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CARE OR CURE LOSS PREVENTION IN HEALTH INSURANCE FOR PRESENTATION AT IAAHS HEALTH COLLOQUIUM 2004 BY George E.

Thomas

CARE OR CURE - LOSS PREVENTION IN HEALTH INSURANCE

- George E. Thomas
In almost every branch of non-life insurance, loss prevention and risk management are practised in some degree or other.

Many industrial houses practise loss prevention voluntarily as a risk management policy. In some cases, it is practised to earn a financial incentive from the insurer. Elsewhere, the practice of loss prevention is forced upon the insured and insisted upon as a policy condition. Whatever might be the driving force, the practice of loss prevention improves the quality of a risk for the insurer. For this reason, historically, insurers have taken the lead in promoting the concepts of loss prevention, loss minimization and risk management. Today, thanks to the efforts of insurers over many decades, the world is a safer place to live. There are fire safety systems in factories and warehouses, safety standards for handling and storage of hazardous material, safer cargohandling arrangements at ports, improved road safety standards, mandates on safety and above all there is an awareness that the owner of a risk should exercise reasonable caution whether a risk is covered by an insurance contract or otherwise.

However, when it comes to health insurance, while concepts of loss prevention and risk management have not gained significant ground with health policyholders, insurers also have historically turned a blind eye on prevention of losses.

Underwriters have conventionally been dealing with illnesses as inevitable natural happenings. Perhaps, many are still under a comfortable belief that all health policyholders know best about managing their own health and take good care of themselves. Health being a matter worthy of any rational human beings prime concern, one cannot find any logical fallacy in this belief !

It may sound ironical that human beings, in general, are not always as logical, rational or methodical as they are supposed to be when it comes to managing their own health and the health 2

of those under their care. One often hears excuses for not taking care of ones health; excuses like not having the time, being busy with day to day work, hoping that things would never happen to them, believing that whether careful or not whatever has to happen would happen, being bad at ones own matters and so on.

From an insurers point of view, on the one hand, this kind of irrational behaviour of human beings converts many good risks into bad ones that are easily susceptible to insured perils. On the other, when dreaded situations arise, most health policyholders find themselves grossly inadequate in their knowledge of loss minimization measures, unprepared for managing the disaster and with no contingency planning whatsoever. In other words, they are badly maintained and poorly managed risks with no worthwhile loss minimization strategies in place.

This state of affairs is t agic for the insured and turns out as bad business for insurers. Any r success in managing this situation would be a boon to the insured, a bonus for the insurer and in the larger perspective, a blessing for humanity at large.

It is interesting to note that like in the case of industrial calamities, a certain degree of cause effect relationships are visible in illnesses as well. 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 have been picked up for illustrative purposes only.)

LOSS MAKING SITUATIONS - SOME SIMILARITIES


LOSS MAKING CONDITION HOST / RISK AGENT/ FLAW IN THE SYSTEM VEHICLE OF INTERACTION INTERACTION/ SCOPE OF LOSS OPERATION OF HAZARD PREVENTION/ CONTROL ACTIVITY

Lighted Carelessne
FIRE

Fire from the cigarette spreads to cotton fluff

Worker training, Installation of Smoke

Textile Factory

ss of worker

Cigarette end thrown in the wrong place

detectors, Automatic sprinklers, Fire alarm, CO2 flooding systems Increasing awareness of

Managing
SKULL FRACTURE

Over speeding & skidding of Motor Cycle Crash

traffic rules, Enforcing road discipline, use of Helmet. Creating awareness on

Human

mechanical energy

Vulnerable to infection
MALARIA

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

Human

by Plasmodium sp.

System incapable of
CIRRHOSIS OF LIVER

effect of excessive use of Wrong life Habitual & excessive use of style and weak liver and of the patient alcohol, periodic health check-ups, Forming mutual help groups like alcoholics anonymous. Promoting a better life style

tolerating Human high exposure to alcohol

alcohol

This is a snap shot of the situation that needs to be addressed. The loss making condition is the result of the operation of a certain hazard by which the insured is affected and the financial burden passed on to the insurer. The insured of the textile factory, has his risk managers to devise his loss 4

management/ loss minimization strategy. In the three other cases, the insured does not have a proper strategy in place. Here, the insurer being in a better position by way of knowledge, technology, professional expertise, infrastructure and financial strength is undoubtedly better poised to go the extra mile in tackling the situation. After all, the insurer is the one who is financially affected and he has a very good reason for helping the insured. The discussion can possibly be wrapped up into the following summations:

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 minimization measures have improved risks and yielded long term financial gains for insurers in many fields of non-life insurance.

Fact No: 3 - If health policyholders are subjected to loss prevention/ loss minimization measures, they become better risks and yield 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 minimization strategies in place for insured.

AS INSURERS, LET US ACCEPT THIS POSITION, FOCUS ON THE NEEDS OF THE SMALL FRATERNITY OF POLICY HOLDERS 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 ?

It is worthwhile looking at a basic loss prevention model of Hazard Identification Studies (HAZID) and Hazard Operability Studies (HAZOP) before getting deeper into the health problem.

HAZARD OPERABILITY MODEL


IMPROBABLE MITIGATION

PREVENTION LIGHT

LIKELIHOOD -1 SEVERITY -2 -3 -4 -5

-1 -2 -3 -4 -5

-2 -4 -6 -8 -1 0

-3 -6 -9 -1 2 -1 5

-4 -8 -12 -16 -20

-5 -1 0 -1 5 -2 0 -2 5

SERIOUS MAJOR CATASTROPHIC MULTI-CATASTROPHIC

LEGEND: HAZARD OPERABILITY MODEL


-25 to -20 -16 to -10 - 9 to - 5 - 4 to - 2 -1 Red Pink Orange Blue Green NON-OPERABLE INTOLERABLE UNDESIRABLE ACCEPTABLE NEGLIGIBLE Evacuate area / zone / country Do not take this risk Evaluate risk thoroughly before insuring Proceed carefully - plan risk improvement Safe to proceed

How can these ideas be translated into action? How can the health policyholders be helped in managing their health better? A three-pronged approach of (i) Prevention, (ii) Minimization and (iii) Exploring Healthcare Options and Knowledge Sharing would be required on a global level for the purpose.

PROBABLE 5

UNLIKELY

POSSIBLE

LIKELY

I.

PREVENTION:

Prevention is better than cure. But in health care, prevention is easier said than done. How can the occurrences of diseases be prevented ?

Education: Conditions of personal hygiene and literacy are not uniform the world over. Education improves the individuals perception of health. It teaches him the importance of personal hygiene. It makes him aware of pollution and its ill effects. Doctors practising in rural areas report the benefits of simple practices like washing ones hands before having food and washing vegetables well before cooking.

Any organized effort in the prevention of illnesses should start with education. Efforts can be at various levels; schools, families, village communities, places of worship or work places. The services of teachers, doctors, and social workers or even organize task forces can be mustered for the purpose.

Lifestyle Management: All are aware of the disastrous effects of life style on health. The ill effects of stress on the heart, the nervous system or the digestive system are again, matters of common knowledge. Mere awareness and recognition of stress symptoms can ring an alarm bell before a burnout. Practising relaxation techniques as well as developing a positive and cheerful attitude towards life, have been internationally accepted as measures that can prevent many illnesses.

Getting a health policyholder to lead a better lifestyle makes very good sense for the insurer. This can be done by personalized counselling, inducing good habits like walking or exercising regularly, sustaining these habits by creating conducive conditions say, by forming walking clubs or fitness centers. Insured who need to exercise regularly on medical advice, local volunteers, school kids or local fitness centers can be utilized for setting up such groups.

Alternate Lifestyle Systems: Preventive measures can also include regular practice of ancient or modern lifestyle systems like Yoga, Reiki, Vipassana, Brahmavidya, positive thinking, mind management methods, breathing exercises, meditation and the like.

Distribution of inspirational books, cassettes, compact disks etc. can be an easily done. Talks and classes by resource persons can be organized for the purpose. Formation of local prayer groups, chanting groups, laughing clubs etc. can also promote continuance of alternate lifestyles.

Preventive Diagnostics: Preventive diagnostics is like preventive maintenance of machines. Policy conditions can stipulate necessity of regular health checkups, scheduled medical tests and investigations, compulsory submission of reports to the insurer. Even, doling out financial incentives for compliance, may not be a bad idea.

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 that can be prevented by vaccination.

Vaccinations can be arranged free of cost or a subsidized rates for health policyholders. t Further, in times of epidemics or when a family member is in quarantine, check lists of dos and donts can be given to insured. Such interaction can bring about definite results. Physicians, nurses, health workers or social workers will be of use for this purpose.

Wellness Centers: There is a mental block among some people about hospitals. Many people associate agonizing mental pictures of hospitals associated with sad experiences, deceased relatives, agony, pain and distress. There are some who few feel that hospitals are making business with disease. There may be unscrupulous hospitals that convert insured patients into business opportunities. Many people declare that the last thing that they ever want to do is going to a hospital. They religiously keep away from hospitals till they are in 8

really bad shape and have to be carried in. Once they are admitted, many of them lose their desire to live, do not co-operate with the treatment plan, thereby delaying the healing process and making it costlier as well.

An insured-patient-friendly image of a hospital has to be carefully built up in the minds of health policyholders so that they willingly approach a hospital when the bodys first alarm bell rings. Further, a patients confidence in the hospital and its systems improves the chances of speedy recovery.

Insurers should interact with hospitals; take stock of their professional standards, systems and business ethics. Maybe, they should have a third party to interface and take care of the interactions among the insured and hospitals. In essence, hospitals should be projected as wellness centers; or still better, they can be induced to open separate wings for preventive diagnostics and insured care.

Loyalty rewards: Insurers should have their strategies in place for retaining health policyholders for longer periods of time. Devising long-term health insurance policies or awarding loyalty rewards for continuous insurance could be options for consideration.

II.

MINIMISATION:

A stitch in time saves nine. Loss minimization includes, early recognition of an illness, preventing a condition from worsening, ensuring speedy and effective medical attention, accurate diagnosis, efficient treatment at reasonable costs, professional and cost effective follow up etc.

Recognizing body conditions: Educating insured to recognize their ailments and the bodys warning signals as well as making them aware of the dos and donts in the event of a health condition, first aid measures can keep the insured better prepared to face an exigency. 9

Arming insured with information: Providing health policyholders with information booklets containing addresses and telephone numbers of doctors, trauma care centers, specialized hospitals as well as familiarizing them with the procedural formalities needed on admission etc. are other measures that can help.

On line Assistance and Tracking: When disaster strikes, one just wrings his hands and does not know what to do. Even normally efficient people, when confronted with health situations for oneself or for ones near and dear, get into panic reactions and find themselves unable to take right decisions.

Providing health policyholders with 24 hour telephone help line services, giving them step by step guidance over phone, locating ambulance services for them, directing them to the right medical help, keeping hospitals informed about the patients arrival and the like are very effective steps that can be taken to save precious time. These initiatives can be very valuable in trauma care, as a cool headed third party can plan the golden hour period effectively. Maybe, call centers could be entrusted to provide this type of assistance.

Local Tie-ups: Insurers can have arrangements to co-operate with local organizations and use their infrastructure. Strategic tie-ups with ambulance services, hospitals and doctors are examples. This can improve the efficiency of trauma care and prevent wastage of precious time for the patient while reducing the insurance companys expenditure on creating infrastructure.

Creating Own Infrastructure: Deep pocketed insurers can make long-term investments in creating infrastructure for supporting health situations. A group of insurers can jointly promote a loss prevention organization that can actively render many of the above services, from education to trauma care. An example of proactive action in this area would be insurer sponsored free ambulance services or mobile trauma care services on highways and in 10

remote places. Financing or sponsoring fitness clinics, counselling centers and employing support staff are other measures worth consideration.

Tie-ups with Hospitals: Insurance companies can make suitable arrangements with all major hospitals so that insured are assured of emergency medical care without making any upfront payment on admission. A system of the hospital directly billing the insurer would be still better from the trauma care point of view.

III. EXPLORING HEALTHCARE OPTIONS AND KNOWLEDGE SHARING

The insurer, as an entrepreneur has to be aware of the options available to the health policyholders and the costs involved in the insured exercising these options. Laws of demand and supply as well as cartels formed by local interest groups will always be pushing the costs of diagnostics, treatment and health care higher and higher. Availability of more and more health care options can break the present demand -supply equation. Research, information sharing and a free flow of knowledge across the globe will create more and more options for the insured.

Wisdom of the ancients: Research would be required to rediscover and tap the benefits of ancient health care solutions practised in different parts of the world. Ayurveda the traditional medicine of ancient India has solutions for many of our health problems. There are many cases where Ayurveda has helped patients having serious ailments. Even for diseases like cerebral thrombosis where allopathic treatment could not help, there are instances where Ayurveda came to the rescue. It may sound surprising that herbal powders and powerful oils applied on the apex of the head and soothing herbal pastes applied on the soles of the feet could achieve what modern day medicine sometimes could not !!. 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. Many other ancient civilizations also do have native medical systems that are equally efficient.

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Insurers can institute scholarships to research students, sponsor research projects or even hire institutions to research into the present day relevance and efficacy of these ancient systems. Research will improve public confidence in these systems of medicine as well as make the benefits of contemporary scientific advancements available to the practitioners of these systems. Once the benefits of traditional medicine are proven scientifically through modern research, they become viable and more affordable options.

The full potential of Homoeopathy, which is a holistic form of medicine, has not yet been fully explored as an alternate treatment. Insurers can as well patronize research activity in contemporary areas of health care solutions, (say, efficacy of using m edicated and non-medicated heart stents for a particular cardiac condition) and cost effective systems of health care administration.

Cost Concerns: The era of hospitals and medical centers being run by the government, charitable trusts, missionaries and philanthropic organizations has steadily been giving way for the professionally run specialty and super specialty hospitals run by professional managers answerable to the share holders of the hospital. At least in the Indian context, one knows that many a time, an insured patient has to pay a higher bill than an uninsured patient for the same treatment. We today hear the voices of philanthropists from Germany and around the world talking about business with disease. A debate on commercialization of medical treatment is, however, beyond the scope of this paper.

Insurers, as commercial organizations should realize that if medical costs go up, the burden ultimately gets passed on to them through their health policies. If treatment costs go up for whatever reason, insurers, in their own business interests are duty bound to do something about it.

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Sharing of Information: Health informatics is an area where a lot of concerted efforts are required to be done the world over. Various authors and researchers have time and again emphasized the need for health information systems. In his paper on Standards in Health Insurance, E. J. S. Hovenga stated that 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 nations 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.

Insurers the world over, should have reliable internal data on treatment costs with uniform standardized codes for diseases, treatment and diagnostic processes. This data can be used for in-house analysis of costs and maybe, without directly impinging upon one anothers business interests, insurers can think of selective information sharing arrangements as well. Either way, insurers should initiate dialogues for achieving commonality of standards for their database architecture.

In 1991, S. H. Mandil had lamented, Despite progress in recent years, the lack of standards remains a major impediment to technical and international collaboration in health and health informatics. A lot of research has been done across the globe and today in 2004, there is no dearth of standards in health informatics. Insurers should take leverage of the latest

technologies such as eXtensible Markup Language (XML) format and Public Key Infrastructure (PKS). Common database standards have to be adopted from well established standards organizations like European Standards Committee (CEN), American National Standards Institute (ANSI), Standards Australia, International Standards Organization (ISO), Insurance Database Management Association (IDMA) and many others or through ad hoc groups such as Health Level Seven (HL7). Today there are many ready to use Disease codes, Procedure Codes, Observation Codes and Messaging Standards to select from.

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What is needed today is joint action from insurers all over the world to see that health care data is captured, used and shared by the insurance fraternity for their own business interests, for providing a healthier life to the insured and for the general well being of mankind.

Let us hope that in times to come, insurers will think more in terms of care than cure !

Thank you all.

George E. Thomas

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