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Data helps manage risk as the Health Insurance Exchanges open

Nilesh Rajadhyax
Blog Post10/22/2013
Health Insurance document

When the new Health Insurance Exchanges opened their doors to enrollment on October 1, around 30 million uninsured people were able to sign up for health coverage. Hundreds of thousands more, already covered by their companies, may choose – or be pushed – to take up the new options on offer.

But no one knows how many people will actually do so, when they will sign up and how they will behave once they are covered.

Those big unknowns mean it is likely to take two to three years for the new reality of U.S. healthcare to take shape. Add the polarized politics, and the uncertainties are huge. As a result, all the players – federal and state governments, payers and providers – need to focus closely on managing their risk.

To date, the healthcare system has been pretty much a business-to-business sector. From October, two big things change. Millions of unpredictable individuals enter the market as consumers, and the underlying risk calculation shifts from one that is largely clear and underwritten (at least for the payers), to one that depends on a precarious balance: bringing in enough young and healthy buyers to make sure that insurance offerings remain both affordable and commercially viable.

So, how best to manage that transition period? Digging deep into data can help in three ways:

  • To monitor individuals coming into the system, by performing patient identity verification analysis and determining what their insurance eligibility is. Sounds simple, but people with uncertain incomes and shifting households will move in and out of eligibility for Medicaid and tax subsidies. Growing differences between states on Medicaid eligibility criteria also exacerbate the complexity. Providers can also combine this data with financial profiles to understand how patients are likely to cope with deductibles and out-of-pocket payments.
  • To develop predictive modelling which can help answer the big questions in real time. Are the majority of new sign-ups young and healthy “invincibles” who rarely see a doctor or are they people suffering from chronic pre-conditions? Are the people coming out of company plans on to the exchange mainly early retirees with health problems or are they more likely to be young, low-paid mothers? How will the newly insured respond to having health coverage for the first time – will they use it more or less frequently than others? And what does all of this mean for the viability and cost of insurance plans in future?
  • To build products that will be best suited to particular segments. Certain types of segments may have different healthcare utilization and financial spending patterns that will lead them to buy different types of products. Families with young children may want high deductible plans as they do not envision running into significant health issues as compared to the elderly with chronic conditions. By combining demographic and financial data, insurers can help develop compelling products to attract selected segments.

The next few years will be an exciting, tumultuous and scary time for the entire healthcare sector, but sophisticated data analytics can help navigate through the ambiguity and give those who use it well a head start on thriving in the new reality.

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