Following a recent relocation with Swiss Re, from Hong Kong to the US, to work in the US Medical Reinsurance unit (and having spent the last 20 years working in medical insurance across Europe and Asia), it's been a fascinating and frankly whirlwind introduction to the American health insurance system.
My first impression is: these guys know what they are talking about. The sheer level of professionalism, passion and expertise in the industry is unparalleled, when compared to most other insurance markets. My second impression is this system is complex! It has so many moving parts and, it would seem, many inefficiencies!
In April I attended the Medicare Supplement Insurance Conference event in Orlando. It was fascinating to see the expertise in the industry and the energy that surrounds this product. All the headline stats are there to see: 9,000 new consumers reaching 65 each day, 11.2 million enrollees into Med Supp, a strong growth rate of 5.2% in 2014, stable and good margins to be made. It was impressive and I enjoyed the event very much.
As I begin to look at the Medical Supplement market for Swiss Re along with other medical reinsurance, it is clear there are many opportunities. This is good news for us as we look at new projects, plus manage our existing inforce medical block.
Yet as I work on these and get up to speed with the US medical system I am now starting to learn where some of the complexities lie.The recent King v Burwell case is one example, where under the ACA, regulation has been put in place to hopefully serve the interests of the broader community, consumers and those involved in the delivery system. But as the case illustrates, there has clearly been a breakdown somewhere in the implementation. Therein lies one of the challenges - putting totally new infrastructure into a system that already had many stakeholders and moving parts. By comparison, the process for medical insurance seemed so much simpler in Hong Kong or China, where I worked for many years. There was less regulation and insurers are essentially allowed to develop products and engage with consumers how they wished, primarily through agency forces. It seems simple but no, even there, things are changing.
For example, Hong Kong is looking to introduce significant healthcare reform, even though to many it’s a system that frankly does not need fixing. Of the population of 7 million, over 4 million have private medical insurance, with high satisfaction rates. In parallel the public health system is excellent (having used it myself) and is broadly free of charge for those who want to use it. Yet the government there is close to introducing major reform, where insurers will need to develop compliant medical products and will not be allowed to sell their current product suite. The reasons for the reform have been clearly stated by the Hong Kong government around giving consumers more choice, better protection and relieving pressure on the public system.
There are clear parallels with the ACA, with both looking to introduce compliant products with many similar principles– most notably - the introduction of cover for all who apply, with acceptance of those with pre-existing conditions, and with a government pool to help fund those high-risk members. One clear difference though is the individual mandate under ACA, which although discussed in Hong Kong, would never have gained acceptance by the public where freedom of choice is an important part of society and its relationship with the government.
There are many discussions and differing opinions on this intended Hong Kong program with little consensus between the government and insurers on the product the government is proposing and its funding suitability. It will be interesting to see how it plays out and see whether the insurers are going to require high increases a year down the line and whether they follow similar patterns that we are currently seeing in the US in the recent rate filing for the exchange programs, where filings are well in excess of 10%, with some I have seen looking for up to 50% increase.
As I continue to explore the system, here in the US, it’s a mind boggling array and complex matrix of MGUs, TPAs, actuarial consultants, carriers, brokers and claims managers. However, it's fascinating to see the expertise each brings to the party. For example, the risk control expertise of companies offering a range of services from bill review, case management, managed care, pharma control and networks. It's a long list, although one could argue if the ACA was right in the first place, many of these services wouldn’t be needed!
In the relatively simple world in Asia, medical insurers broadly manage the end-to-end process themselves, yet are increasingly looking at ways they can manage this process better. Distribution is one thing they do well, but cost control is one that needs improvement. Increasingly they are looking to North America or South Africa, to an extent, for help. I participated in many meetings in Asia where insurers consulted with insurers and risk managers from America. We were starting to see some examples of success in the collaboration between the Asia insurers and Western companies, but in general it's been slow to materialize.
The 2014 Commonwealth Fund report compared 11 health care systems across the world and reported that the US system is the most expensive in the world and under performs relative to other countries on most measures of performance. Among those studied were Australia, Germany, France, Netherlands, New Zealand, Switzerland, Norway, Sweden and the United Kingdom. It would be interesting to see if a survey has ever been done on the health insurance industry, based on staff expertise and experience in managing risk and patient health. If so I'm sure the US would be near the top based on my experiences to date and when I compare it to many other overseas insurance markets I have worked in.
In summary my experiences with the system here are relatively new but I have been extremely impressed by the collective knowledge in the medical insurance sector. I will be on the look out to see if some of the inefficiencies and delivery model improve overtime, especially as the ACA becomes more operational. I will watch this with interest and share further thoughts further down the line.
Category: Funding longer lives: Health/medicine