A PRESENTATION BY - actuaries.orgactuaries.org/IAAHS/Colloquia/Dresden/Thomas presentation.pdf4 CARE OR CURE THEME –1: LOSS PREVENTION / MINIMISATION & HEALTH INSURERS ØPractised

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CARE OR CURE LOSS PREVENTION

IN HEALTH INSURANCE+

A PRESENTATION BY

GEORGE E. THOMAS(TARIFF ADVISORY COMMITTEE, INDIA)

AT THE INTERNATIONAL ACTUARIAL ASSOCIATION – HEALTH SECTION

COLLOQUIUM 2004DRESDEN, GERMANY

28 - April - 2004

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CARE OR CURE THEMES FOR DISCUSSION

1. LOSS PREVENTION / MINIMISATION & HEALTH INSURERS

2. LOSS PREVENTION – HOW ?3. LOSS MINIMISATION – HOW ?4. EXPLORING HEALTHCARE OPTIONS &

KNOWLEDGE SHARING

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CARE OR CURETHEME –1: LOSS PREVENTION / MINIMISATION &

HEALTH INSURERS

“…risk management may be defined as the minimisation of the adverse effects of risk at minimum cost through its identification, measurement, and control.”

(‘Risk Management and Insurance’ by C. Arthur Williams & Richard M. Heins)

Loss prevention/ loss minimisation measures of risk management - have improved non-life risks and yielded long term financial gains for insurers in many fields of non-life insurance.

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CARE OR CURETHEME –1: LOSS PREVENTION / MINIMISATION

& HEALTH INSURERSØ Practised for various reasons in non-life insurance:Ø as risk management policy by industrial housesØ to earn a financial incentive from the insurerØ by insurer’s compulsion - policy conditions.

Ø Practised for any reason, loss prevention improves the quality of a risk and reduces an insurer’s financial burden.

Ø For this reason, historically, non-life insurers have taken the lead in promoting concepts of risk management - loss prevention/ loss minimisation.

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CARE OR CURETHEME –1: LOSS PREVENTION / MINIMISATION

& HEALTH INSURERS

Ø Advantages – over a period of time, risk managers and insurers have made the world safer. Ø fire safety systems in factories and warehouses,

legislations on workers’ safetyØ safety standards for handling and storage of

hazardous materialØ safer handling of cargo at ports, improved road

safety standardsØ created an awareness that insured should take

due care whether the risk is insured or otherwise.

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HEALTH INSURERS

Ø In health insurance, concepts of loss prevention and risk management have not gained significant groundØ health policyholders as well as Ø insurers have been turning a blind eye on prevention

of losses.

Ø Underwriters have conventionally been dealing with illnesses as inevitable natural happenings based on a comfortable and very logical belief that Ø all health policyholders take care of their healthØ and the health of their near and dear ones.

Ø Is this belief really justified ?

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HEALTH INSURERS

Ø Though ironical, human beings are not always as logical, rational or methodical as they should be when it comes to managing their own health and the health of those under their care.

Ø One often hears excuses for not taking care of one’s health;Ø excuses like not having the time, Ø being busy with day to day work, Ø hoping that things would never happen to them, Ø believing that whether careful or not whatever has

to happen would happen, Ø being bad at one’s own matters and so on.

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HEALTH INSURERS

Ø From a risk management point of view, this sort of irrational behavior of human beingsØ makes them bad risks - easily susceptible to loss

making conditions Ø mostly, not prepared for managing the situation

andØ with no contingency planning whatsoever (only

when illness strikes, most insured realize that they are unprepared).

Ø Thus, when an insured peril is in operation, many ‘health policyholders’ turn out to be Ø badly managed and poorly maintained risksØ having no worthwhile loss minimisation strategies

in place

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HEALTH INSURERS

Ø This state of affairs is tragic for the insured and turns out as bad business for insurers.

Ø Any success in managing this situation would be Ø a boon to the insured,Ø a bonus for the insurer and indirectly, Ø a blessing for humanity at large.

To get a more focused view of the situation, let us have a close look at the similarities between an industrial fire, an injury, a communicable disease and a non-communicable disease. (The examples cited are merely illustrative)

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LOSS MAKING SITUATIONS - SOME SIMILARITIES

LOSS MAKING CONDITION

HOST / RISK

AGENT/ FLAW IN THE SYSTEM

VEHICLE OF INTERACTION

INTERACTION/OPERATION OF HAZARD

SCOPE OF LOSS PREVENTION/ CONTROL ACTIVITY

FIRE Textile Factory

Carelessness of worker

Lighted Cigarette end thrown in the wrong place

Fire from the cigarette spreads to cotton fluff

Worker training,Installation of Smoke detectors, Automatic sprinklers, Fire alarm, CO2flooding systems.

SKULL FRACTURE Human

Managing mechanical energy

Over speeding & skidding of Motor Cycle

Crash

Increasing awareness of traffic rules, Enforcing road discipline, use of Helmet.

MALARIA Human

Vulnerable to infection by Plasmodium sp.

Mosquito Bite

Creating awareness on breeding places of mosquitoes – clearing cesspools of stagnant water, Fumigation & other repellents, Protective skin creams. Vaccination.

CIRRHOSISOF LIVER

Human

Body can not tolerate high alcohol exposure

Habitual & excessive use of alcohol

Wrong life style and weak liver and of the patient

Creating awareness about effect of excessive use of alcohol, periodic health check-ups, Forming mutual help groups like ‘alcoholics anonymous’. Promoting a better life style

CARE OR CURE

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HEALTH INSURERS

Ø Here, losses were caused by the operation of certain perils - the insured is affected and the financial burden is passed on to the insurer.

Ø In the textile factory case, the insured’s risk managers will have their risk management and loss minimisation strategies.

Ø In the three other cases, the insured does not have a proper strategy in place.

Ø IT IS ONLY REASONABLE THAT THE HEALTH INSURER, WHO ULTIMATELY HAS TO BEAR THE COST, PLANS STRATEGIES FOR THE INSURED.

Ø Moreover, the insurer being in a better position by way of knowledge, technology, professional expertise, infrastructure and financial strength can tackle the situation better.

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HEALTH INSURERS

SUMMARY OF THE DISCUSSION SO FAR:

Fact No: 1 - If properly maintained, human beings remain healthier and less prone to diseases for a longer time.

Fact No: 2 - Loss prevention/ loss minimisation measures have improved risks and yielded long-term gains for insurers in many fields of non-life insurance.

Fact No: 3 - Health policyholders subjected to loss prevention/ loss minimisation measures, become better risks & bring good returns for insurers in the long run.

Fact No: 4 - It would be preferable for health insurers to take the initiative and get loss prevention / loss minimisation strategies in place for insured.

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HEALTH INSURERS

AS INSURERS, LET US ACCEPT THIS POSITION,

FOCUS ON THE NEEDS OF THE SMALL FRATERNITY OF POLICYHOLDERS PLACED IN OUR HANDS

AND ENDORSE OUR COMMITMENT TO DO OUR BEST IN PROMOTING GOOD HEALTH

FOR HUMANITY.

NOW, HOW DO WE TRANSLATE OUR COMMITMENT INTO ACTION ?

HAZARD OPERABILITY MODEL

MITIGATION IMPROBABLE

UNLIKELY

POSSIBLE

LIKELY

PROBABLE

LIKELIHOOD 1 2 3 4 5

LIGHT

SEVERITY

-1 -1 -2 -3 -4 -5

SERIOUS -2 -2 -4 -6 -8 -10

MAJOR -3 -3 -6 -9 -12 -15

CATASTROPHIC -4 -4 -8 -12 -16 -20

MULTI-CATASTROPHIC

-5 -5 -10 -15 -20 -25

PREVENTION

CARE OR CURE

LEGEND: HAZARD OPERABILITY MODEL

-25 to -20 RedNON-OPERABLE

Evacuate area / zone / country

-16 to -10 Pink INTOLERABLE Do not take this risk

- 9 to - 5 Orange UNDESIRABLE Evaluate risk thoroughly before insuring

- 4 to - 2 Blue ACCEPTABLE Proceed carefully - plan risk improvement

-1 Green NEGLIGIBLE Safe to proceed

CARE OR CURE

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CARE OR CUREFURTHER THEMES FOR DISCUSSION

Ø How can these ideas be translated into action?

Ø How can health policyholders be helped in managing their health better?

Ø A three-pronged approach on the following themes would be required for this purpose, may be at a global level :

(i) [ THEME – 2] Loss Prevention – How ?(ii) [ THEME – 3] Loss Minimisation – How ?(iii) [ THEME – 4] Exploring Healthcare Options and

Knowledge Sharing

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CARE OR CURETHEME - 2 : LOSS PREVENTION – HOW ?

“Prevention is better than cure”. What can health insurers do to prevent or reduce occurences of diseases ?

Education: The individual’s perception of health improves with education.

ü Standards of personal hygiene/ literacy levels are not uniform all over the world.

ü Doctors practising in rural areas report the benefits ofü simple practices like washing one’s hands before eating &ü washing vegetables before cooking.

ü Awareness of the ill effects of pollution.ü Organized effort in prevention – should start with

education. ü Insurers can start from schools, families, villages,

places of worship or work places. ü Services of teachers, doctors, social workers can be used. ü Insurers can organize task forces for this purpose.

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Ø Lifestyle Management: Prevention is possible by improving the policyholders’ lifestyle.

ü Stress has ill effects on the heart, the nervous system and the digestive system

ü Mere awareness and recognition of stress symptoms can ring an alarm bell before a burn out.

ü Relaxation techniques, a positive and cheerful attitude towards life can prevent many illnesses. ü Personalized counseling sessions, ü Inducing good habits like walking or exercising regularly

ü Sustaining good habits through conducive conditionsü Example: forming walking clubs, fitness centers.

ü Employing facilitators like local volunteers, school kids insured who need exercise on medical advice or local fitness centers for setting up such groups.

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Ø Alternate Lifestyle Systems: Preventive measures can include regular practice of ancient or modern lifestyle systems like Ø ‘Yoga’, ‘Reiki’, ‘Vipassana’, ‘Brahmavidya’,

meditation, mind management methods, breathing exercises and positive thinking.

Ø Distribution of inspirational books, cassettes, compact disks etc. can easily be done.

Ø Talks and classes by resource persons can be organized for the purpose.

Ø Formation of local prayer groups, chanting groups, laughing clubs etc. can also promote continuance of alternate lifestyles.

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Ø Preventive Diagnostics: Preventive diagnostics - like preventive maintenance of machinesØ policy conditions can stipulate regular health checkupsØ schedules for medical tests, investigations Ø compulsory submission of reports to the insurer and Ø financial incentives for compliance.

Ø Vaccinations: Many parts of the world are affected by diseases like malaria, yellow fever, small pox, typhoid, and certain strains of hepatitis, tuberculosis and polio. Ø vaccinations can be arranged free of cost or at

subsidized rates for health policyholders.

Ø Do’s & Don’ts: When a family member is quarantined, or in times of epidemics, check-lists of do’s and don’ts can be given to insured. Ø Such interaction can bring about definite results.Ø Physicians, nurses, health/ social workers can help.

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Ø Benefits of modern scientific advancements can be used to forecast illnesses: Examples - Metabolic Disorders Research, checking Homocysteine levels

Ø Wellness Centers: There are mental blocks among some people about hospitals.ØMemories of pain/ distress & deceased relatives. ØMany feel that all hospitals are making “business

with disease”. Ø Unscrupulous medical practitioners convert

insured patients into business opportunities. Ø Some people say that the last thing they ever want

to do is going to a hospital, i.e. till they are carried in. Once admitted, many lose their desire to live, delaying the healing process and prolonging the treatment process.

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Ø Confidence in Hospitals: The patient’s faith/ trust/ confidence in the hospital & its systems improves the chances of recovery. Ø Insurers can interact with hospitals; assess their

professional standards, efficacy of their systems and business ethics.

Ø Insurers can employ third party administrators (TPAs) to streamline dealings between insured and hospitals.

Ø Hospitals should be projected as wellness centres; or even induced to open separate wings for preventive diagnostics and insured care.

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Ø Patient-friendly Image of Hospitals: This image has to be carefully built up by insurers and hospitals together so that patients willingly approach a hospital when the first alarm bell of the body rings.

Ø Loyalty rewards: To ensure long term yield for their endeavours, insurers should plan strategies for keeping insured with them for longer periods of time. Ø Devising long-term health insurance policies or Ø Loyalty rewards for continuous insurance could

be options.

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CARE OR CURETHEME - 3 : LOSS MINIMISATION – HOW ?

“A stitch in time saves nine”

Ø Loss minimisation includes

Ø early recognition of an illness,

Ø preventing a condition from worsening,

Ø ensuring speedy and effective medical attention,

Ø accurate diagnosis,

Ø efficient treatment at reasonable costs,

Ø professional and cost effective follow up etc.

Ø AN ILLNESS ‘PROCESS FLOW DIAGRAM’ CAN MAKE THE SITUATION CLEAR . . . .

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HOSPITAL TREATMENT

ØADMISSIONØCRITICAL / INTENSIVE CARE

üDiagnosisüMedical HistoryüAllergiesüInvestigationsüCourse of treatment

ØINTERNAL PAYMENTSØEXTERNAL PAYMENTS

ØPOST HOSPITALISATION PLAN

PROCESS FLOW

DIAGRAM

EXTERNAL AGENCY FOR SPECIALISED OPINION

TRANSIT FROM SPOT OF OCCURANCE TO HOSPITAL

ØSHIFTING TO AMBULANCEØTRAINED PERSONNEL

ØLIFT / STAIRCASEüFirst Aid / Personal DetailsüPreliminary investigationüCommunication to hospital

ØDISTANCEØROAD CONDITIONS

ØPEAK HOUR TRAFFICØRAILWAYLINE/ CHECKPOST

ØPARKING

DECISION

ØSerious or not ?ØHospitalize?ØWhere ?ØMoney ?ØTransport ?ØAccompany ?ØDocuments ? ØWhat to carry ?

SOS TO HOSPITAL

SOS FOR AMBULANCE

SOS TO RELATIVE

ADMISSION PROCESS

EXTERNAL AGENCY FOR SPECIALISED TREATMENT

EXTERNAL AGENCY FOR INVESTIGATION

RETURN HOME

DIRECTLY TO HOSPITAL

SUDDEN ILLNESS

BACK HOME SAFE

2510

Diagnosis while waiting. First Aid. Less

tension. Streamline procedures. Tie-up

with hospitals

55(5-20)

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Communication /Waiting/ Money/ Preparation

105Predetermined action. Telephonic assistance

30(1 – 20)

10Communication

5010As a cumulative effect, faster diagnosis – and

faster medical attention100

(10–30)15

Diagnosis

4015Diagnosis / First Aid

during transportation. Hospital kept aware.

85(10- 60)

30Transportation

155External online help. Clarity on options.

45(5 – 30)

15Decision

55Early recognition of symptoms and illness

20(5 – 45)

20Recognition

CUMULATIVE TIME TAKEN

(Minutes)

TIME (Minutes)

MINIMISATION ACTION

CUMULATIVE TIME On an

average(Minutes)

NORMAL TIME

(Minutes)PROCESS

TIME FACTOR – GOLDEN HOUR MANAGEMENT

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ü Recognizing body conditions is critical:ü Insured should be able to recognize ailments, body’s

warning signalsü They should know the do’s and don’ts in the event of a

health condition and first aid measures to manage health situations better.

ü Right information needed for right action:ü Health policyholders armed with right information are

better prepared. Examples:ü booklets containing addresses and telephone

numbers of doctors, trauma care centers, specialized hospitals

ü information on procedural formalities on admission.

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“A friend in need is a friend indeed.”

ü Help-line services for providing on-line assistance:

ü When disaster strikes, an unprepared insured can only wring his hands.

ü Even normally efficient people become panic stricken and find themselves unable to take right decisions.

ü 24 hour telephone help-line services ü giving policyholders step by step guidance,ü locating ambulance services for them, ü directing them to the right medical help, ü alerting hospitals about the patient’s arrival

and the likeü In traumatic situations, a cool headed third party can

plan “the golden hour” effectively. Maybe, trained call centers can assist.

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ü Creating Own Infrastructure: Deep pocketed insurers can create infrastructure for support services.

ü A group of insurers can promote organizations to provide loss prevention services, education, trauma-care, free ambulance services, mobile trauma care services on highways and remote places.

ü Sponsoring fitness clinics, counselling centres and employing support staff are other measures.

ü Tie-ups with Hospitals: Insurance companies can tie-up with major hospitals to provide emergency medical care without making any payment.

ü Local tie-ups: Without investing on infrastructure,insurers can have local tie-ups by sharing support infrastructure like ambulance, hospitals and doctors.

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CARE OR CURETHEME - 4 : EXPLORING HEALTHCARE

OPTIONS & KNOWLEDGE SHARING

ü Market Options: The insurer, as an entrepreneur has to be constantly aware of the options available to the health policyholders and the costs involved in the insured exercising these options.

ü Laws of demand and supply, formation of cartels etc. push the costs of diagnostics, treatment and health care higher and higher.

ü More and more health care options can break the present demand-supply equation. Research and a free flow of knowledge across the globe will give more options to the insured.

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Ø Options from the ancients: World wide research is needed to rediscover the efficacy of ancient health care solutions.

Ø “Ayurveda” the traditional medicine of ancient India has solutions for many ailments. Even diseases like “cerebral thrombosis” are being cured.

Ø It may sound surprising that herbal powders and oils applied on the head and soothing herbal pastes applied on the soles of the feet can achieve medical wonders

Ø Traditional medicine based on the research and wisdom of the ancients is still an affordable alternative in India for those who have belief in it.

Ø Likewise, other ancient civilizations also have native medical systems that are quite efficient.

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CARE OR CURETHEME - 4 : EXPLORING HEALTHCARE OPTIONS

& KNOWLEDGE SHARINGü Insurers can sponsor research projects to study the

present day relevance and efficacy of ancient systems.

ü This will improve patients’ confidence in these affordable options. Once the benefits of traditional medicine are proven by modern day research, these will become popular.

ü The full potential of Homoeopathy, a holistic form of medicine, has not yet been fully explored as an alternate treatment.

ü Insurers can sponsor research in modern areas of health care.

ü Examples: Efficacy of using medicated / non-medicated heart stents for particular cardiac conditions, oxidation stress, ‘oxygen paradox’, cellular nutrition etc.

ü Cost effective systems of health care administration.

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üCost Concerns: The era of hospitals and medical centres which are run by the government, charitable trusts, missionaries and philanthropic organizations has steadily been giving way for ‘speciality’ and ‘super speciality’ hospitals run by professional managers answerable to the share holders of the hospital.

üIn many Indian hospitals, insured patients generally pay more than uninsured patients for the same disease.

üWe hear the voices of philanthropists from Germany and around the world about “business with disease”. (A debate on commercialization of medical treatment is, however, beyond the scope of this paper.)

üIn their own interest, insurers should be concerned about medical costs and do something to reduce it.

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CARE OR CURETHEME - 4 : EXPLORING HEALTHCARE OPTIONS

& KNOWLEDGE SHARINGResearchers have time and again emphasized the need for

health information systems.“Despite progress in recent years, the lack of standards

remains a major impediment to technical and international collaboration in health and health informatics”. S. H. Mandil (1991)

In “industry generally, the adoption of standards has resulted in an increase in market opportunities and lower costs for equipment and services to users. In health informatics, the widespread adoption of standards is expected to improve the health of the nation’s population at a lower cost by improving the ability of health professional, public and health service administrators to share and make better use of the information gathered”. Paper on ‘Standards in Health Insurance’ by E. J. S. Hovenga.

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ü Sharing of Information: Health informatics needs to be built up and shared all over the world.

ü Insurers need reliable internal data on treatment costs with uniform standardized codes for diseases, treatment and diagnostic processes.

ü This data can be used for in-house analysis of costs and shared as well.

ü Either way, insurers should initiate dialogues for achieving common standards for their database architecture.

Ø A lot of research has been done the world over and today in 2004, there is no dearth of standards in health informatics.

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Ø What is needed today is

Ø joint action from insurers all over the world to see that health care data is captured, used and shared by the insurance fraternity Ø for their own business interests, Ø for providing a healthier life to the

insured and Ø for the general well being of mankind.

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CARE OR CURESUMMING UP OF THEMES COVERED

1. HEALTH INSURERS HAVE A ROLE TO PLAY IN LOSS PREVENTION / MINIMISATION OF HEALTH POLICYHOLDERS

2. HOW TO MAKE LOSS PREVENTION POSSIBLE

3. HOW TO MAKE LOSS MINIMISATION POSSIBLE

4. HOW INSURERS CAN EXPLORE AND FIND OUT MORE HEALTHCARE OPTIONS & SHARE THEIR KNOWLEDGE

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