Challenges of underwriting and actuaries in US

Challenge 1 : Mitigating risks of noncompliance with evolving regulations U.S. Healthcare is among the world's most heavily regulated industries. The insurance organizations have to comply with a myriad of federal and state laws and regulations. These include rigorous auditing and reporting requirements, HIPAA privacy and security mandates, complex and restrictive rules and payment formulas for Medicare and Medicaid products and ICD-10 coding requirements. Assuring compliance on so many fronts severely strains resources of the insurance organizations.

Despite the efforts of payers to reduce waste, fraud and abuse, and to encourage cost-effective, evidence-based treatments, healthcare costs continue to rise to unsustainable levels. The insuring organizations must continue their leadership role in driving quality up and costs down. Regulators and other stakeholders demand transparency and value. Mere compliance with regulations will not suffice. Payers need rigorous financial controls to prevent fraud and reporting errors. A corporate culture that weaves compliance and risk management into business operations is needed. Employees who take personal responsibility for regulatory compliance and intelligent risk management.

Solution : Reactive compliance solutions that only the law will not suffice to achieve the cost reductions and performance improvements you need to stay competitive. Compliance programs should integrate with business processes to discover risks and vulnerabilities. Controls and monitoring must be embedded into business operations to prevent noncompliance, fraud and abuse and security breaches. Proper balance of risk and reward tuned to organization's tolerance for risk. Risk management should be aligned with performance management to help ones organization make business decisions based on a complete understanding of risks and benefits. Key performance indicators should link to corresponding risk indicators.

Analysis of a broad spectrum of risks - strategic, financial, operational and regulatory - and determine their likelihood of occurrence. Put plans in place to mitigate these risks if they occur.

Challenge 2 : Responding to a changing marketplace with new products

There is an increase in aging population with longer life expectancy. Demographic changes are expanding the market for health insurance. But who will pay? Corporations are cutting health benefits, most of all to retirees. Health insurance is being driven into a direct-to-consumer business. Rising unemployment is shrinking the commercial insurance market. And reforms from the US government such as a new public health plan or expansion of Medicare will crowd private plans out of the market and reduce the pool of potential customers. Insurance organisations need to adapt to these epochal changes in the commercial insurance marketplace. Introduce new benefit models to proactively anticipate and address the needs of targeted submarkets such as retirees, young workers and the growing ranks of the unemployed. Develop new products and reshape existing ones to attract consumers demanding quality and value. Consumers who want to stay healthier longer, for less money. The right products can bring new customers to insurance companies and deepen relationships with existing ones. Solution : Market share can be grown by developing products that meet the medical needs of retirees and address the financial constraints of retirees and their employers. Innovative benefit plans must be made that address current and future retiree health issues. Assessment of each plan's risks and liabilities must be done and they must be priced appropriately. Companies can attract health- and value-conscious customers with new plans incorporating wellness, preventive medicine and integrated health management. One must incorporate wellness initiatives, personalized medicine and disease management practices into an overall health management program. Managing federal Medicare and state/federal Medicaid programs continues to be a growth area for many insurance organizations. To profitably manage complex government programs, one must carefully consider benefit design and pricing, alignment of plans with business strategy, preparation of applications and competitive bids, sales and marketing analysis, plan implementation, network development and medical management. Examples : Lowered co-pays for preferred brand medicines.,Insurance against loss of coverage Plans that incorporate disease management and preventive medicine Once market-savvy plans are developed, one must carefully assess risks to price them appropriately, and then devise strategies to market them effectively. The efforts of product development must be developed to get to market more swiftly than competitors with quality products that add value to the consumer's healthcare experience.

Challenge 3 : Minimizing costs and maximizing operational efficiencies

Consumer choices, government mandates, loss of key accounts to a troubled economy and the possibility of healthcare reform all amplify the relentless pressure on insurance companies to grow revenue and shrink costs. Restrictions on coverage options and premiums will challenge insurers to profit from these new members. Keeping plans attractive and affordable will mean driving value up and costs down. To remain competitive, the companies need to improve operational performance. Integrate information systems throughout their enterprise. Conduct transactions more collaboratively and seamlessly with other stakeholders. Streamline the administrative processes and understand that performance improvement is more than a strategy for growth - it is a tactic for survival.

Solution: The insurance companies need to reduce bottom-line costs and increase top-line revenue. They can reduce costs by improving financial processes and operating more efficiently. The revenues can be enhanced by improving the quality, value and relevance of the products offered to customers. The organizations need to establish a disciplined approach to continuous, long-term performance improvement. They must identify global best practices and use them as benchmarks to analyze and evaluate operating and management processes. Systematically adopt or adapt best practices to its operations to reduce costs and increase efficiency of its key business functions. The insurers need to anticipate and capitalize on margin-enhancing opportunities presented by evolving market conditions and regulatory mandates. One must identify short- and long-term opportunities to improve the effectiveness and efficiency of ones organization and position it for the future. Enable these initiatives with integrated information technology. Accelerate them through enterprise-wide change management.

Challenge 4 : Deriving value from M&A and marketplace changes

A worldwide economic recession, A constricting marketplace, New global competitors, A shrinking commercial insurance market, Proposed policy reforms that could potentially reshape every aspect of the health insurance industry. The Insurance organizations face daunting challenges. In today's volatile economic and political climate, the insurance companies share with other stakeholders the burden of transforming an unsustainable healthcare system. Stakeholders are still working to reach consensus on the nature of the transformation and the details of how to achieve it. The insurers balance between public and private has yet to be determined. New regulations and new marketplace realities are already changing the way insurance companies sell their products, and to whom.

Economic and demographic trends drive the transition away from employer-based health plans to an individual-based market for health benefits. Although proposed mandates and tax credits would enlarge the insurers customer base, there will also be constraints on profit margins. The federal government's likely expanding role in healthcare could lead to caps on premium increases, coverage mandates, limits on insurance underwriting strategies and other regulatory burdens. Solution: The insurance organizations need to protect the markets in which they sell their products. New markets and new revenue sources must be developed by the firm. The benefit of new models must be explored to meet the needs of targeted sub-markets including retirees, young workers and the unemployed. The product portfolio must be diversified. Innovative new lines of business must be developed; new products and new care models (wellness initiatives, e-prescribing, disease management, etc.) that keep patients healthier for less cost. The conversion to ICD-10 and the implementation of standardized electronic health records (EHRs) will require one to adapt - and invest in upgrading - clinical processes and IT infrastructure. One must initiate a strategic plan for integrating clinical and business processes and IT infrastructure for better outcomes and competitive advantage. Expansion into new territories to tap new and growing private insurance markets. Companies should explore new business arrangements with providers and other insurers. Seek global partners and pipelines, and new customers. Consolidate market position through mergers and acquisitions. They can develop arrangements with off-shore partners and non-health companies to expand capabilities, reduce costs and tap emerging markets such as personalized and preventive medicine.

Challenge 5 : Leveraging IT for competitive advantage

Market forces are converging on Payer IT organizations as evidenced by the Health Information Technology for Economic and Clinical Health (HITECH) Act, healthcare reform, ICD-10, privacy and security regulations, cost-reduction strategies, clinical information systems and secondary use of data. These and other market forces make it more important than ever to have a high-performing IT organization. Solution : Insurance companies must leverage IT for competitive advantage. Employers, members, providers and many other stakeholders can all benefit from enhanced information technology. Insurers want to use enabling technologies to increase customer loyalty, improve quality, reduce costs and add value to the healthcare ecosystem-plan, prioritize and execute IT projects to align with business strategy.