Facebook is releasing its virtual reality headset, Oculus. It is big, clunky and expensive, and it will cause nausea and other problems for its users. Within a few months of its release, we will declare our disappointment with virtual reality while Facebook will carefully listen to its users and develop improvements. Version No. 3 of Oculus, which will, most likely, come in 2018 or 2019, will be amazing. It will change the way we interact with each other on social media and take us into new worlds—much like the holodecks we saw in "Star Trek." This is how innovation happens now, innovation and elsewhere. You release a basic product and let the market tell you how to make it better. There is no time to get it perfect; your product may become obsolete before it is even released. Apple has not figured this out yet. It maintains a fortress of secrecy, and its leaders dictate product features. When it releases a new technology, it goes to extremes to ensure elegant design and perfection. Steve Jobs was a true visionary, but he refused to listen to customers—believing he knew what they needed better than they did. He ruled with an iron fist and did not tolerate dissent of any type. At Apple, people in one division did not know what others in the company were developing. Seven announcements Apple made in the March keynote Jobs’ tactics worked very well for him, and he created the most valuable company in the world. But without Jobs, given the dramatic technology changes that are happening, Apple may have peaked. It is headed the way of IBM in the '90s and Microsoft in the late 2000s. Consider that Apple's last major innovation—the iPhone—was released in June 2007. See Also: Apple v. FBI: Inevitable Conflicts on Tech Since then, Apple has been tweaking its componentry, adding faster processors and more advanced sensors and releasing bigger and smaller forms—such as with the iPad and the Apple Watch. Even the announcements Apple made this month were uninspiring: smaller iPhones and iPads. All Apple seems to be doing is playing catch up with Samsung, which offers tablets and phones of many sizes and has better features. Apple has been also been copying products (such as Google Maps) but not doing it very well. There was a time when technology enthusiasts like me felt compelled to buy every new product Apple released. We applauded every small, new feature and pretended it was revolutionary. We watched Steve Jobs’ product announcements with bated breath. However, now I would not even have bought the iPhone a few months ago unless T-Mobile included a large rebate to switch networks. There is nothing earth-shattering or compelling about Apple’s new phones—or, for that matter, any of the products it has released since 2007. By now, Apple should have released some of the products we have heard rumors about: TV sets, virtual reality headsets and cars. Apple could also have added the functionality of products, such as Leap Motion and Kinect, with the iPhone functioning as a Minority Report motion detector and projector. Apple should be doing what Facebook is doing: putting out new products and letting the market judge them. And Apple should be doing moonshots like Google, which is toying with self-driving cars; Internet delivery via balloon, drone and microsatellite; and Google Glass. Yes, Apple might have failed with the first version—just as Google did with Glass—but that is simply a learning experience. The third version of Google Glass is also likely to be a killer product. Instead of innovating, Apple has been launching frivolous lawsuits against competitors like Samsung. My colleague at Stanford Law School, Mark Lemley, estimated Apple had spent more than $1 billion in attorney and expert fees in its battle against Samsung. And this lawsuit netted Apple just $158,400, which, ironically, went to Samsung. Apple could have better spent its money on the acquisitions of companies that would give it a real edge. Will Apple release some products later this year that will blow us away? I am skeptical. I expect we will only see more hype and more repackaging of tired old technologies. Join Vivek Wadhwa for the Path To Transformation Symposium by registering here.

As legal alternatives to workers’ compensation (WC) grow in number and popularity, employers will save money, and employees will—in aggregate—receive better care. [1] As this market grows, my income will also grow. Such forthrightness should seem unnecessary from a proponent of the opt-out movement, like me. But a vocal (and boisterous) contingent of the opposition to alternatives avoids the necessary logical inversion by hiding behind other, less relevant motives. As companies move away from WC, the income for opponents of alternatives will shrink, though they will never acknowledge financial well-being as a motive in opposing the opt-out. Attorneys, judges, cost-containment companies, third-party administrators, industry regulators, the NCCI and a host of other WC stakeholders [2] veil their financial motives by redirecting the argument to “what is fair and just for the employee.” They are being disingenuous. See Also: The Pretzel Logic on Oklahoma Option Over time, it becomes easier to expose financially motivated WC stakeholders. But a second component of the opposition is free from poorly hidden financial agendas. This ideological group—which compels me to write this essay—claims to oppose free market alternatives on altruistic grounds. The group's members—just like their financially motivated brethren—lean quite heavily on the noble ideas that they hope are conveyed in the two-word, nebulous term "grand bargain" and that they treat as sacrosanct.[3] The U.S. was a little late to the WC party. Pressure had been building on policy makers since the second half of the 19th century, but it was the Pittsburgh Survey by the Russell Sage Foundation that provided the greatest influence in the rapid adoption of WC laws in the U.S. between 1911 and 1920. Anecdotes (e.g., The Jungle) helped, but legislatures needed statistically compelling factual evidence to reform the legal schemes governing workplace accidents. Crystal Eastman stood and delivered. In her seminal study, Work-accidents and the Law (which was part of the Pittsburgh Survey and was published in 1910), Eastman gathered and reported on workplace accident data for a 12-month period between 1906 and 1907 in the small but industrially relevant sample of Allegheny County, PA. She rightly and importantly spent the first 200 pages of her study explaining the devastating effects of workplace accidents on individuals, families and communities.[4] After dozens of case studies concerning widows, orphans and maimed workers, she dove into the problem with aplomb. The root of the problem was that common law systems couldn’t keep up with changes stemming from the Industrial Revolution—especially those in the U.S. It’s no coincidence many countries that eventually committed to industrialization were also, to some extent, relying on English common law. From the Pittsburgh survey, Eastman summarized the problematic common law system on page 206 as follows:

1. It is wasteful:

• The state expends a large amount in fruitless litigation.
• Employers expend a large amount, as the result of work accidents, only a small part of which is actually paid in settlement of accident claims. 
• The injured employes [sic] spend nearly half of what they get in settlements and damages to pay the cost of fighting for it.

2. It is slow; recovery is long delayed, while the need is immediate.
3. It fosters misunderstanding and bitterness between employer and employees.
4. It encourages both parties to dishonest methods. 
5. The institutions which have been resorted to as an escape from its evils, liability insurance and relief associations based upon a contract of release, are often advantageous to employers, but disadvantageous in important respects to employees. 

The irony—over a century later—is too obvious. Eastman's first four points might as well be the outline for states like Oklahoma, South Carolina and Tennessee when contemplating legal alternatives to their inefficient, caustic, modern WC systems. Granted, there was substantially more urgency for Eastman when she created this list—deaths per 100,000 hours worked were at all-time highs. Today, that statistic is at an all-time low. As significant as our modern occupational accident problems are, they are a different breed from—even if they are similarly described to—what Eastman studied. Eastman’s study was so powerful that many state legislatures used it to outline their original WC laws. Stakeholders were generally agreeable to this grand bargain, which, 1) prevented employees from suing employers for common law negligence, 2) required employers to pay medical and lost income benefits for employees injured on the job and 3) removed negligence from the conversation by making the entire WC scheme “no fault” in nature. But there are some important contextual factors that contemporary WC stakeholders forget to mention regarding the grand bargain that gave us WC to begin with. First, most states made these new-fangled WC systems optional. That’s right; of the 45 states that passed WC legislation between 1911 and 1920, 36 allowed employers to choose which system they wished to participate in. The original Texas law—which still stands iconoclastically today—was perfectly ordinary when it was originally enacted in 1913 (it gave private employers the opportunity to subscribe to WC or stick with common law, albeit without three powerful common law defenses). When the grand bargain was being born, options were the norm. See Also: Key Misunderstanding on Oklahoma Option A second, forgotten characteristic of the grand bargain is how disputes—though rare—were handled. By design, attorney involvement was minimal. One of the primary goals of the grand bargain was to decrease the amount of litigation, not to recategorize and grow it. Eastman’s suggested mechanism (pp. 211-220) for dispute resolution was arbitration, which was embraced by a number of states.[5] However, never count attorneys out. Primal due process ideals eventually compelled them to increase their involvement (and compensation), all in the name of giving clients the day in court to which they are constitutionally entitled. This aberration—attorney involvement—is now sold to the public as part and parcel of the grand bargain. Opponents will accuse me of misinterpreting Eastman’s time and message. All interested parties are, of course, welcome to read her study [6] and draw their own conclusions. We invite interested parties to tour the facilities of our opt-out employers and interview employees. They can even search for hidden torture chambers filled with injured workers, but they won’t find them, because they do not exist. Our employees are happy, and our employers are delivering top-notch care to them at a fraction of the cost of WC. But our opponents won’t accept this reality. “Facts be damned!” they cry. “The employer needs to pay full fare for WC.” That reasoning, again, is understandable from those WC stakeholders who fear they will starve if they can’t slurp from the trough of WC. Inexplicably, however, this attitude is even more pronounced among the opposition’s altruistic contingent, which maintains that employers must continue covering the inflated costs of employee welfare under WC, whether or not that financial burden improves the situation of injured employees. Medicare presents an interesting litmus test for this ideological perspective. It is obvious to anyone paying attention that our entitlement healthcare program for seniors could—and should—deliver better outcomes at substantially lower costs. This is self-evident to Americans of all political stripes, in large part because we all pay for those costs via taxes. We would all like to see outcomes improve and our tax burden decrease. In both Texas nonsubscription and the Oklahoma option, we eliminate the vast majority of legal overhead, which allows us to focus on medical outcomes. The same sorts of inefficiencies and abuses that occur within Medicare also infect WC, so it shouldn’t be hard to believe that the free market (given the legal opportunity to do so) can economize them.[7] Yet, our vocal, altruistic opponents won’t allow their own criticisms of Medicare to influence their opinion about opt-out saving money and improving outcomes. It’s perfectly obvious that Medicare (a healthcare system rife with bureaucratic inefficiencies) could deliver better results at lower costs if it were redesigned. However, when we demonstrate that WC (a healthcare system equally rife with bureaucratic inefficiencies) could—and should—deliver better results at lower costs, they opponent of opt-out close their eyes and cover their ears. “It can’t be done!” they cry. Somehow, from this perverse perspective, the solution to workplace injuries does not need to make the little guys (the employees) any better off, so long as it does a sufficient job of making the big guys (the employers) pay. Ah, the joys of spending other people’s money. This litmus test provided by Medicare shows our altruistic opponents have an unexpected hidden agenda: politics. Is such a desire—to have the employer pay more than necessary—relevant to the welfare of employees? No, it is not. It is political. It is an impediment. It is stupid.[8] The grand bargain was about rationalizing what had become out-of-control non-solutions for workplace injuries. Throughout the past century, many WC systems have become burdensome for employees and employers alike. They are now, ironically, non-solutions. The grand bargain wasn’t fundamentally about WC; it was about protecting employees and employers as sensibly and pragmatically as possible. It accomplished that objective with minimal use of attorneys, while generally allowing employers to elect (or subscribe) to a statutory scheme that took the name "workmen’s compensation." With slightly different jargon, that sounds eerily similar to what Oklahoma did in 2013. The Sooner State took a critical look at its non-solution for workplace injuries and created an alternative to more efficiently protect employer and employee alike. This statutory scheme has taken the popular name of "the Oklahoma option." What’s next for opt-out proponents? First and foremost, Oklahoma must tend to its new creation. After that, we’ll just have to wait and see what other states will do—if anything. What’s next for our opponents? I suspect they will not advertise their fear of losing income. They will continue to tout the grand bargain as sacrosanct, without examining the historical context from which it emerged. They will try to hide behind arguments that appear noble. We at WorkersCompensationOptions.com will remain at the cutting edge of this movement and will provide whatever legal occupational accident programs our clients wish to implement. Our results already speak for themselves—and they will continue to do so.   [1] If the reader is determined to think of “care” in only post-injury terms, so be it; my claim still stands. However, our idea of “care” starts with motivating employers to create the safest workplaces possible and motivating employees to avoid injuries in the first place. Because “no fault” is a cornerstone of the WC structure, our emphasis on safety is far easier to convey to our opt-out clients than to our WC clients. [2] The panoply of stakeholders in WC (ranging from payroll auditors to WC Medicare Set Aside reporters and from private investigators to coding specialists tasked with maximizing reimbursements) is quite a spectacle. To avoid overwhelming my audience, I generally categorize this excessive cast of characters into the five communities of WC: insurance, medical, legal, employer and employee. Watch the first seven minutes of this video for an explanation of how perverse the incentives are for most of these stakeholders. Regrettably, the employer and employee have become afterthoughts in a system ostensibly designed to meet their needs. [3] In both form and content, this article borrows heavily from the first 12 pages of John Kenneth Galbraith’s The Affluent Society. In particular, I have modeled my discussion on his examination of “the obsolescence of ideas,” where he explains the danger of leaving “sacrosanct” concepts unexamined as a matter of convenience. [4] Sensitive readers beware; stories of aching necks are completely ignored by Eastman in favor of gruesome accounts of deaths and dismemberments. [5] Arbitration was much less formal a century ago. Typically, a disinterested but experienced third party would simply perform a records review and make a determination. Testimony could be heard. For a glimpse of how WC disputes were resolved in the 1920s, see pages 88-194 of Bureau of Labor Statistics Bulletin 301, April 1922. The report by Carl Hookstadt details the various methods of dispute resolution for 21 states and two Canadian provinces. Voluntary resolution between employer and employee was universally sought. In its broadest sense, “arbitration”—in varying layers—successfully prevented litigation in the vast majority of cases (with the California sample offering the singular, glaring exception). [6] I urge all industry insiders to read Eastman’s survey, as it’s fascinating, historically significant and accessible for free via the link above. [7] While this argument is esoteric, I remind the reader we have actual results. Texas nonsubscription and the Oklahoma option are not theoretical; they are real. [8] Reza Aslan delivered one of the greatest uses of the term “stupid” in September 2014, when interviewed on CNN. This nine-minute video is certainly worth watching in its entirety, but, for his thoughtful and appropriate deployment of a term many of us are too cowardly to invoke, watch from 6:20 to 7:00.

When it comes to general liability insurance for long-term care facilities, ratings are often based on the CMS 5 STAR rating system. This is data that consumers view as the holy grail of quality metrics for skilled nursing facilities. It essentially says a facility rated 5 STAR is well above average, and a facility rated 1 STAR is much below average. This provides a good overview for nursing home quality, but there are flaws inherent to this system, whether it is inaccurately reported data, variation in quality standards between states and survey districts or facilities that specialize in higher acuity and have sicker patients in-house. Here are some of the variables that I have noticed not only as an insurance underwriter but also as a licensed nursing home administrator for more than 20 years. 1. Health Inspections STARS – This is a three-year average of annual surveys and complaints surveys and is calculated based on the number of citations and their severity compared with the state averages. The average is not as important as knowing the facility is improving with survey compliance or getting worse. 2. Staffing STARS – This is based not only on the number of hours of care provided to each patient per day by nurses and nursing assistants but is also heavily weighted to the number of RN hours. What you need to know is that the staffing data used is only for a two-week period that is self-reported by the facility during the annual survey. This is a limited snapshot and may not be indicative of normal staffing patterns or could be inaccurately reported. 3. Quality Measures STARS – This is based on 18 quality measures (QMs) for short-stay and long-stay residents. Some of the more scrutinized are for the prevalence of pressure ulcers, falls and antipsychotic medication. What you need to know is, if the facility has a focus in caring for these types of high-acuity patients, the star ratings may be lower in comparison with state averages, and this is not necessarily an indication that the facility is deficient. 4. Overall Rating STARS – A rating of 1 to 5 stars is based on health inspections, staffing and quality measures ratings combined into one. The more stars the better. What you need to know about this is that the facility is being compared in relationship to other facilities in a geographic area. Why this is relevant is, if all the facilities around you are excellent operators, a low star rating may not be a good indication of that facility's overall operation. 5. Trends – A facility that is improving or declining cannot be detected with just an overall 5 STAR score. The CMS 5 STAR system has many good points and provides a consistent rating for all 16,000 nursing home in the U.S. but should not be used without interpretation for insurance purposes. We need to first validate that the self-reported data used for each facility is accurate and also consider the types of residents the facility has chosen to admit and care for. Higher-acuity residents will have an effect on the three categories that drive the overall rating and could make the facility appear as an underperformer. Lastly, both the quality performance and performance improvement of a facility are becoming a heightened area of focus for centers. Effective quality improvement programs play a role in assessing risk that is easily overlooked. Here’s a link the CMS website: CMS 5 STAR Ratings

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Gokul Sudarsana and Rohit Rajan, the founders of NYC-based startup Isaac Re, to discuss the often forgotten space of reinsurance.  To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here. Icebreaker: Two truths and a lie:

• One of us once ate a scorpion
• One of us went to kindergarten at a South Korean army base
• One of us played in a celebrity basketball tournament

(See answers at the bottom of the post) Describe Isaac Re in 50 words or less: Isaac Re is a software marketplace where you can invest in bonds that are backed by insurance risks. As an investor, these bonds will provide you with attractive returns and substantial diversification opportunities for your portfolio. Simultaneously, this allows our insurance partners to make better decisions with their capital and gives them the ability to write new business, closing the coverage gap across America. Why Isaac Re? A core inefficiency in the insurance industry is the high cost of capital, especially in a hard market when capital is scarce. This, in turn, increases prices. By spreading risk across the larger capital market, we smooth out the insurance risk capital cycle, helping insurance companies raise capital cheaply and, in turn, make insurance more affordable to close the coverage gap. How did the idea develop? While I (Gokul) was working in the industry, one of the most powerful insights I gained was that the insurance capital market is inefficient. Rohit and I grew up together; his background is in engineering, and I’m an actuary. As we started talking about this problem, it became clear to us that bringing together our complementary skills and building a software-oriented insurance capital marketplace would be a huge opportunity for us. What's in a name? Isaac Re is a tribute to Isaac Newton. Insurance is a prime example of a big data-driven industry. Valuing risk is built on a wide range of data sources that push and pull prices toward equilibrium, much like gravity. Biggest challenge: Insurance is a slow-moving industry. A solution like ours fundamentally re-optimizes the insurance capital landscape. This requires the buy-in, commitment and shared vision of industry executives and thought leaders. What does competition look like? Right now, these transactions are highly bespoke, over-the-counter arrangements that involve large deal teams to execute. We are the first company to use software to automate the refinancing value chain. Why Global Insurance Accelerator? The GIA is a unique opportunity to go through an insurance-focused accelerator, which helps us quickly connect to industry stakeholders. It is a launching pad to energize the industry and build long-lasting partnerships. What’s on your to-do list? We are announcing partnerships with the insurance and investment communities, and our pilot transaction will be completed shortly after. If not for Isaac Re, what would you be doing? Hard question. The more we develop the vision and realize the impact it can have, the more we can’t imagine spending our time on anything else. Where do you see Isaac Re in five years? We see a tremendous growth opportunity after we prove out the pilot. We have big plans for leveraging our infrastructure down the road. Today, we connect insurers with institutional investors. Tomorrow, we can connect a previously underinsured policyholder directly with an individual investor. Best life lesson: Lead by example.   Icebreaker answers: 

• One of us once ate a scorpion - Truth
• One of us went to kindergarten at a South Korean army base - Truth
• One of us played in a celebrity basketball tournament - Lie

Rohit ate a scorpion, and Gokul went to kindergarten in SK. (For what it's worth, Rohit once played pickup basketball with Don Cheadle.)

In a recent article by CIO, the volume of healthcare data at the end of 2013 was estimated at just over 150 exabytes, and it is expected to climb north of 2,300 exabytes by 2020—a growth rate of 1,500% in just seven years. In response, both healthcare payers and providers are increasing their investments in technology and infrastructure to establish competitive advantages by making sense of the growing pool of data. But key actionable insights—such as how to improve the quality of patient care, increase operational efficiency or refine revenue cycle management—are difficult to find. Core challenges surrounding data analytics (capturing, cleaning, analyzing and reporting) are complex and daunting tasks, both from a technical and subject matter perspective. It's no surprise, then, that many healthcare organizations struggle to make sense of this data. While the advent of big data technologies, such as Hadoop, provide the tools to collect and store this data, they aren't a magic bullet to translate these heaps of information into actionable business insights. To do so, organizations must carefully plan infrastructure, software and human capital to support analysis on this scale, which can quickly prove to be prohibitively expensive and time-consuming. But, by starting small in the new era of big data, healthcare organizations are able to create an agile and responsive environment to analyze data—without assuming any unnecessary risk. To do so, however, they must be able to answer three questions:

1. What narrowly tailored problem has a short-term business case we can solve?
2. How can we reduce the complexity of the analysis without sacrificing results?
3. Do we truly understand the data? And, if not, what can we learn from the results?

To illustrate the effectiveness of starting small, consider two examples: that of a healthcare services provider looking to prevent unnecessary hospital visits and that of a large healthcare provider looking to universally improve revenue cycle operations after a three-practice merger. The first example concerns an organization that specializes in care coordination. This particular organization consumes a sizeable volume of claims—often more than five million a month. And to supplement core operations (e.g. patient scheduling and post-visit follow-ups), it sought to answer a question that could carry significant value to both payers and providers: How can we reduce the number of unnecessary hospital visits? By digging even further, there was a more-refined question from payer and provider clients: Can we identify patients who are at a high risk for a return visit to the ER? Last, but not least, the organization eventually asked the key question many such big data projects fail to ask: Is there a short-term business case for solving this problem? To answer the question, the organization considered all available data. Although the entire patient population would provide a significant sample size, it could potentially be skewed by various factors relating to income, payer mix, etc. So the organization decided to narrow the search to a few geographically grouped facilities and use this sample as a proof of concept. This would not only limit the volume of data analyzed but would also reduce the complexity of the analysis because it does not require more advanced concepts of control groups and population segmentation. The approach may also allow, if necessary, subject matter experts to weigh in from the individual facilities to provide guidance on the analysis. The results returned from the analysis were simple and actionable. The service provider found that particular discharge diagnoses have comparatively high rates of return visits to the ER, often related to patients not closely following discharge instructions. And by providing the payers and providers this information, the service provider was able to improve the clarity of discharge instructions and drive post-discharge follow-ups to decrease the total number of unnecessary readmissions. The cost of unnecessary admissions was significant enough to grant further momentum to the small data project, allowing the project to expand to other regions. In the second example (a large, regional healthcare services provider looking to improve revenue cycle operations), a similarly tailored question was posed: How can we improve revenue cycle efficiency by reducing penalties related to patient overpayments? At first glance, this seems to be a relatively small insight for traditional revenue cycle analyses. Questions that could potentially have a larger impact (Who owes me money now? Which payer pays the best rates for procedure XYZ?), could provide a larger payoff, but they would inevitably complicate the task of standardizing and streamlining data and definitions for all three practice groups. However, the analysis would provide a jumping off point that would improve understanding of the data at a granular level. Not only was this regional provider able to create reports to identify delayed payments and prioritize accounts by the "age" of the delayed payment, it was able to better understand the underlying cause of the delayed payments. It was then able to adjust the billing process to ensure timely payments. Once again, timely payments significantly helped the working capital requirements of the organization by proving a rather short-term and significant business case. As a result, the small data project was expanded to include more complex revenue cycle management problems related to underpayment and claims related to specialty practices. In both examples, the organizations deliberately started small—both in terms of the amount of data and the complexity of their approach. And by showing restraint and limiting the scope of their analyses, they were able to define a clear business case, derive actionable insights and gain momentum to tackle larger challenges faced by the organization.

I’ve said before regarding Opt Out—the alternative plan in Oklahoma that allows employers to escape the workers’ compensation system but maintain the benefits of exclusive remedy—that repeatedly using the word “transparency” will not make it so. Yet, when it comes to “the Oklahoma Option,” the word "transparency" is tossed around like cheap hash on a roadhouse griddle. Proponents continually use the word to describe the scheme. It is used so much that, if it were true, the entire concept would be completely invisible because it would be so incredibly, endlessly transparent. And, of course, the Oklahoma Option is anything but. Really smart people will know the story of Schrodinger’s cat from advanced science classes they took at some hoity-toity university or elementary school. The rest of us Neanderthals have learned about it from the weekly science lessons we get watching the hit television show "The Big Bang Theory." For those of you who neither attended fancy schools nor are "Big Bang Theory" aficionados, Schrodinger’s cat is a thought experiment devised by Austrian physicist Erwin Schrodinger in 1935. It illustrates the problem of quantum mechanics applied to everyday objects. In the experiment, a cat, a flask of poison and a radioactive source are placed in a sealed box. If an internal monitor detects radioactivity, the flask is shattered, releasing the poison and killing the cat. The Copenhagen interpretation of quantum mechanics implies that, after a while, the cat is simultaneously thought of in two states. In other words, if the box remains unopened, the cat may be thought of as both alive and dead. I think that experiment lends itself well to Opt Out transparency. In the realm of Opt Out promotion, the word “transparency” is sprinkled around like holy water. It is used as if it intended to sanctify and purify the concept for the consuming public. It is employed to describe the communication that employers use to educate their workers about their rights and responsibilities. It is used in reference to the overall plans and approval process, and it is used to defend the existence of the plan. Problem is, Opt Out is not transparent in the way proponents would have you believe. See Also: Texas Is NOT an Opt-Out State For instance:

• The application process to have an employer plan approved is now confidential. All documents and information submitted to the state to obtain approval to Opt Out is closed to public eyes. This is because of reforms specifically pushed by Oklahoma Opt Out proponents last year.
• The plans themselves are not available through the state. They were initially, but they have been removed from public access since the previously referenced reforms took effect. At the recent WCRI conference in Boston, a workers’ compensation director for a very large and well-known company took up that issue, directly telling Option author Bill Minick that she was uncomfortable with Opt Out and that she wanted to know where she could actually see existing employer plans. (I wanted to rush up to this woman and hug her in front of all 400 attendees, but I did not know her personally and thought it probably would have appeared wildly inappropriate and would possibly lead to some sort of assault charges being filed). Minick assured her the plans were easily obtainable, mentioning that ProPublica published many. He also told her several courts have copies. He did not mention that courts only have those copies because they have been entered into evidence in multiple lawsuits, and I noted he did not tell her she could get them from the state. Someone on the panel suggested Minick could just send them all to her, and he agreed he could. I am not sure he agreed he would. In a recent article on InsuranceThoughtLeadership.com, Minick stated, “The idea of establishing a public database of SPDs (summary plan description) has also historically proven impractical.”

That statement, explaining why plans are not available to the public, was made in an article describing how transparent Opt Out is. I swear, I could not make this stuff up if I tried. Furthermore:

• There is absolutely no audit function allowing the state to see how employers are managing their plans. They are under no obligation to report their activity to anyone.
• Under many of these plans, an employee appealing a denial may not testify or submit evidence at that appeal. The people reviewing the appeal are selected by the employer.
• Even the denial letters issued on behalf of some employers contain strict confidentiality language, instructing the injured worker not to share the information contained within the letter with “any unauthorized individuals.”

I could go on (and on and on and on), but you get the idea. So, this is the paradox known as Schrodinger’s Opt Out. The Oklahoma Option has been placed, by legislative and regulatory fiat, in a sealed box and kept away from prying eyes. It is in that state that it may be simultaneously thought of as both transparent and not transparent. Only by opening the box and thrusting the concept under the unforgiving light of scrutiny do we learn the truth. That, of course, is what is happening. The Oklahoma Option, recently found to be unconstitutional, has been subjected to tremendous review in a variety of formats and mediums. The claims of transparency do not hold up when exposed to that scrutiny; instead, opaqueness rules the day. The concept of transparency when related to the Oklahoma Option can only survive in a closed and impenetrable box, where the claims can be protected from prying eyes. The cat is out of the bag, and the concept is out of Schrodinger’s box. The transparency variable cannot be easily applied in that situation. Just repeating the word many times will not change that reality. And that, for my" Big Bang Theory" friends, is the big Bazinga.

The insurance industry has remained much the same for more than 100 years, but over the past decade it has seen a number of exciting innovations and new business models. As part of PwC’s Future of Insurance initiative, we’ve interviewed numerous industry executives and have identified six key business opportunities (illustrated below) that incumbents need to take advantage of as they try to meet customer needs while improving core insurance functions. See Also: Key to understanding InsurTech Because FinTech offers substantial promise to take advantage of emerging opportunities, funding for start-ups is surging. Increased funding activity not only demonstrates venture capitalist investors’ interest but also indicates how incumbents may leverage FinTech to address their specific business challenges. The insurance-specific branch of FinTech, InsurTech, is emerging as a game-changing opportunity for insurers to innovate, improve the relevance of their offerings and grow. InsurTech, has seen funding in line with FinTech investment overall, and we expect investments to increase as new players and investors enter the space. As Figures 2 and 3 show, activity around early-stage InsurTech companies has generated considerable buzz. Moreover, experienced insurance executives have joined start-ups, including Insureon and Lemonade, to help them develop new types of products and services, like small business aggregators and peer-to-peer insurance models. All of this indicates that investors and the industry are eager to get on board with early stage start-ups to meet the six areas of opportunity we illustrate above and describe in detail as follows: 1) Meet changing customer needs with new offerings – Customer now expect personalized insurance solutions. One size simply does not fit all any more. Usage-based models are partially addressing these expectations, but the sharing economy also is challenging existing, more traditional insurance products. New players are able work from a clean slate and leverage a variety of available resources to fill market gaps. For example:

• Metromile, a start-up, has developed a customer- (rather than risk-) centric value proposition for occasional drivers. It offers a low base rate and then charges a few cents per mile driven. Metromile also offers an app that provides personalized driving, navigation and diagnostic tips, and can even remind drivers where they parked. Furthermore, the company has entered into a partnership with Uber that allows drivers to switch from personal to Uber insurance.

• USAA has invested $24 million in Automatic Labs, a telematics platform that claims it will “connect your car to your life” and provides a full suite of integrated apps (including wearables).

• In the life sector, Sureify has developed a platform that allows insurers to underwrite life insurance based on lifestyle data inputs they obtain from wearables.

• In the peer-to-peer space, Lemonade claims to be the world’s first peer-to-peer carrier, but other companies like Guevara and InsPeer have been exploring variations of the same model. Bought by Many, a start-up that uses social platforms in its go-to-market strategy, helps individuals join or even create affinity groups, as well as find insurance solutions for their specific needs across different product lines. Of note, leading Chinese insurer Ping An has partnered with Bought by Many to create personalized travel insurance by leveraging social media data.

Some large insurers have decided to develop start-ups in-house. For example:

• MassMutual is using internal resources to build Haven, a new, stand-alone, direct-to-consumer business.

2) Enhance interaction and build trusted relationships - Established carriers have to manage increasing customer expectations and provide seamless service despite their large and complex organizations. In contrast, new market entrants are not burdened with large, entrenched bureaucracies and typically can more easily provide a seamless customer experience – often using not just new technology but new service concepts. For example, self-directed robo-advisers are convenient, 24/7 advisers that provide ready access to information that can empower consumer decisions about financial planning and investment management. And investors have taken notice:

• Northwestern Mutual acquired Learnvest, a leading robo-adviser with an estimated value of more than $250 million.

• Other robo-advisers, such as FutureAdvisor, have been part of important deals, while others (including Betterment, Personal Capital and Wealthfront) have raised funds above $100 million.

Moreover, disintermediation and the emergence of new online channels is occurring in all lines of business:

• The Chicago-based start-up Insureon has created an aggregator that specializes in micro and small businesses. It taps into existing profit pools that personal and commercial carriers are trying to reach.

• To become a B2C player in the digital small business market, ACE Group has recently taken a 24% ($57.5 million) stake in Coverhound, which enables customers to directly compare coverage options and pricing from various carriers.

3) Augment existing capabilities and reach with strategic relationships - The insurance industry historically has included intermediaries, service providers and reinsurers. In most cases, the carrier has led the business relationship because of its retail market position and scale. However, companies increasingly are peers. Accordingly, joint ventures and partnerships are a good way to augment existing capabilities and establish symbiotic relationships. For example:

• BIMA Mobile has partnered with mobile telecom companies to provide life insurance solutions to uninsured segments in less developed countries. It offers simple life, personal accident and hospitalization insurance products on a pay-as-you-go (PAYG) basis for a set time period (usually just a few months). Policyholders can obtain a pre-paid card and activate and manage their policy from a mobile phone.

• AXA has acquired an 8% stake in Africa Internet Group for EUR75 million, opening opportunities for the company in unpenetrated markets.

New B2B2C entrants also are helping forge mutually beneficial relationships:

• Zenefits was one of the first to create channels to connect insurers, brokers, employers and employees.

• Flock, which features broker managed benefits where plans can be designed to cover a range of options from enrollment to life events, offers what it says are “absolutely free” HR and benefits solutions.

4) Leverage existing data and analytics to generate risk insights - Established insurers traditionally have had the advantage over prospective newcomers of being able to leverage many years of detailed risk data. However, data – and new types of it – now can be captured in real-time and is available from external sources. As a result, there are new market entrants that have the ability to generate meaningful risk insights in very specific areas.

• Several Internet of Things (IoT) companies, including Mnubo, provide analytics that generate insights from sensor-based data and additional external data sources like telematics and real-time weather observation. The promise of the better risk assessment and management resulting from this model is likely to appeal to personal and commercial carriers.

• Facilitating this real-time data collection are drone start-ups, including Airphrame and Airware. Drones provide the ability to analyze risk with embedded sensors and image analytics. They also can operate in remote areas where it has traditionally been difficult for humans to tread, thereby saving time and increasing efficiency. In fact, American Family’s venture capital arm is investing in drone technology to explore new approaches to access and capture risk data.

• In the life space, P4 Medicine (Predictive Preventive, Personalized and Participatory) offers insurers better insights that they can apply to life and disability underwriting. Lumiata is offering the potential for better predictive health capabilities, while Neurosky is developing next-generation wearable sensors that can detect ECGs, stress levels and even brain waves.

5) Use new approaches to underwriting risk and predicting loss - Protection-based models are shifting to more sophisticated preventive models that facilitate loss mitigation in all insurance segments. Sensors and related data analytics can identify unsafe driving, industrial equipment failure, impending health problems and more. More deterministic models, like the ones that now exist for crop insurance, are starting to emerge, and new entrants are offering both risk prevention (not just loss protection) and a more service-oriented delivery model. For example:

• The South Africa-based company Discovery has a partnership with Human Longevity. They are teaming to offer whole Exome, whole genome and cancer genome sequencing, to clients in South Africa and the UK. Gene sequencing can identify risks before they manifest themselves as problems, but also raises ethical questions. It has the potential to completely disrupt life underwriting and places certain responsibility on the company to help customers manage genetic risks (while being careful about actually mandating lifestyle choices). But, on the whole, managing genetic risks in advance can benefit both the end-consumer and the insurer because, if they work together, they can better manage or even avoid long-term health problems and associated expenses.

• On the automotive side, Nauto, a San Francisco- based company, offers a system that provides visual context and telematics with actionable information about driving behavior, including distracted driving. The company claims that its system can help insurers design new pricing strategies and pinpoint areas of premium leakage that they otherwise may not notice.

See Also: InsurTech Trends to Watch For in 2016 6) Enable the business with sophisticated operational capabilities - Effective core systems enable insurers to operate at a large scale. Because of cost, establishing these systems has traditionally been a barrier to market entry. However, access to cloud-based core solutions has facilitated scalability and flexibility. Developments like this, combined with new developments like robotics and automation, have provided new market entrants compelling differentiators. As just one example, underwriting automation is now available in life and commercial lines (notably for small and medium businesses). Some carriers have adopted simplified processes and “Jet” underwriting, in which they leverage external data sources to expedite approval. This has resulted from the availability of risk insights that support new underwriting approaches. Several companies are offering to optimize and augment processes via improved collaboration, artificial intelligence and more. For instance:

• OutsideIQ offers artificial intelligence solutions via an as-a-service underwriting and claims workbench that uses big data to address complex risk-based problems.

• In addition, automating claims can improve efficiency and also effectively assess losses. Tyche offers a solution that uses analytics to help clients estimate the value of legal claims.

Implications: Think like a disruptor, act like a startup In a time when societal changes, technological developments and empowered customers are changing the nature of the insurance business, established insurers need to determine how InsurTech fits in their strategies. The table shows the various approaches insurers are taking. More specifically, insurers are:

• Exploring and discovering – Savvy incumbents are actively monitoring new trends and innovations. Some of them are even establishing a presence in innovation hotspots (e.g., Silicon Valley) where they can learn about the latest developments directly and in real time.

Action Item: Plan an InsurTech immersion session for senior management. This should be an effective eye opener and facilitate sharing of relevant insights on desired InsurTech solutions. Subsequently, FinTech analyst platforms can keep management up to date on the latest developments and market entrants.

• Partnering to develop solutions – Exploration should lead to the development of potential use cases that address specific business challenges. Incumbents can partner with start-ups to build pilots to test in the market.

Action Item: Select a few key business challenges, identify possible solutions and find potential partners. A design environment (“sandbox”) will help boost creativity and also provide tools and resources for designing and fast prototyping potential solutions. This approach also can help establish the baseline and approach to building future InsurTech solutions.

• Contributing to InsurTech’s growth and development – Venture capital and incubator programs play an important role strategically directing key innovation efforts. Established insurers can play an active role by clearly identifying areas of need and opportunity and encouraging/working with start-ups to develop appropriate solutions.

Action Item: Define a strategy to direct startups’ focus on specific problems, especially those that otherwise might not be addressed in the short term. Incumbents should consider start-up programs such as incubators, mechanisms to fund companies and strategic acquisitions. (N.B.: It is vitally important to protect intellectual capital when imparting industry knowledge to start-ups.)

• Developing new products and services – Being active in InsurTech can help incumbents discover emerging coverage needs and risks that require new insurance products and services. Accordingly, they can refine – and even redefine – product portfolio strategy. This will result in the design of new risk models tailored to underserved and emerging markets.

Action Item: Take a close look at emerging technologies and social trends that could be business opportunities to define product strategy, determine required capabilities and develop a plan to build a portfolio and seize market opportunities. FinTech has become a buzzword, but whichever way the FinTech/InsurTech market itself goes, the reality underpinning it is not a passing fad. Insurers that are actively involved with InsurTech in any of the ways we describe above stand to gain, whichever way the market moves. They can use their capital and understanding of customers and the market to both inspire and exploit innovative technologies and correspondingly grow their business.

When is the last time you haggled with your doctor over pricing? It’s certainly not a negotiation most Americans are prepared for or even one they know how to approach. However, when it comes to workers' compensation settlements, the system anticipates that, after settlement, injured workers can persuade their doctors to bill them fairly, according to the state’s fee schedule. In reality, the system is naïve, and injured workers are instead being unfairly stripped of their settlement funds because they are routinely overpaying for treatment. Injured workers deserve better, and engaging a professional administration service like CareGuard provides them just that. CareGuard offers injured workers a sophisticated advocate and group-buying power to make sure they can navigate the healthcare system and get the lifetime of treatment they were promised in their settlement, with money to spare. Each year, tens of thousands of injured workers decide to settle their cases. The vast majority (more than 95%) of these workers have no help when it comes to properly spending their funds on healthcare. After settlement, most injured workers pay out-of-pocket for treatments related to their injury, relying on their often limited knowledge of healthcare to figure out what treatments they should pay for with their funds. When they do decide to use their funds to pay, they must navigate a complex maze of fee schedule guidelines that have been provided by the state to find the correct prices. In reality, it’s nearly impossible to comply with the guidelines without a computer application deciphering the numerous pages of schedules, CPT codes, rates, modifiers and rules. The result is that, in most instances, when injured workers are left on their own after settlement, they fail to manage their care appropriately. They overpay for treatments and drugs, depleting their funds more rapidly than expected. They lose track of bills and fail to comply with regulations, putting their Medicare and other benefits at risk. And even when they are aware they can negotiate, injured workers are left to haggle out pricing on their own, pitted against a complex and apathetic medical system. Keep in mind that most of these individuals have far more healthcare needs than the average person. Professional administration services provide access to discounted drug, provider and medical equipment pricing, as well as access to technology that provides a hassle-free experience with medical care. Those services also provide support from a dedicated team of representatives and advocates to answer questions and help the injured worker navigate their medical care. With professional administration, there is no utilization review or any requirement to use a medical provider network (MPN). Instead, injured workers can see any provider they would like, giving them the freedom to get the care they need with the added support to help minimize administrative red tape. The culmination of all these benefits is that professional administration helps alleviate injured workers' concerns about settling their cases. It is a tool that can help everyone at the settlement table prepare the claimant for post-settlement success and minimize any backlash or misunderstandings after settlement. Professional administration is often overlooked because of a common misconception that it is very expensive, costing tens of thousands of dollars. At CareGuard, our pricing is typically below $5,000, and it can be even less for smaller cases. As a result of the low pricing and high discounts we offer our members, we also find that, on average, we save the injured worker over five times the cost of our services each year. The workers’ compensation system was built to protect injured workers. Significant work and resources are dedicated to ensuring the system runs well. However, the system was poorly designed to care for injured workers who have settled their case and have exited the system. Professional administrators pick up where the system left off and ensure the injured worker has a smooth transition to life post-settlement.

Amazon is revered for being a very forward-looking business. So, with the inclusion of a “zombie apocalypse” clause in its latest terms of service, should we all be worried? It’s right there in paragraph 57.10 of the company’s Lumberyard games development engine, a 3D game design program for use with Amazon Web Services (AWS): In this paragraph, Amazon notes the program is not intended for use with “life-critical or safety-critical systems,” except if the Centers for Disease Control and Prevention (CDC) declares the presence of a “widespread viral infection transmitted by bites or contact with bodily fluids that cause human corpses to reanimate and seek to consume living human flesh, blood, brain or nerve tissue and is likely to result in the fall of organized civilization.” Translation: If the zombie apocalypse comes to pass, you can use Lumberyard for whatever the heck you want. All right, so Amazon is injecting some humor in what are typically long, boring and dense terms of service that, let’s face it, no one ever reads—for any company. But the fact that the flesh-eating undead can be referenced in a document like this with almost nobody noticing speaks to a larger and more serious issue: Disclosure documents like Amazon's are an awful way to communicate important information to your customer. Companies bury important details in opaque disclosures they count on no one reading. Examples abound—coverage exclusions for your insurance, service fees for your bank account, cancellation fees for your gym membership, price increases for your cable TV package or conflicts of interest for your financial adviser. Organizations hide behind these disclosure documents and point to them as evidence that anything important is, indeed, revealed to the customer. But here’s the key these companies are missing: Disclosure is not a proxy for transparency. Indeed, as practiced these days (with pages of unintelligible fine print), disclosure is the antithesis of transparency. So let’s start referring to disclosure documents for what they really are: a tool businesses use to convey information they don’t want anyone to see. Until more companies reject such disingenuous practices (like Southwest Airlines has done with its Transfarency strategy), consumer trust in businesses will continue to erode. Do you want to strengthen your customer relationships? Go beyond the legally required disclosures and start communicating with people in a clear and forthright way. That sends a signal to your customers that you’re advocating for them and helping them avoid unpleasant surprises, whether that's in the form of excessive fees, conflicts of interest or, even, the zombie-induced fall of organized civilization. That’s the kind of advocacy from which loyal brand advocates are born. This article first appeared at Watermark Consulting.