Managed Care Underwriters, inc.
Supporting the health care
industry with outsourced underwriting and pricing functions
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Last updated
MEETING THE
CHALLENGE:
The Managed Care Marketplace
Today's health care marketplace is more
volatile than ever. As the market matures, the revenue increases of the past
are harder to come by. Factor in rising medical costs, decreased enrollments,
and ongoing member pressure to hold down rates, and
the reality becomes clear: it takes more of your resources to compete-and
survive-in this environment.
Traditionally, underwriting was one way
indemnity insurers managed risk. Increasingly, however, the trend has been to
turn away from underwriting with the assumption that care management can substitute for its effects. While initially, organizations
have been able to produce an offset equal to the lack of underwriting effects,
that doesn't remain the case.
The bottom line is clear. The premium
ultimately charged by a financially viable managed care organization must
reflect the sum total of the organization's actions, not just its policies,
procedures, and guidelines.
MANAGING THE RISK:
Managed Care Underwriters (MCU) supports
the managed care industry with outsourced underwriting and rating functions. Our experience has repeatedly shown
that when these areas are managed appropriately-and proactively-enhanced performance
results.
Through extensive consulting with small and
start-up HMOs and provider-based risk-taking entities, MCU has identified two
trends. First, many HMOs and provider organizations are not performing
underwriting and rating functions or they are under-performing these functions.
Secondly, outsourcing these areas is a cost-effective way to manage costs and
contributes to an earlier break-even point.
The Benefits of Outsourcing Underwriting
and Rating
There are good reasons to outsource your underwriting
and rating functions with MCU. Importantly, outsourcing enables you to
transform a fixed expense into a variable one. Paying global capitation
transfers risk but also enables your HMO to achieve an earlier break-even by
creating a variable cost on a per-member basis. With MCU, you gain
cost-effective access to sophisticated expertise and proven, functional
systems-without the accompanying overhead. Because our underwriting also
encompasses the rating process, we control the variables within the rates. The
benefits of this can be found in increased profits, price, and market share
stability.
Our underwriting systems are user-friendly
so that members of your sales and marketing department can access them and
utilize the information. Finally, our system automatically incorporates the
accuracy that is so essential to successful monitoring.
How We Work
MCU systematically monitors your commercial
business so that you can maximize your financial performance without having to
rely on pools or entire books of business. As a result of managing these
individual areas, we enhance the financial and marketing performance of the
entire company.
Utilizing your raw claim and membership
data, we apply our underwriting knowledge to it to create a true and complete
picture of your organization's strengths and opportunities. While individual
groups will be underwritten as they are enrolled and as they renew, the entire
block of business will be analyzed each month and one month's worth of renewal
rates will be calculated. This rating system enables you to systematically
monitor your financial results.
IMPROVING THE
BOTTOM LINE:
Creating a Profitable partnership
While financial performance and profit are
always essential to the viability of any enterprise, they become especially
critical if you are interested in directing care to a provider network, selling
the enterprise, going public, or growing the business. Combining your managed
care expertise with our underwriting and rating knowledge creates a profitable
partnership designed to help you achieve maximum profit potential.
How MCU Helps You Achieve Maximum
Financial Performance
We use your historical detailed claims and
membership data to determine the rates you should apply to individual groups
based on their expected use characteristics. This information also is applied
to new group sales. If you don't have historical data, we create and develop
the database with you.
Individual groups will have premium rates
set based on their expected utilization-not just the actual utilization-of the
prior year. This process makes the group's rates more predictable over time. By
aggregating the groups, the entire block of business becomes more predictable.
Improve the predictability of these business blocks and you'll improve your
profit expectations.
Each month, we'll review the financial
performance of the entire block of business and set one month's renewal rates.
In this process, the financial results of the company as a whole are monitored
against the emerging premium stream. This assures that the rating components
used to set the premium levels are deriving the total premium required.
Through targeting those areas that are over-
and under-performing, performance can be monitored at the individual group
level. For analytical purposes, information is aggregated by line of business
or through any homogenous classification.
While new legislation does not permit
individual or declining groups to be excluded, there are still ways to offload
unwanted utilization. For example, underwriting individuals and groups into
substandard pools can help smooth your financial results and improve your profits.
Increasing Market
Share:
Getting the Most Marketing Performance
By getting your premium rates into the most
competitive structure possible, we help you achieve maximum growth potential.
In this area, underwriting and rating strategies will help you increase members
assigned to networks, as well as to improve network reimbursement rates.
Increased membership also helps you offset internal fixed expenses.
The MCU system has been designed to give
management the flexibility to override the recommended rates for individual
groups, lines of business, or any other homogeneous classification. Our system
produces a monthly report that lets you assess the effects of those decisions
against your expectations for growth and profits.
Reducing the variability in the rating
system improves your group retention rates. Ordinary experience rating
introduces fluctuations in rates that are more a function of group size than
the true underlying utilization rates. By assessing both the fluctuations and
the utilization rates, we are able to stabilize the renewal process.
The Ability to Compete
In today's environment, your ability to
compete is critical. MCU can help. For example, by employing your detailed data
to examine the utilization levels of individual groups, we will establish rates
that produce the maximum permissible rate discrimination. This is important
because when you're competing with companies that use community or
non-discriminatory rates, you'll be able to attract customers who will be
expected to utilize service at less than the community level. The net effect is
to become indifferent about the groups you enroll because your premiums reflect
the expected utilization. Of equal importance, you have removed a customer from
your competitor that was subsidizing that competitor's bottom line. To
compensate, your competitor must increase rates.
Optimizing Risk
Capital:
Capital Requirements
Soon, HMOs will have to meet benchmarks for
risk capital. Most likely, provider-sponsored groups will also have risk
capital requirements. While these amounts are regulated, they may still be
insufficient to actually protect you. Disciplined underwriting and rating
processes can tighten the risk corridor and lower the amount of capital you
need.
Managing a risk assuming organization and
minimizing the risk the organization is exposed to are two different
activities. Risk management tools include:
• Care management
• Sufficient numbers of enrollees to make
the population predictable
• Conscientious underwriting
• Sufficient capital to cover any missed assumptions
within the premium
The amount of real-world risk capital an
organization needs is dependent on how well it employs the risk management
tools at its disposal. Through underwriting, the organization's actions will
conform to the established guidelines of the rating assumptions.
When this is in place, the organization can
function with less risk capital. For example, underwriting can assure that the
assumed reimbursement rates equal what's being paid; it can also ensure that
the brokerage commissions being paid are, in fact, loaded into the premium, and
that the sum of all rating adjustment equals the total premium required to fund the organization.
By monthly renewal rating-rather than
filing blocks of rates for a year that are scheduled in quarterly increase-the
organization can continuously monitor its financial condition and make
adjustments as needed. MCU reviews the entire company monthly and compiles one
month's set of renewal rates. This process enables you to take small,
corrective steps as needed, rather than waiting to review annual financial
statements to determine your position.
Take the Next Step:
MCU is ready to go to work for your
organization. If you would like to
learn more about how we can enhance your performance, we encourage you to
schedule a complimentary consultation with us. When you do, we'll arrange for a
team of MCU technical experts to spend a day with your operations staff. Our
team will review data files, procedures, provider reimbursement agreements,
applications, and contracts.
Upon completion of our review, we will
propose a group of services tailored to your organization and describe exactly
how those services will enhance your performance. A signed Memorandum of
Understanding initiates implementation. Typically, it takes 60 days to work out
data flows and begin operations. To find out more or to schedule your
consultation, please contact us. We look forward to working with you.
Managed Care Underwriters, inc
303-694-2748