Commentary - The evolving healthcare landscape has created a wealth of fresh opportunities for payers. There is a sense of urgency for payers in leadership roles to leverage technology and successfully transition to a value-driven healthcare system that rewards top performers and high quality standards. With the passage of the Patient Protection and Affordable Care Act (PPACA), it has quickly changed many aspects of payers’ business with higher costs, new oversight, more competition and a longer-term promise of millions of new members.
Is this two part series, I will discuss the “The Four Key Challenges of Payer Success” beginning with the first two challenges a payer must overcome.
Although a business may be treading water in an ailing economy, it’s time to start showing confidence toward the future. Many reforms have already been implemented, and payers that delay actions today put their futures at risk. New rules for grandfathered plans and appeals processes have already been implemented by the United States Department of Health and Human Services (HHS). Medical loss ratio (MLR) rules are nearly done. And, driven by new premium hikes well above prior years, the employer group selling environment in 2011 is expected to be more competitive than ever. Given these realities, the time is right to reflect an opportunistic attitude on compliance and on succeeding in an era of healthcare reform. Launch new strategies to reduce healthcare costs, increase efficiencies, and improve care delivery. Be a leader, not a laggard left to stew in the politics of healthcare reform.
Each of these waves brings operational and economic challenges for payers—and collectively requires actions that payers must take right now to better ensure their survival and success in this new healthcare world. Some leaders will have the foresight to view the turmoil of healthcare reform as an opportunity to create real and meaningful change. Payers are in a strong position to maximize the coordination of benefits and care for the healthcare consumer through the systematic application of processes, shared information and aligned incentives. This Integrated Healthcare Management will facilitate much-needed communication, collaboration and efficiency in the healthcare system, and create a new era where all constituents can benefit. They have established “The Four Key Challenges of Payer Success” where in order to achieve success in this era of reform, payers need to address four challenges that will be essential to surviving and succeeding in a fiercely competitive reformed healthcare insurance marketplace:
• Comply with Reform
• Increase Administrative Efficiency
• Improve Cost and Quality of Care
• Compete to Win
Payers may better compete with emerging competitors and move ahead of the pack to success by leveraging technology and systematically applying processes and shared information to drive efficiencies. When complying with reform, the first step is to move quickly to address new regulations and associated costs being introduced into your economic models, including: eliminations of rescissions and lifetime/ annual limits, expansion of dependent coverage, and first-dollar coverage of high-value preventative services. Over the next three years, payers will have to meet MLR requirements, begin transitioning to a new exchange distribution model, shift business line profitability and enrollment, and increase movement and influx of small business and individuals. To help comply with these rapidly approaching requirements, payers need enterprise systems—including core administration and care and network management—that are scalable, highly flexible, and configurable to establish and vary benefits. The industry is in the middle of converting to the ICD-10 diagnosis and treatment coding standard, which further complicates this compliance challenge. Payers that use technology to leverage rich HIPAA 5010 and ICD-10 data will be able to drive administrative efficiency and accelerate care programs, helping meet demanding MLR thresholds. Savvy payers will be able to identify and resolve issues faster and support more accurate trend, pricing, and reimbursement analyses—all leading to potential lower costs and better decision making.
Next, increasing administrative efficiency can make payers more efficient and help create sustainable economic models. Reform requirements taking effect in 2011 require at least 80 percent of insurance premiums be spent on direct patient care in individual or small-group plans (85 percent for large groups), or rebates must be paid the following year. Payers must take a hard look at how to reduce administrative overhead even further. Raising premium prices also will be difficult in the more competitive reform environment that kicks into high gear in 2011. A solution is for payers to optimize administrative efficiencies to offset variances in patient care, stabilize the MLR and sustain economic values. Compliance to the MLR rules challenges payers to lower administrative costs through improved processes. Actions to take include streamlining enterprise systems to reduce administrative costs and re-examining outsourcing strategies.
Payers need to coordinate operations through system replacements and new solutions to automate “problem” processes to improve productivity, while keeping costs down. Configurable business process automation features will be a key concept in claims adjudication. Care and network management also are key areas in which your enterprise systems should be highly efficient. These systems must automate administrative tasks and reduce manual configurations. Payers need to closely examine the contracting cycle where automated contract modeling and automated discovery of pricing variation can help avoid downstream manual intervention. Efficiency gains are also possible by examining your outsourcing strategies and pursuing cost-effective solutions for business process outsourcing and technology management. Cost effective offshore, onshore and blended models are available that can significantly lower your administrative costs across areas such as front-end services (mail room, imaging, OCR/ scanning and data processing), claims processing, enrollment and other business processes. In addition, application hosting and management services are tools you can use to help lower operating costs, reduce operational risk and accelerate time to market with new offerings.
In my next installment, I will discuss how improving cost and quality of care, and competing to win, are two vital steps for a payer to achieve success, especially when times are difficult in a struggling economy.
Dan Spirek is chief strategy and marketing officer, executive vice president, Enterprise Strategy & Communications for The TriZetto Group