If your auto insurance worked the way your health insurance does...

It was quite some time since the front left bearing of my car was trying to rhythmically trying to tell me that it needed care. And so last month I finally decided to replace it. I ordered the replacement bearing online and when it arrived last week, I went around looking for repair shops to do the job. Some shops flatly refused to work with customer supplied parts - mostly with Italian accented sentences like - "you gate your parts, I don't touch your car"!! (While it left me fuming, I will cover that aspect in another blog).

One shop said it was impossible to give me an estimate on how much it will take until they got on the job - it could cost anywhere from $100 to $300 - as they might have to - take off the wheel, take off the rotor, take off the brake shoes, the steering column will need to be disconnected, the bearing hub will need to be unmounted.. etc. etc.. and so they will not be able to tell how much each of the tasks will cost until they get down to it. (To me it sounded more like IT consultants talking to a customer to work on a system for the first time and playing it safe when the customer asks for effort estimates by talking about hypothetical details).

And then I came to this third shop - the owner there glanced at the car, took a look at the replacement bearing that I had and said he will charge $89 for the job. And he could do it right away. Given that the hourly labor rate is around $90 in this area and the confidence of the shop to get it done, I awarded my contract to this shop.

Being somewhat interested in how things work, I stood by closely to observe what is involved in a front wheel bearing replacement.

Somewhere along the process, while I watched the mechanic unassemble the wheel assembly, it stuck me that if my auto insurance worked the way my health insurance works, instead of a 5-min discussion, a 45-minute job and a 5-minute payment and settlement cycle, it would have required something like:

• Me calling up my auto-insurance company to determine if Wheel Bearing replacement was a covered service
• If it was covered, what would be the copay & coverage limit
• Find out the "In-Network" mechanics in my area
• Call up the "In-Network" mechanics in my area to fix a service appointment
• In-case it was a breakdown situation, I would likely have to go to a repair shop that had an "emergency repair" facility (and pay a higher co-pay along with waiting in line while the mechanics repaired cars with more urgent problems - like engine or transmission problems)
• At the mechanic's shop, there would be very limited means for the mechanic to verify my coverage and copay
• If the auto-industry was regulated as heavily as the health industry, there would likely be an "Auto Insurance Portability & Accountability Act" - AIPAA
• The Auto-shop itself will be either an independent auto-shop, or a location in a network of auto-shops or a multi-facility auto-shop
• The mechanics working in the auto-shop would also be most likely be independent legal entities, at par with Auto-shops themselves
• At the time of actual repair, leave the car completely at the mechanic's discretion
• The mechanic would have performed thirty five different " diagnostic tests" on my car before touching it. They would charge the insurance company for each of these tests separately, charging for each test
• Based on these test results, they would have performed 45 different "procedures" on my car, again charging for each procedure
• Each wipe, each tool, each gasket and each washer would have been charged for, including every drop of grease/ oil used
• The auto shop would have filled-in a claim form to be submitted to the the insurance company
• AIPAA would mandate that mechanics submit the claim in an EDI format. So my small, poor mechanic would have to use the services of a "Web-AD" as an intermediary to submit the claim
• In-addition, the auto shop would have to keep all my repair records confidential and encrypted, so that no unauthorized disclosure can take place.
• At the Auto Insurance company's end, the claim would be received and checked for format compliance first. If it was non-compliant, it would be rejected and no payments will be made until the claim is resubmitted in a compliant format
• After receiving the format compliant claim, the claim would be adjudicated and the insurance company will make a determination on the amount that needs to be paid out against each line item in the claim, based on the fee schedule agreement between the auto shop and the insurance company
• The auto-insurance company would run the claim through their Fraud-And-Abuse detection system to determine if this claim looks suspicious
• Based on the how this mechanic is set up in the insurance company's systems, a determination will be made if the payment for the claim needs to be made to the mechnic directly (the servicing mechanic), or to the auto shop (the service renderer) or to the Billing entity or to the legal entity
• Based on the adjudication, the Auto insurance company will issue an EOB to me, detailing the amounts that the auto-shop had charged and highlighting how much I saved because the Auto-Insurance company saved me, because of their negotiated preferred rates.
• If there is item that that is only partly covered or not covered, then I will be responsible for paying the auto-shop directly for that service
• Assuming that there is no mistake in this whole claim-to-settlement cycle, the entire process should be completed within a month.
• If there is an error somewhere, this whole cycle repeats itself all over again.

Does the absurdity of the current health insurance system become clear to you? Just like Auto insurance is to pay for specific, exceptional situations and not for every repair and maintenance that the car needs, Health Insurance should be to pay for exceptional health events and not for routine health maintenance.

The current attempts to "simplify" and "improve the process efficiency" merely focus on how to execute the process (outlined above) faster and better. The need is to remove this administrative overhead altogether from the system for most of the routine transcations by allowing patients to directly deal with the providers and pay for the services directly, without going through the insurance route. Patients will be better off because the providers will charge for an outcome, or a bundle of services, allowing patients to make a comparison between various provider services; charges and settlements will be direct reducing the overhead from the system and lowering the costs. There would be numerous other changes that would simplify the system and lead to a transformation of the industry and its players.

Will continue on this thought in the next posting, but please do share your thoughts on this..

The Carbonism Era

The eighties started off with Glasnost & Perestroika as the most prominent buzz words that used to hit the public with fair regularity. The nineties was the decade of Globalization. The early part of this decade was Global War on Terror. The word gaining ground currently is "Global Warming".



Based on the past history, if the amount of public time, the amount of media time and media real estate being devoted to any buzzword is an indication of the likely impact it will have, then "Global Warming" is certainly the next big thing. And it will likely have a significant impact on all of us, in one way or the other. While we might not be in a position to predict how exactly will we be impacted, we certainly can be alert and be ready to take advantage of the changes that are likely to take place.

The Small Company disadvantage

What happens to companies that start late in any industry that is growing phenomenally?

They are behind in the learning curve to begin with. They are perpetually smaller than the average. They are always playing the catch-up game. They try hard to differentiate. They compete for small deals. They get beaten up on margins pretty badly. They nether have the breadth of service offerings, nor depth in the service offerings they do have.

These small companies find it harder to attract people, retain them and offer them the range of opportunities that the big companies can offer. In-fact small companies offer lesser opportunities for rapid growth, if there are senior people already at upper levels.

Do these companies survive? Some of them do, but most either stagnate or get acquired. It will be interesting to watch where MindTree Consulting ends up being.

Blind Marketing

I just received a special offer to join an esteemed association of professionals.

This highly reverred (at least they pretend to be so) association has been in existence for more than 30 years and becoming its member has seemingly helped people grow professionally. And of-course, by accepting to join this network, I will also be issued a Master Card credit card as a privilege.

Now, I am very grateful for this organization to have gone through my profile available with all the spam mail marketing companies, and deciding to offer me a Master Card through along with the membership to the professional association. Oh! I got it completely wrong - it is the Master Card that comes with the membership!!

While I would love to join the National Association of Female Executives - I am certainly not willing to change my sex to do it!!

One aspect of a high cost economy

My car needs an oil change every 3500 miles. The oil service station always puts a tag for oil change at 3000 miles. I drive around 18000 miles/ year. If I follow the 3000 mile routine, I need one additional gas change - an additional $40 per-year. Assuming that there are 100 million cars in the US, and there is an additional $40 million expense being incurred on them, which is avoidable, as a country the US incurs $4bn extra on car oil change alone.

To be able to afford this additional $4bn, individuals collectively have to earn an additional $4bn. This effectively pushes up the average salaries that all the people will be willing to accept on the average.

Now spread this phenomenon to all other areas of our economy and you will see that a number of such expenses - which do not necessarily contribute to "a good life" consume a significant part of the earnings in the economy, which effectively puts the fixed cost of the economy to a much higher level than is needed.

The other side of this story is that the additional expenses create additional jobs for others, which then sustains the demand in the economy. Maybe the additional job creation outweighs the jobs lost because of high fixed costs. We will know for sure someday.

The Brand Lingers on!!

AT&T - the company is no more. With California approving its acquisition by SBC Corporation, the final nail in the coffin of the creator of the telephone industry has been hammered in. But the brand lives on as SBC renames itself as AT&T.

Brand Managers of the world need to look back at what created a brand so strong that it survives beyond the demise of the company that created it. AT&T as a brand was not built by legions of MBAs "strategically managing" its growth. Actually the brand lost a lot of its sheen in the era where brand managers as a group were on an upswing.

So what created the AT&T brand and what can others learn from it? I would hazard to say - nothing very fancy. Rather - it seems to be more a reaffirmation of the basics:

1. Meet needs by offering something that people want - not just once - but consistently evolve as needs change
   
2. Clearly articulate your offering - and build an organization to support the articulated offering
   
3. Communicate far and wide about your offering - set expectation about what, where, when, why and how to expect - internally as well as externally
4. Build trust - internally and externally by consistently meeting promises

SBC has come a long way from being the smallest of the Baby Bells way back in 1984 to being the largest telecom service company in the US. While it will certainly benefit from the AT&T brand value, it will remain to be seen if the AT&T brand is enhanced or diminished under the new AT&T!!!

Bangalore - End of a Dream Run?

Imagine an idylic city in India - where the climate is moderate, there is lush greenery all around, where it takes 30-minutes to drive from one end to the other, where the people are well mannered, intelligent, accommodating and cosmopolitan in their outlook.

Now start adding more people to the city, start building more houeses, start growing educational/ engineering institutes in and around the city to churn out thousands of engineers. But don't yet start on expanding the infrastructure - electricity, roads, sewage, drainage. Worse still start building and expanding the city haphazardly, without any evaluation of the impact on the roads, traffic, pollution. Assume that these problems will somehow solve themselves.

What will you have? Something like what Bangalore has become today. While it is still the capital city of Indian IT, a lack of planning and foresight by the city's administrators has brought the city to a situation where everyone is disappointed and frustrated.

The companies are disappointed that the Bangalore that they were promised (or marketed) is not the same as the Bangalore that exists on the ground today. The migrants into the Bangalore realize that this is very different from the promised land that they had the dreams of. And to top-it off, the local populace who been painfully seeing the deterioration of the city, have started blaming the outsiders for this situation.

All these put together can create a very potent mix - of choked infrastructure, stymied growth and increased regionalism (reduced cosmopolitan nature). This can turn tide away from Bangalore (like increased parochialism did Calcutta in after the 60s).

Is this a real possibility? I would think that the chances are remote, but it surely has the chance of happening.

As citizens and well wishers of Bangalore, let us ensure that we do not lose focus of the real problem - lack of investment in infrastructure and most importantly - a lack of foresight and planning.

What you get is in proportion to what you aim for

It is kind of perfunctory to state it, but I have just experienced it and can relate to it much better than I ever did so far.

My project had a scope increase and everyone was very clear that we were not going to hit the deadline. However, I and the leadership team above me persisted in pushing us towards meeting the deadline. A week before the release, we were in deep trouble, with system testing issues all over the place. With just a week to go before the release, everyone was about to throw in the towel and resign to a delay.

My boss still persisted that we had to go on as per the deadline. We worked hard, late and over the weekend after that to ensure that we get in better shape. Our efforts paid off and we are now in a position to go in for the release.

Looking back, I think about the what our behavior would have been if the leadership team would have agreed to us and our deadline would have been deferred. We would have not stretched hard and even though it might have been possible, we would have most certainly not met the deadline. It is the aim that drove us to perform as much as we could and achieve our goals. A lax target would have relaxed us, and even though the release might have been possible we would have most certainly not made it.