Health Insurance Industry Reference Architecture

Business Capability Maps, Value Streams, and Strategy Maps for the Health Insurance Industry

Analyst Perspective

In the age of disruption, IT must end misalignment and enable value realization.

An industry reference architecture helps accelerate your strategy design process and enhances IT’s ability to align people, process, and technology with key business priorities.

Health Insurers require a unified and validated view of their capabilities that aligns product development, distribution and underwriting, policy management and servicing, and claims management to provide value to patients and stakeholders.

Health insurance organizations are a central component of the healthcare system and interact with providers and other points of care across the healthcare continuum.

Health insurers are focused on developing products and services that facilitate the payment of health costs related to illness or injury.

Depending on where you live, health insurance may be provided as single, private, or public government payers, or through a combination of private insurance and public government payers.

Jennifer Jones

Research Director, Healthcare

Info-Tech Research Group

Executive Summary

Your Challenge

• You are a CIO, head of EA, or chief architect who needs to improve your organization’s understanding of business capabilities and how IT can provide support.
• You work for an organization that wants to sharpen its alignment and focus on organizational outcomes and value by using architecture to better inform innovation, stakeholder management, and IT strategy capabilities.
• Before executing any strategic initiatives, use this guide to understand how the organization creates value and the underlying capabilities and processes of the organization.

Common Obstacles

• You don’t know where or how to begin, or how to engage the right people, model the business, and drive the value of an architecture.
• The business and IT often speak in their own languages without a holistic and integrated view of mission, strategies, goals, processes, and projects.
• The business and IT often focus on a project, ignoring the holistic value of an overarching value stream and business capability view.

Info-Tech’s Approach

• Build your organization’s capability map by defining the organization’s value stream and validating the industry reference architecture.
• Use business capabilities to define strategic focus by defining the organization’s key capabilities and developing a prioritized strategy map.
• Assess key capabilities for planning priorities through a review of business processes, information, and application and technology support of key capabilities.
• Consolidate capability gaps for incorporation into priorities.

Info-Tech Insight

Using an industry-specific reference architecture is central and has many benefits to organizational priorities. It’s critical to understanding, modeling, and communicating the operating environment and the direction of the organization, but more significantly, to enabling measurable top-line organizational outcomes and the unlocking of direct value.

Reference Architecture Framework

Overarching Insight

Using an industry-specific reference architecture is central and has many benefits to organizational priorities. It's critical to understanding, modelling, and communicating the operating environment and the direction of the enterprise, and more significantly, to enabling measurable top-line business outcomes and the unlocking of direct value.

Determine your organizational priority.

Many organizational priorities are dependent on an understanding of how the organization creates value and the organization's capabilities and processes.

Examine organizational opportunities through the lens of business, information/data, applications & technology

Your understanding of your organization's business capabilities, processes, (rules & logic), information/data, and architecture will identify organizational opportunities to create value through reduced costs or increased revenues and services.

Follow Info-Tech's methodology to enable organizational outcomes and unlock direct value.

Your approach indicates the scope of your modernization initiatives.

Build your organization's capability map by defining the organization's value stream and validating the industry reference architecture.

Use business capabilities to define strategic focus by defining the organization's key capabilities and developing a prioritized strategy map.

Assess key capabilities for planning priorities through a review of business processes, information, applications, and technology support of key capabilities.

Sustain capability-based strategy planning through ongoing identification and roadmapping of capability gaps.

Industry Overview: Health Insurance

Health Insurance organizations operate in an interconnected web of products and service providers that create opportunities for people to have healthy lives.

The cross-integration of healthcare is driven by the complexity required to maintain good health. Healthcare payers such as insurance companies and government institutions often pay for a portion of or all products and services. Health insurance organizations are a key component of the healthcare system and interact with hospitals, medical, dental, vision and other points of care across the healthcare continuum. Finally, both providers and patients use healthcare products to manage health.

Health insurers are focused on developing products and benefits for the payment of health costs related to illness or injury. The primary activity of health insurers is to underwrite a variety of claims and develop products and services that create opportunities for patients. Increasingly, health insurers are focused on preventative care of patient outcomes, reducing healthcare costs using predictive analytics, and early intervention data models.

Depending on where you live, insurance may be provided as single payer, private insurance, public government funds, or through a combination of private insurance and public government payers. Insurance services vary by policy holder and polices are often based on pre-defined selections by employers.

Product Development → Distribution & Underwriting → Policy Management & Servicing → Claims Management

Figure above: Value Chain for the Healthcare Industry

Business Value Realization

Business value defines the success criteria of an organization as manifested through organizational goals and outcomes, and it is interpreted from four perspectives:

• Profit generation: The revenue generated from a business capability with a product that is enabled with modern technologies.
• Cost reduction: The cost reduction when performing business capabilities with a product that is enabled with modern technologies.
• Service enablement: The productivity and efficiency gains of internal business operations from products and capabilities enhanced with modern technologies.
• Customer and market reach: The improved reach and insights of the business in existing or new markets.

Business Value Matrix

Value, goals, and outcomes cannot be achieved without business capabilities

Break down your business goals into strategic and achievable initiatives focused on specific value streams and business capabilities.

Health Insurance and healthcare business capability map

Business capability map defined…

In business architecture, the primary view of an organization is known as a business capability map.

A business capability defines what a business does to enable value creation, rather than how. Business capabilities:

• Represent stable business functions.
• Are unique and independent of each other.
• Typically will have a defined business outcome.

A business capability map provides details that help the business architecture practitioner direct attention to a specific area of the business for further assessment.

Glossary of Key Concepts

A business reference architecture consists of a set of models to provide clarity and actionable insight and value. Typical techniques and terms used in developing these models are:

Tools and templates to compile and communicate your reference architecture work

The Health Insurance Industry Reference Architecture Template is a place for you to collect all the activity outputs and outcomes you’ve completed for use in the next steps.

Download the Health Insurance Industry Reference Architecture Template

Info-Tech’s methodology for a reference architecture

Info-Tech offers various levels of support to best suit your needs

DIY Toolkit

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful."

Guided Implementation

"Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track."

Workshop

"We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place."

Consulting

"Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project."

Diagnostics and consistent frameworks are used throughout all four options.

Guided Implementation

What does a typical GI on this topic look like?

A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization.

A typical GI is between six to nine calls over the course of one to four months.

Phase 1

Call #1: Introduce Info-Tech’s industry reference architecture methodology.

Phase 2

Call #2: Define and create value streams.

Call #3: Model level 1 business capability maps.

Phase 3

Call #4: Map value streams to business capabilities.

Call #5: Model level 2 business capability maps.

Call #6: Create a strategy map.

Call #7: Introduce Info-Tech's capability assessment framework.

Phase 4

Call #8: Review capability assessment map(s).

Call #9: Discuss and review prioritization of key capability gaps and plan next steps.

Phase 1

Build your organization’s capability map

Phase 1

1.1 Define the Organization’s Value Stream

1.2 Develop a Business Capability Map

Phase 2

2.1 Define the Organization’s Key Capabilities

2.2 Develop a Strategy Map

Phase 3

3.1 Business Process Review

3.2 Information Assessment

3.3 Technology Opportunity Identification

Phase 4

4.1 Consolidate and Prioritize Capability Gaps

This phase will guide you through the following activities:

• Identify and assemble key stakeholders
• Determine how the organization creates value
• Define and validate value streams
• Determine which business capabilities support value streams
• Accelerate the process with an industry reference architecture
• Validate the business capability map
• Establish Level 2 capability decomposition priorities
• Decompose Level 2 capabilities

This phase involves the following participants:

• Enterprise/Business architect
• Business analysts
• Business unit leads
• CIO
• Departmental executive and senior managers

Step 1.1

Define the organization’s value stream

Activities

1.1.1 Identify and assemble key stakeholders

1.1.2 Determine how the organization creates value

1.1.3 Define and validate the organization’s value streams

Build your organization’s capability map

Step 1.1 → Step 1.2

This step will guide you through the following activities:

• Identify and assemble key stakeholders
• Determine how the organization creates value
• Define and validate the organization’s value streams

This step involves the following participants:

• Enterprise/Business architect
• Business analysts
• Business unit leads
• CIO
• Departmental executive and senior managers

Outcomes of this step

• Defined and validated value streams specific to your organization

1.1.1 Identify and assemble key stakeholders

1-3 hours

Input

• List of who is accountable for key business areas and decisions
• Organizational chart
• List of who has decision-making authority

Output

• A list of the key stakeholders
• Prioritized list of decision-making support needs

Materials

• Whiteboard/flip charts
• Healthcare Industry Reference Architecture Template

Participants

• Enterprise/Business architect
• Business analysts
• Business unit leads
• CIO
• Departmental executive and senior managers

Build an accurate depiction of the business.

1. It is important to make sure the right stakeholders participate in this exercise. The exercise of identifying capabilities for an organization is very introspective and requires deep analysis.
2. Consider:
   • Who are the decision makers and key influencers?
   • Who will impact the business architecture work? Who has a vested interest in the success or failure of the practice?
   • Who has the skills and competencies necessary to help you be successful?
3. Avoid:
   • Don’t focus on the organizational structure and hierarchy. Often stakeholder groups don’t fit the traditional structure.
   • Don’t ignore subject matter experts on either the business or IT side. You will need to consider both.

Download the Health Insurance Industry Reference Architecture Template

Define the organization’s value streams

• Value streams connect business goals to the organization’s value realization activities. They enable an organization to create and capture value in the marketplace by engaging in a set of interconnected activities. Those activities are dependent on the specific industry segment an organization operates within. Value streams can extend beyond the organization into the supporting ecosystem, whereas business processes are contained within and the organization has complete control over them.
• There are two types of value streams: core value streams and support value streams. Core value streams are mostly externally facing. They deliver value to either an external or internal customer and they tie to the customer perspective of the strategy map. Support value streams are internally facing and provide the foundational support for an organization to operate.
• An effective method for ensuring all value streams have been considered is to understand that there can be different end-value receivers. Info-Tech recommends identifying and organizing the value streams with customers and partners as end-value receivers.

Value stream descriptions for health insurance

Value Streams:

Product Development

• Product development is focused on driving the company's strategy, value proposition, marketing, and long-term competitiveness.
• It covers activities necessary to transform market opportunities and technical capabilities into products that meet distribution and consumer needs while adding value to the company.

Distribution & Underwriting

• Distribution is the method by which the company reaches and provides policies to its insurers, such as a direct insurer, company, or government agent.
• Underwriting involves measuring risk exposure and determining the optimal premium that needs to be charged in order to ensure that risk.

Policy Management & Servicing

• Policy management deals with understanding customers, making new policies with various risk coverages, document verification, customer relationship management, and risk and compliance management.
• This process enables new business and cash flow into the company.

Claims Management

• Claims management is the process that functions bilaterally between payers, patients, and providers in order to process, adjudicate, and pay billing claims for health treatment.
• They include elements spanning work from the intake to the adjudication of claims, including post-payment processing.

Determine how the organization creates value

Begin the process by identifying and locating the business mission and vision statements.

Corporate Websites

Business Strategy Documents

Business Mission

Business Executives

Business Vision

What is business context?

“The business context encompasses an understanding of the factors impacting the business from various perspectives, including how decisions are made and what the business is ultimately trying to achieve. The business context is used by IT to identify key implications for the execution of its strategic initiatives.” (Business Wire, 2018)

1.1.2 Determine how the organization creates value

1-3 hours

The first step of delivering value is defining how creating value will happen.

1. Use the organization’s industry segment to start a discussion on how value is created for customers. Working back from the moment value is realized by the customer, consider the sequential steps required to deliver value in your industry segment.
2. The first step to delivering value is defining how creating value will happen. Consider:
   • Who are your customers?
   • What tasks are your customers looking to accomplish?
   • How does your organization’s set of products and services help them accomplish that?
   • What are the benefits the organization delivers to them?
3. Avoid:
   • Don’t boil the ocean. Focus on your industry segment and how you deliver value to your partners and customers specifically.

Download the Health Insurance Industry Reference Architecture Template