How Not To Lose Money In Health Insurances Or How To Make Reasonable Profit In Health Insurances - IIIC Health Workshop - Gülsultan DOĞAN (2014)

1. HOW NOT TO LOSE MONEY IN HEALTH INSURANCES
OR
HOW TO MAKE A REASONABLE PROFIT
IN HEALTH INSURANCES
Gülsultan Doğan
26th of September, 2014
IIIC Health Workshop

2. LOSS RATIO: CLAIM/EARNED PREMIUM
AIM: Lower claim and higher premium
In USA, under Medical Loss Ratio requirements, individual and small
group plans must spent no less than 80% of their premiums on medical
care provided to subscribers and quality improvement activities. For
large-group plans, the ratio is 85%.
That means, loss ratio can not be better than 80% in USA.
For example, for every dollar insured pay to Aetna, they pay 81.5 cents
back out to doctors and hospitals and they keep 18.5 cents for their
efforts (overhead, processing cost, fraud, profit)

3. "Only a nickel of your premium dollar stays with the insurance company.
The profits of insurance companies are truly a trivial part of national
health spending“ says Uwe Reinhardt, a health economist at Princeton
University.

4. In the eyes of public and authorities, health insurance carriers profit
margins from health insurances are expected to be reasonable. High
profits are considered immoral.
This is because health touches basic social values of human life and
therefore should not be a profit maximization tool.

5. Turkey had 76 billion TL health expenditures in 2012, 69 billion TL
in 2011.
OECD Average Turkey
Overall Health
Spending
9.2% of GDP 6.1% of GDP
Expenditure on
health by Type of
Financing
General Gov’t and
Social Security
72% 73%
Private out of pocket 20% 19%
Private Insurance 6% 2%
Others 2% 6%
OECD Health Statistics 2013 (reflects 2011 data)

6.  In Turkey, the average percentage of private health insurance in
health expenditure is lower than OECD countries.
 Turkey has still a long way to go in private health insurance,
which means market penetration is still too low compared to
OECD countries.

7.  Claim management, contracting, payment models and the products of
health insurance differ from country to country, depending on the
country’s public-private healthcare system and public-private social
security payment policies.
 The operation and the products of life insurance or motor insurance
are very much the same in all over the world.

8.  Health insurance products and claim management should be
tailor made according to each country’s healthcare and health
finance infrastructure.

9.  Act fast, be proactive to market conditions
 Design and diversify products according to different target
markets and the distribution channels and direct them effectively
 Lower Administrative Expenses
 Continuous administration of contracts with Healthcare Providers
 Scalability
 Do not focus only on daily operations, think and act strategically
 Effective Claim Handling
 Continuous monitoring
 Preventing unnecessary services

10.  Managed care and preventive care
 Disease Management
 Stimulate a healthy life-style for insured
 Direct insured/patient while receiving health care services
 Establish ‘Trust’
 Detecting and preventing fraud
 Continuous data analysis, using BI tools to determine the fraud
and abnormal behaviors
 Using technology to give insureds better services and better claim
management
 Public-private healthcare payment system in the country
 Closely watch what is covered by social security system, what is
not, where is the gap to fulfill?

11.  Legislations and government policies
 Compulsory private health insurance for foreigners in Turkey to
have a residence permission suddenly increased the market
potential of health insurance market from 2.5 billion TL to 4
billion TL.
 The mandatory health insurance for expats and private sector
employee increased the number of health insurance subscribers
tremendously in KSA.
 Be an active actor to cooperate with public authorities to provide
better healthcare system for the country.

12. The only thing that doesn’t change is change itself and everything is
changing rapidly than ever before.
Even though insurance industry seems traditional and stable, the
insurance companies that give quick response to market dynamics are
the ones that go ahead.
Consumers are changing rapidly too, as their needs become more
sophisticated and their expectations of service providers are shaped
increasingly by technology and a sense of information-driven
empowerment.
Health is the area that includes huge amount of data. There are a lot of
areas for health insurance companies to process this data to reflect as
services to their insured to increase their competitive advantages and
increase premium.

13. The right combination of health insurance products with distribution
channels is critical. Today many insurance companies in Turkey are
achieving success stories by bancassurance in the health insurance area
and getting high profits from the simple, easy to sell health insurance
products like emergency health, critical illness and compensation
payment for hospitalization policies.
However neither banks will sell comprehensive policies nor brokers will
prefer to sell easy and low-in-premium health insurance products.
So, finding right combination and using diversified distribution channels
is important to increase premium production and contributing to the
profitability.

14. Claim management in health insurance is very much paper-based,
includes huge amounts of data and requires inpatient claim
evaluation by doctors or nurses. That is why it is more costly than
other insurance branches.
Health insurance companies in Turkey also shall start to use EDI
between contracted HCPs and their system instead of making their
staff enter to each data to the system.
Moreover, smart claim management systems and underwriting
systems are also means to decrease the number of personnel, make
more accurate claim evaluation and increase efficiency.

15. Not only discounts received from HCPs but also contract conditions
make a difference in paid claims to HCPs.
Besides, once an insurance company made an agreement with HCP,
each year current contracts shall be reviewed and revised. A contract
with a hospital favorable at the time it is signed, may not be so
advantageous next year.

16. Health insurance industry in general and carriers in specific should
have enough buying power against HCPs.
Today in Turkey, the private health insurance industry covers only
2.5% of whole population therefore we cannot talk about scalable
industry.
However General Health Insurance under Social Security Institution
uses its power against all providers in healthcare including drug
companies.
So, how the private health insurance industry will provide scalability?
By growing, not by preserving status qua.

17.  Daily operations in health insurance keep the managers in health
insurance so busy that it prevents them to focus on strategic side.
 However, health insurance deserves strategic and new
approaches, implementing them, shaping the customer’s
expectations and also understanding the expectations.
 Let’s go out from our daily routine, let’s be not afraid of trying
new ways, let’s pursue them!

18.  Health insurance claim management is very critical if a reasonable profit would like to be
reached.
 In Turkey call center authorization departments, electronic claim processing systems and claim
handling departments are in charge of claim management. However there is more than doing
daily business.
 Following the claims of each group insurance and individual policies closely, making data analysis
not only at the end of policy year but also during the policy time, can provide room for proactive
claim management.
 60% of all health insurance claims is coming from outpatient and 40% from inpatient. Following
outpatient claims frequency and getting some precautions like using workplace doctors more
efficiently in a group, could provide decrease in frequency and better results in claim and as a
result better claim/premium ratio.
 Also, sometimes we can make aware the customers that high claims means high premium next
year, then we can invite them to benefit from their policies in a more rational manner.
 Healthcare Providers sometimes can exaggerate the number of diagnosis per doctor visit.
Continuous monitoring and making them aware that we, as an insurance company are aware what
is happening will make them to normalize their healthcare consumption from our insured.

19.  a variety of techniques intended to reduce the cost of providing
health benefits and improve the quality of care (from Wikipedia)
So, is it scary to implement?
Can’t we help our insured to make them have more healthier life and
reduce their health expenditures?
 Disease Management
 Encourage insureds for well-being
 Direct insureds while receiving health care services
 But first establish ‘Trust’

20.  Detecting and preventing fraud
 Continuous data analysis, using BI tools to determine the fraud
and abnormal behaviors
 Take the action accordingly.

21.  Applications
 EDI
 Rule Engines
 Electronic Health Record
 Telemedicine

22.  Coverage of Social Security Systems
 Sustainability of SSS and its willingness to share the burden with
private industry
 Availability of Primary Care System
 HCPs quality and quantity
 Accessibility to healthcare
 Benefits not to be covered (such as dental)
 Behavioral tendencies and traditions of healthcare consumption of
the people