A health plan’s dream is to know by 1/1 if the health of their subscribers matches their expectations and the premiums they charged. Unfortunately, that is never the case. The business of managing that uncertainty is the business of insurance.

Risk management is about asking questions

  • How do you protect yourself against adverse scenarios?
  • If you can’t prevent it, how do you minimize its severity or reduce its frequency?

Risk managers collect these questions and the solutions are divided over the three lines of defense: the business units, risk management and control, and internal audit.

When assumptions don’t match reality

The Product teams have the burden of developing and maintaining complex products based on assumptions of claim costs, member demographics and health risks. Once these products are priced, the Sales and Marketing teams do their best to convert as many prospects into subscribers during open enrollment. With an enrollment period of only a few months, these teams are often left using static strategies based on the previous year’s experiences. However, this historical information may not hold well when launching a new product or penetrating a new market. Only accurate current data can give insight into how a product is performing.

An industry specific CRM powered by data analytics can bridge communication between departments in real time. The Product team receives analysis of who’s buying their products, what estimated risks they pose, and how it compares to the expected population concentrations. The Sales and Marketing team receives recommendations on how to adjust their strategy to address concerns such as anti-selection or low young adult enrollment. According to a study done by Kaiser Family Foundation, a 25% lower enrollment rate of young adults compared to other age groups can lead to costs being 1.1% higher than premium revenues.

Enhanced Enterprise Risk Management

Sitting behind the business units is Risk Management and Control, which is concerned with companywide risks. They oversee every product and service with the task of mitigating their combined and often multiplying risks. Classically, they set concentration limits, implement companywide standards from operational risk controls to risk metric definitions, and scrutinize any new activity the business units propose. An area that is often not addressed, due to the lack of modern technology, is customer retention and more specifically, the retention of valuable members. By collecting member data at every touch point, a carrier could estimate a member’s sentiment or brand affinity. This would provide risk managers and business units valuable insight into the behaviors of healthy and health conscious members who often have lower amounts of claims data and therefore less member data. Company-wide initiatives can then be put in place to service this very important group.

Focusing on what’s important

The last line of defense, Internal Audit, verifies that procedures mandated by the previous lines of defense are actually followed. This requires reviewing processes, checking files, and testing calculations. The most time consuming part for auditors is combining all the information that they collect which often come from many different systems that do not talk to each other. Zipari’s industry specific CRM exists as a middle-ware. It connects these disparate systems into a machine that can provide a clear trail from enrollment through claims payment. So more time is spent verifying compliance as opposed to making sense of spreadsheets.

This post was authored by Michael Green, Zipari’s Lead Data Scientist. If you have any additional questions about the topic of Risk Management or Data Analytics, please feel free to email Michael@zipari.com


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