BONUS MALUS system in Health Care Insurance?
Originally, I had planned to do a write up on a personal selection of the CES 2016 devices which would be, according to me, valuable for a life improving experience. CES is a Consumers Electronics and Technology Trade show and is held every year in January at the Las Vegas Convention center and some 15 additional surrounding venues at hotels expanding every year. It is the largest convention in its kind, dedicated towards the professional buyers and manufacturers of Consumer Electronics in every branch or segment.
Automotive, Leisure, Apparel, Kitchen aid, Audio & TV, Health Care, Fitness, … take your pick …
One of the companies I have been consulting for, required me to attend this yearly event for the last 5 years. I am always looking forward to wander around in an off beat moment, if any, to see the new stuff that will hit the market. Some will actually make it, some will never see an actual production line nor consumer.
I personally have always been interested in gadgets, new technology concepts and products and I have proven to be an early adopter. This is basically to me like strolling through Disneyland. As mentioned earlier, I was going to write about my new discoveries as I was hit with a feeling which grew stronger and stronger over the past few years when I have been seeing the speed in the development of Health Care Measurement Consumables, as I call them. I am hereby referring to the devices that can measure your glucose (Sugar) level in your blood, your blood pressure, your heart rate, amount of oxygen in the blood, your movements on the fly and the likes. As being very interested in the added value of this technology and wearing and using my own smart devices and wearable’s to measure some of the above, I had to think of the may be consequences in the not so distant future related to the Health Insurance “Industry”.
I would like to make a reference here to a system called Bonus Malus, which is known in for example the outsource industry, whereby the service provider to whom a company outsourced a specific service or services is measured on a regular base, and KPI’s (Key Performance Indicators) are contractual predefined and agreed.
These measurements reflect how the service provider is performing. If it is performing poorly, then there would be a malus payment (payment from the service provider to the buying company, a kind of a “fine” or rather refund on the contractual agreed pricing for the service). When the service provider would be doing well, then there is a bonus payment from the buying company to the service provider related to the defined subjects in the KPI reports. Bonus-malus payments in this case would be an addition (Bonus, better performance by the Service Provider) or a deduction (Malus, Service Provider performing better?? then expected) to the normal cost of the contractual agreed services.
Car Insurance business
Another example of the Bonus Malus system is often seen in the Car Insurance business, whereby the system is used to adjust the fee, premium that is paid by the customer according to his individual claim history. Bonus in this case, would result in a discount on the premium which is given on the renewal of the insurance policy, if no claim was made in the previous year(s). Malus would then be an increase in the premium if there was a claim in the previous year. The starting point of the system is defined by several parameters, like age of the principal driver, the location, sometimes the type of vehicle, …
This system is sometimes called or referred to as a no-claim bonus system, but the fundamental principals are more or less the same which comes down to the higher the claim frequency of a policyholder, the higher the insurance costs, that on average, will be charged to the policyholder. All the measurements on what rate on the premium and the % calculated on the premium are based on statistics, how likely would it be, that the policy holder would have an accident or claim damage. It is in other words, pure mathematics.
Now, back to the topic on my statement of the Bonus Malus system entering the Health Care insurance world …
Health Care Insurance
Over the last couple of years I have seen the previous mentioned devices evolve from smart devices which could interact with each other but still needed some “manual” input, towards wearable’s (on your wrist, in your clothes, on your head, …) to “forgettable’s” (devices that just stick to your skin an you are not aware anymore that they are there and they communicate with “the mother hub” and measure and combine (measuring and combining) all data.
Imagine this, due to the already available legacy data (health history, healthy behavior, genetically risk, …) it is already very possible to calculate risks, on an average, how likely an individual is going to need to count on his/her health insurance. With the aid of the above mentioned devices we could include actual individual measurements to fine tune that information …
As it is more and more a challenge to keep health insurance “affordable” one (insurance company, government,…) might think of the following concept. The normal premium according to your (predefined, legacy data and statistics) would be 100%, but we are going to charge 150%. If you would be performing better (those KPI’s would then be in the policy…) then the expected average we would give you a Bonus… so your premium could even drop below the 100% directly related to your lifestyle and health habits and vice versa off course, giving you a Malus which could result in a very big %…
For now, one could still say that he is eating healthy and is not smoking as there is not yet an app or smart device that actually measure if you are eating a healthy snack rather then an unhealthy quick bite, but tech evolves very fast… and there is already some form of merit-rating in the Health insurance “business” so….
The social acceptability is another thing that plays of course, but without wanting to make any statement about the yes or no of this approach or the right or the wrong of this possible scenario, it just got me thinking enough to change the initial purpose of my post. Anyway the “Remote Health Care possibilities” these tech creates, could very well serve as a differentiator in some life threatening circumstances as well, of course. But that is a whole other debate.
Please do enjoy the Youtube clip of some of the devices that (wich) were at CES, I mentioned above. As always, thanks for reading. Have a conscious day!
CES 2016 Life Improvement Health Care high lights