In the comedy by William Shakespeare, “The Taming of the Shrew,” the main plot depicts the courtship of Petruchio and Katherina, the headstrong, uncooperative shrew. Initially, Katherina is an unwilling participant in the relationship, but Petruchio breaks down her resistance with various psychological torments, which make up the “taming” — until she finally becomes agreeable. An analogous challenge exists when using predictive analytics with healthcare data. Healthcare data can often seem quite stubborn, like Katherina. One of the main features of healthcare data that needs to be “tamed” is the “skew.” In this article, we describe two types of skewness: the statistical skew, which affects data analysis, and the operational skew, which affects operational processes. (Neither is a comedy.) The Statistical Skew Because the distribution of healthcare costs is bounded on the lower end — that is, the cost of healthcare services is never less than zero — but ranges widely on the upper end, sometimes into the millions of dollars, the frequency distribution of costs is skewed. More specifically, in the following plot of frequency by cost, the distribution of healthcare costs is right-skewed because the long tail is on the right (and the coefficient of skewness is positive): This skewness is present whether we are looking at total claim expense in the workers’ compensation sector or annual expenses in the group health sector. Why is this a problem? Simply because the most common methods for analyzing data depend on the ability to assume that there is a normal distribution, and a right-skewed distribution is clearly not normal. To produce reliable predictions and generalizable results from analyses of healthcare costs, the data need to be “tamed” (i.e., various sophisticated analytic techniques must be used to deal with the right-skewness of the data). Among these techniques are logarithmic transformation of the dependent variable, random forest regression, machine learning and topical analysis. It’s essential to keep this in mind in any analytic effort with healthcare data, especially in workers’ compensation. To get the required level of accuracy, we need to think “non-normal” and get comfortable with the “skewed” behavior of the data. Operational Skew There is an equally pervasive operational skew in workers’ compensation that calls out for a radical change in business models. The operational skew is exemplified by:

• The 80/20 split between simple, straightforward claims that can be auto-adjudicated and more complex claims that have the potential to escalate or incur attorney involvement (i.e., 80% of the costs come from 20% of the claims).
• The even more extreme 90/10 split between good providers delivering state-of-the-art care and the “bad apples” whose care is less effective, less often compliant with evidence-based guidelines or more expensive for a similar or worse result. (i.e., 90% of the costs come from 10% of the providers).

See also: Is Big Data a Sort of Voodoo Economics?   How can we deal with operational skew? The first step is to be aware of it and be prepared to use different tactics depending on which end of the skew you’re dealing with. In the two examples just given, we have observed that by using the proper statistical approaches:

• Claims can be categorized as early as Day 1 into low vs. high risk with respect to potential for cost escalation or attorney involvement. This enables payers to apply the appropriate amount of oversight, intervention and cost containment resources based on the risk of the claim.
• Provider outcomes can be evaluated, summarized and scored, empowering network managers to fine-tune their networks and claims adjusters to recommend the best doctors to each injured worker.

Both of these examples show that what used to be a single business process —managing every claim by the high-touch, “throw a nurse or a doctor at it” approach, as noble as that sounds — now requires the discipline to enact two entirely different business models to be operationally successful. Let me explain. The difference between low- and high-risk claims is not subtle. Low-risk claims should receive a minimum amount of intervention, just enough oversight to ensure that they are going well and staying within expected parameters. Good technology can help provide this oversight. Added expense, such as nurse case management, is generally unnecessary. Conversely, high-risk claims might need nurse or physician involvement, weekly or even daily updates, multiple points of contact and a keen eye for opportunities to do a better job navigating this difficult journey with the recovering worker. The same is true for managing your network. It would be nice if all providers could be treated alike, but, in fact, a small percentage of providers drives the bulk of the opioid prescribing, attorney involvement, liens and independent medical review (IMR) requests. These “bad apples” are difficult to reform and are best avoided, using a sophisticated provider scoring system that focuses on multiple aspects of provider performance and outcomes. See also: Strategies to Master Massively Big Data   Once you have tamed your statistical skew with the appropriate data science techniques and your operational skew with a new business model, you will be well on your way to developing actionable insights from your predictive modeling. With assistance from the appropriate technology and operational routines, the most uncooperative skewness generally can be tamed. Are you ready to “tame the skew”? Read Dr. Gardner’s first two articles in this series: Five Best Practices to Ensure the Injured Worker Comes First Cycle Time Is King As first published in Claims Journal.

That the workers’ comp industry is uniquely slow in adopting analytics and applying the resulting intelligence to the operational process is generally known. The reasons vary, including natural resistance to new ways of working, fear of additional workload and cost-avoidance. Analytics may be misunderstood and is definitely undervalued. Notwithstanding amazing success with analytics by other industries, the workers’ comp industry remains disinclined to embrace it. Maybe the approach should be changed. To their credit, many payer organizations have created a position identifying analytics as a role in the organization. Titles include director of analytics, consultative analytics, claims analytics, VP of consultative analytics and analytics manager. Yet none of the titles suggest positions with authority. What will finally move industry leaders to value analytics as a legitimate and effective business initiative? Stated differently, how can analytics be made a disrupter in a workers’ comp organization, pushing though the resistance to create superior performance? See also: 10 Trends on Big Data, Advanced Analytics   Analytics as a disrupter One approach is to make it a profit center where analytics leadership is responsible and accountable for demonstrated savings and profitability in partnership with specific business units in the organization. Now the focus is on how the organization’s analytics-informed intelligence drives operational excellence and profitability! Senior management attention and support is quickly engaged. Analytics positioned as a profit center significantly transforms its visibility and perceived value to the organization. Of course, several factors must also come into play to achieve this level of analytic empowerment. First, the analytics leadership is made responsible for executing the analytics. It is also responsible for connecting the resulting intelligence to operations where appropriate actions are taken, mobilizing superior performance. This is best accomplished by means of establishing partnerships between analytics and specific operational business units. Analytics partnership Analytics value is actualized at the business unit level where daily decisions are made and action is taken affecting the operational process, clients, the service product and the organization. Analytic leadership partners with select business units where intelligence is transferred to action. That means systems are designed for easy access, easy use and decision support at the operational level. Initiatives are smart, digital and engaging for all participants. Design Connecting analytic intelligence to action depends on creative system design. The design for each business unit is unique, depending on the unit’s activity, requirements and goals. First, predictive analytics methods are used to analyze historic data related to the unit and the organization, thereby acquiring the intelligence that will be transferred in the form of decision support and guiding action. A major benefit of this approach is structuring and standardizing superior decision support and guidance for specific conditions and situations that occur. Organizational protocol is established and enforced while front-line professionals gain a personal knowledge assistant. See also: 3 Key Steps for Predictive Analytics   Measure As with any business initiative, measuring its effect on the organization is crucial. Moreover, the analytics-business unit partnership must be made accountable through performance measurement. Measure the value gained by repositioning analytics leadership to ensure that accountability is accurately allocated. The bottom line goal of positioning analytics as a disrupter is streamlining operational flow and increasing profitability, which can be measured in multiple ways. Measuring overall profitability related to the initiative is the first imperative. Moreover, profitability can be further apportioned in terms of increased revenue, productivity, accuracy, efficiency, timeliness, quality, return on investment, improved claim outcomes and strategic competitive advantage. The value is sustained by continually repeating the plan and measuring outcomes, always remembering the best outcomes are optimized by connecting analytic intelligence to action.

The definition of a commodity, per Investopedia is: "The basic idea is that there is little differentiation between a commodity coming from one producer and the same commodity from another producer. A barrel of oil is basically the same product, regardless of the producer. By contrast, for electronics merchandise, the quality and features of a given product may be completely different depending on the producer. Some traditional examples of commodities include grains, gold, beef, oil and natural gas. More recently, the definition has expanded to include financial products, such as foreign currencies and indexes. Technological advances have also led to new types of commodities being exchanged in the marketplace. For example, cell phone minutes and bandwidth." West Texas oil of x grade is West Texas oil of x grade. It does not matter what hole in the ground it comes from. The market values it the same. Red Russian wheat is Red Russian wheat. It does not matter what farmer grew it. The market values it the same. When the market values something the same, regardless of who grows it, drills it, makes it or services it, that "something" is a commodity. Sometimes the product is truly indistinguishable, such as the oil and wheat examples. Sometimes. though, differences exist, but the buyer does not recognize the differences and therefore treats something as a commodity that really is not. The seller knows, or should know, the difference. The seller can then take advantage of the buyer by selling a product/service of less quality than the buyer imagines at the commodity price. Or, the seller will sell a higher-quality product at the commodity price and lose money or at least waste money because no one is paying for the extra quality because the buyer does not realize the higher quality exists. In these situations, a perceived commodity exists, not a real commodity. The difference is important. Insurance is a perceived commodity, not typically a real commodity (a few exceptions exist). As a result, quite often, people buy lower-quality insurance policies because they think all policies are commodities, so why spend any extra? If they were correct, then their logic would be right. However, they are getting taken advantage of because they are comparing a lower-quality product at a lower price with a higher-quality product at a higher price and not seeing the difference in quality. Where they get suckered a second time is the seller of the lower-quality product prices the policy higher than actually necessary but materially less than the higher-quality policy. The insured thinks he is getting a good deal when he is not, the higher-quality provider loses a sale and the lower-priced seller makes extraordinary profits. See also: Insurance Is NOT a Commodity!   Any reader thinking this is not happening clearly does not live in the real sales world. An entire economic analysis of this circumstance was described in detail in 1980 by an economist named Dr. Shapiro, and we're seeing it played out before our eyes every day. The only winners are the entities selling low quality. The reasons insurance is a perceived commodity rather than a real commodity are:

• Insurance is complex. All one has to do is read a policy to understand that it is complex. Then add the elements of service and claims, and how no one publishes quality claims data relative to which carriers provide the best claims service, and one understands why consumers' eyes glaze over.
• Most consumers do not want to buy insurance, even if it was simple, so asking them to invest time and energy into determining which product is quality by learning something so complex as insurance when they do not even want to buy it is asking for far too much.
• Let's be honest, most producers and customer service represenatives (CSRs) do not truly understand many insurance coverages, either. I have been teaching coverages, auditing agencies for E&O, answering email questions from agencies regarding coverages and so forth for 30 years. I am amazed at how little quite a few producers and CSRs do know.

If sellers cannot explain insurance, they default to selling insurance as a commodity. Typically we refer to this as "selling price," but it is really defaulting to selling insurance as a commodity because the only differentiation with a real commodity is price. Such actions reinforce to the public that insurance is a commodity. At the very least, producers should selfishly avoid selling insurance as a commodity because, bluntly, insurance companies and the public do not need to pay 15% commission to sell a commodity. To sell price is to tell the market you are worthless. The industry now has new players, insurtech or disrupters as they've become known. Many have no insurance background and therefore no pretense they know anything about insurance. They do not pretend that insurance is special. They see insurance as a commodity. Many industry veterans cannot stand the thought of obvious "know-nothings" selling insurance, but at least when they admit they know nothing I admire them for being honest. Quite a few people in the industry who have decades of experience do not know much either but will not admit it. These particular new players are simply making ignorance transparent. When ignorance is transparent, price also becomes more transparent, and this is what the public, who sees insurance as a commodity, wants. They want transparency. If they see insurance as a commodity, they certainly do not want pricing obscured by an agent, who pretends to know something, when he does not, making an extra 15%, which means the public may pay an extra 15% that is truly a waste. Truly, the industry should not be upset if the result is to eliminate the waste incurred spending 15% on agents who are incompetent. The catch, as Dr. Shapiro described back in 1980, is what happens to the producer who truly knows what she is doing, brings true value to the consumer and is worth 15%? What happens to the insurance company who truly has far better coverages or far better claims service? These entities bring important value to all of society, and they are being squeezed. Here are some of my suggestions:

• Actually know coverages. Actually learn business income. Actually learn ordinance and law. Actually learn at least what questions to ask around cyber. Actually even learn the differences in homeowners policies.
• Then learn how to discuss coverages with clients. Knowing coverages and knowing how to communicate coverages are two different things. This is work and a craft. Learn your craft well.
• Hire a marketing firm/publicity firm to explain for you your knowledge and ability to communicate.
• Package the insurance policy with services. Insurance policies in and of themselves do not deign a premium of 15% commission any more. The 15% is for the package of services the agency provides, the experience the agency creates at sales, renewal and claim.

See also: Insurance is Not a Commodity? Hmmm   I work with a handful of clients that have truly built their culture around these features and others. They do not have the problem of selling commodity insurance that most agencies have, and their organic growth rates prove it. Study after study has shown that, regardless of the industry, building expertise, communication skills and a consumer experience around the sale is absolutely the only way to counter, even thrive, in a world where consumers perceive a product to be a commodity when, in reality, it is not.

Today’s world is run by increasingly “on-demand” societies, where almost anything one wants or needs is available “as-a-service.” This phenomenon means the data-empowered consumer of the Information Age now lives and works in the Age of Convenience. For the insurance industry, the Age of Convenience necessarily dictates changes in product definition, billing preferences and access options. It also means technology has evolved to a point where vendors no longer need to stretch the truth about point solution functionality. The growth of content “services” and ease of integration enables insurers to concentrate more fully on core competencies, realize operational efficiencies by taking advantage of best-of-breed solution strengths and improve uptime and accountability when working with vendor partners who provide the proverbial “one hand to shake.” Core Competencies One of the most significant challenges insurers face is the sheer volume of information required to complete the business of insurance efficiently on an end-to-end basis. Core administration system or suite providers rarely have expertise in document and content management, yet they typically include some baseline functionality or workflow solution that works with policy, billing and claims components. See also: Now, Everything Can Be ‘As-a-Service’   Unfortunately, because document and content management and access is peripheral functionality for core administration system or suite providers, the processes are often woefully incomplete, inefficient and incapable of providing a comprehensive picture of any individual policyholder’s history and product portfolio. In fact, many legacy systems act as self-contained data repositories with no ability to share information via omni-channel interfaces. In addition to handicapping any ability to provide a seamless customer experience and insights into potential coverage gaps because of siloed data, legacy systems also expose insurers to security vulnerabilities. In this scenario, insurers compromise any real ability to focus on core competencies, including quoting and selling policies, as well as managing and mitigating risk, in favor of attempting to resolve data crises on an hourly basis. Best-of-Breed Strengths As the next evolution of enterprise content management (ECM) solutions emerges, one of the most immediate interim strategies for insurers is to partner with external ECM providers for access to tomorrow’s best-of-breed ECM functionality today. Such partnerships in effect outsource data capture, organization and management, so insurers have greater access to the exact information needed to power their business. Across the industry, best-of-breed solutions create an environment in which insurers can better exploit specific expertise. In this case, core administration system providers handle core while content management/ECM experts handle content. Ease of integration ensures that modern ECM solutions can work seamlessly with legacy core systems to provide secure access to information in real time across the enterprise, thereby greatly enhancing an insurer’s content management capabilities. The ability of modern ECM solutions to integrate with an insurer’s internal systems and those of external partners as well, signify a shift from the self-contained data repositories of old to the open access systems of today. One Hand to Shake Reliance on external best-of-breed partners puts a great deal of stress on core systems to be flexible. As insurers move toward digital enablement and expand utilization of the “as-a-service” model, it is important that content is collected, handled, managed and disseminated in a secure and consistent way. See also: Why AI Will Transform Insurance   Insurance data comes from any number of inputs, including the insured, social media, third-party data providers, print communications, text messages, digital recordings, video, audio and more. Because many of these inputs only produce unstructured data, insurers must have the ability to handle the disparate inputs and normalize the data, turning it into useful and actionable information. This makes integration between systems, and across platforms enterprise-wide, more than necessary to ensure a single point of contact, control and source of truth. Conclusion Best-of-breed ECM services provide a valuable, even vital, solution for insurers challenged to focus on core competencies, rather than striving to do all things equally well. By working with external partners, the smart insurer can compete better and provide a smoother customer experience. This kind of collaboration results not only in short-term agility and speed to market but also offers long-term benefits in data cohesion and ease of access. The next evolution of ECM can help insurers struggling with digital enablement move beyond systems reliant on self-contained data repositories, which inherently silo information, and into an age of open access, consistency and a better ability to focus on core competencies.

In Part 1 of this series, I argued that Amazon is the critical ingredient in making its healthcare alliance with Berkshire Hathaway and JPMorgan Chase successful—even though previous employer alliances have failed to make a dent in healthcare costs.

Here’s a quick glimpse of how Amazon’s consumer focus, technological prowess, operational efficiency, strategic patience and successful history of turning internal solutions into platforms for new businesses might accelerate the long-needed transformation of healthcare. To imagine how Amazon could transform healthcare, first look at five capabilities that it has brought to retail:

1. 1. Comprehensive customer records. My first order at Amazon was for “The Act of Creation” by Arthur Koestler on Dec. 8, 1997. The details of that order, and all the other 1,337 orders I’ve placed in the intervening years, is accessible to me on my Amazon account page.
   2. Personalized content and user experience. Amazon has integrated personalization and recommendations throughout my customer experience, from the first point of touch through checkout. Everything it shows me is based on my past purchases, shopping cart items, browsing history and the behavior of other customers like me. Some analysts estimate that 35% of Amazon sales are generated by its recommendation engine.
   3. Price transparency and choice. Not only does Amazon lead me to relevant products, it provides full transparency on price, shipping and handling. It also makes it easy for me to choose between a wide range of sellers.
   4. Quality reviews. Amazon helps me to gauge quality of products and sellers by facilitating reviews from its own editors, a curated network of external reviewers and other customers. This very public feedback loop also creates an incentive for sellers to address quality issues.
   5. Stellar execution and customer satisfaction. Amazon has ranked as the best in customer satisfaction in the Internet Retail category for 16 out of the last 17 years. It consistently ranks among the highest-rated of any company across every industry category.

These capabilities enable a virtuous cycle of better information, lower prices, higher customer satisfaction and more customers. They’ve also become standard operating practice in many industries—but not in healthcare. Now imagine the impact of accelerating their adoption in healthcare.

See also: Media Coverage on Amazon Misses Point 

Imagine having patient health data with complete longitudinal information and intelligent analytics at every point of care. That is far from the case today. Medical records are stored in silos and, even when electronic, are hard to create, maintain, use or integrate. A Rand study found that physicians are very dissatisfied with electronic medical records because of poor usability, time-consuming data entry, interference with face-to-face patient care, inefficient and less fulfilling work content, inability to exchange health information and degradation of clinical documentation.

Imagine having personalized health pages with intelligible information, recommendations and dashboards based on a comprehensive view of a patient’s health history, condition and provider interactions. The personal page could consolidate and monitor biometric data, chronic conditions, acute ailments, medications, care plans, symptoms and other patient-specific critical data. It could integrate data from sensors and apps. It could intelligently collect patient feedback on critical symptoms based on specific conditions, providing behavioral nudges or alerting care teams as needed.

Imagine having a comprehensive view of cost options for needed treatments or medications—and intelligent assistance in choosing among them? Today, it is almost impossible for a patient or a physician to know the cost for a given test or procedure. Rates can vary tremendously based on where the service is provided, what kind of insurance the patient has, how the services are coded and numerous other factors. This makes informed recommendations and choices impossible. A report by the Robert Wood Johnson Foundation named price transparency as the single biggest factor for controlling healthcare costs.

Imagine a single source for trustworthy quality ratings of hospitals, physicians and other healthcare providers. Today, there is a mountain of quality data from federal agencies, health plans, state governments, patients and others who report on the performance of hospitals and physicians. But, there are no agreed-upon standards for what information should be reported, its accuracy and the underlying data that support it. One group of researchers noted that many quality-reporting efforts “appear to be led by marketing departments that are not aware of appropriate scientific standards.”

See also: 10 Ideas That Could Fix Healthcare  

Imagine healthcare customer satisfaction rising to Amazon-like levels. The potential value of these capabilities is not lost on those inside the healthcare sector. Many startups and large healthcare organizations are already working hard to adapt and adopt them. But, Amazon brings distinct advantages to the challenge.

I’ll explore those advantages and how Amazon might tackle health care transformation in Part 3.

Transformation is underway in P&C commercial lines – finally! The nature and speed of the transformation will play out quite differently for small/medium/large commercial, workers’ comp and specialty lines. And the stage of the transformation journey may be very different based on business strategies, the appetite for innovation, emerging technologies, insurtech and the geographic scope of the insurer. But the overriding theme is that commercial lines insurers are more aggressively looking to go beyond business as usual. They are rethinking business strategies to ensure growth and profitability while adjusting to the changes in the competitive and industry landscape.

Our latest (and eighth) annual research study, 2018 Strategic Initiatives: P&C Commercial Lines, addresses 12 strategic initiatives, spending and priorities for 2018. The report reflects big increases in five key initiatives: digital transformational, innovation, core modernization, data and advanced analytics and customer experience. More than 90% of insurers state they are either planning, beginning investment or are in full deployment in these areas. Digital transformation and innovation are up from below 50% in 2017 – a significant increase. And emerging technologies and insurtech are reaching all-time highs of 87% and 58%, respectively.

See also: Commercial Lines: Best Is Yet to Come  

Across commercial lines, leadership teams are experiencing a new urgency to transform, and many are making significant investments toward creating and positioning for the future of insurance. Even though the commercial market financials and results continue to be cyclical, the industry remains financially strong. This allows for expansion in investments in transformational initiatives alongside the traditional ones. Most executive teams understand that the digital, connected world is evolving rapidly, and the competition is coming (not only from new corners but also from within the walls of the traditional industry). As a result, one of the biggest challenges for insurers is linking and balancing the initiatives of the traditional world with those of the new world, a key undertaking for achieving success in the age of digital transformation.

Every insurer actively must seek to understand and track activities in the insurtech and emerging tech spaces. It helps to create a way to evaluate new activities and align them to your business strategy. Actively engaging customers in the digital age and creating a culture of innovation are also mandatory. Perhaps the most important things for senior leaders to do are to ensure that the organization is considering and prioritizing the strategic initiatives identified in the report and then motivating and energizing employees across the organization to be open to the vast possibilities afforded by the convergence of traditional with the new. It would be a mistake to think that your company will be unaffected by the new developments.

Drug overdose is the leading cause of accidental death in the U.S., with 52,404 lethal drug overdoses in 2015. Opioid addiction is driving this epidemic, with 20,101 overdose deaths related to prescription pain relievers, and 12,990 overdose deaths related to heroin in 2015, according to a report from the Centers for Disease Control and Prevention (CDC). What’s behind this unfortunate trend? It is multifactorial. Paradoxically, improvements in healthcare over the last 20-some years are abetting the opioid epidemic. Hip replacements, knee replacements, spinal surgery and other procedures are now commonplace. More surgeries mean more patients who need pain relievers to help them with recovery – and then the subsequent potential for opioid addiction. It is no longer safe to assume that opioid addicts hail from the segment of the population that uses street drugs. Today, it is much more difficult to identify and understand the people who might be addicted to opioids, because all kinds of people – the high school athlete, the middle-aged professional, the retired grandmother -- are prescribed opioids for myriad reasons and then are at risk for developing an addiction. This diversity is what has made prescription opioid addiction so difficult to manage. These patients become very skillful at obtaining their opiates from their pharmacy and not a dealer. See also: The True Face of Opioid Addiction   With all of these changes, the experienced urban criminal detective is no longer the go-to resource used to identify opioid addicts. Alternatively, behavioral analytics is doing the job by making it possible to:

As the healthcare industry moves toward value- based care, reimbursement will be tied to quality outcomes achieved. While the concept is simple enough, operating under this model brings some complications. Advanced analytics can help healthcare organizations understand their current situation, what might happen in the future and what actions they should consider. Below are five ways that healthcare organizations could accelerate their success with their value-based initiatives by leveraging advanced analytics: At the end of the day, care givers seek to gain insight into not only what has happened, but what will happen and then what should I do about it. With so many competing priorities, it can be extremely difficult and overwhelming to know where to begin. By using advanced predictive and prescriptive analytics within daily workflow, healthcare organizations are able to confidently allocate resources to focus on high-value opportunities that will improve both clinical and financial outcomes. Interested in taking a deeper dive? Check out our webinar titled 5 Ways to Use Data for Advanced Analysis.

Football, in its infancy, had no plays. In the late 1870s, the visiting team would travel to the home team, where both teams would agree upon the set of rules for that game. The home team would supply officials, causing occasional controversy, and the game would be off and running. There was no quarterback, no set of downs and very few rules regarding possession of the ball. It wasn’t until Walter Camp, a former Yale player, introduced the concept of a quarterback and a limited time of possession, that “plays” became important. Camp wished to provide more of a strategic element to game play. This resulted in more practice, more play calling and much more interest in the game. Play calling and playbooks have increasing value and tremendous application for insurers as we rapidly shift from Insurance 1.0 to Digital Insurance 2.0. A playbook is meant to provide strategic direction that fits with current or projected circumstances. When business strategists read the industry, the different market segments and demographic trends, they can apply their plays more effectively to capture market share. Those without playbooks and plays will find themselves scrambling from priority to priority, instead of confidently executing their strategies to earn the win. Majesco is helping insurers build their unique digital playbooks with our strategic business platform solutions and market research-based, thought-leadership reports. In two of our recent reports, we provided both generational consumer playbooks and generational small-medium business (SMB) playbooks that give insurers valuable insights into digital capabilities enabled by technology’s potential that will energize insurance plays. In my next four blogs, we will draw on both reports to look at both Pregame Analysis and Ideal Offerings that insurers can use to target consumers and SMBs. Consumer generational playbooks — Pregame analysis Scouting the opposing team is the basis for creating and applying plays from the playbook to win. You’ll find an excellent scouting report of consumers (broken out by generational demographics) in Majesco’s recent thought-leadership report, The New Insurance Customer — Digging Deeper: New Expectations, Innovations and Competition. At a high level, the report highlights the demographic trends that are pointing to a different future for insurance, which we call Digital Insurance 2.0, recognizing that customer expectations, product needs, engagement and more are vastly different than the last 30-plus years.  New experiences and technologies are becoming “the new norm” across all generations but are more intensely and rapidly changing to the next generation of insurance buyers, Gen Z and millennials. See also: Does Your Structure Fit Your Strategy?   Throughout time, the youngest members of society have traditionally been the early adopters of new technology. Millennials and Gen Z are the early adopters of our current, digital age. Both generations are digital natives. Millennials grew up digital in a world connected by the internet, and Gen Z was “born digital” in a world dominated by mobile. In our Changing Insurance for the Digital Age report, we highlight that the U.S. millennial market alone could exceed $7.2 trillion by 2025 and is the driving force behind increasingly personalized capabilities based on unique customer journeys involving engagement and real-time personalized product delivery. However, nearly 69% of millennials remain either actively disengaged or indifferent with their insurance carriers. Adding to this shift and momentum is the fast-emerging Gen Z market, which is poised to surpass the size of the millennial market. Simply put, for these digital generations, the traditional products, the business models that support them and the customer experience do not align with their growing market dominance. We found that millennials and Gen Z demand much more in personalized products and experience, putting innovative products and competitors at an advantage. The scouting report highlights new consumer behaviors and expectations Driving that point home, Majesco conducted consumer research in 2017 to determine the acceleration in changing digital behaviors across a number of technology and business indicators — the factors that are reshaping insurance. To capture the next generation of buyers, let alone retain current customers, insurers must begin to use playbooks that are aligned to the generational consumer needs and expectations, personalizing insurance, and place their companies firmly into the realm of Digital Insurance 2.0. We found that all generations share the top three most-performed “new” activities that we used as consumer trend indicators. There are substantial numbers of people who have now:

• Paid for something with a company’s app (e.g. Amazon, Starbucks)
• Paid for transportation through a ride-sharing service like Uber or Lyft
• Used a fitness tracker like Fitbit, Garmin, etc.

The Gen Z and millennial generations are at about 45% to 60% in usage of the top three, indicating a critical mass of interest. And while Gen X and Boomers are in the 30%-40% range, given the growth in usage we expect this to continue in an upward trend, as their comfort level with digital technologies increases. Customers across all generations have come to expect the convenience of researching, buying and paying for products, services and information on demand – any time and any place – via any device (phone, tablet, wearables) … and that includes insurance. The on-demand context of these behaviors, based on location, time and activity, lend themselves well to insurance applications, as risks are influenced heavily by where a person (or thing) is, what they are doing and when and how long they are doing it. Interestingly, and counter to perceptions of older generations, there is strong on-demand interest by Gen Xers and pre-retirement Boomers … emphasizing why digital engagement needs to be personalized to be effective. The report categorized analysis of the activities into seven key areas: gig economy, sharing economy, connected devices, payment methods, products, channels and other emerging technologies. Here are some of the highlights:

• The 2016 Upwork and the Freelancers Union’s annual survey estimated that 55 million people, or 35% of the U.S. workforce, chose freelancing as their means of work. Our survey results confirm that participation in gig economy activities across all generations is similar to the Upwork survey. However, a smaller percentage have “side hustles” via ridesharing or renting their rooms/houses or cars.
• Consumption of ridesharing services is a dominant behavior across all generations. Home/roomsharing services are used about half as much, yet still have a strong and growing appeal.
• Connected device use is seeing tremendous gains. Fitness trackers are the most popular type of connected device across all generations. The nearly 33% of Gen Z and 25% of millennials using connected home devices could also rapidly help intensify these new needs and expectations.
• Use of ApplePay and SamsungPay saw strong year-on-year growth, with more than a third of Gen Z and millennials and a quarter of Gen X now using them regularly. The increased use of digital payment capabilities is raising the bar of expectations across all generations for all types of purchases, including insurance.
• Across all generations, 22% to 38% purchased insurance from a website, with Gen Z and millennials clearly leading the use of this channel. This suggests the increased ease and desire of the younger generation to buy online.
• On-demand insurance was surprisingly strong, with 25% to nearly 30% purchasing it for a specific item or event, such as the kind of insurance that Trov offers. On-demand and subscription-based models are rapidly gaining acceptance in a shorter time, as compared with website purchases, which have been around for nearly 20 years.
• Not surprisingly, Gen Z and millennials lead the older generations in their use of drones and 3D printers (or items produced by one). These are two rapidly growing technologies that present significant risk implications for the insurance industry.

What this conveys to insurers doing their own analysis is that “new” is increasingly “normal,” more quickly. Using research responses, we extrapolated valuable “plays” that insurers may pull for use in their own playbooks. See also: Stretching the Bounds of Digital Insurance   The game has already started…your team better join soon   Many new business models and new products emerging in the market are focused directly on exploiting these new behaviors and expectations. These Digital Insurance 2.0 teams are intent on challenging the traditional products, services and processes of traditional Insurance 1.0 teams. And while customers and the market will ultimately determine their success, we tested five of them and learned they stand a good chance of succeeding, especially among the younger generations who are the new generation of insurance customers. Furthermore, we decomposed these new products and new business models into 30 distinct attributes and tested them with customers to determine their interest in buying and potential to switch to them. And the interest to buy and switch is strong. Existing insurers need to seriously begin to understand, plan and develop new offerings and capabilities aligned to these … which represent Digital Insurance 2.0. In my next blog, we’ll look at customer reactions to those business models, assess their viability for use in insurer playbooks and discuss how the 30 attributes can be used to create some Ideal Offerings for different customer segments. For a preview, be sure to read, The New Insurance Customer — Digging Deeper: New Expectations, Innovations and Competition. Digital playbooks are already in use. Does your company have a strategy to embrace the digital age and shift to Digital Insurance 2.0 to drive growth? The time for developing and using the digital playbook is at hand.

"Your margin is my opportunity.” - Jeff Bezos Amazon has proven again and again that Bezos and team can bring fundamental change to multiple industries. Adding one of the world’s most respected and trusted business figures in Warren Buffett and the leader of one of the largest financial institutions who pulled it through the 2008 financial crisis in Jamie Dimon, and healthcare’s long overdue overhaul may be upon us. Not since I wrote Health Insurance's Bunker Buster nearly eight years ago have I seen anything that has the potential to bring a brighter future for all Americans. In this article, I refer to my book, The CEO’s Guide to Restoring the American Dream. You can get it on Amazon or download it for free here. For simplicity, I’ll refer to the Amazon-Berkshire Hathaway-JP Morgan Chase as “ABC.” The slide below is a very rough breakdown of where each dollar in the U.S. healthcare system goes. Shockingly little makes its way to the value-creators—primarily nurses, doctors and other clinicians. As I laid out earlier in 10 Mistakes Amazon, Berkshire Hathaway and J.P. Morgan Must Avoid to Make a Dent in Healthcare, conventional employer-led efforts have failed to change healthcare. Few would call Bezos, Buffett or Dimon conventional thinkers, and they collectively bring more weight than most of the world’s developed economies. Given that the U.S. healthcare industry would be tied with Germany as the 4th largest economy in the world, the potential of their influence becomes clear. The benefits from tackling the extraordinary fraud, waste and abuse in our healthcare system is why employers can and are doing it. More importantly, the collective successes have already created a guiding framework for all healthcare purchasers—private or public. We call this framework the Health Rosetta, but we’re just aggregating these successes. Baked into virtually every U.S. healthcare industry business model is that employers are what healthcare pundit and author Matthew Holt calls “dumb price takers.” Most readily pay 2X-10x more than market-clearing prices. Chapter 6, PPO Networks Deliver Value—and Other Flawed Assumptions Crushing Your Bottom Line, spells out how this happens. I will spell out below how ABC could tackle the healthcare tapeworm (Warren Buffett’s term for the negative impact of healthcare on the U.S. economy). See also: Whiff of Market-Based Healthcare Change? Three key facts potentially differentiate the ABC health initiative from past employer-led efforts:

1. The strategic focus and attention of three of the most successful CEOs in America.
2. Warren Buffett’s moral authority and trust, which will give the initiative a bully pulpit that can reach the general public.
3. Amazon and J.P. Morgan Chase’s technology, financial structuring, and data prowess, which can be applied to root out fraud, waste and abuse, create new care pathways and produce new revenue and financing models.

The following points riff off the line from The CEO’s Guide that people tell me most resonates with them—You’re in the healthcare business whether you like it or not. Here’s how to make it thrive. In other words, when ABC applies the same discipline to healthcare that they apply to every other area, modeling the path for other employers, everything will change. Below are 11 ways the ABC initiative could forever change the U.S. healthcare system, followed by a summary treatment of each point.

1. New industry norms for benefits-purchasing transparency and conflicts disclosure will emerge
2. Cybercrime fraud rates will drop dramatically
3. Fraud awareness enabled by healthcare industry will trigger landscape-changing litigation
4. Healthcare will stop stealing from retirement savings
5. Healthcare will stop stealing millennials' future
6. Market clarity will show that employers are the real “insurance” companies
7. A spotlight will shine on high rates of overtreatment and misdiagnosis
8. Open source will come to healthcare
9. Massive new capital restructuring opportunities will appear
10. Primary care will experience a rebirth
11. There will be a focus on going local to go national

Now that you know where we’re going, let’s dive into each point. 1. New industry norms for benefits purchasing transparency and conflicts disclosure will emerge The ABC leaders each have deep financial services expertise where meaningful disclosure of compensation and conflicts of interest is deeply embedded both legally and culturally. As they dig in, I would expect them to conclude that new norms are needed in this space, such as what we’ve developed for the Health Rosetta plan sponsor bill of rights, benefits adviser code of conduct and disclosure standards. These are “motherhood and apple pie” concepts that are a 180-degree change from current industry norms, where benefits brokers often sit on both sides of a transactions with significant undisclosed conflicts. 2. Cybercrime fraud rates will drop dramatically The same sort of algorithms that identify fraud in credit cards can be applied to healthcare, but haven’t been. Simple-to-detect fraud like a single claim being paid 25 times to cybercriminals (a real and all-too-common occurrence that modern payment integrity services find) will be the low-hanging fruit, but these have not been broadly applied. ABC will also see that this blatant fraud is just the tip of the fraud, waste and abuse iceberg. As a bonus, a leader in payment integrity is one of the earliest adopters of Amazon’s AWS cloud service. 3. Fraud awareness enabled by healthcare industry will trigger landscape-changing litigation Even though cybercrime is only the tip of the iceberg on fraud, waste and abuse, it is so blatant that it is already spurring legal activity. In Chapter 19 of my book, I quote a Big Four risk management practice leader who said, “ERISA fiduciary risk is the largest undisclosed risk I’ve seen in my career.” There are two areas of legal jeopardy that are snapping CEOs to attention as they get awakened to the risk. Chapter 7, Criminal Fraud is Much Bigger Than You Think, is just the basics on ERISA fiduciary risk, but it is so blatant that there are dozens of cases in the works. An additional thread of fiduciary legal front is emerging—activist shareholders are realizing how straightforward it is to improve earnings by slaying the healthcare cost beast. The Health Rosetta website has a simple estimator that translates removal of healthcare waste into EBITDA impact. Here is just one example of the impact. A multinational manufacturer implemented a proper musculoskeletal management program by having physical therapists working with employees and workplace ergonomics. The savings (if applied directly to EBITDA) from this alone create a positive $2 billion of market cap impact (calculate savings x price-earnings multiple). 4. Healthcare will stop stealing from retirement savings Healthcare has crushed the average boomer’s retirement savings by $1 million. Even if this estimate is off by 10x (unlikely), it’s still $7.6 trillion that could have been under management by financial firms such as JP Morgan. My senior level contacts in the 401k/retirement segment surprised me when they said that government de-privatizing of retirement (due to low savings levels) is on the worry list of folks like Jamie Dimon. If true, it is another reason organizations like JPMorgan Chase would want to redirect money being squandered in healthcare to retirement accounts. 5. Healthcare will stop stealing millennials' future David Goldhill’s outstanding Catastrophic Care book gave an “optimistic” view of how healthcare is on track to consume half of a typical millennial’s lifetime earnings. He assumed that healthcare costs grew at half the rate of regular inflation (extremely rare—more typically, it’s 5% to 10%). As the largest generation in history, millennials are the most important generation for all of the ABC organizations. Smart employers find they are natural early adopters of Health Rosetta-type benefits programs. [See Chapter 4, Millennials Will Revolutionize Health Benefits] 6. Market clarity will show that employers are the real “insurance” companies This is the health plan industry’s worst nightmare. There is a growing realization that because less than a third of the claims that insurance companies process actually put the insurance companies’ money at risk, “insurance” companies are more appropriately described as commoditize-able claims processors. It is self-evident that paying a third party to manage risk when they benefit from rising costs hasn’t worked out well. The smart BUCAs already understand this, which is why you see some aggressively diversifying out of the insurance business. They are happy to milk the insurance business until it goes away, but their corporate development actions clearly signal the future. For example, I heard Aetna CEO Mark Bertolini say at a Health 2.0 conference that they increasingly see themselves as a technology company with insurance on the side. [See Chapter 3, What You Don't Know About the Pressures and Constraints Facing Insurance Executives Costs You Dearly] 7. A spotlight will fall on high rates of overtreatment and misdiagnosis ABC’s leadership will see past studies such as the Starbucks/Virginia Mason study that found that 90% of spinal procedures did not help at all. They will also be shocked to find extraordinary rates of misdiagnosis across healthcare, like what I outline in Chapter 12, Centers of Excellence: a Golden Opportunity. They will want to ensure their employees get the best possible care, which also saves tremendous money. It’s commonly known that ~50% of what we do to people in healthcare does not make them better and could make them worse. One of the foremost experts in employer benefits, Brian Klepper, estimates that 2% of the entire U.S. economy is tied up in non-evidence-based, non-value-added musculoskeletal procedures. 8. Open source will come to healthcare As much as companies such as Amazon keep some information and code proprietary, they also actively benefit from open source. Open source software underpins major parts of Amazon’s business. Some problems are too big to tackle on your own. As big as ABC are, they aren’t big enough to tackle all of healthcare, and they don’t have dominant market share in any single geography. Because adoption happens so slowly in healthcare, Health Rosetta is catalyzing the creation of a Wikipedia-like resource for the next 100 years of health (a group of visionary doctors call their vision Health 3.0) to dramatically accelerate the rate of adoption for successful approaches. Those insights will benefit ABC. In the other direction, ABC should be motivated to share what they are doing with other local employers to more rapidly change norms in a given healthcare market. While the Fair Trade-like model for healthcare transactions we’re working on is non-controversial outside of healthcare, ABC can add heft and use their bully pulpit to normalize more appropriate behavior in this area. For example, legitimate, known pricing (link to a petition by a former hospital CEO) versus the arguably predatory and arbitrary pricing today would still let healthcare providers set their prices (i.e., not government-set), but pricing would be consistent and known across all payers. One Health Rosetta component—Transparent Open Networks—already enables this. In other words, healthcare transactions could operate like every other part of the economy. Single pricing is a subtle, but critical, part of making healthcare functional. Not tackling this would be one of the biggest mistakes ABC could make. 9. Massive new capital restructuring opportunities will appear This item could be an entire white paper, but I’ll touch on just two opportunities stemming from the above items. Hundreds of billions of dollars (if not more) have been and are being tied up in fraud, waste and abuse. As large purchasers and others begin to account for this, a subset of it can be treated as bad debt and turned into instruments that are sold to opportunistic, sophisticated investors. The subsequent collection efforts by these purchasers would be dramatic to any person or organization enabling the fraud. Second, it is well known that we have at least 40% overcapacity of hospital beds, fueled by a massive revenue bond bubble. The orderly disposition and restructuring of these assets is another massive opportunity that can be accelerated by the work of ABC and others. Outside of rural settings that have few overcapacity issues, evidence shows that hospital closings have no impact on outcomes. Freakonomics did a segment on how health outcomes actually improved when hospital cardiologists were away at a conference. This horrific story about a typical overtreatment scenario leading to bad outcomes is another example of why this would be the case. 10. Primary care will experience a rebirth I detailed the critical reasons why ABC must have a strong primary care foundation in my open letter to Jeff Bezos, Warren Buffett and Jamie Dimon. Just based on the number of employees ABC has, it makes economic sense to fund ~1,500 value-based primary care clinics. They can derisk this investment by making the clinics available to ABC partners and customers. I wasn’t surprised that ABC recently hired my parents' primary care physician, who has deep experience in a vanguard value-based primary care organization. [See Chapter 14 for more on value-based primary care] 11. There will be a focus on going local to go national From Facebook to Uber and Lyft, the best way to go national with something game-changing is to start with a hyperlocal focus. This lets you prove unit economics in a controllable environment. Despite conventional wisdom, the future health ecosystem will be local, open and independent, which provides anti-fragility versus easy-to-destroy monoliths. I often draw an analogy between the Health Rosetta and LEED for many reasons. One is that certain locales were early adopters of LEED. Likewise, certain geographies will abandon the current, silly medical facility arms race. For example, Portland, OR, is an early adopter of LEED, and it has grown a cluster of sustainable industries by attracting talent and businesses to the area. Over the last year, I have been gathering feedback on creating a competition like Google Fiber or Amazon HQ2 competitions to identify communities where the new health ecosystem forms. See also: Media Coverage on Amazon Misses Point   Beyond the obvious benefits of defining and pioneering the next century of health, solving the opioid crisis is a profound imperative. As I pointed out in Chapter 20: The Opioid Crisis: Employers Have the Antidote, the largest public health crisis in 100 years has major employer/economic implications and is simply impossible to solve without active employer involvement. The sad fact is that every addict needs an enabler, and employers have been the biggest (unwitting) enabler in 11 of the 12 major drivers of the crisis. The silver lining is that solving the opioid crisis takes you a long way toward solving broader healthcare dysfunction. Employers implementing Health Rosetta-type benefits have much lower rates of opioid overuse disorders due to the upstream “antidotes” to the crisis. In short, ABC has the power to demonstrate that employer health benefits are the newspaper classifieds of transforming the healthcare business Healthcare has many analogies with another industry that has been dominated by regional monopolies/oligopolies—newspapers. Like employer health benefits, the classifieds business was very easy to overlook. However, in both cases, they drove a significant majority of profits for newspapers. Once the classifieds business was undermined, the newspaper industry was never the same. If the ABC initiative plays its cards right, they can catalyze restoring the American Dream for millions of Americans by fixing healthcare. The great news is that there are many microcosms in America where the best healthcare system in the world exists — far more affordable and effective than we’re used to. ABC has the opportunity to help America leapfrog the rest of the world and finally have a truly superior and efficient healthcare system. “You can always count on Americans to do the right thing - after they've tried everything else.” - Winston Churchill