Needs, Issues, Requirements and Results
The property & casualty insurance industry relies on a combination of skilled claims people, highly efficient processes and sophisticated technologies to deliver prompt, consistent and accurate claims handling. With the right combination in play, an insurer can leap ahead in terms of claims productivity, cost effectiveness, claims service and customer loyalty.
One area of concern for insurers that can create significant service, efficiency and cost issues involves the processes and technologies that support the review and payment of medical bills—and the inevitable payment status and remittance advice inquiries—surrounding this important claims handling activity.
This paper discusses these issues, explores the criticality of resolving them, offers some important tips to keep in mind as insurers look at technologies and technology partners to assist them in resolving these issues—and describes some of the speed, accuracy, service and cost benefits that adopting insurers can achieve.
The Current State
At the end of the medical bill review process the insurer is required to produce and deliver a payment check (or draft) and a form of payment remittance advice; usually in the form of an explanation of benefit (EOB), explanation of reimbursement (EOR) or explanation of payment (EOP).
On the surface, the usual process of receiving, reviewing and paying medical bills (Figure 1) does not appear to be overly complex, but it can embody many labor-intensive, non-integrated workflow and technology issues that impact the business from a monetary and service standpoint. In addition, lurking just below the surface of this seemingly simple process lie a myriad of constantly evolving State and Federal standards that an insurer’s medical bill and review process must adhere to.
For many insurers payments and remittance advisements are created using different systems—if not separate claims specialist units—with the payment check or draft approved and generated within the claims management system, while the remittance advice is generated by the bill review system. Having two separate systems involved, of course, increases the load on both the adjusting team and IT resources from a “systems to know and support” perspective as well as data entry considerations. If these systems and/or the business processes that they support are non-integrated, the payment and remittance advice may not be generated at the same time. This slows the process of providing high quality claims service down while
either the payment waits for the advice—or vice versa—so that they can be matched and placed in outgoing mail in the same envelope.
To alleviate this time lag, some insurers may allow the payment and remittance advice to be mailed separately and use “under separate cover” wording to advise recipients that the payment or remittance advice will be forthcoming. Since not all the information arrives together, this process—designed to alleviate timelag—can actually exacerbate both time-lag and process efficiencies as it can create confusion and account receivable reconciliation difficulties for the payee and significant “after payment” status requests to the insurer, many of which come via phone injecting additional tasks on already lean claims professional teams.
Analyst firm Celent reports that billing inquiries represent a significant portion of customer service calls from both policy holders and agents, and poor service in resolving these issues can have a worse impact on customer retention than almost anything except poor performance in claims.1 Just imagine what the impact can be when the billing inquiry is about a claims payment.
Industry studies indicate that up to 25% of payments give rise to payment status inquiries or disputes.2 Specific to the property & casualty insurance claims handling world, research indicates that with conventional payment processes (Figure 1), claim representatives can spend significant portions3 of their day just dealing with payment status inquiries and payment dispute resolution—impacting their ability to work on handling other claims and potentially impacting customer satisfaction.
Aside from critical efficiency and service considerations, paper-based medical bill payment processing is expensive. In 2010 United Healthcare reported an estimated cost of paying 145M claims via paper at $30.7M or $0.21 per claim. They estimate the cost of paying 145M claims via electronic funds transfer (EFT) at $2.7M or $.018; a 91 percent reduction.4
This same organization also advises that the speed of processing EFT transactions can also actually reduce the number of payment requests needing to be processed by 30 percent.5
Concerns exist outside the control of the insurer as well—especially in the area of fraud. The American Bankers Association 2009 Deposit Account Fraud Survey Report collected baseline information on check and electronic payment fraud losses and actions taken by banks to reduce these losses. Some of this survey’s findings were that industry check-related losses amounted to an estimated $1.024 billion in 2008; up from the $969 million in 2006 and eighty percent of reported having check fraud losses in 2008 up from 75 percent in 2003. It is logical to conclude that the fewer paper checks insurers issue, the less risk of them and their claim participants have of being a victim of fraudulent check activities.
As well as lower costs, increased processing speed and reduced fraud exposure, additional benefits of EFT enabled medical bill payment processing include elimination of checks being sent to the wrong providers, reduced stop payment and reissue activities,6 as well as providing additional opportunities to expand the capabilities of self-service Web-enabled payer portals.
While problems associated with conventional paper based payment processes are abundantly clear, the challenge for an insurer’s claims organization lies in actually achieving a better payment processing mechanism while reducing operational expense, increasing consistency and accuracy and improving service.
EFT processing is certainly part of the solution. However, acquiring EFT processing without electronic remittance advisement (ERA) capability only addresses a portion of the challenge and leaves unsolved the need to link both payment and remittance components of the medical bill payment process—which is critical in order to fully solve for the root causes of after payment claims business process costs.
The ideal mechanism will enable the organization to acquire broad electronic EFT capabilities as well as include the ability to deliver remittance information through multiple electronic formats; including web based and electronic data interchange (EDI) mechanisms. Additional capabilities should include extensive claim payment history inclusive of date of payment, payment amounts and payee as well as any bill reconsideration and/or bill supplement activities and their status.
Successfully surmounting this challenge brings a series of benefits to adopting insurers—including claims handler efficiency, productivity and satisfaction, and increased cost effectiveness. Additional benefits include payment accuracy, customer service satisfaction and reduced mail fraud exposure.
Defining the Solution
Here are several important functional requirements to keep in mind as you explore a combined EFT/ERA solution.
Support multiple payment types—not every payment relates to a medical bill and not every payee wants an electronic payment. The appropriate solution must provide for an automation of all payment types via multiple payment mediums, including EFT and Print/Mail as well as for multiple claim types, coverages and parties to the claim.
Enable payment status and dispute resolution—self-service customers, providers and payees should be able to see the progress of their payment 24/7 via secure Web-portal capabilities. The ideal portal should provide total visibility to both EFT and paper based payments and be a comprehensive mechanism to track payments from point of generation, through date of execution, to date and time of deposit (electronic disbursements) or mailing (checks/drafts). Additionally this portal should provide for the initiation of any potential payment disputes and two-way e-enabled dialogue—enabling these inquiries to be shared across the claims professional team, reducing response delays and reducing work interruptions and phone time for your staff.
Enable payment aggregation—processing multiple payment transactions to the same payee is inefficient. The implemented solution should be to aggregate payments (to the same payee) to the greatest extent possible within an individual payer’s preferred business processes and requirements. Aggregation reduces transaction volume and lowers total costs related to both electronic and print and mail processing.
Provide easy access and history of both payment and electronic remittance—most medical billing questions are combined around “what was paid?” and “why was that amount paid?” Thus the implemented solution must provide for a simultaneous and seamless display of both payment and remittance information. This capability should be surrounded by robust multi-variable search capabilities to locate individual records quickly and accurately. Available history should be at least 3 years.
Fully compliant with e-billing mandates—any implemented solution must comply with existing automated input and output transactions as required by state mandated electronic transmission of health record standards (ANSI ASC X12, etc.) as well as be flexible for future requirements.
Help you build your enrolled payee network—the more payees who are EFT enrolled, the more benefit to you, your policyholders and your business partners. Your selected solution partner should be able to demonstrate an extensive, comprehensive and successful approach to enrolling your payees. This process should include easy payee registration and include continuing recruitment via opt-in messages included with paper checks and extend to a full service payee management network. A key feature to look for is single registration enablement so that you can immediately take advantage of payees who are already registered without having to undertake your own registration activities for these same payees.
Finally, the solution you select must provide comprehensive customer support for payee initial enrollment, banking transitions, changes in payment medium or change requests as to remittance formats.
The New View
Figure 2 illustrates the business processes surrounding a modern combined EFT and ERA solution.
Insurers need to take a close look at the current state of their payment and remittance advice processes and support systems.
A rapidly diminishing claims workforce7 working in an inefficient environment8 not only impacts claims handling production, it is expensive and can also negatively impact customer claims service. Combined, it can cause a huge ripple effect on an insurer’s profitability.
This paper has discussed several of the many ways in which a modern payment and remittance advice solution can assist insurance carriers improve claims performance. The properly designed and implemented solution must provide a series of capabilities and be flexible for future needs and this document has provided a short list of features, functions and capabilities that the modern property casualty insurer should remain aware of in pursuing these benefits.
As well as adjuster efficiency, productivity and claims service gains, the proper combination of people, processes and technologies in a property casualty insurer’s claims can bring substantial bottom line benefit. Analyst firm Celent estimates that a 4% to 6% reduction in pure losses and a 10% to 12% reduction in loss adjustment expense are feasible through the appropriate selection and application of modern claims technologies—representing a 4- to 5-point improvement in the carrier’s combined ratio.9
About Mitchell Auto Casualty Solutions
The Mitchell Auto Casualty Solutions (ACS) division delivers solutions that help accelerate prompt, fair and effective liability claims handling with automated decision-making tools. By connecting people with technology and data, ACS delivers timely, intelligent and actionable insight to our clients so that they can handle 1st and 3rd party liability claims better. ACS offerings incorporate leading-edge technologies that empower our clients to handle claims more accurately, consistently, efficiently and cost-effectively enabling them to deliver outstanding claim service results.
For more than 20 years, ACS has delivered high-quality products and services to meet the evolving needs of our clients. With extensive industry experience and a track record of outstanding service delivery, ACS is uniquely positioned to deliver solutions that simplify and optimize your claims handling.
Mitchell International, Inc. empowers clients to achieve measurably better outcomes. Providing unparalleled breadth of technology, connectivity and information solutions to the Property & Casualty claims and Collision Repair industries, Mitchell is uniquely able to simplify and accelerate the claims management and collision repair processes.
As a leading provider of Property & Casualty claims technology solutions, Mitchell processes over 50 million transactions annually for over 300 insurance companies/claims payers and over 30,000 collision repair facilities throughout North America. Founded in 1946, Mitchell is headquartered in San Diego, California, and has 1,700 employees. The company is privately owned primarily by the Aurora Capital Group, a Los Angeles-based investment group. For more information about Mitchell, visit www.mitchell.com.
For More Information
To learn more about Mitchell International, call 1-800-238-9111 or 858-368-7000 (US and Canada), or visit http://www.mitchell.com.
- Celent, Billing: Business and IT Issues for P/C Insurers, February, 2006.
- Studies by Gartner indicate that most medical providers dispute 16% of all medical payments they receive. The National Association of Clearing House Administrators (NACHA) indicates that 25% of bills submitted to payers give rise to payment status inquiries.
- Mitchell research with personal lines carriers indicates up to 25 percent of claims professional time can be spent on medical bill payment and remittance advice inquiries.
- NACHA, United Healthcare, PNC Healthcare, United States Department of Veterans Affairs, E-Payment Cures for Healthcare, April 26, 2010.
- Medical facilities will generally resubmit another claim if not paid by 24-28 days and industry metrics indicate 30% of payer denials are due to duplicate billings, NACHA, United Healthcare, PNC Healthcare, United States Department of Veterans Affairs, E-Payment Cures for Healthcare, April 26, 2010.
- Healthcare provider data solution provider Enclarity indicates that 30-40% of payers’ provider records contain errors with 28 percent of errors coming as a result of duplicate records and 11.9 percent resulting from incorrect address information. This firm further reports that 2.5% of healthcare provider demographics change each month.
- Deloitte Consulting predicts a shortage 84,000 claims adjusters in the United States by 2014. Deloitte Consulting, How Insurance Companies Can Beat the Talent Crises, March, 2006.
- In 2002 consulting firm Accenture issued a ground-breaking report that indicated that claims departments spend up to 49 percent of their working time on activities that had no direct influence on settlement amounts. Accenture, Unlocking the Value in Claims, 2002.
- Celent, Technology Enabled Claims Performance Improvement, September 6, 2006.