GLG News by Bilyana Savic

Implications: There are ways to control costs, reduce premiums and provide access to quality healthcare plans. Creativity in plan design and customization of plans are key areas insurers are exploring in order to meet the demands of current trends and to build and retain customer loyalty.

Analysis: The health insurance industry has traditionally treated the market in a mass approach. The advancement of Consumer Driven Healthcare has forced some changes, including how insurers view their market. Customer demand for customization and individualism has spurred on a race in creativity, revenue generation and market competition, as we are seeing with this pilot program. I don't think it's a minute too soon. All consumer trends point to a menu approach. Many of the carriers have begun to respond. In terms of providing stronger value propositions, setting up health savings accounts, segmenting markets and adjusting pricing, personalized benefit design, etc. This is just the beginning. Demands of transparency and some of the recent legislation that has taken effect on transparency will continue to drive innovation and personalization of our approaches to healthcare services and funding.

Implications: The controversy of contingent commissions is not a new one. This debate has caused significant changes to our views of broker payments, disclosure, ethics, and loyalty. The central question started off as being one about disclosure. Theoretically, if the client is aware then there isn't an issue. If this article is any indication, the debate is far from over. Aon, Marsh, Willis Group and Arthur J. Gallagher have all dealt with repercussions from investigations. Even though full disclosure is now a standard business practice, the question still remains.

Analysis: The role of a broker is complex. As such, it deserves compensation in all areas of service. Contingent commissions, or forms of such commissions traditionally are viewed negatively. I'm not certain why exactly. A broker working in the role of advisor is compensated fairly for that service. That same broker places a carrier into position and is compensated with commissions. Carriers build incentive programs into their marketing allowances. Contingent commissions are builtin incentives and come in many forms. They vary from cash awards to travel to advertising contributions, etc...From my experience all incentives are "if-then" propositions. "IF" something happens, "THEN" something else happens in return. IF a broker hits certain targets set by an insurer, shouldn't they THEN be properly compensated in all ways available to them? As long as that broker can demonstrate that this is the best possible advice they are delivering to their client, why is it a conflict of interest? Incentives are not illegal. Incentives have never been illegal. Whenever this issue comes up, I feel as if we are looking for ways to restrict, ways to control and limit our industry. Why is that?

Implications: There are two key considerations I think are very indicative of the changing times of American healthcare. First of all, the Consumer Driven Model emerging as the primary vehicle of healthcare insurance. And secondly, the effects on domestic medical costs should this trend continue.

Analysis:

The Consumer Driven Model embraces the concept of channeling costs and medical control to the consumer directly. That being the case, it is the consumer's right to shop around for the best medical care at the best price. So, why not expand that to an international level? It makes sense. The emergence of television, the internet, high speed travel, etc.. has already made the globe more accessible to more people than ever before. So why not healthcare? I believe that as our cost conscious consumers continue to be empowered and educated in healthcare, this trend will force our medical institutions, our government, and our health insurance carriers to adjust their own expectations and compete more aggressively for that same business, both domestically and internationally.

My second thought regarding this article has to do with costs. Medical costs have been on a steady rise for several years. Hospitals cite profitability challenges as one of the causes of their rise in costs. Advances in many procedures have turned what once was a lengthy hospital stay to a short stay, or even into an outpatient procedure, leaving empty hospital beds. If we already have more than a comfortable number of empty beds across the country, if more consumers continue to seek high ticket medical care in foreign countries, who will be filling our hospital beds here? How will the medical facilities cope with that?

Implications: In an era of high speed information, it is unfortunate that our heatlhcare providers are lagging behind consumer demand. The transition from paper to eletronic is inevitable for all providers.

Analysis: As more and more consumers switch to high deductible/Consumer Driven Health Plans, the need to access information will increase. As a matter of fact, 13 states have already adopted statewide health electronic records networks systems. Consumers are able to comparison shop, acess personal medical records, research treatments, etc...The majority of other states are in various stages of designing legislation. It is imperitive that any provider who has plans to stay competitive transition over to electronic records as quickly as possible. I don't think a "hybrid" system is helpful. It just prolongs the process. My experience has been that any time an organization is stressed with a major shift in business practices, that the best results come from agressive and decisive action, not from a slow transition.

Implications: There are a number of new trends emerging in the care and delivery of health needs. One of the most prominent is the rise of retail health clinics. For the first time, Primary Care Physicians, an area traditionally unchallenged is facing competition.

Analysis: Retail clinics are a very interesting concept in direct response to consumer demand. As more of the population embraces Consumer Driven Healthcare, more services will be evaluated and creative solutions will continue to rise. Currently, the most popular CDHP is a Health Savings Account. This high deductible HSA offers flexibility and convenience for the consumer. Typically, the consumer pays office visits and small dollar procedures directly, with coverage in place for large dollar medical procedures. A retail clinic is an attractive alternative.  Here is an outlet that will reduce costs and increase convenience. Consumers are listening. As more consumers are charged with greater responsibility for not only the services rendered but also for the management of money spent, the trend will continue and we will continue to see growths in self service programs and retail clinics.

Implications: Insurers looking for cost cutting programs are interested in outsourcing operations and customer service functions. However, the success rate has been marginal. Outsourcing faces many challenges and will continue to do so until the Indian culture adapts its business models to ones compatible with our insurance practices.

Analysis: Although there are potentially some functional areas that could be outsourced successfully, the majority face challenges and are regularily plagued with issues of culture, credibility, responsiveness, and training. I have found that the cost is far greater over a long term than anyone anticipates.  Outsourcing is supposed to be a seemless transition for a customer or broker from the carrier to the vendor. This is rarely the case. Functional areas such as IT Services are very successfully outsourced. Other areas such claims, customer service, call center are better left the the carrier.