Is your life insurance policy risk-free? At its core, a cash-value life insurance policy consists of three components: interest rates/dividend rates, mortality costs (cost of insurance) and expense charges. And, over the last 10 years, interest rates have been at historic lows. They are often lower than the guaranteed interest rates on universal life insurance policies. Something has to give. Insurance companies traditionally have invested their funds in debt-related investments (mostly bonds). As insurance companies are not earning enough interest to meet the projected interest rates on universal life and other cash value life insurance policies, they have had to lower the interest rates they credit to their policy owners. On some of these older policies, the guaranteed interest rate is higher than what the companies are earning, so the insurance companies are losing money on interest rates. See Also: How to Reach Millions With life Insurance What happens when insurance companies lose money? Well, they're not charities, so they look for the money in other places. Some companies have been able to make up some of the difference by changing their investment portfolio; however, by regulation, they are restricted in what they can invest in to some degree.  Why Am I Reading About Universal Life Policies Terminating?  Keeping in mind that almost every universal life insurance policy is crediting the guaranteed minimum interest rate, the insurance companies really only have one other component they can change to continue to maintain profitability. And that's the mortality costs, also known as the cost of insurance. A number of companies have recently announced increases in their mortality costs, though they do not typically disclose what the actual change is (dollar amount or  percentages). These companies include AXA Equitable, Banner Life, Security Life of Denver, Transamerica Life, Voya Life and William Penn Life. It is important to note that the companies are only raising mortality costs on some universal life policies, not all of them.  It is highly likely that other life insurance companies will follow, especially if there are no repercussions (regulatory, media, consumer, etc.).   If you have a whole life policy, you may be thinking, "Well, I'm safe, I'm getting my dividends." Dividends are tricky. Companies with whole life policies have reduced dividend scales, but this is usually not disclosed anywhere—you just receive lower dividends. On a whole life policy where your original projection was to pay premiums for X number of years, you'll find yourself paying premiums for much longer periods without ever being told. Most people don't realize their premium payment periods have been significantly extended.  Also, you won't be building up the cash value that was on the original projection, so if you bought a policy using the "Missing Money concept," "Be Your Own Banker concept" or a similar concept, you are almost certainly not going to end up where you expected. (This is setting aside the issue of whether these concepts really make sense, but that's a topic for another newsletter/article.) What's This Mean for You?  If you have a cash value life insurance policy, especially one purchased more than 10 years ago, your policy has a very high chance of terminating without value. To avoid this unwanted outcome, higher premiums are needed on almost every older universal life policy (traditional universal life, variable universal life or indexed life), basically on any life insurance policy where the premiums are not fixed. And if your premium is guaranteed, such as on a whole life policy, you may be paying premiums for significantly longer than expected or will be receiving a lower cash value. "So," you ask, "why hasn't my insurance company or insurance agent told me about this?" Good question. The answer could be any or all of the following: The insurance companies are not facing facts; the insurance companies would prefer to not face the issue; the insurance company does not realize the issue exists; the agent doesn't understand the problem; or the regulatory system is not addressing it yet.  This is definitely a matter of concern because life insurance companies are not detailing the impact on premiums and the life of the policy. And companies are not required to do so; nor are they even required to notify policyholders of increases in their costs of insurance (mortality costs).  How Do I Find Out About My Policy?  Recently, Bottom Line Personal interviewed me for a story on this topic: "Your Life Insurance Policy May Be Terminated." As mentioned in the interview, the only way to determine the impact of this increase in mortality costs is through an in-force illustration. An in-force illustration is a projection of future values based on current assumptions. The Insurance Literacy Institute has free "Insurance Annual Review" guides that include a form letter to request in-force illustrations in the Resources Section.  Your in-force illustration request should include a projection based on current premiums and assumptions, along with a request for the required premium to continue your policy to maturity (maximum length). The difference in premium may be significant. What Should I do?  A couple of things to consider are your health and life expectancy as well as your current need for life insurance. Most people find they don't have a need for permanent life insurance because they have other assets they accumulate and that replace the need for life insurance. Remember, life insurance is for protecting those who are financially dependent upon you. If you do need your life insurance policy, consider if you can pay the higher premium that would be required to keep your policy in force to maturity, or consider if a reduced death benefit would meet your needs. You should also take a look at the ratio of premiums to death benefit. If you're paying in 10% of the death benefit each year in premiums, then the policy doesn't provide you good leverage. Surrendering the policy is an option to consider, especially if there is a sizable surrender value. See Also: Bringing Clarity to Life Insurance Another option is selling a policy in the secondary marketplace (life settlement), though this needs to be approached carefully. Big Question:  How many other companies have increased their mortality costs, and how many other policies are affected?

What do you do when a group of precocious students decide to build a satellite and launch it into space? Or, when they decide to build an unmanned aviation vehicle (UAV)—more commonly known as a drone—and fly it over a busy urban market? Or, when they design and launch a few rockets October Sky-style from a training field on campus before heading to a NASA competition for a chance at $50,000 in prize money? As a risk manager, considering the answer to these questions may cause a heart palpitation or two as you think about the potential effects of these educational opportunities on the educational institution. Not only does the institution face increased liability and property damage risks, but there is also the potential for increased risk to reputation and even regulatory compliance considerations. Insurance was likely the last thing the students at St. Thomas More Catholic School in Arlington, VA, were thinking about when they began construction on a shoebox-sized satellite called Cubesat. According to a Washington Post article, the purpose of Cubesat, which was released from the International Space Station on Feb. 15, 2016, is to beam photos from 200 miles above the Earth back to computers in their school library. You can view pictures from the satellite here. See Also: Should We Take This Risk? Insurance was also, probably, the last thing students from the University of Wisconsin-Whitewater were thinking about in October 2015 when they launched their drone to capture aerial images of the new Whitewater City Market. According to the University of Wisconsin News, the purpose of the project was to respond to the market organizer’s request to geographically depict the organic growth of the Whitewater City Market. A video of the aerial images has been posted to YouTube and can be viewed here. To the 54 college teams selected by NASA for 2015-2016 NASA Launch Challenge, insurance was likely pretty low on the list of considerations as the teams worked to design, construct, test, launch and successfully recover a high-powered reusable rocket and its payloads. The purpose of the challenge is to encourage participation in STEM fields and to examine innovative solutions to potential issues that may arise during space travel. There is also $50,000 in prize money for the top three teams that complete the challenge. For 2015-16, the competing rockets will be launched on April 16, 2016. So, what are the risks associated with these types of activities, and how can insurance assist the college in transferring some of these risks? According to a white paper recently published by Allianz, a large commercial insurer, these types of aviation/space risks can be bifurcated into two areas: (1) ground or pre-launch risks and (2) in-orbit or post launch risks. Ground risks include:

• Hazard or catastrophic risk to facilities because of fire. This type of risk can be significantly increased if someone is using flammable chemicals, such as nitrogen or any of the components present in rocket fuel. Keeping these materials on campus can create additional risk for the institution, which may not be contemplated in current insurance programs.
• Transportation risk increases the risk of property and liability losses. Moving rocket components, including flammable materials, increases the potential for losses to (1) the components themselves and (2) a third party that may be injured as a result of an incident on the road.
• Liability loss because of launch failure may result in damage to property near the launch site or even injury to a third party, faculty member or student. Failure to take adequate safety precautions during design/construction—working with chemicals, power tools and other materials—may result in increased potential for injury to students and faculty participating in the project.

Post-launch risks:

• Loss of the object because of malfunction, damage or equipment failure, items that represent a significant investment of time, resources, and materials. Such a loss may result in the inability to participate in a competition, a loss of grant money or additional time spent rebuilding or reworking the project.
• Liability loss due to in-air collision, falling objects or interference with another aerial object (such as a satellite signal or an airplane’s operating equipment)—these types of incidents may result in significant bodily injury or property damage of a third-party property.

Typical insurance policies maintained by most institutions may not provide adequate coverage for space/aviation risks: Property policy—Provides coverage for loss or damage to property, equipment and materials of the university. Coverage is generally broad but may exclude: (1) hazardous materials, (2) property in transit or off premise, (3) property not owned by the university and (4) pollution because of the release of a hazardous substance or chemical. General liability policy—Provides coverage for the injury or property damage of a third party because of the negligence of the institution or those operating on behalf of the institution. Coverage responds to a wide range of standard risks, but there may be exclusions for: (1) aviation risks, (2) loss caused by the acts of a third party, such as a student or contractor, (3) third-party liability related to a discharge of pollutants/chemicals, (4) loss of institutional reputation or cost of a crisis management team, (5) coverage for regulatory fines and penalties for failure to obtain proper permits, etc. and (6) the liability to a third party because of the failure of a vessel to perform as expected or because of a design flaw. Automobile liability policy—Provides coverage for liability and property damage associated with the operation of a motor vehicle. Coverage responds to a wide range of standard risks, but there may be exclusions for: (1) pollution because of the discharge of a chemical substance transported on or in the vehicle, (2) liability for use of third-party transportation, such as a rental vehicle or bus charter or the use of a personal vehicle by a faculty member or student and (3) property damage to institutional property being transported on or in the vehicle. There are additional types of coverage that may be needed, including: Pollution coverage—Including premises pollution (to provide coverage for the institution’s own facilities) and pollution liability coverage (to provide coverage for third-party exposure to pollutants) Aviation/space coverage—Specialized policies can provide coverage for losses to an aerial vessel or its equipment and, also, for the most common types of liability loss (collision, crash or interference). Note: Special endorsements may be required for drones. Inland marine rider/policy—Provides coverage for scheduled equipment and property that may not otherwise be covered by the institution’s standard property coverage. This can include coverage for property that is being transported in a vehicle Crisis management coverage—Provides coverage for loss or damage to the institution’s reputation; this may include coverage for the costs to engage a crisis mitigation team and public relations experts or the cost to take other steps to preserve and restore the reputation of the institution. See Also: What Is the Future for Drones? Professional liability—Provides coverage to professionals because of the failure of the design/construction or for the failure of the devise to perform as intended. This coverage may include coverage for damages not related to injury or to property damage— including the financial loss and the costs for rework and redesign. Not all insurance policies are created equal—individual coverage and policies may respond differently. Please consult with an expert if you if you have questions about coverage for these types of institutional activities.

In the 1988 film “Bull Durham,” Nuke LaLoosh, a young pitcher with great talent but no professional experience (or maturity), embarks on his professional career with the minor league Durham Bulls. Crash Davis, an experienced though aging catcher near the end of his playing days, is responsible for grooming LaLoosh into a more polished player. Davis and the team’s coaches and managers spend an entire summer trying to teach LaLoosh the finer points of baseball, and – as importantly – how to think and comport himself like a professional. LaLoosh, Davis, and the Bulls have many ups and downs as the season progresses, but eventually Davis’ mentoring of LaLoosh is effective, and the young pitcher is poised to go onto to bigger and better things, just as Davis prepares to retire from the game. There are many similarities between the insurance industry and “America’s Pastime,” not the least of which is how to manage and solve the challenges of maintaining a pipeline of young talent. The insurance industry can learn a great deal from baseball’s tried and true strategy of developing talent organically through the minor leagues. Moreover, professional teams – which, like insurers, are in a data-driven business – have invested significantly in data analytics to operate more economically and efficiently with the resources they already have. Using similar strategies, the insurance industry can build an effective strategy for recruitment, training and development, as well as for sustainable operations, thereby establishing a platform for long-term success. Too many Crash Davises and not enough Nuke LaLooshes The insurance industry is facing a crisis – a rapidly aging workforce. According to the U.S. Bureau of Labor Statistics, the number of insurance professionals aged 55 years and older has increased 74% in the last 10 years; by 2018, a quarter of insurance industry employees will be within five to 10 years of retirement. Moreover, by 2017, one in every three U.S. employees will be a Millennial, and Millennials will make up 75% of the global workforce by 2025. These workforce changes mirror the demographic shifts in the U.S. population. The U.S. Census Bureau estimates that, in the U.S. alone, 10,000 baby boomers (those born between 1946 and 1964) will turn age 65 each and every day until 2030. While the expected number of Americans age 65 and older who leave the workforce will grow 75% by 2050, the expected number of American workers age 25 to 54 will grow by only 2%. Most U.S. employers are woefully unprepared for the business realities of an aging workforce and face a potentially massive loss of skilled, knowledgeable workers. Companies that effectively recruit, train and develop dedicated future staff and leaders will differentiate themselves and set themselves up for success. Like professional baseball teams, they are trying to find ways to maximize existing talent and replenish it. Also like baseball teams, they are attempting to more effectively use analytics to improve functional efficiencies (e.g., scouting in baseball and claims/underwriting in insurance), as well as continue to automate routine/recurring processes (e.g., data collection in both industries). Recruit Traditionally, baseball teams have employed scouts who are responsible for finding and evaluating amateur baseball talent. The scouts talk with each other and college and high school coaches to develop a network of contacts and resources. Human resources recruiters are the scouting departments of the insurance industry. Similar to baseball, where major league teams can either hire qualified free agents or grow talent organically through the minor league system, insurance recruiters have two options – to hire experienced candidates or recruit and develop raw talent through effective training programs. (For the purposes of this report, we focus below on acquiring and retaining young talent.) Effective college campus and entry level hiring programs are just the first step in growing talent organically. Organic growth can only occur with the development of robust recruiting programs that focus on two key things:

• Improving the insurance industry brand. Show Millennials that insurance isn’t boring. Insurance isn’t just about adjusting claims or underwriting risks, and it’s not necessarily an office-bound industry. It offers technical, sales, account management, data analytics and product development jobs similar to those in other industries that have more of a ”hip” image.
• Educating talent about the variety of roles available in the industry. Letting young people know there are rewarding career paths available in insurance (and working with them to make the promise a reality) is more likely to result in long-term employment.

To recruit Millennials, companies must adapt their recruiting strategies. Companies must think like this generation, supplementing recruiting on college campuses and at career fairs with outreach via social media and online talent communities. See Also: Why Millennials Are the Best Workers In “Bull Durham,” Annie Savoy says, “Well, actually, nobody on this planet ever really chooses each other. I mean, it’s all a question of quantum physics, molecular attraction and timing.” However, as an employer, you DO choose employees and need to be in the best possible position to make them want to choose you. Train Training new employees, much like training baseball rookies, is critical to retaining talent. Companies that find ways to deliver cost-effective, interesting and meaningful training in fundamentals, coupled with mentorship programs that pair young employees with experienced ones, will create sustainable leadership pipelines. Of note, companies that use e-learning, which appeals to Millennials much more than conference room meetings and presentations, will especially benefit:

• Company perceived as cutting-edge. A newly hired Millennial trained via an easy-to-follow e-learning system that is technologically up to date, with quality graphics and sound, will perceive that the company is on the cutting edge of technology.
• Millennials feel respected. Companies that develop a high-quality, customized e-learning program, catering to the way Millennials learn, will demonstrate value and respect for the time and talents of their employees and build loyal, hard-working and fulfilled employees.
• Cost-effective and agile. E-learning is well-suited to today’s work environment, which is fast-paced and characterized by constant change. Easily customizable and cost-effective, e-learning easily keeps pace with the rate at which technology, work procedures and workers develop.

When asked if he’s heard of Walt Whitman, Nuke says, “No. Who’s he play for?” We hope your personnel development and education is easier, but you should have the processes and systems in place to answer the questions of a younger generation that is learning on the job. Developing a succession management plan that prioritizes leadership development not only improves retention, building a solid pipeline of talent for years to come, but also reduces recruiting costs. Over the last 15 years, many baseball owners have realized that a high payroll does not necessarily result in on-field success. Expensive free agents are not a sure thing, and savvy clubs realized that they could be competitive (and have a lower payroll) by developing young players in-house. The World Series champion Kansas City Royals are a case in point: The team has developed much of its roster – and many of its best players – in its own system. Because top talent clearly is a competitive differentiator, companies will define future success by developing deep and enduring bench strength – a pipeline of players with the leadership skills to be successful in the “big leagues.” Good development results in beneficial, life-long lessons that benefit the employee and employer. Consider the following exchange after Nuke and Crash fight: Crash: Did you hit me with your right hand or did you hit me with your left? Nuke: My left. Crash: Good! That’s good! When you get in a fight with a drunk, you don’t hit him with your pitching hand. Remaining competitive even after the veterans leave Attracting and hiring Millennials is only one way to address the challenge of an aging workforce, and building a developmental system is not the only way companies can promote the transfer of knowledge from one generation to the next. Many organizations are now seeking operational efficiencies via outsourcing, predictive analytics and automation to help address the challenges of an aging workforce. Shifting back office operations (e.g., claims processing, call centers and mail rooms) to an outsourcing provider can help obviate the need to replace retiring workers. While companies historically have considered outsourcing from a cost and labor arbitrage perspective, they are now making it part of their overall growth strategy because the right outsourcing partners can help them create efficiencies, lower costs and enjoy bottom line savings. Moreover, by consolidating existing and incoming information into standardized management systems and using advanced analytics to interpret this data, companies can position themselves to make better business decisions – consider the Oakland A’s now famous and commonly used “Moneyball” approach – with a smaller workforce. Some companies have gone so far as to globally standardize key processes by using business process management or workflow software that promotes procedural consistency throughout the enterprise. As has been the case with forward-thinking baseball teams, these types of investments have enabled leading carriers to more effectively manage and use the vast amounts of structured and unstructured data they possess. Perhaps as importantly, these companies also have increased worker productivity because their employees are now able to focus much more of their time on value-added activities instead of routine, low- to no-value administrative and clerical tasks. Last but not least, the carriers that have made meaningful investments in outsourcing, business process improvement and advanced analytics have created a virtuous cycle in terms of recruiting. Companies that are on the cutting edge of business technology are also more attractive to Millennials. As a result, these employers not only need fewer employees, they attract higher-caliber newcomers. See Also: 22 Steps to Reduce the Impact of Retirement To meet the challenges of an aging workforce, prescient carriers, agencies and brokers are already changing how they recruit and assess their workplace. They are modifying policies to appeal to Millennials, making physical changes to create a more inviting workplace and facilitating knowledge transfer to improve the long-term viability of their organizations. With the impending profound demographic changes, the need to build a pipeline of new talent is mission-critical. In addition, to further minimize the effects a shortage of workers may have, many companies have recognized the need to modernize processes and systems to more effectively manage the business even with a smaller workforce. Implications

• The insurance industry is facing an impending talent crunch. If it does not take steps to attract young employees, the crunch will become a crisis.
• Millennials will soon predominate in the workforce, and insurers need to differentiate themselves from companies in other industries as being attractive places for Millennials to work. They can do this by:

– Effective recruiting that demonstrates rewarding career paths exist in the industry. – Training that pairs new hires with experienced employees and helps build mentoring relationships; e-learning is a cost-effective way to do this, and one that Millennials like. – Developing leaders internally – akin to a minor league system – which both encourages retention among younger employees and also eases internal succession planning because it ensures there is a healthy talent pipeline. – Strategic outsourcing that focuses on complementary capabilities and not just cost reduction; modernizing business processes and effectively employing advanced analytics can significantly improve efficiencies, reduce costs, foster a focus on the things that really add value to the business and attract the best and the brightest newcomers to the industry workforce.

I love health policy, healthcare technology and using "corkscrew" thinking to find solutions for big problems. Perhaps no problem looms larger today than our current healthcare crisis and its financial implications for our future.   The U.S. healthcare system needs more than a healthy shot in the arm—it needs a cure. Premiums continue their upward surge. More Americans are going into debt because of healthcare. Fewer workers are funding a growing Medicare base. There is a heavy shift of enrollees to Medicaid coverage, drug prices keep climbing and people are living longer. In the last decade, top healthcare analysts, industry leaders, medical school experts, bloggers, public policy wonks, foundations, think tanks and politicians have had plenty to say, but the American consumer continues to be hit hard. Current (and evolving) solutions we have to fix healthcare include: the Triple Aim, affordable care organizations (ACOs), private- and public-sponsored medical research, disease fundraising, population health management, electronic health records (EHRs), high-tech abuse/fraud solutions, new drugs, end-of-life talks, Obamacare and the future of pay-per-value. See Also: Why Employers Should Comply With Obamacare Mandate Everything about our healthcare crisis screams for utilization that is more selective, has a greater efficiency and can lower costs. But the red light on healthcare's dashboard says there is a bigger issue. It's something that, when fixed, will provide a greater benefit for generations to come. That red light alerts us to the fact that, out of the $3 trillion spent per year on healthcare, 86% is related to chronic disease—many of which can be prevented, delayed in their onset or better managed earlier. Per the Centers for Disease Control and Prevention (CDC), the costs and figures are simply staggering. If the world's largest company was going under, its underlying financials couldn't look any more crippled. Everyone has been looking at our national healthcare crisis in the wrong way. The solution is not to provide everyone with health coverage but to take strong, legal steps to teach, coerce and even mandate that the majority of American children and adults become healthy, through individual accountability. "Mandate" hits a nerve, especially to those like myself who value the strength of our individual freedoms. But, historically, a large number of American citizens have consistently shown they do not value their health. When value is lost, the effect is often poor choices and subsequent long-term management. This leads to the development of sustained drivers, culminating in the onset of chronic disease(s), the major cost driver of our healthcare crisis. For starters, nearly 50% of all American adults (117 million) have a chronic disease, and 25% have at least two. More than a third of our country (35%) is obese. Nearly half of U.S. adults (47%) at least have uncontrolled high blood pressure or uncontrolled high LDL cholesterol or are smokers. "Steve, that is the individual's choice, and that person has to live with the results," you say. Sure, personal responsibility is key. However, for the healthcare markets, one person's chronic disease affects everyone in the system. Subsidies and public coverage, such as Medicare and Medicaid, run off taxpayer money. Private insurance prices group and individual premiums from risk pools. Therefore, there is no misunderstanding—today's unhealthy people cost healthy people money both now and in future generations. Almost everyone agrees that eating a carrot is better than eating a donut, that running two miles a day beats chain-smoking a pack of cigarettes. If that's the case, why aren't people making the needed changes? Simple : Those people do not value their health. Therefore, they do not take actions to improve or maintain it. Having individuals value their health on a mass scale is the answer to lowering chronic disease rates. Lower disease rates lower cost for care, resulting in more affordable healthcare for everyone. ACOs, EHRs, increasing pay-per-value reimbursement helps lower costs and creates efficiency but does very little to drive individuals to value their health. When someone makes a decision on just about anything, there are only two reasons: to gain pleasure or to avoid stress or pain. You might eat a chocolate bar, craving the sweet taste. Or you might quit smoking, after the first heart attack, where the strong possibility of death has set in. Here’s the thing. For most people 25 and under, if they already "feel good" physically, neither trigger is in play. By the time they "feel bad," many chronic diseases may already have had an irreversible foothold for years or decades. Early detection for everyone is tremendously important and desperately needed. Many young Americans don't go to the doctor, because they "feel good." The initial motivator to get people to value their health is not public education, throwing large data points at them, getting them on high-deductible healthcare plans or using fear marketing. Rather, we must create an instance where people will get massive amounts of pain from not going to get a checkup or screening. The law must require every insured and uninsured American to have routine physicals and screenings. Basic Outline of Program:

• There must be repetitive and selective screenings, depending on gender and age.
• Those who do not get screened receive a financial penalty, paid directly by individuals from their taxes or through their paycheck, or deducted from their social program or subsidy benefits.
• Subsidies would cover the patient portion for screening, whether insured or not.
• Results would be tracked, individuals would be counseled and any further results on subsequent actions would be tracked.

Yes, this plan will drive up costs on the front end. Look, it took us a lot of time to get to this healthcare crisis, and it will take time to undo it. If we believe we can find a short-term solution to reverse this, we are kidding ourselves. See Also: Endangered Individual Health Market The most important result is gaining proper management for the long term, allowing affordability for future generations There will be those who claim individual rights will be lost when such coercion takes place (just think about how the Affordable Care Act was positioned as a tax). In the end, if we didn't have such nasty, costly surprises on the middle and back-end portions of our lives, we wouldn't have to make these changes. Perhaps if doctors, insurers, drug companies, hospitals and other medical services reduced their revenues, affordability would be in hand. But here's a reality check: The U.S. healthcare sector is growing faster than any other sector in the country. Companies, employees and shareholders are not going to reduce their financial interests and current way of life for the average American consumer to afford care. We need something new. We do not need something to work against businesses but something to work for people.  People can, then, with better personal health data, be motivated to gain more than ever in their current and future health. Americans have always been strong enough to call upon resolve and forward thinking. Now, we live in the time of "what's in it for me?" Sometimes, mandates are necessary to get people to see the importance of helping their fellow man, instead of themselves. People are dying unnecessarily. This will continue if we don't stand for more than ourselves. Let's come together to give more people the chance to make better decisions and to live healthier lives.

The group insurance market shows real promise, but most carriers are still trying to determine the best path forward. Moving from being in a quiet sector to the front lines of new ways of doing business has shaken the industry and confronted it with challenges – and opportunities – that many could not have foreseen even a decade ago. For starters, let’s take a look at where the market is right now. Three recent trends, in particular, are having a profound impact:

• The Affordable Care Act, which has led health carriers to increase their focus on non-major medical aspects of the parts of their business that the legislation has not affected. In turn, this has led to intensifying competition.
• Consumerism, which has resulted largely from workers’ increasing responsibility for choosing their own benefits. This has created disruption as employees/consumers have become increasingly dissatisfied with the gap between group insurance service, information and advice and what they have come to expect from other industries.
• The aging distribution force, which means that experienced brokers/agents are leaving the work force and are being replaced by inexperienced producers at decreasing rates or are not being replaced at all.

Group players – which historically have been conservative in their market strategies – focus on aggressively driving profitable growth. To do this, they are concentrating on four key areas: 1) growing their voluntary business, 2) streamlining their operating models, 3) re-shaping their distribution strategies and 4) making significant investments in technology. See Also: Long-Term Care Insurance: Group Plans vs. Individual Group insurance is no longer a quiet sector of the industry but instead is in the front lines of developments in customer-centricity and technological innovation. Growing the voluntary business – The voluntary market has been of interest to traditional group insurance carriers for more than two decades, but the success of the core employer paid group insurance business has resulted in a lack of robust voluntary capabilities. However, with employers shifting more costs to employees, voluntary products have become a key way to manage group benefit costs while expanding the portfolio of employee products. Some carriers are expanding their voluntary businesses by offering a modified employer paid group product in which the employee “checks the box” to pay an incremental premium and receive additional group coverage (e.g., long term disability (LTD), life and dental). Other carriers are exploring models where employees can sign up for an individual policy at a special premium rate. The former example is a traditional voluntary product, while the latter example is a traditional worksite product. For most carriers, adding the traditional voluntary product is fairly straightforward because it is still a product that the group underwrites. However, more carriers are looking into the worksite product (which AFLAC and Colonial Life & Accident have executed particularly well) because, with the passage of the Affordable Care Act, some see a potential opportunity to reach small businesses that previously may not have been interested in group benefits. Streamlining operating models – Group carriers also are trying to develop streamlined, cost-effective, customer-centric operating models. The traditional group insurance operating model has been built around product groups such as group LTD, short-term LTD, dental, etc. However, the product-based model is inefficient because it increases service costs, slows speed to market and fails to support the holistic views of the customer that enables carriers to serve customers in the ways they prefer. Group insurers are now investing both time and capital to understand how to remove inefficient product-focused layers of their operations and streamline their processes to profitably grow. Many have focused on enrollment, which cuts across products and is a frequent source of frustration for everyone. Carriers are frustrated because they can spend days and weeks trying to ensure that everyone is properly enrolled in the right plan. Moreover, what should be a fairly straightforward, automated process often can require considerable manual intervention to ensure that employees are properly enrolled. In the meantime, employees are frustrated with recurring requests for information and the slowness of the enrollment process. Employers are frustrated by the additional time and effort that they have to expend and the poor enrollee experience. Producers become frustrated because the employer often holds them accountable for the recommended carriers’ performance. Reshaping distribution strategies – In terms of distribution, private exchanges initially promised to connect group carriers with the right customers using extremely efficient exchange platforms. As a result, many group carriers joined multiple exchanges expecting that this model would put them on the cusp of the next wave of growth. However, success has proven more elusive than they expected, largely because they’ve spread themselves too thin across too many, often unproven exchanges. And, while private exchanges still offer great potential, many carriers have now begun to rethink their private exchange strategies with the realization that the channel is not yet a fully mature group insurance platform. Investing in technology – Whether group carriers are focusing most on entering the voluntary market, streamlining operations or refining their private exchange strategies, successful in all these areas depends on technology. Group technology investments have lagged behind the rest of the industry. The reasons for this range from a lack of proven technology solutions that truly focus on the group market to downright stinginess and the resulting reliance on “heroic acts” and dedication of committed employees to drive growth, profits and customer satisfaction. However, viable technological solutions now exist – and they are probably the most critical element in the march toward effective data integration, efficient customer service and ultimately profitable growth. Every facet of the business –underwriting, marketing, claims, billing, policy administration, enrollment, renewal and more – is critically dependent upon technological solutions that have been designed to meet the unique needs of the group business and its customers. Prescient group carriers understand this and have been investing in developing their own solutions and partnering with on-shore and offshore solutions providers to fill gaps in non-core areas. Whatever their primary focus – growth, operations or distribution – a necessary element for success is up-to-date and effective technology. A market in flux In conclusion, group insurance is in a time of transition. Major mergers and acquisitions have already started to reshape the market landscape, and existing players are likely to use acquisitions and divestitures as a way to refine their market focus. Moreover, new entrants are looking to exploit openings in the group space by providing the kind of focus, cutting-edge product offerings and service capabilities that many incumbents have not. These developments show group’s promise. The winners will be the companies that wisely refine their business models and effectively employ technology to meet the unique needs of new, consumer-driven markets. Implications

• We will continue to see group carriers focus on the voluntary market, especially traditional group-underwritten products. They will look to not only round out their product bundle by providing solutions that meet consumer needs, but also integrate their offerings with other employee solutions like wealth and retirement products.
• Group insurers will continue to aggressively streamline processes to promote productive and profitable customer interactions.
• Private exchange participation strategy needs to align with target markets goals, including matching products with appropriate exchanges. Focusing on participation means that group carriers avoid spreading themselves too thin trying to support the various exchanges (often with manual back-end processes).
• Group carriers can no longer compete with antiquated and inadequate technology. Fortunately, there are now group-specific solutions that can make modernization a reality, not just an aspiration.

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.