Health Insurance Industry – an Enterprise Architect’s perspective

Health Insurance Industry – an Enterprise Architect’s perspective

Can a health insurer improve its competitive position within the bounds of industry and regulative constraints under which it currently operates? Our Enterprise Architect says yes and explains how.

Analysts generally agree that the private health insurance industry has several serious issues[1]. On the one hand, long term revenues are declining, especially due to young member exodus (affordability and perceived value playing a big part). On the other hand, the industry’s ability to respond is constrained.  It cannot introduce risk-based pricing of premiums, for example, and its ability to control provider costs is very limited.

These forces and a reliance on government-mandated premium increases have left the industry, according to its own peak body[2], in a ‘downward spiral’ of participation.  The Australian Medical Association pronounces the private health insurance sector to be ‘on the precipice’. [3]

Many remedies that require macro level industry reform are in the domain of public policy and legislative actions. Their efficacy, and some radical alternatives, continue to be debated.   I plan to address a more manageable question: How can a health insurer improve its competitive position within the bounds of industry and regulative constraints under which it currently operates?

Let’s look at some opportunities:

While the health insurer has limited ability to control provider costs (unlike say in the USA), let us not entirely dismiss this avenue. It goes without saying that insurers have paid a good deal of attention to their provider management processes and systems. So, what else can they do to encourage providers to curb costs and discourage over-servicing?  Well, they can act to persuade members to increasingly seek and request supporting evidence for expensive service options (for example robotic vs manual prostate surgery). Providing a function rich ‘find a Provider’ option on the health insurer’s website may well encourage providers to clearly articulate their services, including evidence-based benefits and costs.  Some insurers are already doing this.

Similarly, health insurers can help their members make informed health choices in navigating their life’s journey. It’s important to note that I am not suggesting insurance companies provide individual treatment advice.  However, they are in a position to facilitate informed choice, by helping members access research and case studies about available options and their reported efficacy. For example, information around knee or hip replacement surgery from expertly curated sources.  Translating this to a workable solution, examples that come to mind include online resource library of curated evidence-based material (including links), compilation of independent, expert advice, and technology to facilitate transparent disclosure of all provider costs.

Insurers currently provide wellness options – is there room to improve these?  For example, current regulatory constraints should not preclude providing personalized wellness plans as a service to members, including appropriate, chargeable, non-health-insurance services.  Actions to make members healthier could include improving access to, and quality of, resources, such as text/audio/video/and online-based information, as well as encouraging and providing incentives for health/wellness monitoring via wearable and other technology support.

Turning to claims processing, what can be done to reduce benefit leakage?  We need to approach this challenge carefully – treading a fine line between not turning down legitimate claims, thereby upsetting an already fragile member base, while at the same time filtering out inappropriate and fraudulent claims.  Enhanced claims analysis through analytics and machine learning opens opportunities to further this objective. Akin to the way credit card transactions are monitored in real time for ‘exceptions’ based on information from historical analysis of credit card transactions in banking, we can use accumulated knowledge from historical analyses to support claims processing in real time.

Finally, are there opportunities to devise and market more profitable products and ‘propositions’ by bundling health insurance and non-health insurance products? For example, offering tailored wellness programs as a separate service and/or bundling other forms of insurance – travel, home and contents, pet, etc.? The ‘proposition’ here entails tailoring these insurance and non-insurance products into a bundle to suit the individual circumstances of the member – or potential member.  To support these innovations, suitable technology capabilities, such as product management software, associated analytics, and capabilities to access white labelled products from external suppliers, are needed.

Of course, the circumstances and strengths of individual health insurers will differ, and certainly these suggestions will not apply in equal measure to all; indeed, some health insurers are well progressed in these areas. At a first pass though, these are some areas that surface from an enterprise architecture -anchored analysis of the situation.

A key motivation for this article was to draw out how the discipline of enterprise architecture would approach the problem, in particular dispelling the common notion that enterprise architecture is only about technology solutions.

I started with the business problem. And this is where we must start, for without a business problem what does an EA fruitfully address?  Secondly, as I have illustrated above, the solution to a business problem will almost always consist of combinations of people, process, technology components – indeed some solutions may not even have a technology component. Those that do may not require a whole of organization disruption, but a simple extension / best use of existing technologies.  Thirdly, a first pass of potential solutions need not contain a great deal of detail, and especially does not require scrutiny of detailed technical reference documentation.  What is required is breadth, plus the ability to hone-in on the aspects of the enterprise that relate to a problem or provide a business opportunity. Finally, as our analysis progresses, the solutions can be refined and detailed in an iterative manner. The analysis I have done here is very much a first iteration, in this case, for health insurance companies.

Inji Wijegunaratne, Enterprise Architect, Envisian


[1] Actuaries Institute. “How to make private health insurance healthier” Green Paper June 2019; ACCC “Australians exiting private health insurance as price rises bite” Nov 2018; Stephen Duckett and Kristina Nemet, “The history and purposes of private health insurance” Grattan Institute July 2019

[2] Private healthcare Australia, “Pre-Budget Submission 2019-20 Improving the Value and Sustainability of Private Healthcare”, 2019

[3] AMA Private Health Insurance Report Card, 2019