There is little doubt that the perfect storm is here. A combination of regulatory requirements, changing employer attitudes and consumer buying habits has hit hard, and health insurers are taking the appropriate steps to ensure that they don't become the next Andrea Gail. For many health plans, 2015 will be the year of technology.
It will set the stage for one of the most critical periods in the history of healthcare, where insurers will adopt the lessons learned from other industries and leverage modern technology to bring a new level of consumerism to the market. Here is what 2015 will look like, backed up by data from the industry as well as our latest "State of the Payor" industry survey.
Health insurers will invest in technology, a lot of it, to meet the needs of the 21-century health care economy. Our latest survey found more than 88 percent of respondents are currently using, or planning to use technology as the catalyst to transform their organizations. What areas are they planning on transforming? Reporting and analytics (85.47 percent) and transparency tools (portals, mobile applications, etc., 80.34 percent) lead the way. Additional areas with high interest (greater than 40 percent) include claims processing, benefits administration, disease and care management, customer service and meeting regulatory requirements.
Insurers will apply a Total Cost of Ownership (TCO) methodology to technology investments. Build vs. buy, legacy vs. modern technology and custom vs. commercial technology are just a few of the areas that will come under scrutiny. While insurers will invest in a lot of technology in 2015, CIOs will use the TCO approach to make their technology purchasing decisions. This includes evaluating the license cost, total implementation cost, and fees for annual upgrades, maintenance and support, including enhancements and compliance changes. The past approach to considering technology investments meant lining up a feature set with the problems an insurer wanted to solve, and looking at the licensing costs to do so. By looking at TCO, insurers gain a better understanding of the long-term costs associated with their decision. This includes both economic and lost opportunity costs. For example, investing in technology that enables the insurer to bring new products to market that were not possible before can have a significant impact on earnings. Adding just two of these products per year, each with 12,500 new members, results in a potential revenue increase of more than $4,750,000 a year.
The Affordable Care Act will force health insurers to transform their businesses. Regardless of the actions of the new Congress, the ship has left port. In fact, when asked about what factors influenced their decision to participate in new healthcare delivery models, 87.39 percent of our survey respondents said the ACA was the major contributing factor. As we have seen, members are now demanding from insurers the consumer experience they have come to expect from other industries. And, insurers are listening. Survey respondents are planning to participate in or support new models like Pay-for-Performance (72.73 percent), public and private exchanges (72.72 percent), Medicaid expansion (66.94 percent), and Value-Based Benefits (51.24).
Taking the administrative costs out of health care becomes essential. While new mobile apps and EMRs seem to get more than their fair share of attention, removing crippling administrative costs will swiftly move to the forefront of discussion. Tasked with improving care while reducing costs, health insurers will "cut the fat" by making their operations more efficient. For example, respondents to our survey indicated that reducing manual processes and increasing auto-adjudication rates offered the most effective ways to reduce administration costs. Why is this such a problem? Our survey showed more than 82 percent of respondents are currently auto-adjudicating less than 90 percent of their claims, and more than 57 percent are paying more than $6 to manually adjudicate a claim.
The October deadline for ICD-10 compliance will be a non-issue, but the deadline could still be moved. Health insurers, for the most part, have used the delays in ICD-10 compliance to ensure that they are now ICD-10 ready. Some insurers just remediated their existing legacy systems at a huge cost, which puts them in a poor position come the next regulatory requirement. Others used ICD-10 as an opportunity to upgrade their systems to modern technology, ensuring that they were prepared for ICD-10 and any other future regulatory requirements that come down the pike. Either way, our survey respondents said that they were ready, with more than 60 percent of reporting no fiscal impact to their organizations as a result of the delays. However, the expectation remains that continued lobbying and requests for a delay from the provider community could push the ICD-10 deadline to 2015.
Insurers who were on the fence about change in the health plan market are scrambling to catch up to their early-adopter brethren. 2015 will bring tremendous change to the way health insurers think about, and market their health plans, no doubt. While uncertainty and seismic change will continue to preside over thealthcare, insurers will jettison the "wait and see" approach, and try to find a way to make up the distance that competitors have opened, including a year or more of lead-time transforming their organizations to adopt new business models.
Ray Desrochers is executive vice president of HealthEdge.