A customer base who never gets sick but still pays its premiums is the Holy Grail for health insurers.
Since this is all but impossible, many insurance companies have adopted incentive schemes, whereby the insurer offers rewards or lower premiums for anyone with a healthy lifestyle.
Now a number of insurers are adopting incentive schemes and lifestyle coaching for people who have been diagnosed with chronic diseases such as diabetes or cardiovascular illnesses.
Bupa, the health insurer and care home group, is hoping to make a drive into treating and managing chronic diseases in the UK following its purchase last year of Health Dialog, a company that works with US health insurers that provide healthcare plans for large companies.
“The insurer may come to us and say they’re interested in looking at people who have quite expensive health care because they have chronic illnesses, which don’t go away and often develop significantly over time,” said Ray King, Bupa chief executive.
“They ask if we can help with helping them manage their illness so that the quality of life is better and so they go into emergency rooms less frequently.”
Health Dialog works by providing telephone counselling from trained nurses, who monitor policyholders’ health and suggest ways they can improve their condition. Mr King believes one of Health Dialog’s strengths is its proprietary database, built up over 10 years. It will help Health Dialog to better predict the efficacy of different treatments used to treat people who may have a variety of different chronic conditions.
Health Dialog is already doing some consulting work for primary care trusts in the UK, and Bupa is hoping to launch Health Dialog in the UK soon. The rewards for getting it right are potentially large, since Bupa’s scheme, and others like it, are exploiting two growing trends – the increasing demand for private medical insurance and the growing prevalence of chronic illnesses.
Chronic diseases, including some types of cancer, are on the increase across the developed world, a consequence of lifestyle issues such as greater obesity and poor exercise, but also the result of an ageing population. In western Europe, the number of people over the age of 80 has quadrupled in the past 60 years, and the World Health Organisation estimates that at least 35 per cent of men over the age of 60 now have two or more chronic diseases.
People with these diseases are more likely to require medical treatment and thus cost medical insurers more. However, most chronic diseases can be greatly alleviated by encouraging lifestyle changes such as exercise and healthy eating. Although private medical insurance in the UK does not pay for treating these diseases directly, it will have to pay for acute episodes such as hospital admissions. If insurers can improve the health of people with chronic diseases, that is is good business, improving their bottom line.
PruHealth’s experience with its health incentive programme in South Africa – covering both healthy people and groups with chronic conditions – showed that people who were classified as “engaged” with their incentive programme had a claims ratios (the amount paid out compared with the amount a company receives in insurance premiums) of 53 per cent compared with ratios of 67 per cent for those who were at the less engaged “base level”.
Moreover, people who over the course of five years moved from the least engaged level of the programme to the most engaged level had claims ratios roughly one-third of those who stayed at the least engaged level.
In the US, where 15 per cent of the population has a chronic condition of some sort, Cigna Healthcare has one of the longest records, operating a coaching programme for people with chronic diseases for more than 10 years. About 2m people are enrolled in the programme.
Chris Coloian, vice-president of health advocacy products for Cigna, says: “You can see upwards of a 6 to 8 per cent reduction in the year-on-year cost of individuals with chronic conditions when they are actively engaged in chronic disease management programmes”.
Given the disproportionate effect that the chronically ill have on healthcare costs (including the healthy), this translates to a saving of between 2 and 3 per cent on claims across the entire insured population.
According to healthcare industry analysts Laing and Buisson, there are 7.5m people – or 12.5 per cent of the UK population – covered by private medical insurance. Bupa has the lion’s share of this market with about 4.3m UK customers while Axa PPP comes second with about 2.5m.
The private medical insurance industry makes £3.4bn in annual revenues.
“The nurse is acting as the patients’ advocate,” said Ann Dougan, marketing director of Cigna, which is now offering this service to several hundred policyholders with chronic conditions.
“But the nurse is also acting on behalf of the person paying for the plan, who is the employer, to make sure that the care is delivered in an appropriate setting over an appropriate time period. Basically it’s not so much a medical intervention, it’s very much a lifestyle and medical coach that you have.”
Ms Dougan estimates that about 95 per cent of those on the programme show significant improvement in their health after between 12 and 18 months.
The employer benefits from this in cash terms, thanks to lower premiums, and a reduction in employee hospitalisations as a result of the chronic disease. There are also benefits in productivity and a reduction in employee absences.
PruHealth, a division of Prudential that insures 190,000 in the UK, has taken a slightly different tack.
Its “Vitality” incentive programme gives points to healthy people for going to the gym or quitting smoking. The points can then be redeemed for cash or lower premiums. It has now altered the Vitality programme to allow people with chronic conditions to earn between 15 and 20 per cent more points for making the same healthy lifestyle decisions as people without chronic diseases.
“If we get a chronic person to make the right lifestyle choices, the impact on our claims cost is obviously more dramatic [than for a healthy person],” said Shaun Mattison, chief executive of PruHealth.
“Historically, if you said when filling in your application, that you were diagnosed with diabetes or hypertension, it sets alarms bells ringing. But you could argue that what we should be more worried about is not people who know they have been diagnosed with a disease, but the people who don’t know they’re diagnosed and don’t do anything about it.”
Get alerts on Health when a new story is published