Despite claims processing being at the heart of the what insurers do, there is no standard format, legacy systems abound and some claims still arrive by mail.
Yet, up to to 80 percent of all premiums are spent on claim payments and associated charges, according to Strategy&, a subsidiary of PwC.
By keeping these costs under control, insurers can price more competitively, which is important since pricing and the handling of claims are two of the biggest factors in customer retention.
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Pier Noventa, a principal with Strategy& in Chicago and an expert in the health payer practice, said for insurers to be more efficient and to trim costs, they should start by simplifying the upstream complexity to make the downstream process easier.
This means having clear contracts and medical policies for providers to send in the correct information, and for the system to understand what it is being asked to do.
Claims come in electronically through an electronic data interchange channel, or an electronic web channel. But a smaller percentage arrive on paper, especially in rural areas where providers may not be equipped with electronic channels. The paper is scanned or entered into the system.
CEO Doug Klinger of the information technology company Zelis Healthcare, recommends the use of electronic claim submissions to reduce the administrative burden and improves payment turnaround time for providers and payers.
However, the claim gets to the insurer at this point it has entered the payer value chain.
Best practice is to have an auto-adjudication rate upwards of 85 percent. This is for claims to go through system without human touch.
An auto-adjudicated claim costs health insurers cents on the dollar, while one that needs human intervention costs about $20, according to Noventa.
There's also stiff penalties in some states on claims that take longer than 30 days to process.
The claim goes through the first round of checks for data to see if key fields are missing.
Besides having claims come in electronically and on paper, providers are also sending claims in different formats to their various payers. Currently, there is no universal, standard claim format, though there is work being done to get there, Noventa said.
"The challenge for the provider, there isn't one universal way of sending the information," Noventa said.
Lack of correct patient name, the provider ID, or more precise information on the procedure, are also reasons for the claim to be spit out.
Providers need to clean claims with no administrative or coding errors to improve payment turnaround time, Klinger said.
Insurers have a primary administrative platform and many also have separate platforms dedicated for government or retail claims.
"That can really complicate things further," Noventa said.
The platform tries to adjudicate the claim automatically. It retrieves the provider contract and agreed-to rates and checks these against medical policy rules.
"Here, many things can happen and things can go wrong," Noventa said.
It's good to have a claim rejected here, because it will save time later when the same error rejects the claim further downstream, Noventa said.
A best practice, according to Noventa, is to enforce certain rules with providers at this point about what information is needed to continue processing the claim. This requires education and outreach.
Klinger recommends payers use data scrubbing and clinical reviews to ensure proper billed charges, using a claim system with routing intelligence and connectivity to vendors, and one that references historical and geographic claim data ensure consistency in billed charges.
When the information is unclear, the claim goes into the pending file and needs to be looked at manually.
Some claims by design, become pend claims, Noventa said. If they contain a high dollar amount, the system is programmed to kick it out as a pend claim so it can be viewed manually.
In a second recommendation, Noventa said insurers need to determine whether it's less expensive and more efficient to have claims processing done by a vendor, possibly one offshore.
If the process remains in-house, an upgrade may be needed, but replacing a legacy system can cost upwards of $200 million. Beyond cost, payers still struggle with loading contracts into the system.
There's also the migration of data from the old platform that needs to be mapped in the correct way, and accumulators that count the number of visits members have tallied in connected their benefits.
"For that reason a lot of payers stick to legacy platforms," Noventa said. "Every time they try to improve the system, it's a massive undertaking. That's the dilemma."
When it comes to investing in technology, smaller plans are at a disadvantage. Smaller Blue plans and other regional plans try to get together to build capabilities.
"It's a real challenge for small plans," Noventa said. "The solution is to collaborate. This brings the challenges to find like-minded plans."
In the past, insurers looked at claims after they were paid to catch waste or fraud. But that's changing.
"Today we are seeing in technology, the ability to do sophisticated analytics," Noventa said. "Payers are looking at payment integrity to catch anomalies, from post-pay to a shift to pre-pay, to spot issues. This is where we're seeing meaningful investments being made."
This can affect upstream design, the way provider networks are set up, and the product offered.
The third level of decision-making involves working more efficiently, perhaps using digital lean techniques, robotics or artificial intelligence, Noventa said.
In the 1980s, Toyota used lean to create a different way of working with suppliers, in which the suppliers became part of the value chain to drive improvement.
Insurers can use lean techniques to give incentives for providers to be invested in claims process improvement.
"It's a little bit of what needs to happen," Noventa said.