Speaker Name & Country :

Topic:

Joanne Buckle, Milliman London

Safder Jaffer, Miliman Dubai

Optimising Margins by Understanding

the Health Insurance Value Chain

Agenda
What is the heath insurance value chain?
Actuaries and power analytics to drive value
Use cases in healthcare

Tug of War
Various Stakeholders & Level of accountability
Members
Spending someone elses money

Providers
Volume versus value
Standards

Insurers
Profits versus Service
Meeting regulatory requirements (Financial & Health)

Regulators
Enhance healthcare delivery coverage & infrastructure
Market efficiency and customer care
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Tug of War
Monopoly power
Physicians and nurse practitioners
Hospital based physicians

Tension between stakeholders

How to divide the pie

Is there a solution for an equitable pie?

Various models of delivery

Facilitating an effective relationship between various

stakeholders (insurers, providers, third party administrators,
regulators, customers) can help health insurers optimise
margins by moving along the healthcare value chain.

Health
Chain
Health Insurer
InsuranceValue
Value Chain
Indemnity Plan

Managed Care

Financing and Insurance

Planning,
Marketing
& Sales

Care Management

Actuarial &
Operations

Member
Management

Branding

Pricing & reserving

Product
development

Claims

Sales channel
management

Integrated Delivery System

Enrollment &
eligibility

Provider
Management

Member
engagement,
education &
information

Network
development &
provider contracting

Member services

Provider relations

Provider
Appeals/ grievances
reimbursement

Billing
Connectivity
Management
reporting & analysis
Utilisation & unit cost
targets

Credentialing
Provider profiling

Care Delivery

Care Management Care Delivery

Utilisation
management

Primary care
Specialty care

Case management

Hospital Care
Demand management Physician
Disease management
practice
management
Clinical outcomes

measurement
Quality measurement
& improvement

Pharmacy
Ancillary care
Skilled nursing
care
Long-term care

Standard insurer
analytics

Basic clinical data &

analytics

Advanced power
analytics, combining
clinical and financial

Rehabilitation

care
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We use a number of proprietary benchmarks to categorise the

performance of health insurers and identify areas for improvement
of financial performance. The remedies will depend on where the
insurer and market sits on the health insurance value chain.

Over Managed

Well Managed

Loosely Managed

Under Managed

Strict compliance with

evidence based care

Evidence combined
with patient centric
based care

Patient centric and

limited evidence based
care

Noncompliance with evidence

based care

Rationing or restriction of
services which modify or treat
disease

Rationing to stop
services which have
little or no impact on
health status

Insufficient rationing or
restriction of services
which have little or no
impact on health status

Provision of services which

have little or no impact on
health status

Incentive fatigue

Outcome based
incentives

Incentives which do not

encourage control of
costs

Perverse incentives

Driving value of managed care techniques requires extending

beyond the current traditional financial reporting role to a
more business-focused role using clinical analytics.

Benchmarking of experience against well management health systems

can identify areas of inefficiencies and potential savings. Remedies will
depend on the stage of the health insurance value chain.

Predictive model patient risk score listing report for case finding depends on
having detailed data on patient encounters with the health system, but can
stratify members to be targeted with new services or propositions.

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Diagnostic Groupers to look at the clinical distribution of populations. The use

case depends on the health system in each country, but stratifying members into
mutually exclusive groups can help with targeted services, risk adjustment and
new proposition design
Number of Members by Condition Category

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Chronic Condition Hierarchical Groups (CCHGs) to

support baseline, trends and risk adjustment to
identify members contributing to high trends

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Use of evidence based measures and waste

indicators can identify poor quality and profile
providers to uncover fraud waste and abuse.
Id #
Waste Mnemonic
Waste Short Description
Waste Headline
toperform
calculate
potential
system waste
1 combined
FP01
younger than 21
Pap smears on women
Dont
Pap smear under 21
PSA
2

The USPSTF recommends against PSA-based screening for prostate cancer. This
CG01
recommendation applies to men in the general U.S. population, regardless of age.

The USPSTF recommends against screening for colorectal cancer in adults older
3
than age 85 years.
Dont order sinus computed tomography (CT) or indiscriminately prescribe
Sinus CT
4
antibiotics for uncomplicated acute rhinosinusitis.
Dont do imaging for low back pain within the first six weeks, unless red flags are
Lower back pain image
5
present.
Dont use dual-energy x-ray absorptiometry (DEXA) screening for osteoporosis in
Dexa
6
women younger than 65 or men younger than 70 with no risk factors.
7 Headache Image
Dont do imaging for uncomplicated headache.
In the evaluation of simple syncope and a normal neurological examination, dont
Syncope Image
8
obtain brain imaging studies (CT or MRI).
Dont perform PET, CT, and radionuclide bone scans in the staging of early
Breast cancer scan
9
breast cancer at low risk for metastasis.
Colonoscopy

CG02
AI01a, AI01b
FP02
FP03
RO01
PY01
CO03

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Quality can be measured with power analytics and used as part of an

engagement program with providers.

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Global Case Studies

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Moving along the value chain by engaging with

patients and members: a case study
Insurer wanted to enter the market, with a defining health branding message
Created a programme of healthy points, based on South African Vitality model
Offered healthy gifts to join gym discounts, outdoor exercise equipment, etc,
which appeal to healthier members.
Members must complete a Health Risk Assessment before they can join which
gives the insurer a lot of rich information which can be matched with claims data
Discounts given initially for non smoker status and normal BMI at underwriting
Future discounts based on points level achieved
Programme heavily promoted via website
Gives clients continuous interaction with insurer, rather than just at point of claim

By attracting sufficient lives to build critical mass, insurer can obtain further
discounts from supply chain (hospitals, clinics, gyms)
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Patient/Member Engagement (2)

Insurer gained significant advantage through positive selection in effect they drew
healthy lives away from competitors
Lower claims costs overall, which allowed them to offer richer benefits
Required a significant investment in:
setting up networks of providers (gym chains, screening clinics, pedometer/fitness tracker devices)
advertising spend to promote brand
broker education

Complex to model, but allows for flexibility, as discounts based on levels, and the
number of points required to reach each level can be flexed
Attractive part of offering is allowing people ability to compete against each other in
healthy tournaments and games, through points
Allowed insurer to move from member engagement phase to network management phase and
increase margins. Also allows insurer to gather a vast quantity of data on members health and
wellbeing and use of services, to improve future offerings. It is a fundamentally different
relationship between provider, member and insurer to the traditional insurance model.

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Moving along the value chain using outcomesbased contracts: a case study
In many markets, insurers find traditional utilisation management too expensive or
too difficult
Attractive therefore to move reimbursement of providers to a model where
utilisation risk is managed through financial incentives, such as capitation style
contracts, with bonuses and penalties tied to outcomes
Many names for broadly the same thing:
alternative payment arrangements
provider risk sharing,
outcomes-based contracts

Successful risk-sharing agreements are mutually beneficial and promote a

sustainable health economy and better clinical outcomes for patients
But often can be a blunt instrument and tricky to get the details right
The data requirements are considerable

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Successful outcomes-based contracts

incorporate outcomes/quality measures

Recommended
approach to
quality/outcomes
metrics is based on
some broad
principles:

Based on existing data, with limited reliance on patient surveys

Process measures should be linked to outcomes using an evidence-base.
Clear metrics, with the methodology defined in the contract.
Metrics should be ones that the provider can directly influence based on
the attributed population and the targets should be attainable over the
duration of the contract.

These principles should result in a outcomes-based contract that reduces cost and improves quality,
allowing the insurer to become a contract monitoring partner for good outcomes, rather than a
cheque-writer for reimbursing invoices. It requires fundamentally different organisational skills and
resources for insurer and a different relationship between insurer and provider.
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Moving along the value chain using DRG

package pricing: a case study
The fee-for-service method of reimbursement is still the most prevalent in many
markets and is known to be associated with excess healthcare utilisation.
Transforming the reimbursement method for inpatient care through the use of
Diagnosis-Related Groups (DRGs) is an effective method used globally
This requires a significant investment in tool development:
Accurate diagnostic coding and procedure data
Developing an algorithm to group inpatient care
Attaching a financial incentive to inpatient groups

Effective implementation of this type of reimbursement is complex requiring a high

degree of cooperation between patients
A high level of technical risk exists in developing and implementing this methods
The level of clinical coding needs to be adequate to capture groups accurately
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Moving along the value chain using medical

underwriting processes: a case study
The success of a private healthcare insurer is highly dependent on its ability to
accept and price risk vetted through its medical underwriting process.
Attractive to develop a structured system-driven medical risk assessment framework
using a risk scoring strategy.
This entails the use of :
Historical claims analysis and experience
A system that guides the information collection from prospects and allows underwriter to see impact of risk
modification strategy
Understanding the product, proposal forms and tele-underwriting module

The most effective risk stratification achieved through a standardized and uniform
risk assessment.

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Questions?

Milliman, London UK
Joanne Buckle, Principal & Consulting Actuary
joanne.buckle@milliman.com
Tel: +44 207 847 1630

Milliman, Dubai UAE

Safder Jaffer, Managing Director and Principal
safder.jaffer@milliman.com
Tel: +971 4 3866 990

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Caveats and Limitations

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