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A Hospital That Leads World on Transparency

The Virginia Mason Medical Center in Seattle shows how disclosure can do so much to reduce errors and build trust with patients.

Jeremy Hunt, secretary of state for health in Britain, recently toured the Virginia Mason Medical Center in Seattle. He said the visit was “inspirational” and announced plans to have the British National Health Service (NHS) sign up “heart and soul” to a similar culture of safety and transparency. Hunt wants doctors and nurses in NHS to “say sorry” for mistakes and improve openness among hospitals in disclosing safety events. I had a similar reaction to my tour of Virginia Mason. The hospital appears impressive—and truly gets impressive results. My nonprofit, the Leapfrog Group, annually takes a cold, hard look at the hospital’s data and named Virginia Mason one of two “top hospitals of the decade” in 2010. Every year, it ranks near the top of our national ratings. Virginia Mason’s success is rooted in its famous application of the principles of Japanese manufacturing to disrupt how it delivered care, partly at the behest of one of Seattle’s flagship employers, Boeing. There are numerous media stories and a book recounting the culture of innovation Virginia Mason deployed to achieve its great results, so I won’t belabor the point here. But at its essence is Virginia Mason’s unusual approach to transparency. Employees are encouraged to “stop the line” – that is, report when there’s a near miss or error. Just as Toyota assembly workers are encouraged to stop production if they spot an engineering or safety problem, Virginia Mason looks for every opportunity to publicly disclose and closely track performance. It is not normal for a hospital to clamor for such transparency. Exhibit A: the Leapfrog Hospital Survey, my organization’s free, voluntary national survey that publicly reports performance by hospital on a variety of quality and safety indicators. More than half of U.S. hospitals refuse the invitation of their regional business community to participate in Leapfrog, suggesting that transparency isn’t at the top of their agenda. But for Virginia Mason and an elite group of other hospital systems, not only is the transparency of Leapfrog a welcome feature, but they challenge us to report even more data, faster. I hope the British health care system takes Virginia Mason’s model and runs with it, but, more than that, I hope the model takes hold here in the U.S. Too many hospitals in the U.S. avoid disclosing their performance instead of welcoming transparency as an opportunity to build trust with the patients in their care. The movement toward transparency has a long way to go. We do not have publicly disclosed accreditation reports, even though those reports are tickets for hospitals to obtain public funding through Medicare. We do not yet know enough about infection rates, sentinel events, medication errors and outcomes including death rates from many common (or uncommon) procedures. Price transparency is also rare, according to a report by the Catalyst for Payment Reform. The ultimate example of our tendency toward non-disclosure came last week, when USA Today reported that CMS quietly removed from public disclosure the incidence of certain "never" events, like objects left in after surgery. Experts disagree on the merits of how CMS counts these "never" events, and CMS—no doubt influenced by lobbyists—believes that they aren’t fair to hospitals. Yet, in a culture of transparency, CMS would do the opposite: first err on the side of reporting the "never" events, then let the experts refine the measure over time. Indeed, as the Virginia Mason experience demonstrates, the very act of reporting can accelerate improvement and transformation. It’s time for the U.S. to ignite its passion for free speech and lead the world in applying it to health care.

Has Auto Insurance Become a Commodity?

No. TV ads emphasizing the speed of application suggest otherwise, but you don't pick a dentist based on how fast he does a root canal.

A boomerang kid lost his job and moved back home with his parents. While driving his mother’s car, he negligently struck another vehicle, causing several thousand dollars in property damage. The mother’s insurer denied the claim on the basis that the driver’s residency was not reported to the carrier within 30 days of his return home. Fifteen minutes can save you 15%, anyone? Actually, the latest online ads say you can get a car insurance quote in only 7 ½ minutes. Buying insurance may not be a pleasant task for most people, but neither is getting a root canal, and you wouldn’t choose a dentist based on how fast he or she can complete a procedure where your health is at stake. Yet consumers routinely risk everything they own and much of what they might earn in the coming years by choosing the fastest, lowest-cost insurance with the cleverest advertising campaign. The denial of the boomerang kid’s claim arose from an exclusion in the insurer’s policy for accidents involving undisclosed household residents, unless the insurer had been notified within 30 days of the residency. What insured would think to report something like this to his or her auto insurer? If an “ISO-standard” policy had been in place, that wouldn’t be necessary. At a rapidly accelerating rate via TV advertising, online “ease of use” promotion and proliferating media articles, consumers are being duped into believing that personal lines insurance is a commodity, with the only significant difference being price. Nothing could be further from the truth. While a lower price doesn’t necessarily imply lesser coverage, that is often the case. In the words of sales legend Morty Seinfeld, “Cheap fabric and dim lighting. That’s how you move merchandise.” What Does the Caution to Compare ‘Apples to Apples’ Really Mean?  (Hint: Nothing.) Recently published studies by firms like McKinsey, A.M. Best, Nomura Equity Research and Gartner proclaim that auto insurance is now officially a commodity. Some of their conclusions predict the demise of the insurance agent, as the direct sales model wins the commodity war. Have any of these researchers ever read their own auto policies, much less compared the coverages in multiple policies? The media perpetuate the myth. The typical “How to Save Money on Car Insurance” article cautions consumers to make sure they compare “apples to apples.” Translation: Make sure you’re getting quotes on premiums for the same liability, uninsured motorist and medical payments limits and physical damage deductibles. It’s as if broad coverage categories, limits and deductibles were the only differences between auto insurance policies. A Wall Street Journal article, “Car Insurance Rate Shopping Can Pay Off,” says, “The Consumer Federation recommends consumers shop around to get quotes from insurers that don’t use agents, such as Amica Mutual Insurance and USAA (for families with military ties), and then ask an agent to beat the best price.” Not a word about any coverage differences—only the price. More Proof That the ‘All Car Insurance Is the Same’ Mantra Is an Illusion A Florida insured’s auto was in the shop, so she rented a car and later loaned it to someone, who loaned it to someone else, who had an at-fault accident that killed a child and seriously injured other children. The claim against the operator and named insured was denied by the insurance company on the premise that the vehicle was not a “temporary substitute” and that the operator was not a “permissive” user, as defined in this insurer’s personal auto policy. The son of a friend of an agency owner was street racing when he crashed, seriously injuring himself and his passenger. The claim was denied by the insurance company based on its interpretation of its personal auto policy’s “racing” exclusion. A church allowed a member to park his car in its heated “bus barn.” While exiting, he wrecked the car, causing structural damage to the building. The claim was denied by the insurer, citing the “care, custody or control” exclusion in the personal auto policy. What do these claims have in common, other than denial from the insurance company? Each of them would have been covered if the policyholder had purchased an “ISO-standard” personal auto policy rather than the policy in question. With regard to the Florida claim, the ISO personal auto policy defines “temporary substitute” and “permissive use” much less restrictively than the policy that was in force. The named insured might have saved 15% in 15 minutes when she purchased her auto policy, but it proved to be a bad deal when she had to take her claim to the Florida Supreme Court to recover. The Supreme Court did reverse the Court of Appeals ruling that favored the insurer, but the rationale was less about the policy language and more about Florida’s unusual dangerous instrumentality doctrine. In the street racing example, the ISO personal auto policy excludes injury that arises from accidents that take place “inside a facility designed for racing,” while the auto policy in question excluded almost any racing activity, including on a public street. Fortunately, the father of the injured child had a Trusted Choice independent agent to aggressively advocate on his behalf by pointing out to the insurer that the exclusion applies only to organized racing activities, not impromptu street racing. More than a dozen coverage opinions from the Big “I” Virtual University Ask an Expert service supported the agent’s efforts. Do you think someone who purchased insurance online from “a guy in khakis” would enjoy the same advocacy? Like the ISO personal auto policy, the “bus barn” claim also involved a “care, custody or control” exclusion. But the ISO policy makes an exception for damage to a private garage. The policy in question has no such exception—not to mention the fact it’s unlikely that the barn was actually in the driver’s care, custody or control. So both the policy itself and the insurer’s interpretation of the exclusion were faulty from the insured’s perspective—rendering the carrier’s slogan, “same coverage, better value,” untruthful. 12 More Nails in the Coffin of the ‘Insurance Is a Commodity’ Myth Here are a dozen auto insurance exclusions or limitations you won’t find in the “ISO-standard” personal auto policy:
  1. Undisclosed household residents are excluded.  How many families have “boomerang” kids living at home whom they have not told their auto insurer about? An exclusion of this type was just recently added to the auto policy of one of the major TV advertisers.
  2. Business use of autos you don’t own is excluded.  Have you ever borrowed a neighbor’s car or made a business stop in a dealer loaner or rental auto?
  3. Business use of ANY auto is excluded.  Do you ever run to Staples or the post office on business for your employer?
  4. Use of ANY auto you don’t own is excluded.  Better not drive anyone’s car but your own.
  5. Vehicles weighing more than 10,000 pounds are excluded.  Have you ever rented a U-Haul truck or an RV for personal use thinking your liability coverage extended to the rental? With an “ISO standard” policy, it does; with some auto insurance policies, it doesn’t.
  6. Any type of delivery is excluded.  Denied claims include pizza, newspapers, Mary Kay cosmetics and, yes, even the delivery of insurance policies to customers by an agency producer. Google pizza delivery auto accidents and take a look at the catastrophic nature of some of them. Was that $50 you saved to buy a policy a good deal?
  7. Permissive users only get minimum limits.  This can apply to people who borrow your car or even unlisted household drivers.
  8. “Street racing” is excluded.  Google “street racing” and see how often people are killed or critically injured in the process. Does the auto policy covering your testosterone-fueled teenage son cover street racing? The “ISO standard” auto policy does.
  9. Criminal acts are excluded or limits reduced.  DUIs or even speeding tickets may preclude coverage.
  10. Medical payments only include licensed physician fees.  One insured incurred a $25,000 “life flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
  11. Theft without evidence of forced entry is excluded.  One insured had a four-figure vehicle theft loss denied because he left his keys in the car. No such exclusion exists in the “ISO standard” personal auto policy.
  12. Sales tax is not covered under loss settlement.  This cost one “You get the SAME COVERAGE, often for less” insured more than $2,000 out of pocket for sales tax on a replacement auto.
Do you still believe what you’re told on the TV ads that the auto policy you’re getting a quote on is just like every other auto policy in the marketplace? Accept the Challenge and Dispel the Myth The differences between auto insurance policies are many, varied and potentially catastrophic. As insurance educator John Eubank, CPCU, ARM, says, “The bitterness of no coverage is remembered long after the sweetness of low price has been forgotten.” Don’t be sold a bill of goods by TV advertising and consumer articles that state or imply that the only material difference between insurance policies is the price. It is time for insurance professionals to dispel this destructive myth. Innocent consumers experience catastrophic uninsured losses every day because they bought into the illusory proposition that their risk exposures can be identified and addressed cheaply and within 7 ½ to 15 minutes. Failure to get this message to the consuming public is likely to lead to increasingly stripped-down insurance products that enable competitive pricing. Arm yourself with the information necessary to educate your clients, and bust the myth that insurance is a commodity.

Bill Wilson

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Bill Wilson

William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of Insurance Commentary.com. He retired in December 2016 from the Independent Insurance Agents & Brokers of America, where he served as associate vice president of education and research.

How the NFL May Fix Workers' Comp

The RFID sensors that the NFL is putting on players to generate data for fans could help with investigations of workplace injuries.

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I have a whiz bang idea for solving that pesky investigation issue that surrounds every workers' compensation claim. This idea will clearly get me that Nobel or Pulitzer Prize. Either one. I’m not fussy. It came to me while I was reading an article about the NFL boosting its statistics tracking and accuracy with the use of RFID tags in the players' shoulder pads. It seems these amazing little chips will allow NFL statisticians to know "real-time position data for each player," as well as "precise info on acceleration, speed, routes and distance." This is part of the NFL's "Next Gen Stats" initiative for fans. For those who are unaware, RFID (radio frequency identification) technology is the hot new thing. Essentially, an RFID tag contains a passive ID chip that can be activated by receivers as it passes near them. The tag requires no battery power and is highly reliable. Stores like Walmart now use them extensively to track and monitor inventory changes. Even my Florida SunPass tag uses one. The small sticker on my windshield allows me to zip through tolls and access parking at Tampa International Airport without talking to anyone or even rolling down my window. Of course, the tag also allows the state to bill me for that activity and serves to notify the NSA that I am on the move again. But the NSA probably already knew that. The complete loss of privacy is a small price to pay for not having to chat up a friendly toll taker. I am so glad the NFL has gone with RFID. It is a much more reliable technology than those old scanner barcodes. That was a disaster -- having to get the player to run into the end zone six times before the scanner could capture the touchdown -- but I digress. . . . While the article on the NFL and RFID was prattling on about all the useless stats fans could now have access to, I was thinking in an entirely different direction. I recognized that the NFL has inadvertently invented the personal "black box" for workplace accidents. Think about it. This is a technology that could be employed in offices and factories all over the country. Employers could easily monitor "real-time position data for each employee," as well as "precise info on acceleration, speed, routes and distance" as employees move throughout the day. An RFID-enabled wearable could tell accident investigators if an employee was running when he slipped and fell down the stairs, as well as how many rotations he took as he progressed to the bottom.  The tag could determine that an employee was idle in the break room at the time she claimed to be straining her back on the loading dock.  And biometric sensors added to the RFID wearable could actually cross reference stress levels and physiological indicators to the time and location of the accident, giving a clearer view of events than ever before possible. It is just like data used from airplane black boxes to reconstruct what actually happened to cause an accident. I am telling you, this technology could be a tremendous boon for risk managers and accident investigators everywhere. But why should they have all the fun? Safety professionals could leverage the same technology to prevent accidents in the first place. Restaurant servers would no longer have to yell “corner” or “door” when traversing areas with visual limitations. Their RFID-enabled monitors would send real time location updates of other employees in the vicinity to heads-up displays located within employees' Google Glass. The system would issue potential collision warnings similar to those in today’s aviation industry.  I’m telling you, Big Brother really may have all the answers after all. Unless, of course, all the employees were watching internet porn on their Google Glass heads-up displays, and no work would get done anywhere. On the plus side, biometric sensors should pick up signs of unauthorized porn viewing, so it may be controllable after all. The remaining challenge will be the design and implementation of the RFID biometric wearable devices. Will they be embedded in the work clothes or uniforms, in bracelets, necklaces or other accessories or simply implanted in our skulls? For the record, I do not recommend the skull implant method. My wife tells me my skull is so thick, the signal could never get out. Also, multiple sensors may need to be deployed on every employee, such as in shoes and on the head. This would be helpful for a truly accurate rotation count on those extended fall injuries. In the end, we may all be wired to the hilt, with no more need to verbally communicate in the workplace. But we will have our personal black boxes. We’ll all end up as fat people in our little floaty chairs. But if we over-sensored tubbos have a collision, our wearable technology will give investigators a much clearer idea of what went tragically wrong. Even though the idea is somewhat creepy, and I am largely joking, I think we may actually have something here: black box wearables. Coming soon to a workplace near you.

Bob Wilson

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Bob Wilson

Bob Wilson is a founding partner, president and CEO of WorkersCompensation.com, based in Sarasota, Fla. He has presented at seminars and conferences on a variety of topics, related to both technology within the workers' compensation industry and bettering the workers' comp system through improved employee/employer relations and claims management techniques.

'Data on the Move' Means Data at Risk

Breaches related to "data on the move" in healthcare are rising, but there are simple ways to address the problem.

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Everywhere we look today, data is on the move. The downside:  When personal information and data are being moved electronically, they’re more vulnerable to identity theft. At the Identity Theft Resource Center,  a crucial part of our analysis when we track data breaches is to look for emerging trends.  Unfortunately, one trend has become evident: The number of breaches linked to “data on the move” in the healthcare industry is up significantly.  In fact, these types of data breaches – say, when a laptop or flash drive is stolen or back-up tapes are lost in the mail – have risen above other industries quite dramatically. But there’s hope. Companies and organizations can take steps to reduce these data breaches. They can provide more robust employee training and stricter controls over what devices are allowed to leave the premises. Organizations can also review what data is stored on devices and how the devices are protected. Adding encryption to laptops that contain sensitive data – and that must leave the premises – will also improve the situation without busting the bottom line. Breach incidents because of data on the move have been trending downward as a percentage of all breach incidents, from 20% in 2008 to 12% in 2012. Although the percentage increased slightly to 13% in 2013, most industry sectors have seen a payoff from preventive measures. The medical sector is not having a similar experience. More than half of the breaches because of data on the move occurred in the health/medical sector. DataMove For instance, in California, Palomar Health recently experienced a data breach when an encrypted laptop and two unencrypted flash drives were taken from a staff member's car. The devices exposed the personal health information of 5,000 patients. In Michigan in late January, a laptop computer and flash drive were stolen from an employee of the state Long Term Care (LTC) Ombudsman’s Office. Information on the laptop was encrypted, but data on the flash drive was not. The flash drive contained personal information about 2,595 living and deceased individuals, including names and addresses and, for some individuals, dates of birth. Either a Social Security number or a Medicaid identification number was included with 1,539 records. Data breaches pose a significant risk to consumers because of the correlation between breaches and identity theft. According to Javelin Research, one out of three people whose information was breached fell victim to fraud in the same year. When medical records or personal health information (PHI) are compromised, consumers are not only  facing an increased risk of medical identity theft. The risk for all types of identity theft is increased. (For more information on medical identity theft and its impact on the community, see the Medical Identity Theft and Fraud article on ITL). The information entrusted to medical providers and insurance companies is often the same information that can be used to steal a person’s identity and commit financial identity theft, government identity theft and even criminal identity theft. In addition to receiving medical goods and services or prescriptions in the victim’s name, a thief could obtain loans or new lines of credit, apply for government benefits or file a false tax return. The perpetrator could even use the victim’s name if caught while committing a crime. “Whether sensitive data is at rest or in transit, it should have appropriate risk-based controls and policies applied to its governance,” says Ann Patterson, program director with Medical Identity Fraud Association, which unites all the stakeholders and helps to convey the importance of these best practices. “The same judicious enterprise-wide data protection principles that you apply to your data at rest should also be considered for your data in transit and your mobile data. Particularly for mobile, BYOD policies (Bring Your Own Device) are essential.” According to MIFA, many organizations are feeling the impact of shrinking budgets and may be tempted to reduce costs by limiting financial resources for internal fraud detection and prevention programs.  This may provide immediate help to the bottom line. But in the long term it’s the wrong solution. Costs creep up in other areas when fraud is ignored.  This could result in an organizational culture shift; as the old saying goes, what we allow, we encourage. Coupled with human resources divisions, the fraud detection and prevention programs often provide employee training and formulate best practices in regard to fraud reduction. The ITRC realizes the critical importance of information management and data security. We believe strongly in the importance of educating consumers and businesses about  the value of our individual data and the importance of personally identifying information (PII). For this reason, our organization began tracking data breaches in 2005. Tracking breaches has allowed us to look for patterns in regard to how our information is being safeguarded, or compromised, by those we trust with it. The ITRC defines a data breach as an event in which an individual name plus a Social Security number, driver’s license number, medical record or financial record (credit/debit cards included) is potentially put at risk because of exposure. This exposure can occur either electronically or in paper format. The ITRC will capture breaches that do not, by the nature of the incident, trigger data-breach-notification laws. Generally, these breaches consist of the exposure of user names, emails and passwords without involving sensitive personal identifying information. These breach incidents will be included by name but without the total number of records exposed. (For a more detailed explanation of our methods, visit the ITRC breach report page). Data breaches and identity theft have been on the rise and have a significant effect on the individual victims as well as on the U.S. economy.  We acknowledge that there is no panacea to rid ourselves of this issue entirely. However, encouraging negligence by not providing employees with the proper tools, and simply not acknowledging the problem, is not the answer, either. Small and steady gains can be made by implementing training and increasing accountability for the individuals and organizations that we entrust to be good stewards of our PII.  A good start would be to understand and recognize how each type of incident plays a role and identify deficiencies. Another option for organizations is to get involved with industry and trade organizations that also tackle issues related to data breach best practices daily. Businesses want to keep proprietary information close to the vest, but best practices about breaches should not be a trade secret.  A highly engaged and enlightened health/medical community would be a step in the right direction.

Eva Velasquez

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Eva Velasquez

Eva Velasquez is the President and CEO of The Identity Theft Resource Center. Velasquez has more than 500 hours of specialized training in the investigation of economic crimes and has been a presenter at numerous conferences across the state, including the PACT (Professionals Achieving Consumer Trust) Summit, the California District Attorney’s Association Consumer Protection Conference and the California Consumer Affairs Association annual conference.

The Wellness Industry Pleads the Fifth

The author has repeatedly pointed out major problems with wellness claims but says the industry won't respond. Now, he's upping the ante.

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The wellness industry’s latest string of stumbles and misdeeds are on the verge of overwhelming the cloud’s capacity to keep track of them. First, as readers of my column may recall, is the C. Everett Koop Award Committee’s refusal to rescind Health Fitness Corp.’s (HFC’s) award even after HFC admitted having lied about saving the lives of 514 cancer victims. (As luck would have it, the "victims" never had cancer in the first place.) Curiously, HFC’s customers have won an amazing number of these Koop awards, which are given for "population health promotion and improvement programs." Why so many, you might ask? Is HFC that good? Well, HFC is not just a winner of the Koop Award. HFC is also a major sponsor. Perhaps it was an oversight that HFC omitted this detail from its announcement that both Koop Awards were won by its customers for 2012. Second, the American Heart Association (AHA) recently announced its guidelines for workplace screenings. They call for much more screening than the U.S. Preventive Services Task Force does. As it happens, the AHA guidelines were co-written by a senior executive from Staywell, a screening vendor. Not just any vendor, but one that had already been caught making up outcomes. Third, although the American Journal of Health Promotion published a meta-analysis that showed a degree of integrity rare for the wellness industry, it then hedged the conclusion. The analysis showed that high-quality studies on wellness outcomes demonstrated “a negative ROI in randomly controlled trials.” But the journal then added that invalid studies (generally comparing active, motivated participants to non-motivated non-participants) showed a positive return. The journal said that if you averaged the results of the invalid and the valid studies you got an ROI greater than break-even. However, the averaging logic leading to that conclusion is a bit like “averaging” Ptolemy and Copernicus to conclude that the earth revolves halfway around the sun. How does the wellness industry respond to criticisms like these three? It doesn't. The industry basically pleads the Fifth. The industry knows better than to draw attention to itself when it doesn't control the agenda. The players know a response creates a news cycle, which they will lose -- and that absent a news cycle no one other than people like you are going to read my columns and notice these misdeeds. One co-author of the AHA guidelines wrote to my Surviving Workplace Wellness co-author, Vik Khanna, and said the AHA would respond to our “accusation” but apparently thought better of it when the lay media didn’t pick up the original story.  (As a sidebar, I replied that saying a screening vendor was writing the screening policy was an “observation,” not an “accusation,” and recommended the editors check www.dictionary.com to see the difference.) Similarly, in the past, I have made accusations and observations about the wellness industry both in this column and on the Health Care Blog…and gotten no response. So to make things extra easy for these folks, I dispensed with statements that needed to be rebutted. Instead, I asked some simple questions. I said I would publish companies' responses, which would create a great marketing opportunity for them…if, indeed, their responses appealed to readers. I posted the questions on a new website called www.theysaidwhat.net.  I got only one response, from the Vitality Group. The other wellness companies allowed the questions to stand on their own, on that site. To ferret out responses, I then did something that has probably never been done before: I offered wellness companies a bribe…to tell the truth. I said I’d pay them $1,000 to simply answer the questions I posted about their public materials, which would take about 15 minutes.( If someone makes me that offer, I ask, “Where do I sign?” but I’m not a wellness vendor.) Here’s how easy the questions are: Recall from a previous ITL posting that Wellsteps has an ROI model on its website that says it saves $1,358.85 per employee, adjusted for inflation, by 2019 no matter what you input into the model as assumptions for obesity, smoking and spending on healthcare. The company claims this $1,358.85 savings is based on “every ROI study ever published.” Compiling all those citations would require time, so I merely asked the company to name one little ROI study that supports this $1,358.85 figure. Silence. I asked similar questions (which you can view on the click-throughs) to Aetna, Castlight, Cigna, Healthstat, Keas (which wins style points for the most creative way to misreport survey data), Pharos, Propeller Health, ShapeUp, US Corporate Wellness and Wellnet, as well as their enablers and validators, Mercer and Milliman. Propeller and Healthstat responded -- but didn’t actually answer the questions. Healthstat seems to say that rules of real math don’t apply to it because it prefers its own rules of math. Propeller – having released the completely mystifying interim results of a study long before it was completed – said it looks forward to the study’s completion and didn’t even acknowledge that questions were asked. In all fairness, one medical home vendor sent a response expressing a seemingly genuine desire to understand or clarify issues with its outcomes figures and to possibly improve their validity (if, indeed, they are invalid). As a result, I am not adding the vendor to this site; the idea is not to highlight honest and well-intentioned vendors. (The company would like its name undisclosed for now, but if anyone wants to contact it, just send me an email, and I will pass it along to the company for response.) Likewise, there are good guys – Towers Watson and Redbrick, despite their high profiles, managed to stay off the list by keeping their hands clean (or at least washing them right before inspection). Allone, owned by Blue Cross of Northeastern Pennsylvania, even had its outcomes validated and indemnified. I will announce more validated and indemnified vendors in a followup posting. As for the others, well, I am not saying that their historic and continuing strategy of pleading the Fifth when asked to explain themselves means that they know their statements are wrong. Nor am I saying that they are liars, idiots or anything of the sort. Something like that would be an “accusation.” Instead, I am merely making an “observation.” It isn’t even my observation. It is credited to Confucius:  “A man who makes a mistake and does not correct it, is committing another mistake.”

8 Make-or-Break Rules for Innovation

Following these rules won't guarantee success -- business is a contact sport -- but will help you turn size into an advantage.

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In my last posting, I laid out three reasons for why large companies should out-innovate start-ups to capture the disruptive opportunities that are being enabled by a perfect storm of technological innovations. In this post, I offer eight rules for how they can do so. 

Based on research on thousands of innovation efforts—both successes and failures—that went into The New Killer Apps: How Large Companies Can Out-Innovate Start-Ups, corporate innovators should apply these rules to help their companies get out of their own way and leverage their assets. By doing so, they can take better advantage of innovation opportunities than start-ups can. 

The eight rules fall under three general categories that distinguish winners from losers: Thinking Big, Starting Small and Learning Fast. 

Think Big

Successful innovators “think big” by considering the full range of possible futures. They facilitate innovation by daring to pursue “killer apps”—new products and services that might rewrite the rules of a category. By contrast, failed innovators tend to “think small.” They assume that change will be a slight variant of the present and just look for incrementally faster, better or cheaper innovations. Here are three rules designed to help you think big: 

Rule 1. Context is worth 80 IQ points. As you start to “think big,” you must understand the information-technology environment in which you are operating. Six technological innovations—combining mobile devices, social media, cameras, sensors, the cloud and what we call emergent knowledge—are reshaping both what is possible and the competitive landscape in every information-intensive industry. Mary Meeker, the noted business analyst, argues that these technologies are putting more than $36 trillion in market value up for “reimagination.” ($36 trillion is the total market value of the 10 industries most vulnerable to change over the next few years.) You must understand all the traditional forces inside your industry and come to grips with these six technological megatrends, both individually and in combination. 

Rule 2. Embrace your doomsday scenario. Thinking big is not just about bold aspirations; it also requires understanding the starkest threats facing your organization. One reason to look for doomsday scenarios is that it helps spot vulnerabilities and spark improvements even if doomsday never comes. Another reason is that it helps to build alignment. Getting beyond vague views and developing detailed, shared views of existential threats and how quickly they might arrive can help management teams develop consensus on timing and move forward in unison. But people tend to avoid thinking about truly worst-case scenarios, so this rule is designed to make sure that they do so. 

Rule 3. Start with a clean sheet of paper. A markets change, large companies’ strategic assets too often become liabilities. Success brings with it priorities to juggle, budgets to protect, bonuses to maximize, resources to defend, loyalties to reward, egos to stroke. People have all sorts of incentives in big organizations to slow or halt innovation, and many manage to do so. That’s why it is important to periodically start with a clean sheet of paper and think about key trends and looming inventions, then envision how everything could come together to transform the business—without worrying about what people, capabilities and other assets have to be added or subtracted to become that perfect version of the business. 

Start Small 

Successful companies “start small” after thinking big. Rather than jumping on the bandwagon for one potentially big idea, they break the idea down into smaller pieces for testing and take the time to make sure that key stakeholders are working in unison. By contrast, companies that fail in the face of a disruptive technology tend to swing from complacency to panic. Initially, they not only don’t see the opportunities; they can’t accept that they’re in danger. When they finally see the disruption, they panic. They make a last-chance, massive bet on a single idea—only to have it not pan out. Here are three rules that ensure you are starting small: 

Rule 4. First, let’s kill all the finance guys. To start small, make sure you don’t settle on financial projections too soon; they can’t be accurate, and they hamstring innovation. By definition, disruptive innovations deal with future scenarios that are hard to read and where the right strategy is not clear; the right strategy has to emerge over time. This rule, then, is a reminder to take a more iterative approach to understanding the finances of new businesses. A culture has to be established, beginning at the very top of the organization, that says newborns get to crawl and walk and maybe even start preschool before their talents are evaluated. 

Rule 5. Get everyone on the same page. While the tendency is to leap into action as soon as a possible killer app is identified, it is crucial to take the time to step back, assess where the organization is and identify possible impediments to change. One challenge is to understand who wins and who loses if the envisioned innovations succeed. If an innovation has to kill the core business to succeed, it won’t be possible to get everyone to embrace it. Those in the existing business will always try to kill rather than be killed. In some cases, you can delay an uprising by being discreet. In other cases, where those not on the same page can’t cripple you, you can be overt and simply pit a new business against the existing one (while protecting the new efforts sufficiently). Another challenge is to understand the cultural implications of the desired innovation. Many executives believe they can change a culture to suit a strategy, rather than try to make the strategy fit the culture. That route is possible but usually takes longer than most are willing to admit. Sometimes it is better to work with what you’ve got. The key is to understand that there is no silver bullet to managing change. Instead, you must form a cleared-eye view of the particular circumstances that must be addressed and manage accordingly. Remember Nelson Mandela’s admonition, “Lead from the front but don’t leave your base behind.” 

Rule 6. Build a basket of killer options. Once you are ready to start building killer apps, make sure to invest only small amounts and test a number of possibilities. At the early stages, any fledgling killer app is more likely to fizzle than sizzle. Do not waste a lot of money plunging toward The Answer. What you really want is a finely nuanced understanding of The Question. Do this by employing the discipline associated with financial options. Rather than investing tens or hundreds of millions of dollars to build out a full-fledged business, invest in iterative experiments that can be expanded as they prove out, or be set aside if they don’t. It is important to limit the number of options to a handful. Innovations of transformative potential require CEO attention—which is limited—to make sure the efforts are protected from the organizational antibodies; to make sure they do not take on a life of their own; and, to shepherd them to scale if their potential proves viable. (In most organizations, only the CEO can play this role.) Our experience is that the right number is around three “killer options” and no more than five. 

Learn Fast 

In addition to thinking big and starting small, successful innovators “learn fast.”They take a scientific approach to innovation. They figure out how to gather comprehensive data and quickly analyze both what’s working and what isn’t. They have the institutional discipline to set aside or alter projects based on that analysis. By contrast, companies that fail have neither the time nor the inclination to learn. They fall into the “it’s all about implementation” trap and end up expertly implementing a failed strategy. Here are two rules to make sure you are learning fast. 

Rule 7. A demo is worth a thousand pages of a business plan. Too often, early success or optimism about a big idea quickly transforms it into a conventional business development program: a long march where the only acceptable outcome is to get a product to market. As a result, people do all the analysis they can, however imprecise, and the result becomes The Plan. Some of this is due to habit—planning is what big companies do, and business initiatives can’t typically proceed without detailed business plans and reams of confirming spreadsheets. Our research revealed the need for less planning and more testing. Rather than prematurely building out the new business, keep prototyping to explore key questions, such as whether the technology will work, whether the product concept will meet customer needs and whether customers will prefer it over the competitive alternatives. 

Rule 8. Remember the Devil’s Advocate. Setting up the right process for demos, prototypes and scaling is crucial but only half the battle. The other half is making sure you ask the tough questions during the process and remain open to hearing uncomfortable answers. Devil’s advocates are individuals or groups whose role is to stress test critical assumptions, key forecastsand other make-or-break aspects of a potential killer app. The goal is not to interject an abject naysayer into the decision-making process but rather to drive at the answer that best serves the long-term success of the organization. Nor is the goal to relegate the task of critical thinking to the devil’s advocate. Instead, the devil’s advocate process serves as a safety net, and, because everyone knows that tough questions are forthcoming, they’ll be more likely to confront them. Done right, a devil’s advocate frames the most important questions that need to be answered before moving to the next stage of commitment. The advocate also guides the process along, making sure that the right amount of uncertainty is reduced at each step and that the possibility of a graceful exit is always preserved.  

Following these eight rules won’t guarantee killer-app-level innovation. Business is a contact sport. Some companies win. Some companies lose. That won’t change. What following these rules will do, however, is help you overcome the biggest barriers to innovation and turn size into an advantage. You’ll do a far better job of sensing what’s really going on in your market and of putting yourself at the forefront of the powerful trends that are transforming our economy.

How Internet of Things Puts Industry at Risk

Insurers must stop thinking about protection and must focus on prevention, in a personalized way -- or will leave the market open for outsiders.

To put the  impact of the Internet of Things (IoT) into context, consider industry estimates: By 2020, there will be 8 billion people on earth and 50 billion connected things, with 5 million apps; that means nearly six connected things per person. By 2035, there will be 1 trillion connected things, with 100 million apps. That is powerful! The IoT is so much more than a cool, emerging technology. And it can do so much more than change a process in the business value chain. The IoT is transformative … because it is about fundamentally changing business and revenue models. Companies that are focused on using IoT only in selected areas of the existing insurance value chain will miss one of their biggest opportunities to reimagine the business of insurance. They will put their companies at risk. Why? Because other companies and industries are thinking bigger and including new services and integrated offerings that are made possible by the IoT. Their transformations will potentially change every aspect of insurance. The Internet of Things is rapidly transforming standalone products into complex business solutions that combine or integrate sensors, software, analytics, processors and digital user interfaces into the product, all connected to the Internet. The IoT creates the opportunity to reimagine a product, taking it from what it was to what it could be, redefining the customer experience by providing real-time information, alerts, services and much more. In so doing, the IoT counters the rapid commoditization of products – new products can include integrated, valuable services. As an example, one company that manufactures a “commoditized product” embedded sensors, at the company’s expense. At the time, 100% of the revenue was from selling the product. Today, the company has built services, both independently and with an ecosystem of partners, that use and analyze the data from the product. The result: The product is seen as more valuable; the company is experiencing market-share and revenue growth; the business model is now both manufacturer and service provider; and more than 80% of customers purchase services along with the product. The company's service revenue is now more than 50% of overall revenue. And this was all done in just three years! For insurance, the first foray into the IoT was in telematics, but insurers did so within the historic context of how the insurance product was defined, designed and priced. The added dimension of pricing for miles actually driven differentiated the pay-as-you-drive (PAYD) product. The majority of insurers have followed this approach, missing the bigger and transformational opportunity with IoT! The IoT, whether using telematics or other sensors, has the potential to deliver a plethora of new services that can be purchased by customers, changing the definition of a product and flipping the business and revenue model. Products can go from being risk-protection products to risk-prevention products with embedded services that also provide protection. Our inability as an industry to reimagine our businesses, our products, our services and our entire revenue model is why we will be competitively challenged by other industries … because they already are disrupting historical assumptions and business models. Industries and companies outside of insurance are embracing the IoT at a rapid pace: automotive, manufacturing, retail, communications, healthcare, banking, agriculture, transportation, consumer products, food production and more. These companies are transforming their business and revenue models through new, smart, connected products with embedded IoT sensors that are merging products and services into a new product with new capabilities that redefine the value proposition. These companies are creating profound and personalized customer experiences that strengthen and deepen customer relationships, attract and draw customer loyalties, divert and capture revenue and more. Examples from other industries, and the resulting transformation and innovation of business and revenue models, emphasizes the power and potential of IoT in a number of dimensions:
  • The connectivity of the devices with applications, analytics and services enables healthier, safer and more efficient, effective and enjoyable experiences for businesses and individuals.
  • IoT allows new business models that put the customer in control, enabling personalization of the products and services.
  • It fuels an emerging market shift where the customer will own her data, authorize use and expect something in return for that use.
  • IoT creates the opportunity to create new products, services and solutions and to enhance existing products to strengthen customer insights and loyalty, increase competitiveness, create new revenue options and grow market share.
Because insurance is part of every industry and reaches nearly every individual or business, the insurance industry has the opportunity to be at the center of this IoT revolution. But it will be necessary to flip the business model. Insurance must embrace the transformation from focusing on risk protection to focusing on risk prevention – with protection included in a personalized way. Insurance can become central to collective connectivity -- with the connected car, the connected home, the connected life and the connected world. Remember this quote from Charles Darwin: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” Change is coming with a connected world of everything. We can either define the change, or it will be defined for us by those companies and industries rapidly adopting the IoT.  

This article is based on a new SMA research brief: “The Internet of Things: Creating a Connected World – Disrupting and Transforming Business and Revenue Models.”  Click here to learn more about SMA’s research.

Denise Garth

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Denise Garth

Denise Garth is senior vice president, strategic marketing, responsible for leading marketing, industry relations and innovation in support of Majesco's client-centric strategy.

'Agency 2020': Can You Get There? (Part 1)

This diagnostic will help agencies fully critique themselves and prepare for the strange new world that is rushing at us.

It’s been 45 years since astronauts Neil Armstrong and Buzz Aldrin first walked on the moon. “That’s one small step for man, one giant leap for mankind,” Armstrong said. Many consider this to be mankind’s greatest adventure. Today, you should begin planning for the greatest adventure in your agency’s history. Now is the time to prepare for what I call “Agency 2020.” This is your mission: to survive and prosper in tomorrow. It’s a Star Trek mission. Your challenge is to seek out new life (future consumers) and civilizations (niches and affinity groups), to boldly go where no man (or insurance agency) has gone before. This preparation is merely one “small step” to fully critique, improve and prepare your agency today so that it can explore strange new worlds – the global and virtual marketplace – that will be prevalent in 2020. In other words, you need to prepare your organization for the one “giant leap” required for future prosperity. To give you perspective on the world of 2020, consider this statement from a July issue of The Kiplinger Letter: “The next big phase in computerization: connecting all objects of all sorts … buildings, industrial machinery, appliances, medical devices, vehicles, roads, containers, apparel and much more. In an ‘Internet of Things,’ 26 billion objects will communicate with others by 2020 … up from a piddling 1 billion things doing so now.” Other sources suggest even greater connectivity – with some predicting 50 billion or more “things” talking to each other daily. That is seven times what the world’s population in 2020 is predicted to be (7.6 billion people, according to infoplease.com.) That connectivity will be transformational. Everything will be in flux: industries, delivery systems, communications, smart data, products offered and not offered, risks, pricing, value-added services, insurance (healthcare, loss control, underwriting, risk management, safety, etc.), banking and education and even everything about how, what, where and why clients shop and buy. When one thing is different, it’s change. When everything is different, it’s chaos. The year 2020 will have chaos, and in chaos there’s great opportunity. If my first few paragraphs have confused or upset you, don’t worry. We’ve already walked on the moon! Anything is possible. To do great things, you merely need a purpose and a vision, a commitment to both, a plan and the discipline to live the commitment you’ve made. Join us in this exciting five-year mission. Let’s start at square one. As the American businessman and writer Max Depree notes: “The first role of the leader is to define reality.” This article offers a simple process to follow through on Depree’s advice. Questions are asked, and you merely answer them – honestly and completely. Today you are establishing your starting point for your trip to tomorrow. Remember, if you misrepresent on the front end – you will not reach your planned destination. This process will be simple. Some questions are included under each category below. This is an essay test. But it’s essential that you answer as truthfully and as completely as possible! Ask, ponder, challenge, reflect and ask again. 1.         Leadership
  • What is your culture? In other words, what is tolerated? What are your house rules? As the leader, do you control and direct the culture, or does the culture dictate to you? Be honest.
  • What is your reality – i.e., history; financials; SWOT analysis identifying your strengths, weaknesses, opportunities and threats; marketplace presence by way of customers served and carrier relationships; demographics and geography; viability (is yours a Rust Belt or Silicon Valley organization); etc.? Also consider where your world is heading.
  • Is passion or pessimism the rule in your environment? Is your team passionate in what they do? Are clients passionate about what is being done and how you serve them? Do your team members see themselves as victims or victors? Is your team committed to the adventure called tomorrow –  or are individuals looking to jump ship at the first opportunity?
  • Are plans in place for the perpetuation of leadership, key roles, books of business, market niches, offerings, opportunities, relationships, technology, etc.?
2.         Operations
  • Are you low-tech (suicidal), medium-tech (terminal in the long run) or high-tech (viable and vital and the only acceptable option)?
  • Is your team adaptable – willing and able to embrace technology, the virtual world, social media and innovation as it occurs? Do you have a balance of generations – Greatest, Boomer, X, Y and C – and the wisdom and perspective each can offer? Is there balance in your management and operations, or are you fragmented?
  • Are you paperless, client-defined and -driven, connected, tech-committed and -focused, virtual and balanced in the new world of “Tech-Knowledge-Y”? Are you really?
  • Are you “owned” by yesterday and its traditions – office buildings, eight hours at the desk, hierarchy, producer- and product-defined and -driven and based on seniority rules, that family is more important than performance, etc.? Be honest.
3.         Marketing
  • Do you know your customers as individuals, in niches, as parts of an affinity group? Are you willing to serve them as a “niche of one?” Every consumer in 2020 has unlimited options!
  • In your current system, do products and services dictate your focus? Or do the wants and needs of your clients and prospects dictate what products and services you offer?
  • Are you structured based upon Peter Drucker’s 1993 concept of “price-driven costing?” (That is, determining what your customers think a service or product is worth and then designing it accordingly. ) Do you control or influence the price of what you sell? Can your clients afford your product offerings? Are you constantly striving to bring your cost down?
  • As markets innovate and become more competitive, can you profitably deliver what you sell at a price the market is willing to pay? Do you block markets to protect your client or your agency? Do you and your clients have a conflict of interest in the world of “hard” and “soft” markets? Can you retain clients if your offering was quoted net of commission and you had to work on fees, not commissions? Be truthful.
4.         Communications
  • Do you know your clients – their wants, needs, values, expectations and fears? Or do you merely know their purchases? What is important to them? What is their risk-taking tolerance, and what are their available resources?
  • Do you sell products/services/commodities? Or do you facilitate your clients’ buying what they want and need? Are you more focused on closing a transaction or creating a positive experience?
  • Do you have a formal system of client-relationship management? Do you tailor solutions for clients’ problems, or are you merely the checkout counter once they find what they need? Can you anticipate their future needs?
  • As an intermediary between your clients and the marketplace, do you stand closer to the client … or the carrier? Who “owns” you? Are you addicted to existing products, commission streams and delivery models? Or are you willing and able to take “the road less traveled” and find the future as it will be?
(Suggested reading – Unbundling the Corporation, by John Hagel III and Marc Stinger, Harvard Business Review, March-April 1999) This brief inquiry was designed to create “chest pains,” because “chest pains” will often change behavior. This article is not intended to be an all-inclusive study but rather a reality test of your leadership. Are you willing to see your agency and the marketplace as it really  is -- or only as you want it to be? If you don’t get the starting point right, the end game of Agency 2020 is impossible to target accurately. You can’t get there from here! First, test your resolve, your commitment and your discipline. If these are real, go back and answer the above questions more honestly. Future articles will provide a process that will facilitate your “small steps,” or tactics, as well as the “giant leaps,” or strategies, so necessary for success. Subsequent articles will cover:
  • A process for discovery of 2020 as you project it to be
  • How to maximize the efficiency and profitability of your agency today
  • How to answer the one question that is all-important for each stakeholder: What’s in it for me?
  • How to design a blueprint for your Agency 2020 initiative
  • And how to facilitate the transition of all stakeholders from where they are today – to where they are willing and able to be (and must be) tomorrow – whether those stakeholders are inside or outside of your organization
Don’t panic or become discouraged. Remember, we’ve already walked on the moon! Commit to 2020 – and be disciplined to your commitment!  One day you’ll be ready to declare your purpose and vision – your organization’s leadership role and success in 2020!

Mike Manes

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Mike Manes

Mike Manes was branded by Jack Burke as a “Cajun Philosopher.” He self-defines as a storyteller – “a guy with some brain tissue and much more scar tissue.” His organizational and life mantra is Carpe Mañana.

A Bizarre but Common Strategy: Hiring Incompetent Producers

That's what employers do when they decide that all revenue is equally valuable.

sixthings
Hiring incompetent producers is apparently the strategy of a group of agency owners who told me that my advice that no producer is better than a bad producer was:
  1. Just wrong
  2. Too harsh
  3. Short-sighted
I have seen some consultants make the same case, so I thought I should have an open mind and reconsider my position. The consultants’ point was that every commission dollar sold is worth (pick a multiple) 1.3 or 1.5 or 2.0 times. That makes every commission dollar a commodity. From the agency owners’ perspective, one way to build value is to put as many commission dollars on the books as possible because the value is same regardless of whether the sales are profitable or unprofitable. The value is not affected by whether the sales are personal lines or commercial, whether the accounts carry more or less E&O risk. All sales carry the same value, in this perspective. Some people will argue I have taken the consultants’ and agency owners’ point too far, but that is impossible. Remember, their point was that poor producers, meaning unprofitable producers, still have enough value to justify keeping them. This means that even if the producers’ sales have a negative 20% profit margin, which is common, the consultants and agency owners believe these sales have the same effective value as books of business with a 20% profit margin. The strategy of adding sales without regard to profitability is quite relevant if the agency can grow fast enough and sell itself quickly enough. More than one such flip has made an agency owner wealthy. The key is how long the producer is with the agency before the sale. Let’s say that at the end of five years a producer has generated $150,000 of commissions. The profit on this book is (using industry standards for agencies with $1 million to $2 million in revenue): incompetent   This excludes all administrative wages such as the bookkeeper, receptionist, claims and so forth. It excludes ANY owner compensation. It understates the CSR compensation, too, because the average commercial CSR makes much more than $35,000. If we include these real additional expenses proportionately, this book likely is still losing money in the fifth year, anywhere from $10,000 to $30,000. Losses in the prior years were even greater as the book was built. Over five years, then, the agency has likely lost between $75,000 and $150,000 net. Using $75,000 and a one-times multiple and an agency sale in year five, the agency still nets $75,000 (($150,000 times 1.0) - $75,000) = $75,000. But if the agency hangs on too long or the five-year loss is too great, this strategy fizzles. So to make this work financially, the agency owner has to have a firm and fast exit plan. Why not hire quality producers initially? Then the agency gets profit and value simultaneously. Besides, who in their right mind would pay the same multiple for an unprofitable book as for a profitable book? Let’s use an EBITDA example. If the profit is $25,000 and the EBITDA multiple is six, then the value is $150,000. What is the value of a book with a loss of $25,000 and a multiple of six times? Why would someone pay the same multiple for a low-profit book as for a high-profit book? Maybe the thought is that books all average out. But why do they have to average out? A poor producer cannot take an entire book, even most of a book, with him if fired. If the producers were so good, they would not have been fired. So agency owners can eliminate unprofitable producers and reassign their books to staff or other producers at lower commission rates, which is common when books are transferred between producers. This is a key secret to the success some serial acquirers have achieved. They completely understand that poor producers are unnecessary so when they buy, they fire and they keep the business but make it profitable. Even if 20% is lost, that is 20% losing money vs. 80% making money. I truly feel for agency owners struggling to find quality producers. If it was easy, everyone would do it. Is hiring poor producers really the solution, though? My experience, and I’ve seen the hard data, is that when agency owners properly prepare their agencies for finding quality producers, use the right interviewing tools and tests and create a quality development/management plan, successful hire percentages quadruple. All the work -- and it is a lot of work --  is before the hire, and, given all that agency owners already have to do, finding the time and energy for this key element is not so easy, but it is essential if the goal is to truly build profit and value.

New Confusion on ACA and Healthcare Reform

Customers are making choices, and insurers are in the middle of getting rates approved. The time for Congress to act is now.

Recent events have added a layer of confusion for healthcare reform that needs to be resolved now. The already confusing Affordable Care Act, with its massive regulations, reached a new tipping point as two separate federal appeals courts made contradictory rulings regarding federal subsidies for lower-income enrollees.  One ruled that a strict interpretation of the law limited subsidies to those states running their own exchanges, while the other indicated that the law would also apply in those states using only the federal exchange. The conflicting rulings raise a very important issue for the many hundreds of thousands of people who have made insurance decisions in the affected states, relying on what they have been told. Individuals in one of the specified lower- income categories were told they would receive subsidies from the federal government. They reviewed their options and made specific choices based on the information they received and, without some clarification by the courts or Congress, are having the proverbial rug ripped from under their feet. Will there be a subsidy or not? Insurance companies and health plans are in the middle of getting rates approved under the assumption that certain people will be there to sign up for the rates. If the underlying population group radically changes, rates will not reflect who is signing up. The lack of a subsidy will drive up the cost to each individual, making insurance unaffordable. This is unacceptable no matter what side of the aisle you’re on. Someone has to step in quickly and resolve this issue. If there was ever a time to act in Washington, DC, this is the time. Either there are subsidies for all Americans, no matter what state they live in, or there should be no subsidies for any. This is a broad entitlement issue, not a political issue.  Many of the states that didn’t establish state-run exchanges (and, thus, may lose access to subsidies) are “red” states, so any financial blow will fall disproportionately on conservatives. Democrats, meanwhile, want the president’s signature legislation to succeed. So, both sides have a significant reason for prompt resolution.  Let’s get to it.

David Axene

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David Axene

David Axene started Axene Health Partners in 2003 after a successful career at Ernst & Young and Milliman & Robertson. He is an internationally recognized health consultant and is recognized as a strategist and thought leader in the insurance industry.