Big Data Can Provide Opportunities For Health Insurers To Improve Costs

By Sreedhar Potarazu

The goal of using data to gain a better perspective on an individual’s health status, and what consumers are doing (or not doing), is one of the most significant challenges facing the insurance industry. 

The use of data tethered within the “system” has been the industry standard for many decades. This includes, most commonly, claims data used by many stakeholders within the health care system in order to analyze health care use and trends. Claims data usually consist of billing codes that physicians, pharmacies, hospitals, insurers, employers and others use as a means of understanding trends surrounding health care consumption.  While claims data can provide a relatively comprehensive perspective on an individual’s various encounters throughout the health care system, the quality and disparity of data often can create challenges in the accuracy of the output generated.

In a rapidly evolving world of digital communications that has transformed how information is shared in many industries, including health care, the amount of data now available is significantly more than what we have been accustomed to.  Under the current mechanics of the Affordable Care Act, insurance companies and stakeholders in the health care system are focusing all their attention on how to engage individuals as proactive consumers of health. The greatest challenge for insurance companies is the economic constraint defined by new standards of medical loss ratios that place stringent parameters on the amount of money that can be spent on administrative costs versus medical care.  

For decades, insurance companies have struggled with integrating and synthesizing basic data pertaining to medical claims, enrollment and pharmacy costs. In fact, a more specific analysis of the operational performance of virtually every insurance company, or any health care company for that matter, would reveal that a significant percentage of their ongoing operations cost is consumed by information /data management. The essential catalyst for driving consumer engagement is access to data that provide a global perspective on consumer behavior and consumption of health care resources. The rate of innovation in devices and technology has spurned new methods and modalities to measure heath functions. However, the continuing challenge is integrating and synthesizing all this data effectively in order to create knowledge to enable the health care industry to engage consumers better. In the ideal world, an insurance company would be able to integrate and analyze every piece of data available within the system, including claims, biometrics, lab, fitness devices, health apps, social media metrics, health risk assessment, purchase trends, home monitoring systems, electronic medical records and more. The cost challenge for insurance companies that are struggling to integrate basic data on their members becomes even more complicated as companies look at expanding the reach of signals within the market that help them to do a better job for their members. 

Unlike sectors such as retail, finance and telecommunications, the health care industry was much slower to adopt the use of big data to drive greater cost efficiencies and transparencies within the system.  One of the key barriers to innovation has been the siloed approach to implementing technology in sectors of the health care industry that don’t necessarily communicate with each other.  As sophisticated as the U.S. health care system is in delivery, it’s ironic that it has been unable to solve a fundamental issue of creating a longitudinal record for a consumer that encompasses all the data derived from the employer, the benefits provided, all the way to a point of care delivery and everything in between. 

The challenges of inter-operability between systems have been expressed to a certain extent by recent standards established by the government on the hospital and provider side, but few if any standards have been initiated on the insurance/purchasing side.  The disparity that exists between legacy-source systems in insurance companies and other vendors is a key culprit for some of the inefficiencies and costs that are being incurred.  Although insurance companies would hope to revamp these older systems, the amount of money required and the time it would require make it virtually impossible based on the aggressive objectives they have.   

With the current rollout of the Affordable Care Act and the health insurance marketplaces, insurance companies have an urgent need to get as much data as possible about new members signing up for coverage.  Many companies are getting about one-third less information about their new members. The problem is compounded further by the fact that insurers must accept individuals who have pre-existing conditions and about whom insurers know very little. Consumer engagement is a key focus for the entire health care industry, especially insurance companies.  It is more urgent than ever for insurers to have access to a 360-degree view of consumer preferences and trends, as opposed to simply getting a snapshot. The challenge for insurers will be how quickly they can improve their ability to gather, integrate and analyze all of this key data, as a means of better engaging consumers.  

Insurers don’t have many options left for controlling their costs since they already adjusted premiums and restricted the number of doctors in their networks. By looking at savings opportunities for their data management processes, insurance companies have a major opportunity to improve their costs.

Dr. Sreedhar Potarazu is an ophthalmologist and entrepreneur.  He is the founder of VitalSpring Technologies, a software company focused on providing employers with applications to empower them to become more sophisticated purchasers of health care. He is the founder and chairman of WellZone, a social platform for driving consumer engagement in health. Sreedhar may be contacted at [email protected].