Question

You have been hired as a consultant to a major health insurance company to help identify ways to reduce payments for healthcare benefits. Please identify some possible methods that may be useful in cutting costs.

Answer 1

As an insurance company there is no way to prevent payment for the healthcare benefits. The insurance company will have to pay the hospital and/or the patients for the plan. However, the organizations can likely take a few steps to reduce the payouts.

Partnership deal with hospitals: build partnership deals with the hospital, clinics and healthcare centers. Through partnership deals, the cost of healthcare can be negotiated and shared between the two institutions. This is an approach of controlling the supply side of the healthcare industry and through such partnerships even though the number of claims will not reduce, the overall payouts made can be reduced.

Promote preventive healthcare: this is beneficial for the patients and the insurance companies as well. Preventive healthcare programs build a good reputation for the insurance companies and at the same time helps reduce the overall claims. This results in lower payments made to healthcare centers and/or patients.

Create different categories of healthcare insurance plans: different insurance plans provides the insurance company with a larger portfolio to offer to the consumers. At the same time, they also provide the insurance companies to provide mutually exclusive illnesses that can be covered. For example, general health insurance may not have coverage for critical illness and vice versa. This will result in increased revenue and even if the payout does not reduce, the overall profit for the insurance companies will likely increase.