Health Plans Not Fully Prepared for Operational Efficiency

By September 9, 2019Blog

A recent survey1 has indicated that healthcare executives of leading payer organizations do not feel totally prepared to improve operational efficiency in their organizations.

Global consulting firm North Highland interviewed 100 “cross functional decision-makers in healthcare payer organizations with an annual revenue of $1 billion+” for the survey, according to an article in Managed Healthcare Executive.

Eighty percent of respondents said operational efficiency is a top strategic priority, yet none of the respondents said they felt “very prepared” to manage that priority. A North Highland consultant said in the article that implementing value-based care to comply with the ACA value-based principles is preoccupying many payers currently, taking their attention away from operational efficiency.

MLR Requirements Make OpEx Reduction Paramount

Controlling and reducing operating costs to drive revenue is perhaps the most significant aspect of operational efficiency. It’s all about the bottom line, and the medical loss ratio (MLR) requirement by the Affordable Care Act (ACA) is continuing to be a challenge for health plans. Health plans are always looking for ways to cut costs to get the most out of the 15-20% of earnings they are allowed to use for administration, marketing, growth and profit.

Eliminating print/postage costs for claim payments and remittance advice can go a long way toward reducing operational expenses, adding back a chunk of net income anywhere from 1 – 10%.

Take this scenario:

  • If health plans save roughly 50 cents a paper claim for 11 claims per member per year, they will save $5.50 per member per year.
  • Monthly premiums for individual plans average $508.50 a month, according to the ACA. Multiply that number by 12 months a year and that comes to $6,102 in premiums per member per year.
  • Saving $5.50 out of $6,102 per member per year is a 1 percent savings, which may seem small, but actually adds up to $550,000 for a plan with 100,000 members.
  • Typical health plan net income margins range from 1% to 6%.
  • Therefore, net income can be increased by 1.6% to 10%.

Payspan Achieves Highest ACH Conversion Rates in Industry

Payspan has developed a provider enrollment methodology that is helping health plans achieve the highest provider electronic payment adoption rates (95-99%) in the industry, relative to the industry average of 63%.2 No competitors are even close, either in-network or out-of-network on speed or results.

Payspan can offer health plans what they have indicated they need most:

  • A plan for transitioning their providers to paperless payments,
  • A process for enrolling their providers in EFT/ERA transactions,
  • A way to promote the value of electronic payments, and
  • The ability to offer options for ACH, print and virtual card.

This means we have a higher capacity than our competitors to help health plans lower operating expenses associated with paper checks and remittances, print and mail costs, which for some plans, may seem insurmountable.

Learn more about Payspan’s comprehensive solution for transitioning providers to electronic payments.

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1Managed Healthcare Executive, “Top 8 Priorities for Health Execs in 2019,” Dec. 19, 2018

22018 CAQH Index