Risk management and loss control are established practices in the property/casualty insurance industry. An example in homeowners insurance is clearing brush and flammable materials away from structures to reduce the risk of loss due to fire. On the commercial side of the business, it might take the form of recommending an insured business replace old or damaged electrical wiring that could short out and cause a fire. Or reducing safety hazards at the job site that could lead to an injury and workers’ compensation claim.
These practices however haven’t been widely adopted in the health insurance industry. Notwithstanding s a consensus that engaging in health promoting behaviors such as getting sufficient sleep and exercise can mitigate the risk of lifestyle-related chronic metabolic and cardiovascular disease. These risk reduction factors are now measurable, thanks to the availability of wearable tracking devices over the past few years.
The health insurance industry should figure out the best way to use data from these devices to encourage sustained healthy lifestyle habits. If the data show, for example, that an individual is engaging in regular exercise and getting 7-9 hours of sleep most days, an employer-sponsored health plan could offer a premium discount. The discount is justified since an individual who demonstrably practices healthy lifestyle habits on a regular basis will likely be at lower risk to develop a chronic medical condition that could lead to a high dollar loss in the future. It recognizes that people are best situated provide health maintenance for themselves — not their medical providers – a critical distinction as the economics of health care are reaching a breaking point. It also recognizes that as long as the United States utilizes an insurance-based system of paying for much of the nation’s health care, there must be a partnership between health insurers and those they cover to reduce utilization to ensure money is there for those facing high, unexpected medical costs.
Large employer plans can already put this into practice. For the small employer and individual market segments, the addition of an optional rating factor (in addition to the permitted factors such as family size, age, location and tobacco use) under the Patient Protection and Affordable Care Act would be necessary. Given the particular concern health plan issuers have expressed over higher than expected losses in the individual market over the past few years, the impetus is there.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email