The health plan of tomorrow: the increased role of consumers, along with increased healthcare costs, will compel health plans to use technology so everyone in the equation comes out a winner - Managed Care

Health Management Technology, Jan, 2004 by Jeffrey H. Margolis

Ready or not, the age of consumerism has descended upon healthcare.

With health insurance premiums rising an average of 11 percent annually, most employers are shifting more costs to employees. Some are dropping benefits altogether. As they pick up more of the tab each year, consumers will expect more say in the delivery of their healthcare. They'll demand better service from health plans, more information about doctors and hospitals, and more help navigating the healthcare system.

Macro-level cost pressures also are driving efficiency and modernization in healthcare. Employers' tolerance of double-digit premium increases is wearing thin. That means health plans need to uncover more internal efficiencies and cost savings, and prove they add value. Better use of technology can help them achieve those goals.

Preparing for Tomorrow: A Cycle-by-Cycle Approach

To prepare for the future, health plans must streamline and integrate eight key "business cycles." Information must flow smoothly across these cycles and outward to the plan's constituents. The following changes are likely to occur as health plans transform themselves into more consumer-oriented organizations.

Product development. Health plans are developing products that appeal to consumers as well as employers. Soon, they will employ mass customization via the Internet. Consumers will be able to build their own benefit plans with options like provider panels, premiums, copays, coinsurance and drug formularies.

Revenue management. Health plans will use automation and e-business to generate more revenue with less effort. Quotes will be delivered to brokers in real time via the Web. New members will enroll online, replacing paperwork and manual processing. Premium bills will be sent to employer groups for electronic review and reconciliation, versus manual corrections that span several billing cycles and result in perpetually inaccurate balances.

Risk management. Underwriting will occur prospectively and in real time, relying on risk factors tied to individual demographics (e.g., college students, childbearing-aged women, etc.) and medical data including diagnostic codes and prescription histories. The benefit? More precise risk assessment, more competitively priced premium rates and more accurately calculated financial reserves.

Customer service. Self-service over the Internet will become the rule, not the exception, for health plan constituents. Health plans will also adopt sophisticated techniques that allow members to obtain live assistance when necessary. Members will receive monthly statements, similar to bank statements, that reflect money paid into and out of their health savings accounts.

Reimbursement management. Over time, healthcare will be funded from multiple sources, including employer contributions, medical reimbursement accounts and out-of-pocket spending. To deal with this complexity, health plans will continue integrating their information systems and automating claims payments. Eventually, claims adjudication will happen in real time, while the patient is still at the physician's office.

Care management. Chronically ill and high-risk members will be identified proactively through patient-authorized health questionnaires, historical claims and other data sources. A member will self-manage her illness over the Internet by following an online disease-management program tailored to her benefit plan and provider network.

Network management. Health plans will automate management of their provider networks, a growing challenge as benefit plans and network options become more complex. Predictive-modeling programs will help with provider negotiations, and new natural language capabilities will make it easier for non-IT staff to load reimbursement rules into the system. Health plans will also open their internal information systems to the Internet, arming consumers with easily accessible information such as a surgeon's patient-satisfaction rates, surgery success rates and fees.

Finance and administration. Health plans will move toward integrated information systems and more sophisticated business intelligence, critical for effective data collection, analysis and reporting. As a result, management will make more informed decisions and spend capital more wisely.

Most organizations will move toward this future state gradually, with some business cycles advancing more rapidly than others.

The Role of Technology

Whether a health plan's evolution is gradual or rapid, technology will play a critical role. The innovations described above require an enterprisewide administrative system that extends the business beyond organizational boundaries, via the Internet, to the health plan's constituents. This will result in high levels of automation and better, more accessible information.

Following are five IT concepts that will be critical to the health plan of the future. Some may be commonplace in other industries, but they are greatly underutilized in managed care today.

Automation and efficiency. According to Gartner, health insurers spent only 2.5 percent of their gross revenues in 2002 on IT, compared with 6 percent spent by financial services firms. A huge gap exists between healthcare and other industries in the cost and efficiency of processing basic transactions. A single healthcare transaction can cost as much as $25. Banks and brokerages, which rely heavily on automation and technology, have cut their costs to less than a penny for certain transactions.