Health Underwriting Consciousness... In The Best Of Times

How health insurers underwrite in the best of times has a staggering impact on their profitability.

Real-world experience, however, suggests this nugget of reality has not reached higher cortical consciousness across the industry. This is unfortunate because it has positively protean implications for either righting the ship or – forgive me – "staying the course."

Given that unprofitability is not a diffuse source of angst at this writing, it is (more than) timely to focus on how carriers can dodge a hollow-point bullet: The underwriting-mediated consequences of suboptimal revenue due to the "W" word ("wastage" – the unwitting sacrifice of viable business).

When morbidity gets out of hand, one hunkers down, asking: 'were our underwriting standards too liberal in relation to risk?' Conversely, when morbidity is acceptable but potentially-profitable business likely sacrificed on the altar of conditioned nitpickosis, ask: how might our approach to risk assessment be fine-tuned so as not to toss out "the baby (revenue) with the bath water (genuinely untenable risks)?"

How is this accomplished?

Ask first: Are we too-much "lumpers" and too-little "splitters?"

Lumpers bask in broad generalizations about prevalent adversities besetting Homo sapiens to the counterintuitive extent of missing the trees for the forest.

The lumbering lumper asserts "all abnormal liver tests are anathema!"

"Au contraire!" rightly says the splitter with this Orwellian insight: "All may be less than ideal, but some are less 'less than ideal' than others!"

Two points for the splitter!

Take home message: Obsessively broad, compulsively (over)conservative underwriting practices fuel the jettisoning of perfectly good new business.

It doesn't have to be that way.

Woe betides the revenue stream of those who do not heed the splitter, for they are doomed to toss gobs of sound new business in the Dumpster of lost opportunity!

What's in YOUR underwriting manual?

Part the second is to ask: how do we gather core risk information used to establish insurability?

The more primitive the harvesting appliance, the less bountiful the yield…which is gosh-awful significant where wastage is concerned because the more one knows about any given risk, the better one can unmask nuances needed to conserve good business.

Health insurers who revel in nondisclosure elicit the barest essence of what matters with tedious lists of oft-vague impairments on applications completed with the all-too-gracious assistance of producers and paramedical quasi-examiners.

Health insurers who are keen to both minimize nondisclosure and facilitate prompt issue of as much good business as possible, forsake the ways of the past (see previous paragraph) in favor of teleinterviews.

The insurance seeker, all aglow at long-last genuine input on his medical history, provides a portrait the like of which is the stuff of underwriters' dreams. Melded with progressive risk appraisal assets, these portraits accommodate the most cost-effective triage in the history of health insurance.

Progressive risk appraisal assets?

Just so; the mother of all such being the so-called Rx profile. In the language of professional pugilism, the "pound for pound" (light price tag) champion of prescient appraisal is the pharmacy profile.

If one were privy to just one fraction of salient medical detail to sort insurance eligibility, let that rivulet of knowledge be the nature of all Rx prescribed for the applicant. Because, if you tell us what he's taking, we can likely tell you what he's got!

How wondrous, then, that we are empowered to access these priceless details through the good offices of pharmacy benefit manager-mediated profiles offered on an affordable and highly cost-effective basis.

To summarize:

Want to short circuit the wastage blahs?

1. Reconfigure your underwriting guidelines in the spirit of the splitter. You'll issue volumes of new business you (in point of fact) probably largely squandered when morbidity was an issue.

2. Get with the program. Teleunderwriting catalyzes competent risk assessments. It should be driving your new business process.

3. Police your underwriting assets. Do you deploy screening resources that accommodate business conservation? If not, fix it.

Isn't it refreshing when one's fate rests squarely in one's own hands?

Hank George, FALU, CLU, FLMI, is president of Hank George Inc., Greendale, Wis. His email address is [email protected].