The Missing Piece of the New Underwriting Paradigm

By Ron Schaber

Product Matters!, August 2022

This article was originally published by Munich Re in January 2022. It has been reprinted with permission here.

The federal government began funding the HITECH (Health Information Technology for Economic and Clinical Health) Act in 2009 to promote the meaningful use of health information technology or Electronic Health Records (EHRs). Since then, U.S. hospitals and medical providers have been mandated to create and leverage medical records in an electronic data format. The EHR is an instantly available, patient-centered record designed to improve information sharing between medical care providers. According to a leading EHRs vendor from our industry, over 95% of providers are compliant with using EHRs. 

EHRs are used in the insurance industry with modest success but are expected to become an essential piece of the new life insurance underwriting paradigm as access increases. Insurance companies can now receive medical records much faster, significantly reducing the cycle time of the underwriting process. For successful automation, information technology (IT) systems must accept extensible markup language file (XML) data to fully leverage medical records in their underwriting systems. XML data is structured in a format that will allow the relevant data to be transmitted from the sender to the receiving company. Incorporating EHRs provides an opportunity for life insurers to modernize underwriting systems and improve underwriting product offerings, turnaround times, and the customer experience. 

The Continuity of Care Document (CCD) is a standardized form used to transmit medical information in the Electronic Health Record that contains critical information for each patient and hyperlinks to view existing test results. The document features a variety of information, including dates, tests conducted, and biometric measurements. It also includes a narrative of the clinical notes that describes the problem, procedures, results, social history, and plan of care. All patient information is held in the CCD and transmitted as XML data.

With the standardized format of the CCD and XML transmission, insurance companies can receive medical information electronically. The goal of incorporating this technology in the insurance process is to share electronic medical records as quickly as it takes to run a motor vehicle report (MVR) or medical information bureau (MIB) report—which only takes a few seconds.

Current Availability

Insurance companies express concerns with the limited availability of EHRs. Hit rates from leading vendors for our industry are twice what they recently were and account for over 50% of life insurance applicants. This is heavily dependent upon geographic location, the demographics of the applicants, and the vendors the aggregators have contracted with in order to gain access to the medical records. It is also worth noting that since there is no financial incentive for the provider to do so, historical medical records are not transcribed into an EHR format. The authorization sections of life insurance applications may need to be revised by EHR vendors to comply with Federal law on disclosing confidential medical information.

By the year 2024, the U.S. Department of Health and Human Services wants interoperability between disparate electronic health records systems to be a common capability. This would allow patient data to be shared among authorized practitioners seamlessly, which is significant for our industry in terms of efficiency and accuracy of risk assessment using EHRs.

There are also concerns with the level of comprehensiveness of the patient histories in EHRs. Missing documentation of critical medical history is an issue in EHRs, especially sensitive information about medical history such as major psychiatric details and chemical or alcohol abuse. Vendors in the insurance industry market medical health insurance claims diagnostic codes created for financial reimbursement of the provider or treating physician—and may not encompass the complete medical diagnosis or history required for risk assessment purposes. To date, the most efficient use of EHRs for life underwriting occurs when there is no adverse history expected or found and is often a proxy for the traditional attending physician statement (APS).

Currently, companies receive EHRs directly when ordering records from their APS vendor. Providers have begun using digitized records, but today, the records are still commonly scanned and sent. This is due to the need for special authorizations and the limited IT connections from healthcare providers to health insurance exchanges and then to life insurance companies.

Obstacles for EHRs

Several obstacles could reduce (if not prevent) the pace at which EHRs reach their risk assessment potential for life insurance purposes, such as:

• Data breach situations involving hospitals and insurers, which civil liberties groups use these situations to lobby the U.S. Congress to prohibit the Electronic Sharing of Medical Information outside of health care fields.
• Legislation that advocates for limited use of black box algorithms, as already implemented in Colorado.
• Preventing the use of genetic-based information in underwriting, such as in Canada.

Obtaining EHR Information

Insurance companies obtain EHRs through APS ordering services then send them to reinsurers through previously established methods. Carriers will need to incorporate XML receiving capabilities with individual vendors to accommodate EHRs successfully.

Another way to obtain records is from IT vendors or retrieve directly from health information exchanges. Carriers will need to partner with one of the numerous EHR IT platform providers and build integrated systems to receive the information. New legal authorizations may need to be developed to satisfy the needs of both health care providers as well as vendors while protecting the patient's rights. Unfortunately, there is no universal authorization available, which means the process to get the required authorizations for EHRs may take an extended period. In addition to vendors serving as EHRs aggregators, middleware companies partner with the aggregators to standardize and format the data for underwriting purposes.

Use Case for Direct Carrier Underwriting

EHRs are currently marketed to the insurance industry as a proxy for an APS, which is usually more complete. Medical providers are learning and accepting EHR IT platforms to improve the quality and accuracy of the EHRs content, identified as significant issues per health information management executives at major providers. Connectivity is expanding from doctors to intermediaries and will eventually expand to life insurance companies. This connection must be seamless and transparent to the applicant/patient and requires little to no involvement beyond a signed authorization. Adopting EHR-specific wording for authorizations will also need to be addressed since about 30% of APS requests require special authorization, as per data from an EHRs vendor. EHRs are now utilized for accelerated underwriting (AUW) programs, fully underwritten business as an age/amount requirement, and post-issue business analytics.

Leveraging EHRs and Automation in Underwriting

EHRs are still several years away from being fully integrated into life insurance underwriting, but much work is being done today on this critical medical data. All EHRs would be instantly available for all applicants in a perfect world, at the same price or less expensive than the traditional APS. There would also be high-quality EHR data with no gaps in medical diagnosis or history. However, there are still many questions about the availability, speed, price, accuracy, and system requirements that will need to be resolved. Once these issues are solved, EHRs will provide the medical data required for accurate real time risk assessment

In the future, EHRs will be the standard for applicant medical records because it truly is the missing piece of medical information on the applicant to make way for a new underwriting paradigm.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.

Ron Schaber, FALU, FLMI, ACS, AIAA, HIA, is second vice president and underwriter, Biometric Research and AUW Services, at Munich Re Life US. He can be reached at rschaber@munichre.com.