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Big Data: Good or Bad for Health Insurance?

by Precise Leads

August 24, 2017

Big data has been a game changer for most health insurers. But there are some challenges.

As with most industries, big data has revolutionized healthcare. Thanks to IT programs that automatically collect and store patient information, providers and insurers have more data than ever, and healthcare organization continue to embrace data-oriented solutions. In a recent survey of 300 healthcare IT professionals in North America, cloud-computing and IT solutions consultancy SADA Systems, Inc. found that 89% of respondents worked for organizations that use cloud-based apps, while 95% planned to expand their cloud infrastructure in the future. A majority of respondents also reported that these IT programs produced greater patient satisfaction and improved internal efficiency.

Despite these many advantages, however, big data poses some significant challenges. As health insurance providers increasingly rely on it, they’ll need to incorporate patient information into their pricing models while protecting patient privacy.

Rooting Out Fraud

According to research company Gartner, fraud and waste cost the U.S. healthcare system pays out some $60 billion each year. Big data has the potential to greatly reduce that figure.

Data analysis can reveal suspicious activity, such as a patient receiving the same service twice within a short span of time, filling the same prescription at multiple pharmacies, or receiving care at different hospitals and different locations simultaneously. Fortunately, some major healthcare providers have already started using big data and predictive analysis to eliminate possible fraud. The Centers for Medicare and Medicaid Services, for example, has already saved as much as $1.5 billion with its Fraud Prevention System, which it’s used since 2011 to examine roughly 4.5 million Medicare pre-paid claims for fraudulent Medicaid bills.

Using big data to identify fraud and waste can also result in significant returns for investors in for health insurers. UnitedHealthcare, for instance, reaped a 2,200% ROI after strengthening its big data operations.

Better Patient Outcomes

Mobile health-monitoring devices such as wearable sensors record a patient’s heart rate, blood pressure, and other vital signs. If a doctor or caregiver notices any unusual changes, he or she can immediately administer treatment or advise them to seek help at a medical care facility. As the healthcare industry increasingly centers on the quality of care rather than fees, big data provides real-time insights into patient health so that treatment can be given as soon as it’s needed.

Insurers benefit from such technology, as well. With quicker diagnoses and treatments, insurers stop wasting money on unnecessary or ineffective treatments and pay for fixes that result in better outcomes for the patient.

Impact on Premiums, Privacy

Health insurers have traditionally based their rates on risk pooling, grouping healthy people with those with more extensive medical needs so as to balance out costs for everybody. Although less healthy people seek more treatment, those costs are offset by premiums from healthier enrollees.

However, big data may replace this risk-sharing model with an algorithmic alternative. Armed with information gathered from sources ranging from patient histories to social media posts, health insurers can proactively identify patients with a greater risk for chronic conditions such as diabetes or heart disease. Knowing such information gives providers and insurers the ability to give patients the preventative care they need at the earliest possible date.

By pinpointing those riskier enrollees, insurers can estimate healthcare costs for those individuals. Instead of spreading risk across a wide spectrum of people with different needs, insurers can calculate premiums based on a person’s actual expected healthcare costs.

As insurers collect all this information, however, they must ensure patient privacy. Providers and insurers require access to detailed medical information to make decisions, but that information is confidential by law. As insurers continue to rely on this data, they must institute strong safeguards against breaches and ensure that it’s shared with the proper individuals.

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