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E-Transforming Health Insurance

By reducing costs and speeding transactions, the Internet and related technologies are having a significant impact on the health insurance business.

Q: What are the biggest benefits of e-commerce on the health insurance business? Where has its impact been greatest?

A: Weh-Tih Cheng, Aetna: E-commerce has allowed us to strengthen our relationships with our constituents by providing access to real-time, value-added services and tools that offer administrative efficiencies throughout the entire business.

A: Catherine S. Harvey, Cobalt Corp.: The benefits of selling health insurance and providing customer service online are clear reductions in administrative costs that we can pass on to our customers. We have reduced our costs associated with printing provider directories by approximately 30 percent. Further administrative savings come from eliminating agent commissions, providing access to benefit booklets online, and allowing health insurance members to check claim status and other member service functions online.

A: Steve Wiggins, HealthMarket: The Internet drives benefits in three important categories: transaction support, price and quality transparency, and decision support. Transaction support is currently the most developed. More significantly, the Internet's principal advantage has been its ability to drive price and quality transparency. We have seen this in virtually every other product market, and ultimately, we will be able to use the Internet to discover price and quality differences between hospitals and physicians.

A: Travnicek, Selectica eInsurance: The biggest benefits are the promise of greater sales volume, exposure to more customers, faster input of information so that customers receive quotes quicker, and more efficient alternatives to paper-based initial product proposals. Additional major benefits include quicker delivery of facts to decision-makers, which result in a shorter sales cycle, and the ability to support larger pipelines with stable or reduced staffing. The greatest impact is being felt on applications that deliver information to customers, sales applications of non-complex products (e.g., term insurance), and applications that promise to deliver worksite efficiencies.

Q: How has the Internet facilitated sales of health insurance? Do you think there is moresuccess in this segment than in other lines of business?

A: Cheng, Aetna: The Internet has helped simplify purchasing health insurance, which becomes a value-added advantage when buying decisions are made. The more we can demonstrate to the end user that we offer the best suite of Web technologies, the more business we win and ultimately retain. The complexities of using the Internet are greater than for many other lines of business, but the potential for success is huge.

A: Harvey, Cobalt: Through our Web site, employers and individuals can buy health insurance. Since we do not pay commissions for online sales, our administrative costs are lower, allowing us to pass on these savings to our customers. We have had a tremendous surge in individual sales as a result of our online capabilities. There is certainly more potential, if not yet realized success, in selling individual health insurance online because it is so much faster and easier than using traditional channels.

A: Wiggins, HealthMarket: Adoption of the Internet as a vehicle for selling health insurance will be slow. Health insurance is complicated and doesn't lend itself as easily to an online experience as other forms of insurance--particularly P&C or life. Nevertheless, companies like BenefitPort, BenefitPoint, Simply Health and E-healthinsurance are all experiencing meaningful customer growth.

A: Travnicek, Selectica: Health insurance often is difficult to understand, evaluate and rate, and the Internet offers great potential to simplify this process. In addition, the Internet has made the development of agent-broker portals possible and has facilitated the advent of e-brokers. To date, however, sales of individual term life insurance have been more successful than sales of health insurance on the Web. This is due to the simplicity of the term life insurance product. For health insurance sales, the industry needs to develop tools that can help the prospective insured member with the needs analysis and plan selection process.

Q: What do you anticipate regarding your company's investment in e-commerce in the coming year?

A: Cheng, Aetna: E-commerce capabilities are core to our fundamental operation processes and critical to meeting the service and partnership expectations of our constituents, as well as the success of our company. We had a strong investment strategy in 2001 and intend to sustain that focus in 2002 and beyond. We will continue to expand our e-capabilities in areas that build stronger partnerships and capabilities with plan sponsors, members, physicians, hospitals, and insurance brokers.

A: Harvey, Cobalt: Our investment in e-sales will remain constant; we will be increasing our investment in online administrative functionality by developing online enrollment and electronic bill presentment for our non-Internet-based customer segment.

Q: How will the requirements of the Health Insurance Portability & Accountability Act (HIPAA) affect continued or broader use of e-commerce in health insurance sales and administration?

A: Cheng, Aetna: While HIPAA is demanding a substantial compliance effort within the health industry, we don't believe these provisions will significantly impair the continued or broader use of e-commerce for sales and administration over the long run. An argument can be made that enhanced consumer confidence in the privacy of health information will lead to increased e-commerce, with corresponding efficiencies and cost savings.

A: Wiggins, HealthMarket: HIPAA makes everything more complicated and more expensive, but it's the right thing to do. When selling health insurance, individual names are not required to generate a quote, so there are fewer HIPAA entanglements. However, administering health insurance poses greater challenges. For firms attempting to increase their customers' use of the Internet, password protection will become standard. Unfortunately, HIPAA-compliant solutions make Internet use more cumbersome and will slow adoption for many important service applications.

A: Travnicek, Selectica: Privacy already is very much a concern in the paper environment, as it can be extremely difficult to ensure the security of paper records. While there is understandable worry about sensitive information becoming available for unauthorized uses via the Internet, the stakes are so high for providers and carriers, in terms of their financial stability and reputation, that the industry undoubtedly will develop the most secure systems possible. In the long run, the implementation of HIPAA's privacy standards should help drive broader Internet use in health insurance, as the perception of enhanced security and privacy increases in the general population.

Q: In general, are privacy requirements and concerns an obstacle to expanding the use of e-commerce in health insurance?

A: Cheng, Aetna: In order to maximize our e-commerce goals and opportunities, we will need to continue to foster an environment in which individuals feel their privacy is being honored and respected. We feel certain this can be done, and that any reluctance on the part of individuals will gradually fall away. The technical requirements should not present any overwhelming obstacles.

A: Harvey, Cobalt: Perceived privacy and security concerns may impact consumer adoption of online sales. We are the only insurer Web site in the country to have been awarded the WebTrust seal of assurance, having met the high standards for the online privacy of data transmitted over the Internet as developed jointly by the American Institute of CPAs and the Canadian Institute of Chartered Accountants. This seal is displayed on our Web site to give consumers confidence.

A: Travnicek, Selectica: There are very substantial compliance concerns for insurers and providers under the HIPAA regulations. The imposition of strict standards for security and confidentiality will hasten the development of technology used to encrypt patient information and authenticate users for access to information. Although complying with HIPAA will require tremendous expense for providers and insurers in the short run, the long-term effect is expected to be very positive, given the imposition of industry-wide electronic information exchange standards and protocols.


This Month's Experts


Senior Vice President of Marketing Cobalt Corp. (Milwaukee), a publicly traded managed care company serving 2.9 million lives in 50 states.


Senior Vice President and CIO Aetna (Hartford, 17.5 million total health membership).


President Selectica eInsurance (San Jose, CA).


Founder, President & CEO HealthMarket (Norwalk, CT), offering self-directed health plans.

Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio

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