Use of responsible artificial intelligence to predict health insurance claims in the USA using machine learning algorithms

Abstract

Aim: This study investigates the potential of artificial intelligence (AI) in revolutionizing healthcare insurance claim processing in the USA. It aims to determine the most effective machine learning (ML) model for predicting health insurance claims, leading to cost savings for insurance companies. Methods: Six ML algorithms were used to predict health insurance claims, and their performance was evaluated using various metrics. The algorithms examined include support vector machine (SVM), decision tree (DT), random forest (RF), linear regression (LR), extreme gradient boosting (XGBoost), and k-nearest neighbors (KNN). The research involves a performance assessment that encompasses key metrics. Additionally, a feature importance analysis is conducted to illuminate the critical variables that exert influence on the prediction of insurance claims. Results: The findings demonstrate that the XGBoost and RF models outperformed the other algorithms, displaying the highest R-squared values of 79% and 77% and the lowest prediction errors. The feature importance analysis underscores the pivotal role of variables such as smoking habits, body mass index (BMI), and blood pressure levels in the domain of insurance claim prediction. These results emphasize the degree to which these variables should be included in the formulation of insurance policies and pricing strategies. Conclusions: This study supports the transformative potential of AI, with specific emphasis on the XGBoost model, in extending the precision and efficiency of healthcare insurance claim processing. The identification of key variables and the mitigation of prediction errors not only signal the potential for substantial cost savings but also affirm the potential to integrate AI into healthcare insurance processes. This research supports the value of the utilization of AI as an emerging tool for process optimization and data-informed decision-making within the healthcare insurance domain.