COVID-19’s Impact on Industries
– Advanced Analytics Practice
COVID-19 pandemic has impacted demand and expenses of sectors in different ways. For many sectors, this pandemic is resulting in loss of demand and attrition of existing customers. But for some other sectors, spike in demand and reduction in expenses is observed.
It is important for each company to analyze what may happen post COVID-19 and prepare to mitigate the potential risks. A sector-wise overview is summarized in a 2-by-2 quadrant along the orthogonal dimensions of revenue gain/loss during COVID-19 and stable/unstable outlook post COVID-19. Each sector is placed in a quadrant based on these dimensions.
Sectors revenue impact during COVID-19 and outlook post COVID-19
Sectors that gained revenue during pandemic but may face challenges post pandemic
Series 1 – Healthcare Payer
- Payers received fewer number of claims during the pandemic due to postponement of elective surgeries and reduction in physician visits. This decreased claim expenses and increased the bottom-line growth.
- However, post pandemic, a resurgence in the number of claims is expected. Also, new customer acquisitions and renewals are expected to drop due to increase in unemployment.
- Blue Cross Blue Shield of Massachusetts (Blue Cross), Inc. and Blue Cross Blue Shield of Massachusetts HMO Blue, Inc. reported [Reference] a combined after-tax first quarter net income of $28.8 million on revenue of $2.1 billion (1.4% net margin) for Q1, 2020. A slowdown in claims for elective procedures was also reported.
- BCG’s recent COVID-19 health care survey [Reference] showed a 60% decline in medical procedures in the US as efforts to “flatten the curve” continue across the country. Approximately 80% of this drop is linked to delayed or deferred care, while 20% represents permanent cancellations.
- As a result of deferrals, Anthem currently expect the second quarter Medical Loss Ratio (MLR) to be well below of historical levels [Reference] but expect an elevated MLR in the second half of the year as elective procedures return.
- With respect to medical utilization, Humana have seen overall declines by at least 30% depending on the service category [Reference].
- Post COVID-19, high claim volumes are expected due to deferred procedures.
- Renewals are going to be harder due to expected increase in insurance cost, increased unemployment and reduction in spending power.
Artificial Intelligence Powered Solutions:
- Processing Claims – Healthcare payers while processing claims has to go through a lot of manual processes like checking medical reports, identify items for adjudication etc. With high volume of claims expected to come from deferrals this can result in high turnaround time for processing claims. Computer vision can read scanned medical reports and deep learning models can be used to categorize the text into disease, procedure, body organ etc. using a medical ontology. Natural language processing and machine learning algorithms can be used to classify each item into a charge type (e.g. laboratory changes, monitoring charges etc.) and decide the adjudication accordingly. This will result in automation of manual processes resulting in significant acceleration in processing claims.
- Renewal Risk Estimation – Due to high COVID-19 treatment cost per patient, there have been a significant impact on health insurance companies loss ratio. It will lead to increase in renewal premium for certain profile of customers. Analytics is helping insurance companies in identifying such profiles like customers with higher age having occupation that requires him to interface with public and residing in high risk geographies are suspected to be charged higher. Impact on policy renewal premium along with customer past renewal history and socio-economic parameters are used to estimate the renewal risk. Based on the risk score, insurance companies are creating strategies and planning campaigns to boost the renewals.
You can read the next series here: Auto Insurance Sectors.