German insurance firms merge IT departments

In January 2008 over 200 German health insurance companies will combine their IT departments to form one company. This is a significant consolidation on the customer side of the German health IT market.

“The step will lead to a new company with a turnover of €300 million and around 1000 employees”, said Wolfgang Schmeinck, head of the health insurance association BKK. Together with another health insurance association, IKK, and the second biggest single German health insurance company, DAK, the new IT-provider will be responsible for IT-services for nearly 30 million insurants.

“Essentially, we will have a bipolar market now”, says IKK-CEO Rolf Stuppardt. The new alliance competes with AOK-IT, which offers services for most other German health insurance companies to another 30 million customers. The only major health insurance company that has not joined either alliance is Techniker Krankenkasse, with four million insurants.

“It is clear that cost saving is a major goal of this venture”, said DAK-CEO Claus Moldenhauer when talking to E-Health Europe about the issue. By 2012, Moldenhauer expects savings of at least 32 million Euros annually, which is 12.5 per cent of the overall budget. “It might even go up to 20 per cent”, said Moldenhauer. “We aim at getting better prices when negotiating with IT companies, and we will bring together our data processing centres. This last step will probably be the cash cow of the project.”

The new alliance will be divided into four departments with the largest being software development. One of the major efforts here will be a change in the DAK insurance software from a proprietary system to the new standard software ISKV 21c, recently developed by BKK/IKK.

Of second most importance to the alliance is the ‘Services’ department. This is where responsibility for electronic patient records, personal health records and for regional networking projects lies. Since the companies involved have been using different vendors of web based personal health records– including Careon, ICW and IBM/Acure – it is unlikely that the alliance will opt for one product.

Rather, the task will be to agree on communication and data standards so that insurants will be able to change between companies without loosing personal medical data. This is a sensitive point: as health insurance companies are competing with each other they’ve traditionally been reluctant to make it easier for customers to switch to a competitor.

It seems more likely now that these agreements will be possible. Indeed, it may be that the IT alliance is the first step in a wider consolidation process that could lead to full mergers between health insurance companies.

Today, there remain around 250 independent health insurance companies in Germany but Rolf Stuppardt, from IKK, indicated that this will change: “While forming the IT alliance, we have realised that we can trust each other more than we thought. This might make it easier to take the next step and merge whole insurance companies.”

Phillip Grätzel