By Jeff Meyers, Product Marketing Director, Kofax from Lexmark
The healthcare industry continually faces new mandates and requirements that dramatically affect business processes and the bottom line. The Affordable Care Act (ACA), HITECH, Meaningful Use, HIPAA, ICD-10, HIT, as well as other mandates challenge both health and property and casualty (P&C) insurers to improve operational performance. They are, however, not the only drivers. Following are six additional drivers that are increasing the costs of claims processing.
- Increasing Healthcare Costs
According to the U.S. Health and Human Services analysis, the second lowest-cost silver plans with HealthCare.gov will increase an average of 7.5 percent across markets in 37 states. Likewise, employers are continuing a shift toward higher-deductible plans and requiring employees to “share” more of the cost through surcharges or co-pays. According to a recent Kaiser Foundation survey, deductibles have risen by 67 percent since 2010. The cost of medical care continues to climb, making healthcare coverage more expensive for individuals, families, and employers. With claims processing, the AMA estimates $2.36 of waste-per-claim for electronic claims and $6.63 per paper/manual claim. The AMA’s 2013 National Health Insurer Report Card estimated that $12 billion a year could be saved if insurers eliminated unnecessary administrative tasks with automated systems for processing and paying medical claims. While some administrative costs are inescapable, many routine processes must be automated to save time and money for both healthcare providers and insurers.
- The Shift From Paying For Services To Paying For Value
Adapting payments to the Centers for Medicare and Medicaid Services’ (CMS) new payment models, which focus on bundled payments for care of selected injuries and conditions as opposed to the individual services of care, will present multiple challenges. The largest of these is defining what constitutes value. Unfortunately, it’s unclear if this new approach will generate actual savings for either the provider or payer. Consequently, insurance companies will have to monitor and track clams in this category to assess profitability or loss.
- Uncertainty About The Quantity And Quality Of New Enrollees
Although health plans are still determining the health status of new ACA enrollees, the makeup of their marketplaces will largely affect their premiums over the next few years. Enrolling younger, healthier adults may be the answer to help offset the costs of insuring less-healthy members. But if these healthier individuals choose not to participate in the new exchanges or decide not to buy insurance altogether, the cost to insurance companies will definitely be higher.
- New Taxes And Fees
The ACA’s new taxes levied on health insurance companies as measured by total premiums and market share will add additional complexity to their costs and uncertainty to their bottom line. As the tax is set at a fixed amount, insurance companies will be forced to pass the tax on to consumers in the form of higher premiums.
- Gearing Up For The New Employer Mandate
The ACA’s employer mandate requires employers to pay penalties unless they offer affordable health insurance coverage to their employees. Most firms subject to the employer mandate already comply with the requirement. However, those that do not are most likely to find compliance less expensive than trying to avoid the mandate. According to an October 2014 issue of the “Brief” from the Commonwealth Fund, there are 100,000 full-time workers at the firm-size threshold and 296,000 at the hourly threshold who are uninsured that are eligible for the Employer Mandate. These uninsured, plus all of the insured whose policies will be changing at the 2016 deadline for the Employer Mandate, will have a significant impact on driving change in the healthcare insurance marketplace.
- The Impact Of New Healthcare Mandates On Liability Insurance
In a 2014 study, the RAND Corporation wrote, “Looking further into the future, the ACA carries with it at least the potential to foster broader changes in the U.S. health care system that could also have significant ramifications for the costs of providing liability insurance.” The same is true for worker’s compensation insurance. Although the ACA does not specifically mention workers compensation medical care, several aspects of the law may have an indirect yet significant impact on employers’ costs associated with workplace injuries. To date, the ACA has accelerated medical cost inflation that in turn will drive up workers compensation costs. Worker’s compensation medical costs have already outpaced indemnity costs at an alarming rate over the last three decades and this trend is expected to continue for the next decade, shifting from 40% of costs in 1991 to an estimated spend of 64% in 2021. Consequently, the cost of claims processing will have a significant impact on the profitability of P&C companies offering liability and worker’s compensation insurance.
No Matter The Drivers, Understand Your Customer
Unfortunately, the healthcare industry is plagued with systems that do not work together and bills that are almost impossible for the average consumer to understand. In a recent article in Healthcare IT News, Paul D’Alessandro, PwC principal and customer leader for health industries stated that, “Technology will play a significant role in creating ways to consolidate billing and payments, and mobile apps, online portals and other innovations should become more commonplace in the immediate future. For longer term solutions, the system should be redesigned to remove complexity and support a seamless customer experience.”
There are three ways to better meet consumer needs:
- Embrace simplicity. Many consumers do not understand the insurance benefits they are entitled to receive and are constantly confused by their medical bills. Online payment sites, mobile apps and more informative billing are required for a better consumer experience.
- Facilitate multiple payment options. Since two-thirds of bankruptcies in the United States are due to the inability to pay medical bills, offering choices for payment and helping consumers plan for costs can help reduce bad debt and reduce days in accounts receivable. Today’s technology provides a variety of payment options and improves claimant communications to report claims status and provide remittance advice, denial notification, and EOBs to both providers and beneficiaries.
- Cater to tech-savvy consumers. It is no longer merely a question of digital channels versus paper when it comes to serving customers. Digital customers are eyeing new and more digitally-savvy market entrants, while demanding more control over the experience and how their personal information is used. In fact, cost-conscious millennials are more likely than the rest of the population to search for better deals and make value-based decisions based on an insurer’s ability to work with them digitally.
Over the last decade, healthcare industry initiatives combined with legislation and regulatory mandates have provided a whole new framework for the use of technology in claims processing. New business models, consolidation and automation are reshaping the insurance industry. Insurers who can update and/or replace their existing systems will gain a competitive advantage over established companies that cannot modernize their claims processes.
According to the report, Smart Process Apps – One Year Later, by Forrester Research, “Smart process apps (SPAs) are a response to the frustration with software platform approaches like CRM, ERP, and data warehouses that consumed more budget, skills, and mindshare, but left important business needs unaddressed.”
The report continued, “New distribution models and accelerated product innovation are the primary disruptive elements facing insurers today. These directly pressure core business systems. Insurers that can modernize these systems will gain advantage over players that can’t.”
Today, more than ever, healthcare providers, payers, and related business partners must update their technology to improve claims accuracy, streamline workflows, improve customer service, provide a competitive advantage and grow market share—all while reducing operating costs.
About The Author
Jeff Meyers is Product Marketing Director at Kofax from Lexmark. He supports healthcare initiatives for both payers and providers and has extensive experience working directly with Medicare Advantage Organizations to provide enrollment, billing, encounter data (claims) submissions, risk adjustment, and revenue reconciliation solutions.