Health Insurance in India: Thoughts & Insights

This is the third of a series of blogs to follow on health insurance administration in the post-TPA, post-liberalization, post-detariffing era in India. I hope the insights presented in these posts would enable insurers and TPAs to reexamine the health insurance scenario in India and how health administrators / TPAs can play a more active and involved role in demystifying the healthcare (Payer and Provider) scenario in India.

Saturday, October 31, 2009

The Health Insurance Kaleidoscope

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 surgery

Chronic 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

Monday, September 14, 2009

7 Pillars Of Health Insurance Administration

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'.

Saturday, August 22, 2009

The Changing Landscape

Health is one of the fundamental obligations a society owes to its members. Health insurance is an enabler that should assure every individual of adequate and appropriate healthcare – based on their needs, risks and affordability. While the RSBY is a good mechanism to offer affordable healthcare for those falling in the lower economic strata, as a society there is still a large segment belonging to lower-middle, middle and upper-middle classes that have varying needs to be addressed in a manner that makes it win-win for all stakeholders - Insurer, Insured and the Intermediaries (including Providers) - in the health care/insurance domains.
This blog series will focus primarily on how the TPAs have contribued and should/can contribute to health insurance administration in India in the following sections:

The Challenges
Year 2002: Enter The TPA
TPAs: Catalysts or Facilitators ?
The Road Ahead
TPAs: Deliver 'Value' Or Perish

The Challenges

The broad challenges in India's health insurance are:

a) ability to understand the health profile and requirements of the population and come out with a strategy to offer a health insurance payment mechanism tailored to the needs of each segment of the population
b) ability to manage a large portfolio of products with a large customer-base dispersed over a large geography
c) ability to manage a large number of providers thriving in an environment totally devoid of regulatory controls (I recently discovered that if I want to, I can start and run a chain of diagnostic centers without being a doctor or a chemist!)
d) ability to keep the business viable, taking into consideration the above three

<Year 2002: Enter The TPA

When the TPAs first started operations in late 2002, the scenario was like this:
a) Only public sector companies were in health insurance business
b) The PSUs had broadly 3 types of products – Standard – Individual, Standard – Group, Tailormade – Group. There was one other product of significance – New India’s Good Health – sold via Citibank. All these were “indemnity” products - with no sub limits! The customers have always loved it!

The PSUs were often offering the Group policy product to premium general insurance clients virtually as a freebie – or at a highly discretionary, concessional premium with virtually no suitable IT platform to keep track of who the employees and their dependents are! This was a gaping loophole for anybody to become any policyholder's dependent when faced with the threat of hospitalization!

In 2003-04, Bajaj, Tata AIG and ICICI Lombard became the visible private sector players in this domain. In 2007, I-Pru was the first life insurance company to foray into health insurance space with their “fixed benefit” products. They have been followed by LIC,MNYL, Aviva, Birla Sun Life, Royal Sundaram etc. This has definitely increased the number of products – but in the eyes of the consumer, they look the same: fixed, rigid and the consumer unsure whether he can really "top up over Indemnity” in the event of an incidence of claim.

<TPAs: Catalysts or Facilitators ?

Today, in 2009, the situation has changed somewhat - radically in perspective, but miniscule if one looks at the needs of the next 5 years. The TPAs have brought in a semblance of data consolidation in this industry - though, the insurers and IRDA would know the pains associated with getting the data and the risks of making sense out of it! There have been some improvements in the processes too - ID Cards and Cashless Treatment being worthy of mention, something the slow moving PSUs would not have achieved in such quick time. But there are so many other opportunities that are probably not getting the right kind of attention or the focus is blurred.

This brings us to the next question:
Are the TPAs to be seen as catalysts or as facilitators?

Let's take a look at what these terms mean in the dictionary:

catalyst: a substance that accelerates a reaction without itself being affected

facilitator: someone who makes progress easier

We need to answer a few more questions to determine whether they are catalysts or facilitators:
a) Why were the TPAs brought in?
b) Was it for a limited purpose?
c) Is there a continuing role for them
d) Is it a marriage of convenience?
e) Are they delivering value that can(not) be easily replicated?

It is likely that having seen several TPAs moving "up?" the value chain and turning insurers, many existing insurers may see TPAs as the Trojan Horse. The answer to this lies in how the engagement is structured and could be the topic of a separate blog.

<The Road Ahead

The share of PSU insurers has declined from nearly 100% in 2003 to about 65% in 2009. The industry is witnessing serious growth with a CAGR of 37%. E&Y estimates paint a scenario where the market will grow from US$ 1 billion (2008-09) to US$ 7 billion by 2015. Here are a few questions this expected quantum leap will pose for TPAs and Insurers:

a) Are the PSUs planning to have their own TPA as a strategy to maintain their market leadership? Can they manage it within the 5.x% commission they are paying to TPAs presently? Or will there be a huge overhead that will further erode the viability of the business?
b) Will ICICI Lombard and I Pru (who have moved their operations in-house)
adopt exactly the opposite strategy and revert to TPAs as a strategy to focus on markets rather than operations?
c) Or will some dark horse do something different(ly) to emerge in the forefront?
d) Would the stand-alone health insurers, Star and Apollo DKV steal a march over others?
e) Will more TPAs partner with global players and become insurers? What are they doing today to get there tomorrow?
f) Is there a chance of the 'Self Insured' market emerging from its shadows? If so, how will the providers network and payment mechanism operate? Is this a niche or big space?
f) Can a 'reward for performance' system be introduced for the TPAs to participate proactively in this market?

The answers each stakeholder brings to the above questions will determine the speed and direction in their chase for market leadership

<TPAs: Deliver 'Value' Or Perish

The current state of health insurance should lead one to think that the TPAs have fulfilled the role of catalysts, and will now qualify to be considered as facilitators.But somehow the TPA industry tends to believe that they have to fight for survival. How about each PSU insurer picking up 'one TPA' based on stringent selection criteria as their pan-India service provider who will get 65% share of their business? Such TPAs should not be attached to any other insurer. The remaining 35% will go to several of the other fringe TPAs. With clearly defined deliverables and measurable service parameters that guarantee value creation.

There are about 30 TPAs in India with diverse width and depth of competence, capacity and technology support to address the challenges of the business. The bigger TPAs have taken the 'TPA business is too small, let's be an insurer ourselves' route to growth. At the risk of losing their TPA leadership and not making it big as insurers. The smaller TPAs live under the threat of being thrown out of business, with their "patrons in chief", PSUs, thinking of "in house administration" while the mid-sized TPAs are the ones who do not seem to be certain of the road ahead. Some TPAs are looking for buyers, even if it means a distress sale.

In the midst of all this chaos, one can see several entrepreneurs/businesses juggling as Providers, Brokers, Bankers, TPAs, Insurers, Reinsurers, and what not?

All these are signals that the landscape has changed. The battlelines are getting drawn. The war for market leadership in India has begun. And with more players entering the scene, it can only get hotter. Can a bloodbath be inescapable? Who wins, who loses in the health insurance sweepstakes will be an interesting outcome to look forward to in the next few years. It all reminds me of the book Rule of 3 (by Dr Jagdish Sheth and Rajendra Sisodia) in which the authors say that in any market, 3 players will lead and rule; all others will either be in the niche or in the ditch.

Are the TPAs facing extinction? Or are they in for a new lease of life with a more challenging role and growth opportunity? Surely, it is "make or break" time for the TPA industry. And maybe for some of the insurers too. The moment of truth is not very far away!

Coming Up Shortly: The Pillars of Health Insurance Administration