Big Changes in the Biggest Challenge Facing Health Plans Today

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Managing costs and improving operational efficiencies jump to the top of the list in 2022 Health Plan Market Survey

Every year, we conduct a survey of hundreds of health plan executives. This year, more than 300 health plan leaders responded, and the full research results can be found here.  One of the biggest changes that surfaced in this year’s results was the sharp increase in the number of executives who are concerned about rising administrative costs. This blog explores the research results and some of the drivers that are impacting costs – along with some practical advice on how some of the most successful plans are taking the challenge head on.

Results Reveal Heightened Attention on Managing Costs

As “managing costs” jumped from near the bottom of the list in 2021 to the top of the list in the 2022 Health Plan Market Report, the shift reflects the monumental changes that are going on in the market today. Everything from aging technology that is not able to keep pace with market changes to increasing regulatory pressures, administrative costs have been rising. Let’s break down the key factors driving the heightened focus this year.

1. Aging technology: As member expectations of their health plans evolve to be more in line with what the experiences they have with other parts of their lives (retail purchases online, personalized service, price transparency), payers are being forced to respond with higher service levels. The growing number of regulatory requirements are also putting pressure on aging systems to make available data to members and other stakeholders. New market entrants with more innovative approaches to benefit plans and services are threatening the market share of traditional payers, resulting in the need to be more agile and creative.

Aging systems directly impact administrative costs. For example, systems without flexibility to support new payment models requires more manual work or results in missed opportunities. Legacy systems that are incapable of seamlessly exchanging data with other systems require manual data entry that increase labor costs and introduce the risk of human error. Also, systems that can’t facilitate advanced automation increase the cost per claim by adding even more manual intervention. In fact, in this year’s survey, we saw the cost per claim increase for more health plans this year – with 58% of survey respondents reported their cost per claim is $8 or more, compared with 44% the previous year.

Outdated, legacy systems were never designed to be flexible and open. They were mainly designed to process claims. As payers seek to respond to the market demands, they are having to make tough decisions about whether to continue to invest in their aging systems and more manual resources or move to more modern, open systems.

2. Workforce dynamics: The labor shortage is also driving up administrative costs. With fewer staff members and rising wages required to attract and retain qualified resources, operating expenses are increasing. In addition, when the technology is not easily adaptable, health plans are forced to hire more people just to cover the basics, like maintain compliance with new regulations and meet member and provider expectations. As backlogs build up and service levels go down, so does the health plan’s ability to positively impact member outcomes. The impact of having fewer resources available in a business that is heavily depending on manual processes has far-reaching effects on virtually every component of the organization.

3. Regulatory Changes: More regulatory changes have occurred in the past two years than in the previous 10 years. All of this change typically requires modifications to the underlying systems that generate the data and run the workflows. Without a modern, flexible system, health plans have to use manual resources and add more work to their already overwhelmed IT departments, which in turn, impacts costs.

When asked what their top challenges were when it came to staying compliant with CMS’ frequent changes to quality standards and payment rules, the top two responses were:

1. Technology/infrastructure cannot keep up

2. Lack of IT staff or resources to make changes

3. Interoperability mandates

4. Post-Pandemic Care: During the pandemic, patients delayed care, creating gaps in care and sometimes costly complications. As those patients return to their physicians and hospitals for care, claims volumes have increased and so has the cost for the care. This surge in claims is putting further strain on inefficient and manual processes.

Digitization Can Drive Savings and Growth

To address these challenges, health plans are looking for ways to get more from less and finding investments in modern technology to be a smart solution. And when costs are reduced and efficiencies are gained, leaders are bullish on the future of the industry.

When asked what leaders would do with the savings captured from lowering costs and finding new operational efficiencies, the top three answers were:

  1. Invest in new geographies or lines of business
  2. Consider new partnerships or acquisitions
  3. Reallocate for further innovation

HealthEdge currently provides best-in-class solutions delivered on powerful, digital transformation platform that enables more than 100 health plans tackle these tough challenges today. Modern systems from HealthEdge provide the true integration capabilities, advanced automation, and access to real-time data that is necessary to drive down costs. Replacing outdated, legacy systems with modern technology made to support the demands of today’s market not only opens the door to new operational efficiencies, but also enables greater opportunities to increase member satisfaction and drive new revenue opportunities.

For more information on how HealthEdge can help your organization manage rising administrative costs, visit www.healthedge.com or email [email protected].

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