Mastering the APS Paradox

published September, 2006 - On the Risk and InsuranceNewsNet, February, 2007, InsureIntell, February, 2007, ProducersWEB, September, 2007

Mastering the APS Paradox

Executive Summary
In the first two articles we discussed the importance of distribution and underwriting working together in partnership, as well as the need to breach operating silos across the lifecycle of an insurance policy. We also examined market dynamics such as staff attrition, lack of training and long-term career development, and the emergence of global automation and outsourcing all of which are posing serious questions for the insurance industry.

It is our supposition that underwriters in the 21st Century are uniquely positioned to benefit from these dynamics by taking advantage of technology and outsourcing solutions to help manage the stresses caused by fluctuating volume cycles and the ever increasing impact of staffing challenges. Another challenge to consider in underwriting (and claims) is time and cost effective use of the Attending Physician Statement (APS). In this installment we will discuss tools available to better manage the process of acquiring and then utilizing the APS as a productivity driver—and not a productivity detractor.

Introduction: The Paradox
Attending Physician Statements (APS) have long been an industry paradox. On the one hand they are an important source of information about an applicant’s insurability, but they are also inconsistent, duplicative, voluminous, and expensive to procure. Why do companies use an APS? Simply defined, an APS contains information from medical records to allow proper pricing of mortality or morbidity risk according to company guidelines. The goal of every insurer is to cut down on their reliance/volume of APS’—and innovations in risk management such as tele-underwriting, rules based engines, and pharmacological databases have contributed significantly to that end. None the less, the APS is an indispensable tool that will continue to play a role in the risk evaluation process for the foreseeable future.

Underwriting departments are back logged with more trial apps and higher case volumes than ever before. Simultaneously, they are understaffed and as a result, high-value resources (senior level underwriters) are being asked to perform administratively driven functions. The result of diverting the time of experienced underwriters in this way is:

· Decreases in productivity and case review cycle times
· Opportunity and real costs per case are on the rise
· A measurable decline in morale permeates the industry

As the saying goes, “you get out of something what you put into it”, and in the case of an APS, certain companies are getting more value and return on investment from how they handle an APS as compared to others. As the population ages and becomes more affluent, the volume and complexity of the typical APS has risen considerably. This simple fact has placed an increased burden on already over taxed underwriting departments and has added to the friction between producers and underwriters. The question is: How does one balance the desire for expeditious decision making with the need for prudent risk management?

First—build a better mousetrap
Companies have been struggling for years with the methods and services available to retrieve an APS from a doctor’s office. The cost and reliability of available options have been a challenge for companies seeking only to acquire evidence of insurability in a timely and cost effective manner. Single handedly taking on the task of retrieving an APS from a doctor’s office is clearly not practical in today’s Byzantine environment of HIPAA regulations, special authorizations, myriad copy services, payment requirements, and disorganized medical records departments.

There is no doubt that the advent of technological advances over the last ten and twenty years should have reduced the time and difficulty of retrieving an APS. But the question must be asked: are today’s time frames ranging from fifteen to thirty calendar days as good as it gets? Perhaps a few years ago that was impressive but technology and means of communication have continued to advance—shouldn’t standards and expectations for APS retrieval continue to advance as well?

Raise your expectations, raise your productivity
Companies need to take a hard look at what is acceptable in terms of time service, tracking/status, and success rates when retrieving an APS. If you could shave today’s average time frame by 1/3-2/3-- what would that mean in terms of productivity, field and customer relations, and persistency of applications taken? Underwriting departments are under ever increasing pressure to increase productivity with decreasing resources—the ability to recapture days lost to unnecessarily protracted APS retrieval time frames can’t be ignored. The time has come to expect better results and real time information during the APS retrieval process—and an average of ten calendar days is the new industry standard.

Another APS productivity factor is how underwriting departments handle the information once it arrives: Is the APS imaged or paper? Is it sorted and put into chronological order? Is the APS summarized with the key information presented as a concise health history? Are illegible entries and missing records annotated? Not only is the time it takes to get an APS important, but the circumstances of its arrival and utilization are also key factors that impact productivity.

What is an APS Summary?
An APS that is summarized by a trained and experienced risk management expert can be the difference between dealing with a frustrating burden and working with an important productivity tool. The components of a well constructed APS summary include a health history synopsis that chronologically details tobacco use, medications, prior conditions, lab tests, BP, Cholesterol, HDL, LDL and Cholesterol/HDL Ratio.

But how should companies use their internal, high value resources when it comes to the APS—to perform the laborious administrative task of deciphering and summarizing the medical information or focus on using the medical information to underwrite and make decisions?

A high level underwriter is not necessary to prepare an APS summary. Junior level underwriters and medical professionals can be trained (and are often better qualified) to dissect an APS and create a composite of the applicants medical history. A high level underwriter is necessary to interpret that medical summary against a company’s guidelines and procedures to evaluate the insurability of the applicant and then issue a risk based decision. An underwriter’s focus should be on underwriting and not on sorting records to begin that process.

Consider a visit to a doctor’s office
Think about your last check up. When you arrived at the office the reception area took care of your paper work. When you went in to the exam room an intern or nurse measured your vitals and “summarized” basic medical elements such as height, weight, blood pressure, heart rate, etc. in advance of the doctor’s arrival. The doctor’s time and value is maximized by having a patient composite prepared in advance by trained professionals who know how to deliver a “summary” that allows the doctor to focus on core functions: diagnosis, treatment, and prescriptions.

Henry Ford had it right when he devised the assembly line to manufacture automobiles-- it is the most time and cost effective way to bring a group of trained professionals together to focus on delivering their area of expertise as part of a collective effort to produce the desired end product.

Just like in the doctor’s visit, the components of an APS summary are very specific and play a similarly important role as part of the underwriting process. Specialists with underwriting and medical backgrounds are trained and have experience in the specifics of medical terminology, chronological sorting, reviewing, note taking, annotating gaps and indecipherable entries, and double checking for duplicative entries/records, inconsistencies, and spotting patterns. To ensure quality and reliability of data, very strict quality standards, training regimens, and audit schedules must be in place.

Underwriters supported by this type of “information triage” will be more productive and can underwrite more cases per hour—and therefore become a more profitable contributor to the bottom line.

What should a company look for when outsourcing APS summaries?
An APS summary is a very specialized risk management tool. A minimum requirement to be able to prepare an effective summary is knowledge of medical terminology and pharmacology. Underwriters and medical professionals are well suited to be trained to apply their knowledge and experience in this direction. In the case of a third-party provider of APS summaries, look for a company that offers more than a “one size fits all” approach to APS summaries.
Every insurer’s guidelines and workflow demands are different and an APS summary needs to be customized to match the needs of the underwriters.

Remember—the reason you are looking at an APS in the first place is to give you information about the insurability of an applicant so you can make a sound risk based decision. An APS summary is a productivity tool specifically designed to increase the effectiveness of that process. If you decide to use outside resources to produce APS summaries make sure you are working with an organization that understands your needs
and has the appropriate personnel and processes in place to deliver a high quality tool that is consistent with your guidelines.

Conclusion
Although companies are constantly looking for ways to reduce their reliance on the APS—it remains an important tool in the underwriting and risk management process. The key to success for an underwriting operation (and claims) is to obtain an APS faster than your competitor and then to extract and use the pertinent information in the smartest, most efficient manner possible. For those seeking to underwrite successfully in the 21st Century-- working faster and smarter will always be the key ingredients.

In today’s stressed underwriting environment—maximizing the value and utility of the APS is just what the doctor ordered.


Original version published in On the Risk September, 2006 as Underwriting in the 21st Century: Mastering the APS Paradox
"Reprinted with permission of ON THE RISK, Journal of the Academy of Life Underwriting www.alu-web.org"