Diminish rising administrative costs with streamlined technology

March 1, 2011

Health plans are facing a regulatory jolt that could cost them millions of dollars annually in lost revenue. The first zap is the medical loss ratio provision of the Patient Protection and Affordable Care Act.

HEALTH PLANS ARE facing a regulatory jolt that could cost them millions of dollars annually in lost revenue. The first zap is the medical loss ratio (MLR) provision of the Patient Protection and Affordable Care Act.

According to PricewaterhouseCoopers, medical inflation is expected to be 9% in 2011, which could make it difficult for insurers to reach the MLR. This federal cap is on top of the many state-regulated administrative-expense caps currently in place.

"And if you're writing a refund check to one member, you're writing refund checks to thousands of members," says Dennis Schmuland, MD, worldwide managing director of health insurance industry for Microsoft and a member of the MANAGED HEALTHCARE EXECUTIVE Editorial Advisory Board.

At the same time health plans are severely restricted on premium hikes, they're also being forced to reduce administrative costs.

"It's like an earthquake and tsunami at the same time," Dr. Schmuland says.

Health plans are searching for ways to reduce their costs and complexities at a time when both are on the rise. Many plans have begun to analyze their portfolios of technology applications, evaluating solutions that provide the highest value and lowest costs. Areas of focus include eliminating redundant and high-cost processes and improving the applications that have a cost benefit.

Technologies must be standardized across the enterprise for efficiency. Under reform, billions of dollars of administrative expenses must be eliminated.

"We continually look for new ways to improve our systems and technology, so that we can provide better service to our customers," says Greg Barnowski, chief enterprise architect for Independence Blue Cross (IBX) in Pennsylvania. "Healthcare reform doesn't necessarily change what we're already doing, although it has created additional considerations and opportunities for system enhancements and changes, given the new provisions of the law we need to comply with."

For example, IBX was able to reduce its benefit booklet production costs with a document management process. The organization built an application to automate two labor-intense functions: the employer contract lifecycle process and benefit booklet production, distribution and archive process.