In a previous role, I worked for a company that had a home-grown administrative system that was used to deliver our services. It was a complex piece of software built over a decade and a half that delivered our services accurately and quickly. The only problem: We wasted a lot of operational – and development – time because it was obsolete. As a result, we were falling behind our competitors.
That same dilemma is facing health insurers. A recent Gartner research report highlighted the technology quandary they face. Most are using aging homegrown on-premise core admin systems. A good number of those core admin systems were built in the 90s leveraging antiquated technology. Or, they’re using packaged on-premise systems from the same era which have been customized beyond recognition by the insurer.
Insurers recognize the need to modernize their core admin systems. Not doing so is costly — as Gartner notes, “…payer CIOs spend disproportionately more on operations than providers as well as peer financial services organizations.” So shouldn’t those health insurers be jumping to prioritize spending on modern core admin solutions?
Therein lies the dilemma. As the business where I previously worked found, developing a new core administration solution — or buying one when significant customizations are required — is costly and threatens operational stability. Case in point — the company where I worked spent two years and millions of dollars trying to build a solution from scratch before eventually scrapping that idea and continuing to use the legacy system.
Health insurers face the same issue. They know they need better health insurance technology but are afraid of the consequences of potentially failing. Ripping and replacing a solution that serves as the technological foundation on which revenue is based is not for the weak of heart. So many boards, CEOs, and CFOs resist replacing their legacy systems.
So what can a health insurer do? For one, the COVID-19 pandemic is showing the value of cloud-based solutions instead of on-premise solutions. Available anywhere, cloud solutions are becoming de rigueur in other industries. They offer several benefits — from delivering access anywhere to reducing operational costs when compared to on-premise solutions. Plus, cloud-based SaaS solutions generally include regular vendor software updates and new capabilities — without costly internal development costs.
There are some issues with legacy on-premise solutions and finding remedies for those issues should be the first order of business for health insurers looking for technology replacements. For one, we’ve heard from several insurers that their legacy systems limit their ability to quickly configure billing and collection parameters for new products. They value speed to market, which can only occur with a highly configurable solution.
Second, to build real-time analytics with disparate systems, it’s vital that any system — cloud or on-premise — includes APIs or other ways to integrate data with other systems. Data is the key to innovation. You can leverage it to tailor offerings to members, make experiences more personal, and boost member retention. You can see how your business is operating in real-time and make better strategic decisions based on insights gleaned from that data. In short, interconnected systems will deliver a nimbleness that will make your health insurance business more competitive.
The Case for Modularity
In 1973, Ron Blomberg became the first designated hitter (DH) in major league baseball, earning a walk. Why? Because usually, pitchers couldn’t hit very well. Baseball, noting that scoring generally draws more fans, decided to eliminate pitchers from hitting. The DH hung on in the National League until just last year when the league decided to eliminate it temporarily. Though no decision has formally been made on whether the DH will become permanent in the National League, it’s likely pitchers will soon be eliminated from the batting order.
You’re probably asking yourself “What does this have to do with health insurance technology trends?” In baseball, teams select pitchers for their arms and hitters for their ability to hit. It’s rare — Babe Ruth being the most famous exception — for a great pitcher to also be a great hitter.
In a lot of cases, I think the same can be said about health insurance technology solutions. When you look at what core admin solutions do, they contain a lot of disparate pieces of functionality. Enrollment is different than claims processing. Provider payment is different than premium billing. Just like baseball, usually, a technology provider excels at a core competency — say claims processing. But as they add customers they try to grab market share by adding more features, like health insurance premium billing.
The problem — they’re generally not as good at developing premium billing solutions because claims processing is a much different process.
Another analogy: Google knows search. But to increase revenue, they’ve experienced some product failings. Remember the early 2010s when they tried to become a social media company? Even a company with almost limitless resources like Google couldn’t unseat Facebook, largely because that just wasn’t their company’s DNA. Google also tried designing phone hardware to compete with Apple with little success.
Health Insurance Technology Trends: Modular Solutions
The same is likely true of a lot of core admin vendors who approach the solution from a certain perspective — like member enrollment. They have a great member enrollment function but a poor premium billing function.
That leads to a health insurance technology trend — modularity. Modularity delivers more robust solutions at every turn — whether it’s an enrollment solution, a billing solution, a provider payment solution, or a claims processing solution. Finding best-of-breed point solutions and seamlessly coupling them through APIs or other integrations can lead to a more robust technology solution.
There are some pitfalls — including managing multiple vendors — but a modular approach has some significant advantages. Not only do you get best-of-breed solutions, but you also future-proof your organizations to some degree. Consider my opening story; our core admin solution had many different functions. Had we chosen multiple point solutions and one underperformed, it would have been a lot easier — and a lot less painful — to replace a specific piece of functionality rather than the entire technology solution.
It may be painful at first to replace a single core admin system with multiple point solutions. But in the long run, cloud modularity can deliver best-in-class functionality and a more agile health insurance technology solution.
Certifi’s health insurance premium billing and payment solutions help healthcare payers improve member satisfaction while reducing administrative costs.