CORAL helps insurance startup gain an edge

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By Michael G. Sturm | 12 July 2010

SeeChange Health, a startup insurance company based in San Francisco, had faced an onerous task to help meet its ambitions for growth: how to quickly and efficiently value competitor insurance plans in its new markets. At first glance, determining the relative value of its own products vs. other insurance plans would require detailed actuarial estimates. That would mean significant costs and time spent in all the back and forth with a consultant as SeeChange readied its own offerings for employers.

Yet SeeChange found a better way by tapping CORAL, a groundbreaking actuarial program that helps users quickly estimate equivalent relative values of different health benefit plans. CORAL, developed by Milliman, gives insurers constructing new plans for market a much faster way to reach equivalent relative values.

"That benefit allows SeeChange to save time and money as it prices hundreds of plans in its evolving California markets such as Fresno, Santa Cruz and the Monterey Peninsula," says Mike Christy, chief underwriting officer at SeeChange. "When I want to get a certain price point or plan design, I can do it in real time," says Christy. "CORAL gives me the tools to allow that to happen."

Aiding an innovative approach

SeeChange, rolled out its first product in Fresno, Calif., in March 2010, with an innovative strategy to offer benefit plans that provide members with financial incentives to take better control of their health. Using advance software, SeeChange assigns individualized health actions based on age, gender and health status. For example, by completing annual health screenings, a health questionnaire and participating in biometric screenings, members pay less for health-related costs in the form of lower deductibles, lower out of pocket limits and cash rewards.

Members with chronic conditions such as pre-diabetes, diabetes, asthma and heart disease receive specific screening and treatment compliance requirements based on their medical condition. Members fulfilling the compliance requirements receive a financial reward. SeeChange provides a first dollar benefit into a health incentive account. Larger employers may elect to waive copays for diabetic supplies and drugs as a way to encourage compliance. "We provide a clear roadmap for services members ought to receive to help control their chronic conditions to help prevent them from becoming catastrophic," Christy says.

For its insurance plans, SeeChange focuses selling group policies to small companies, which tend to be confined to tight geographies. As SeeChange expands in California markets such as Silicon Valley and Los Angeles, it has benefited from having the same competitors in the various markets around the state, helping streamline its research. But as the company branches out to other target markets such as Phoenix, Denver and Florida, CORAL will allow SeeChange to adapt on the go. "As we expand out of California, the competitors and the plan designs they market are likely to change," Christy says. "We can use CORAL to price out what all of the competing plans are going to be worth."

That helps SeeChange exploit opportunities, Christy adds. "You have got to understand the relative value of the benefit plan to make any sense if rates are in line," Christy says. "It's important to understand if there is a disconnect between what is being charged as a premium vs. actuarially what the cost value differences truly are."

Flexibility and efficiency

CORAL allows users to change a multitude of variables such as copays, deductibles and coinsurance rates to determine how that will affect a plan's per-member-per-month cost. Users can adjust dozens of other variables and conditions such as out-of-pocket maximum, fixed-dollar copay and percent copay, prescription drug benefits and amount-of-account funding. In addition to insurance companies, CORAL also helps large employers with self-funded plans, and the third-party administrators and brokers who serve self-funded employers.

CORAL allows users to analyze data easily, even if they don't have an actuarial background. The program provides estimates of what certain adjustments are worth, which is especially valuable when making multiple benefit changes that are interdependent. CORAL was also built with an easy-to-use interface, so that all the complicated technical work is done inside the program.

CORAL also helps insurers develop new products. SeeChange in the spring of 2010 was considering offering a health savings account (HSA), using CORAL to calculate the equivalent relative values on competing HSAs.

Bottom line, CORAL has become an integral part to SeeChange's expansion plans, which include a goal of 15,000 members by the end of 2010, and several hundred thousand by the end of 2014, the year when the major components of the national health care reform are due to take effect.

"CORAL is a really good tool that accommodates all the variables needed to price our own plan designs as well as a host of competitive plan designs in the market," Christy says. "It gives me flexibility and tremendous cost savings compared with having to work with an outside provider."