If you believe the headlines, health insurers are enjoying surging profits that have exceeded forecasted levels, even as other healthcare sectors struggle amid the COVID-19 pandemic. Most of these overly rosy assessments overlook short-term factors such as how rising unemployment numbers could reduce revenues from plan premiums.

Even more important, these reports don’t reflect the enormous shifts underway in healthcare before the pandemic hit. These shifts, especially from fee-for-service to value-based care, plus the industry push toward interoperability and price transparency, require payers to adopt new business, operating and technology models to stay competitive. In this blog series, we’ll look at some key technologies health insurers should implement to support these new models.

Perfect Storm Presents Opportunity for Change

Healthcare as an industry is increasingly oriented around outcomes – value-based care is about results. The Affordable Care Act and the Centers for Medicare and Medicaid are driving regulations and payment/reimbursement practices so that conversations are more and more about how to attract and retain desired members, increase “right time, right place” health and care management, and contain and reduce costs. All these pressures, along with the prospect of thinning margins in 2021, make now the perfect time for payers to evaluate options for profitable growth and increased agility. Health insurers have some financial flexibility now, and the ongoing pandemic has created a situation in which plan members and healthcare providers are open and able to change.

The first strategy payers should consider is business process as a service (BPaaS). Few payers have the scale to deliver innovative new services without dramatically cutting costs. Adopting BPaaS strategies can help payers that lack the technology infrastructure or financial resources to rapidly modernize the processes necessary to support new healthcare delivery models now and after the pandemic.  

Breaking Down Legacy Strongholds

Legacy technology and operations tend to go hand-in-hand. The thinking among the many payer organizations we speak with is that the cost to modernize is too high. Health insurers have conventionally operated on narrower margins compared with other sub-verticals in the healthcare and life sciences industry, hovering around 3% to 5%. Given that cost pressures are endemic to healthcare, payers should revisit all components of their expense structure. They will find that supporting legacy technology is increasingly expensive, even when operated via traditional business process outsourcing (BPO) models.

BPO does reduce costs and allow payers to focus resources on other tasks. But in our experience, BPO delivers sub-optimal operating efficiencies and competitive flexibility. We see most payers deploying BPO in silos that create barriers to data flows and workflow efficiencies. The seamless, intelligent interactions consumers now expect to be delivered on any device, at any time require open, modern platforms that support a broad ecosystem of systems, applications and devices, including those of third parties. Neither BPO nor legacy systems can deliver on that.

Payers instead need to implement system-agnostic platforms with published application programming interfaces (APIs) and even incorporate an “app store” concept to make data accessible by different groups looking to solve shared problems for patients and populations. These platforms can support best-of-breed applications with an engagement layer, ensuring one look-and-feel among all apps. Additionally, a data orchestration layer standardizes key data elements for use among all the apps, as well as software bots and AI agents, in real time.

Lowering Costs and Beyond

A BPaaS platform and data orchestration eliminate many of the barriers of a siloed BPO approach and are why BPaaS makes so much sense for health insurers. While it lowers the total cost of ownership (TCO), BPaaS emphasizes the achievement of higher-value business outcomes that go beyond what’s possible with BPO. Payers with whom we’ve partnered on BPaaS have achieved overall TCO reduction of 40% to 50%; improvements in claims financial accuracy of up to 99.5%; customer satisfaction and STAR rating improvements of up to 4.5%; and provider data quality improvement from 95% to 99.5%.

BPaaS achieves stronger results because its goal is to find and even create efficiencies across the operations landscape, supporting connections and orchestrating data flows so payers can operate their businesses more efficiently and intelligently.

An optimized BPaaS solution is a shared-services ecosystem with standardized processes deployed on a preconfigured platform. Clients pay on an outcomes-based model: BPaaS is all about output and benefits delivered.

For example, we worked with one client to help it retire an aging legacy in-house platform and shift to a modern Medicare Advantage BPaaS platform. The legacy system could not keep pace with claims volume or provide needed transparency, such as the status of claims being processed. The BPaaS solution provided end-to-end capabilities and complete plan administration with a service level-driven model. Provider calls were reduced by 40%, and member satisfaction increased with first-call resolution.

A Five-Pronged Approach to BPaaS

A BPaaS platform and the processes it delivers must be supported by highly trained people, AI agents and software bots, all engaging these five value levers in concert to drive maximum efficiency, identify innovation opportunities and reduce TCO:

  • Factory model of operations. BPaaS delivers synthetic scale by leveraging the factory model: a scalable, globally distributed business model that maximizes efficiencies through a combination of shared services. The factory model enables payers with fewer resources to compete with larger organizations on an equitable footing.
  • Cloud-based infrastructure. Hybrid cloud technology enables payers to expand and contract services easily and cost-efficiently based on volumes and/or service demand. It also enables more efficient exchange of information across platforms.
  • Out-of-the-box analytics and reporting. Platforms with built-in analytics can monitor their own performance and system health, and alert users to potential issues. Platforms can also act directly on transactions, analyzing which claims that were flagged for rejection would ultimately be approved anyway and continue processing these to avoid rework and resubmissions.
  • Automation, AI and machine learning (ML). Automation is critical for reducing rote, rules-based processes and minimizing manual handoffs among systems. AI and ML help drive autonomous, automated decision making that further improves throughput. We’ll cover these in our next blog.
  • Compliance. Compliance oversight – including dedicated performance reporting, dedicated audit functions, regulatory delegation, state and CMS audit assistance, FWA and HIPAA compliance – are all key functions and capabilities that are a part of the BPaaS ecosystem.

In a value-based BPaaS relationship, a payer and its BPaaS service provider function as true partners. The payer entrusts key aspects of its business to the service provider. The ideal contract reflects mutual benefit from reduced costs, increased efficiencies, enhanced member satisfaction ratings and retention rates. These are the very qualities payers will need in abundance to thrive as COVID-19 drives organizations across the industry and beyond to retool and rethink healthcare delivery.

John Reynolds

John Reynolds

John Reynolds, Ph.D., has over 30 years of healthcare services, benefit consulting and financial technology experience. He is currently Business Lead for... Read more