State of the payer market: the growing need for infrastructure and operations

The U.S. health insurance market we know in 2019 is already drastically different and more challenging than the one we left behind in 2018.

In addition to the growing need to better understand the market landscape and its various segments and players, Medicare Advantage (MAOs), increasing administrative costs, and the impending financial audits of health plans will transform the industry. Here are five changes that are poised to shake things up:

1. Quick entrants will lead to quick exits. One of the most pivotal and impressive moves in the health insurance market is the hundreds of health plans that have entered the Medicare Advantage space. The interest in this market along with the rapidly growing aging population leveraging Medicare resources creates new challenges for the insurance market. Unfortunately, many of them will not be adequately prepared to effectively take on the market. According to a North Highland report, many healthcare payers feel that they are not prepared to succeed with what it takes to become a “data-driven” organization. Their quick entrance could mean just as quick of an exit for those that are not equipped with the right technology infrastructure or operational capabilities.

2. The fight for market share will intensify. Entering the Medicare Advantage market is about more than putting together insurance products and collecting premiums. These bets will be met with challenges for many organizations from an IT and revenue standpoint including compliance, payment accuracy, reporting integrity and workflow support. All this movement lowers the margin for error for new entrants, challenging their stability in the market. Conversely, if the new Medicare Advantage participants see rapid success, the industry can expect a new wave of mergers and acquisitions as market leaders buy up these new entrants.

3. MCOs face increased administrative costs. With additional covered lives comes “paperwork” and administrative costs. The rising costs and member rosters mean Managed Care Organizations (MCOs) need a more modern approach to operations and processes in order to effectively manage their memberships. A recent Sherlock and Co. report highlighted that there was an almost six percent increase in administrative costs for MCOs in 2017. This coincides with a year-over-year increase in membership to the tune of roughly seven million members. This sizeable increase in membership coupled with skyrocketing costs means many MCOs will continue to find themselves in a financially untenable situation.

4. Enrollment mistakes will be costly. For veterans in the space, some of these administrative costs can be recouped with close consideration and modernization of their enrollment operations. Inefficient and antiquated enrollment processes and technology plague many MCOs, leading to high levels of manual work (and rework). As costs continue to rise unabated, MCOs face many challenges with their outdated enrollment operations including, full file roster processing, lack of enrollment fall-out workflows, managing and mitigating the effects of member churn, among others.

5. CMS compliance will be crucial. Just as health plans dedicate some TLC to their administrative processes and recoup some of that revenue, in comes the impending anticipation of Centers for Medicare and Medicaid Services’ (CMS) targeted financial audits of managed Medicaid programs to “ensure provider claims for actual health care spending matches with the health plans are reporting financially,” according to Seema Verma. What does this mean? MCOs will be pressured to improve accuracy, completeness and timeliness of their data. This is challenging enough for a plan that operates in a single state, but many plans operate in many states. In order to succeed and avoid financial penalties, many plans will reconsider their encounter submission processes and consolidate with purpose-built encounter management systems that aligns with the specific rules, formats and regulations of a given state. With so much on the line, they can’t rely on a “one-size fits all” encounter management process, which would most certainly yield unsatisfactory results and set plans up for financial penalties.

The bottom line is change is here! With new entrants, consolidation of plans and shifts in lines of business from payers attempting to meet growing market demands and accommodate changes in government regulations, the pressures to modernize infrastructure and operations will surely improve their bottom line. This heightened awareness and solution-oriented approach will determine whether MCOs and MAOs make it through the gauntlet of change and stay in business for 2020. Only time, and the right technology, will tell.

Aaron Fulner, Senior Director, Product Marketing, Edifecs
Aaron Fulner is the senior director of product marketing at Edifecs. A passionate, seasoned product marketing leader, Aaron has spent many years directing the go-to-market strategies behind cutting edge, enterprise-level software solutions for health insurers. His focus spans insurers involved in commercial, managed Medicaid, Medicare Advantage and Dual Eligible programs. Prior to Edifecs, Aaron worked in product marketing at McKesson Health Solutions.

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