Why Data Matters
Big data, small data – it doesn’t matter. All data is currency in today’s world.
In the insurance business, data is the word that sets the hearts of actuaries and underwriters aflutter. It’s the facilitator to their ability to deduce, determine and decide what moves to make. But further, to their Stop Loss companies, data quite likely is the difference between a win and a loss. And I don’t mean just winning an account or not – I mean winning financially or taking a loss – and that extends to everyone involved.
You see, data elements are crucial to the underwriting process. Like our competitors, we look to assess the risk a group presents. A census and general claim information are a good start, but with the explosion in the frequency and severity of large claims, general claim information isn’t actually enough.
We are not looking simply for how much was paid and for what diagnosis; we want to know what is really going on with a claimant. Will that trend rise or fall next year? What services are needed to manage the disease state? What medications are being delivered? How are those medications being delivered and where? When we ask for separate large pharmacy claim reports, we’re also looking to see what the prescription patterns tell us, as they can indicate the potential for future large claims.
We fully recognize that we’re looking for details that not everyone seeks. I anticipate sighs and eye rolls at times when I send emails asking for the detailed large prescription drug reports from the carve-out PBM. (As a former consultant, I can say I remember doing so many times.)
But when pressed on these requests, I often hear, “No one else is asking for this…” My response always includes, “Why wouldn’t everyone want to know this?” The purpose isn’t to find a way to say no; it’s to find a way to say yes at the right rate. An appropriately priced Stop Loss policy provides stability in terms of both risk and rate. An imbalance on either end can hurt an insurer in the short run and a client in the long run.
My first boss and mentor in this business once told me that there is no such thing as bad risk, only bad rates. While I am not completely sold that there isn’t bad risk, I 100 percent agree there are a lot of bad rates out there. To avoid a bad rate situation, the appropriate use of data is essential.
A concerning trend of late is the whitewashing of, or withholding of, claims data from consultants and the marketplace. Never mind that the data is really each employer’s to use and also that even the strictest reading of HIPAA provides for data release for the use of health plan treatment, payment and operations. In fact, the ever-increasing pressure to withhold data could create a crisis in the reinsurance markets. Without transparency, the risk is not taken by the healthy carve-out Stop Loss market, so choice is restricted, and with less competition, rates go up. Or worse, rates are taken irresponsibly and drive trouble in the carve-out market.
A healthy marketplace provides competition and options for employers. Data enables the right programs for protection to be put into place, making it the lifeblood of marketplace wellness. The value of that currency shouldn’t be diminished.