Health Insurance Channels

Recently, I heard some buzz about channel modernization in the health insurance space but I could not get anyone to clarify what exactly they meant by this term. Hence, deciding that self-help is the best help, I took a shot at defining channels in the context of health insurance.

I restrict myself to group health insurance since a large percentage of health insurance in the United States is employer funded. 

As always, I rely on UML to represent my ideas. Specifically I use UML class diagrams to present my ideas.

I start by defining a channel as an abstract concept which has two end points between which information flows in either direction.

Looking at this from a business perspective, it is easy to conclude that the end points need to be businesses that partner with each other to deliver healthcare.

The class diagram below illustrates the various businesses that are possible candidates to be end points of channels.

Channel End Points

I continue to use an alternate image to notate classes that represent physical actors (this notation is similar to that of an Actor in UML, but has been Indianized into a Balle-Balle posture!)

The specialization of Producer models the concept of sales channels.

• Sales through brokers and agents is very common in the health insurance space.
• Direct sale is represented by defining Agent to subsume call center operators.
• Bank indicates Bank Assurance, i.e. banks selling insurance; this is an emerging trend.
• So is the retail sales channel - i.e. WalMart selling health insurance!

Now that I have defined the end point, I proceed to determine the information that flows between these end points.

To start with I attempt to identify all key information elements and their relationships to these channel end points. To do this, I split the information space into three groups;

• Sales and Enrollment
• Claims and Remittances
• Bills and Premiums

The class diagram below shows the key information elements that are involved in sales and enrollment.

Sales and Enrollment

For those of you who know how to read UML, this diagram is self explanatory. Some of the notation may need additional explanation:

• The diamond represents an n-ary association where n > 2. I am not sure how to read cardinalities with n-ary association. Hence, I have omitted cardinalities from these diagram.
• Enrollment and Commission are association classes, i.e. classes which encapsulate the attributes and behaviour of associations.
• Labels on associations have to be read appropriately as per the business context. UML does not provide any assistance on how labels have to be read. This becomes somewhat tricky in the case of n-ary associations.  

Now, I will read the diagram as follows:

• A Payer offers a Product. The Product includes eligibility details.
• A Producer customizes the Product and the eligibility details to create a Plan that suits a Employer Group’s needs. He sells the Plan to the Employer Group.
• The Payer compensates the Producer for the sale. Details of this compensation are encapsulated in Commission. 
• Employer Group buys the Plan and instructs its employees (i.e. Members) to enroll in the plan.
• Members enroll in the Plan.  They submit details about themselves and their dependents. These details constitute Enrollment.

This next class diagram depicts tha key information elements that are involved in bills and premiums. The n-ary relationships become somewhat more complex here.

Bills and Premiums

Here is a reading of this diagram:

• The Payer generates a Bill for a Plan and send it to the Employer Group.
• The Employer Group pays the Premium against that Bill into the Payer’s account with a bank.

This final class diagram depicts the key information elements that are involved in claims and remittances. This diagram is somewhat tricky to read because of the presence of three n-ary relationships.

Claims and Remittances

• A Provider generates a claim against a Payer pertaining to services provided to a Member.
• The Payer remits payment against the claim into the Provider’s account with a bank.
• The Payer also sends a remittance advice to the Provider giving him details about the abovementioned remittance.

Now that I have analyzed the key information entities, we are in a position to depict all the channels. I use a little known UML 2.0 notation known as information flows to summarize all channels in a single diagram. Information flows depict which entities flow between which other entities. Information flows are a natural choice for representing channels which are, by definition, conduits for infromation flows between end points.

Health Insurance Channels

Since I am looking at this from the perspective of the Payer, I put the Payer at the center of the universe (unlike Galileo, I have complete freedom to put anyone at the center of the universe):

• Payer – Employer Group channel: Enrollment and Premium flow in one direction. Bill flows in the other direction.
• Payer – Producer channel: Plan flows in one direction. Product and Commission flow in the other direction.
• Payer – Provider channel: Claim flows in one direction. Remittance and Remittance Advice flows in the other direction.
• Payer – Member channel: Plan (and hence Eligibility) flows in one direction. Nothing flows in the other direction.

Now that we have seen channels, we can proceed to identify the technologies that are used to implement these channels, and the possibilities of modernizing those technologies. For example

• How do the Producers get access to Products offered by a Payer? Paper brouchers? Paper brouchers hosted on a portal? XML download from a portal? RSS feeds that gets pushed to the Producer? The possibilities are endless.
• What assistance does a Payer give the Producer to customize Products to create Plans that meet a Employer Group’s needs?
• How are claims received by Payers – online or batch? If batch, is it possible to introduce an online mechanism?
• How does the Payer send remittance advices to Provider – is it paper? If it is paper, it is possible to make it electronic?

In other words, this analysis of channels provides a framework for analyzing the current state of channel implementations and identifying modernization opportunities.