The healthcare industry is aflutter with transformation and if health plans don't properly adapt to those changes, they won't be able to compete in the new environment. That's what Lawrence Bridge, president of the Government and International Market at the TriZetto Group, said during a recent Webinar hosted by AHIP.
He suggests that in order to preserve economic survival amid all the new health reform requirements, payers must achieve compliance with the health reform law, recognize and act on the increased importance of administrative efficiency, decrease costs and increase quality of care, and compete to win.
First, to achieve compliance, payers must understand exactly what each of the reform provisions means to their organization and what tracking and reporting obligations they have. "This sounds simple, but we've been surprised by the number of payers that only understand reform on a general level and haven't put in processes to really understand what impact the reform has on their specific organizations," Bridge said.
Health plans also should assign responsibility for reform compliance to one individual or one group, and they should establish a program that tracks and documents compliance. Another compliance issue is staying current with the regulations as they evolve--both at the federal and state level. "So much of reform rolls out at the state level, so if you're a multi-state operator, you've got to understand what your requirements are on a state-by-state basis," Bridge added.
Administrative efficiency is the second pillar of success Bridge recommends for health plans. This is especially important in the wake of the medical-loss ratio requirements. "For the first time in this industry, we have an absolute ceiling on the dollars that can be spent on something other than direct medical care," he explained. "Now administrative efficiency has become mission critical for economic survival, because if you can't operate within that threshold, if you can't operate within that ceiling, you really won't have a chance to be successful longer term."
What's the best way to achieve such efficiency? Bridge says it's integrated technology. To examine the value of integrated technology platforms, TriZetto looked at data from 150 payers separated into two groups--plans with integrated platforms and plans working in a silo environment. As a percentage of total premiums, integrated plans had an average of 10 percent administrative expenses compared to 11 percent for siloed plans. "So that's one key opportunity to look at the underlying technology and see if you're really operating as efficiently as you can," Bridge advised.
TriZetto also determined that integrated plans had an 83 percent average medical-loss ratio compared to an 86 percent average for siloed plans. When you have real-time information on membership and eligibility, when care plans tie back to claims systems, when you pay claims timely and accurately, you avoid additional, unnecessary work, Bridge said.
Here's the big reward for operating in an efficient environment: After combining the administrative expenses and the medical-loss ratio, integrated plans had a 6 percent profitability, compared to only a 2 percent profit for siloed plans. That amounts to $164 million in savings or additional income per year, or as Bridge says, "a very substantial chunk of change." I would think that's incentive enough to start operating an integrated platform.
Perhaps more important than reform compliance and administrative efficiency is the cost and quality of healthcare. These two aspects have the potential to become transformational for payers, moving them from just paying claims to enabling the right care to take place at the right time for an individual health condition--all while extracting more value from dollars spent.
To make a difference, payers first should be creating value-based insurance plans based on individuals and their specific healthcare needs. For instance, diabetics need different plans than congestive heart patients or healthy 28-year-olds. These tailored plans should include incentives so that when patients take the appropriate healthcare actions, they get a reward to reinforce and provide motivation.
The flip side of that coin is value-based provider reimbursement, which as Bridge explains, is paying providers for practicing evidence-based medicine. For example, payers can create payment algorithms for providers practicing certain guidelines, offer episode-of-care payments, and encourage providers to coach patients to take an active role in their healthcare.
Member engagement is the last piece to this puzzle. Payers must provide the information needed to patients and interact with them for value-based insurance to be effective. If plans don't engage their members, they won't be able to compete when health insurance exchanges soon dominate the individual health plan market.
Creating benefit plans specific to an individual's medical needs, combining them with the best evidence-based medicine, and engaging members to enhance competition enables a fundamentally different value proposition for payers. "This really changes the role of the payer five years from now. This is the key to health plan success in the new post-reform healthcare model," Bridge said. - Dina