By Abhinav Shashank, president, Innovaccer.
The health plan market is undergoing a drastic transformation. In the past, the competition had been lean with just a small number of payers. However, the market dynamics are changing. Since 2017, the number of MA plan choices per county has increased by 49%. The competition is said to grow even more in the coming years as more health plans are set to enter the market, owing to the fact that nearly 26 million baby boomers will age into Medicare through 2030.
Rising cost burden on health plans
With additional members, the “paperwork” and administrative costs are also increasing. A recent report revealed that there was almost a 6% increase in administrative expenses for MCOs in 2017. The substantial rise in membership with soaring costs means many health plans might find themselves in a financially untenable situation.
Along with the growing administrative burden, the compliance requirements are also weighing on the workload and costs. The push towards improving accuracy, completeness, and timeliness of the data is intensifying to “ensure that provider claims for actual health care spending matches the health plans reported financially,” said Seema Verma. To fulfill the reporting requirements and avoid financial penalties, health plans will have to improve their data submission process to align with the specific rules, formats, and regulations of a given state, which also ensures an increase in cost.
Payers don’t have much control or influence on the administrative and compliance costs. The member population will increase, and so will the requisites by regulatory authorities. The costs are likely to keep increasing on these fronts in the future.
The growing financial pressure has made it inevitable for payers to explore measures to contain costs from spiraling out of control. Since operations account for around 50% of an insurer’s base cost, reducing expenses on this segment can result in cost savings of significant proportions.
Resolution for cost pressures: Operational efficiency
There are certain operational activities such as claims adjudication, reprocessing, and post-call documentation which are highly repeatable and are executed manually. With the addition of more members each year, the burden of these tasks ought to grow even more. Automating these tasks can give a significant boost to operational efficiency; at the same time, it can help reduce overall costs. According to an article, automation technology can lead to an additional operational cost savings of up to 30 percent within five years for many payers.
Outcomes of automating operational activities
Apart from cost savings and reduced utilization, automating operational tasks has multiple other advantages. Automating routine tasks can ensure that the tasks that previously took days to finish are completed in minutes. The accelerated service delivery can build more synergy between members, providers, and internal stakeholders.