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Data federation for the health insurance industry

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People of a certain age will recall the time consuming and often frustrating experience of cashing a paycheck. As archaic as it may sound in an era of ultra-fast online and app-powered banking, simple tasks like making deposits once involved waiting in long lines, hoping the bank teller was having a productive day.

Not surprisingly, customer satisfaction in the banking industry 10 or 15 years ago was in the cellar.

Fast-forward to today and the level of satisfaction among banking customers is near the top among all industries. Indeed, a 2013 McKinsey & Company report found that the banking industry rated number four in overall customer satisfaction. What changed? Are there any lessons health insurance agents and brokers can use to evaluate, and possibly shape, what’s happening at the health insurers?

How one industry evolved

In the banking industry, the evolution of technology provides part of the answer. The proliferation of smart phones and tablets paired with sophisticated and secure bank websites has made it so that many customers have never even met a teller face-to-face.

But give the banks some credit of their own. The banking industry as a whole did an admirable job of harnessing a wide variety of data to understand their customers better, and more importantly their customers’ preferences. For some, this means standing in line at the bank to speak to a teller face-to-face. Meanwhile other, possibly more tech savvy, customers prefer the freedom and flexibility of their mobile access to banking. This has yielded not only higher levels of customer satisfaction but also enhanced brand loyalty and boosted the lifetime value of customers.

See also: 5 Trends Drive Benefits Brokers’ Use Of Technology

Banks are hardly alone in tapping into the power of data. Everyone from retailers to travel companies uses data and analytics to simultaneously improve the experience of their customers as well as their own revenue and profits.

Can health insurance follow suit?

In that same McKinsey report, health care companies and facilities now occupy a low position in customer satisfaction. There are a host of reasons why health care has not embraced the use of data and analytics, but, in large part, health plans and other health care players have simply had no compelling reason historically to use broad sets of data  to better understand and communicate with their entire base of customers.

For decades health insurance players have focused on the 3 percent of the population that drives 50 percent or more of their risk. In fact, it was a pretty straightforward proposition, particularly from the standpoint of data: identify the small minority of people who generate the majority of claims and focus attention on them. It’s an approach that doesn’t require collecting data from the outside world; all that is needed are the claims and eligibility information.

Until recently, there was such high turnover in health plans that there was no concept of customer lifetime value for the plans or the brokers and agents who recommend them. There was no incentive to treat patients like customers.

But as everyone is aware, the health care industry is in the midst of substantial change, due largely to the impact of the Patient Protection and Affordable Care Act (PPACA).

See also: Where health care consumerism is headed & what that means for brokers

In the past the health care system worked more or less like this: patients would go see a doctor and incur a fee based on the type and volume of services received. By contrast, PPACA is fundamentally changing health care to a value-based performance system. Increasingly, provider reimbursements are based on delivering quality care and improving patient outcomes rather than the number of tests or procedures a doctor performs. This is a profound change.

For example, a five-star quality rating – known simply as Star Ratings, which are highly structured and based on four dozen measures of performance and outcomes – determines reimbursements in the Medicare Advantage health plan market. These ratings have real teeth and a direct impact on the revenue and profitability of health care plans. Starting in 2015, plans without a 4.0 or higher Star Rating won’t receive the 5 percent bonus the Centers for Medicare & Medicaid Services (CMS) provides as a way to incentivize overall health plan performance.

This is real money. For some plans, not reaching that 4.0 threshold means a loss of revenue in the tens of millions of dollars, maybe more. Inherent in this systemic change in health care is the need for plans to better understand all customers to improve outcomes across the total population, not just the few who generate the most claims. To do this effectively requires the use of data that lives beyond the confines of a health plan’s walls.

See also: How Medicare Advantage might change

Make no mistake though; the plans that effectively tap into the power of data both inside and outside their own walls are the future of health care in this reformed environment. The agents and brokers who identify and align with those plans will also experience success in the changing health care landscape.

Data federation, not big data, is the key

Although it’s hard to avoid the term “big data” these days, its pervasiveness does not make it especially helpful or even accurate. After all, so-called big data isn’t necessarily always big. It comes in all shapes and sizes. Consumer data can vary from huge to enormous, while data like income level by five-digit ZIP  code can be very small.

Big data also comes with various levels of security. Consumer data is readily available, at a price, through data vendors, while electronic medical record (EMR) data is highly sensitive and subject to the Health Insurance Portability and Accountability Act (HIPAA) privacy and data security provisions. But once the information is acquired, the key is to make it consumable by narrowing it down to the elements that provide statistically valid insight into the issue being addressed, what’s known as data federation.

Data federation is a process where data is collected from multiple independent databases and placed into a single virtual database, without ever copying or transferring the original data itself. Until recently, data federation was not a concern for health plans and health insurance brokers, because the only in depth information they needed was about a small percentage of their customers. But the new health care landscape is one where data federation can drive powerful results.

See also: How the PPACA exchange program still infuriates agents

That said, success is by no means inevitable. For one thing, health plans must embrace databases that the rest of the world has already embraced and successfully utilized. Historically, the health insurance industry has primarily used relational databases in which plans took a person’s Social Security number and modified it be used as their member ID. These databases have traditionally been impervious to information from the outside.

While health plans can maintain their relational databases, to succeed in the new marketplace requires leveraging what’s known as unstructured data — which is everything not owned by the health care plan, ranging from text mining of social media sites and DMV data to activities within payer portals. When this is done properly, the data is federated into a single virtual database and becomes actionable when making decisions related to improving the customer experience as well as the financial, clinical and operational performance of the health care plan.

A whole new ballgame with data federation

What doors swing open when the health insurance  industry takes advantage of data federation? Plenty. Go back to the Star Ratings that play such a major role in how health plans are reimbursed under Medicare Advantage. In the new value-based health care system, where outcomes and patient satisfaction are so critical, outside data is essential to reaching revenue goals because it provides the means to effectively reach and motivate members, as well as better understand, and more effectively communicate to members who have expressed dissatisfaction with the plan itself.

For example, imagine a health plan that needs to improve outcomes among its diabetic patients a few percentage points in order to achieve a Star Rating that will earn it that five percent bonus from CMS — an effort known as revenue optimization or revenue management. In that scenario, does it make sense to send out an email blast or start calling the plan’s entire patient population? No, a far more effective approach — one that the travel and retail industries already know so well — is to use data federation to tailor the right message to the right people, at the right time.

See also: 5 important wellness findings

Ultimately, health care plans need to use data federation to find and engage patients who are willing to modify and sustain a changed behavior in order to improve their own health. Again, as other industries already know well, that comes down to understanding a wealth of other factors: do they want to be contacted by text, email or a phone call? What tone of messages prompt people to respond? How frequently do they want to be contacted? In other words, it’s about understanding customer profiling and its nuances.

Agents and brokers will want to ensure that the health plans they recommend are making use of all of the data available to them, not just claims and eligibility data. Brokers need to recognize which plans see the value in leveraging data in a customer-centric approach to taking care of patients, because those are the plans that are going to result in the highest satisfaction for their customers.

Another area where the changed health care marketplace provides opportunities for plans that use data federation is in tapping into the lifetime value of their customers.

Not long ago, the concept of the lifetime value of a health care patient was unheard of. The combination of companies changing health plans almost annually and employees changing jobs often meant that the probability of an employee staying with the same health payer for several years was unlikely.

But consolidation in the industry and the establishment of health insurance exchanges means that people will likely be sticking with their health plans longer, and likely their providers as well. That not only puts a premium on good customer service, but there is now a big incentive for plans, and once again the agents and brokers who sell them, to retain and cross-sell products like life, dental, vision and disability insurance to their members. This strategy builds brand awareness and loyalty; much like Apple continues to do with computers, iPods, mobile phones, iPads and now watches.

See also: Most Gen X & Y consumers need more life insurance, but few will buy

Guess what? The analytic techniques that other industries use to pinpoint and market to high-value customers apply directly to health care.

To be clear, the health insurance industry is at the beginning of its data federation journey. But here’s the good news: those that follow and learn from the successes of the likes of banks will one day be able to speak about the olden days when customer service ratings were bad and be happy those days are long gone.


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