The R&D Tax Credit Aspects of Hybrid Call Centers for Health Insurers

By and

        There are 313.9 million people in the United States, of which 48 million people do not have health insurance as of 2012. With the passing of the Affordable Care Act, it is estimated that at least an additional 9.5 million people will be covered as of the closing of the initial enrollment period. The additional insured further the need for improvement of the already burdened call centers which the major healthcare companies operate.

The Research & Development Tax Credit

        Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation
        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On December 18, 2015 President Obama signed the bill making the R&D Tax Credit permanent.  Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax and startup businesses can utilize the credit against $250,000 per year in payroll taxes.

Call Centers

        Call centers have moved to the forefront as the method of communication between the insured and the health care companies. In the health insurance industry, a common goal is to answer approximately 80% of all calls within 30 seconds. With the number of people being insured on the rise and fierce competition, it becomes more important to ensure positive customer service experiences.

Healthcare insurers employ thousands of employees across the United States. For example, the table below illustrates UnitedHealth Group call center employment in select locations:


Number of Employees

Greensboro, NC


Irving, TX


Tonawanda, NY


Roanoke, VA


Jacksonville, FL


St. Louis, MO


Miami, FL


Raleigh, NC


Note: Data estimates are used. Greensboro, NC data includes all employees at that location and not just healthcare call center employees.

        According to, after all benefits and bonuses, the entry level call center representative makes approximately $46,551. Keep in mind that this is an entry level call center representative as well as it being an industry average, not specific to health insurance, whose employees might need more experience than the average call center. In any event, just considering those select call centers for UnitedHealth Group given above, the annual employee cost for the insurer is $284,193,855. This magnitude of annual costs alone can support increased investment in artificial intelligence call center technology.

Hybrid Call Centers Defined

        Many call centers are therefore being transitioned into a hybrid of human interaction with computer speech recognition. Artificial intelligence enables call centers to handle calls faster with better quality and at less cost than human only operated systems.

Industry-Wide Change as a Result of the Affordable Care Act and Aging Population

        The Affordable Care Act has created a large change in the health care industry. The additional ten million people obtaining health insurance has created a need for additional communication with these new insured. As a result, a move towards smarter communication methods has emerged.

Below is a list of the 2012 number of people insured and 2012 revenue for several major health care organizations:

                  Number Insured and Revenue Per Company

2012 Total Insured

2012 Revenue in Millions of Dollars

UnitedHealth Group


















Health Net



Data from: and

        Despite initial well publicized implementation issues , more and more people are becoming insured. Aetna added 230,000 insured from the public exchange with expectations to add 450,000 more by the end of 2014. Similarly, Cigna was optimistic indicating that younger people have been obtaining more insurance policies. According to an interview with WellPoint CEO Joe Swedish, the second largest health care insurer has already added 1,000 people to staff their call centers just as a result of the Affordable Care Act. With more of younger people insured, machine systems can gain faster acceptance.

        Aging population means additional people need to be insured for longer periods. This also means that an application based website for health care management by individuals may be too difficult to utilize because of the lack of technological skills that older generations stereotypically have. Health care insurers have in turn looked towards smart call centers as a potential fix. Although machine systems can handle a wide range of standard inquiries, there are always issues better handled by humans. Furthermore, many people prefer dealing with humans as opposed to automated systems.

Administrative Costs in Health Care

        A significant goal of insurance companies is to have a majority of premiums paid going to actual health care and not administrative costs. According to a study conducted by Harvard Medical School and the Canadian Institute for Health Information and presented in an article in the New England Journal of Medicine , administrative costs accounted for 31% of health care expenditures in the United States. WellPoint, a major insurance provider, has already indicated that it will pass on additional costs as a result of the Affordable Care Act to its customers. One method for reducing these administrative costs is by implementing a hybrid call center composed of artificial intelligence and human operators.

Using Call Centers to Improve Medical Care

        Health insurers are trying to lower costs to both themselves and the patients by implementing technologically based methods of care. Although often used in rural or hard to reach areas, insurers such as WellPoint, Aetna, and Cigna are increasingly using telemedicine, where a doctor can consult a patient over a webcam conference or simply a phone call. WellPoint’s program, LiveHealth Online, saves an average of $71 per visit. In Cigna’s program, named MDLive, fully trained medical doctors respond to requests on average within 11 minutes. This can have great use in non-urgent care such as having a cold or the flu or asking a doctor to quickly look at a rash. In conjunction with telemedicine, healthcare insurers can levy the amount of data and resources available to them to further cut costs for their customers.

Increased Usage of Predictive Analytics and Big Data

        In an industry that uses great amounts of actuarial data in their management of policies, predictive analytics and big data has played an increased role in business operations. Factors such as religion and culture can be used to predict health insurance usage. Analytics can recommend specific doctors and treatment procedures before patients need expensive emergency room visits. For example, a patient with allergies may be encouraged to see an allergist as a result of correlation testing with certain behavioral factors before needing emergency care. This is just one of the many applications for this data. Potential data sources include genetic data, sleep data, data collected from smart phones, and other data.

Existing Consumer Spending Data

        To date, many health care insurers have used already available consumer credit card data. One insurer, Carolinas HealthCare System, has already implemented such a program. The table below illustrates how this data may be used:



Frequent credit card purchases at pizza shops and fast-food outlets

May need advice on weight control or diabetes and high blood pressure risks

Frequent purchases of large amounts of alcoholic beverages

Possibly a sign of depression

Falloff in the frequency of drug refills shown on a charge card

Might require a reminder call from a nurse

Cigarette purchases at grocery stores by consumers with bronchial problems

Increased chance of visiting an emergency room for an asthma attack

No vehicle ownership registration on file

Could presage difficulty in reaching scheduled care appointments

Source: All Consumer Data Suggestions taken from Pettypiece and Robertson, Business Week.

        With artificial intelligence enhanced call centers, health insurers can quote quicker with more accuracy than when just using the historical actuarial data. This consent may or may not comply with policy goals and legal requirements.

        Although the opportunity here is large, there are potential issues that may come up. For example, credit card spending cannot always be traced to a particular individual. This is simply a proxy variable for physical healthiness, and the correlation may not be that strong in many cases. For example, just because one is purchasing a fast food meal at midnight doesn’t mean they are consuming it; the purchase could potentially be for a spouse, friend, or child. This can be a common occurrence, causing the data to be unreliable. Nevertheless, more data is beneficial in statistical analysis, and data engineers can filter out irrelevant data.

New Sources of Healthcare Data

        Although consumer spending data can be used, there is an even larger potential to take advantage of other sources of data available to health insurers. Consider the following table of potential data indicators and their interpretations:

        As more and more electronics become prevalent in daily life, it is just a matter of time until this data is widely available. The possibilities for sleep or wearable data and the potential information that can bring are large and widespread.



Too much sleep

Might be depressed

Wearable technology indicates that the user has walked over three miles for the day

Person might be in good physical shape

Lack of sleep for long hours

Possibly a sign of stress

Historical blood results indicate DNA mutations

Disease prevention measures should be taken

Social media data indicates a regular “check-in” at 12:30 am

Person might like to party. Discuss health effects of too much alcohol intake


        A move towards smart machine systems in health care is vital to maintain the growth in the number of insured that has been seen from an aging population and the Affordable Care Act. In a time where the healthcare industry is rapidly changing, R&D tax credits both on the federal and state levels can help support the development and implementation costs associated with undertaking the artificial intelligence based call center project. It is more important than ever for healthcare insurance companies to keep up with technological improvements in an ever changing industry.

Article Citation List



Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Gary Savell is a Systems Engineer with R&D Tax Savers.

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