtain their own data which many physicians are willing to accept, can revolutionise the need for arranging a visit or prescribing medication.
For insurers though it adds another level of uncertainty. This change is being ushered in by customer preference, cost-effectiveness and speed, but it is having the effect of taking an element of the process out of the hands of the physician, something that we are hearing rather a lot of. The role of physician extenders has been heavily debated in recent years – the idea of effectively having physician assistants, nurses and the like doing things a physician might have previously done. Some would argue it is for the best, not just for cost, but for care too, and there is no sense that these are not professionals. But you are removing 10 years of medical school training from the process, and it also begs the question does it end here?
What about the choice of who should be treated? If the top 1%, the very sickest of patients, account for 20% of US healthcare spending, might we all be faced with some uncomfortable, perhaps even morally challenging decisions that say if that 20% was used to treat less sick patients it would be a much, much healthier society. But then again, if it was my mother lying there, I might have selective memory about where we should spend that 20%. Ultimately, it might not be my decision.
As patients, our managed care insurance plans have, in effect, been asking us to think twice about taking that expensive drug or treatment by applying a larger deductible and co-pays (where we have to contribute some cost of treatment), and this shows no sign of slowing down. With the ink drying on the Affordable Care Act which was heavily motivated to stop insurers denying certain benefits – and supposedly lessened liability concerns as a result – it might just come full circle for the malpractice insurers who could see denial of benefit type claims as a consequence of a pricing strategy by the managed care insurers.
Many of these claims will affect the newly insured – some 10 million adults that since the enacting of the Affordable Care Act are covered insureds. This is a seismic shift in US healthcare, from hospital balance sheets to the expectation of those patients, and the way they now access healthcare; many are younger, want a louder voice and want the ability to access their own data. That in itself raises new and concerning questions. Around five million patients had their personal records compromised in 2014, and balancing customer preference and the security of the individual looks like being a continued tug of war. Unfortunately, for an industry that prides itself in risk advancement, healthcare has done a pretty poor job of managing privacy data, and is overweight in claims notifications. Here, the opportunity for insurers remains clear. Cyber cover has not yet seen the big bang in healthcare – a fact verified by the purchase of woefully inadequate limits - but this is something that could change rapidly in 2015. ‘Sell more insurance’ is lesson one in Insurance School, but in this case it might actually help everyone.
A time of change
So reflections on a time of change for the healthcare industry, and some potential trends that could influence insurers. The major changes which will surely accompany the way healthcare is accessed over the next decade are unlikely to be matched by the comfort blanket that insurers offer around it, but as an industry, insurers would be wise to be aware of the currents that could pull some under.