Electronic Multi-Product/Carrier Premium Billing (Individual, Voluntary and Group Benefits)

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Increasing efficiency and customer satisfaction, while decreasing lapse rates.

Rising unemployment and the consequential decline in workers covered by employer-sponsored group plans is driving growth in the individual insurance market. Indeed, according to McKinsey & Co., revenue growth in individual insurance is 2½ times greater and the profit growth is 1½ times greater than for employer-based insurance.

However, individual insurance plans carry higher costs relative to group plans – costs that are coming at a time when the drop in group coverage is negatively impacting carrier revenues. That is why carriers are seeking ways to reduce costs and streamline processes to maximize the profitability of their individual offerings.

Converting to electronic billing is one way in which carriers can achieve significant reductions in administrative expenses. The problem is that most have legacy systems in place that cannot support the transition to eBilling. As a result, many are seeking to outsource these services to organizations like HealthPlan Services that offer eBilling as a core competency.

Paper-based premium billing and payment is a complex process, particularly for individuals who often cobble together multiple products including medical (traditional, high-deductible, catastrophic, cancer, and critical illness), dental, vision, life and long term care. In some cases, small employers who do not offer group health coverage still want to provide their employees with easier access to individual health and ancillary insurance products by offering payroll deduction of premiums for their non-employer sponsored coverage. This requires the need for a “group list bill” of individual products.

In either case, each product requires a separate premium bill, which must be mailed to, then reconciled and paid by, the individual or employer. When received by the carrier, those multiple payments must be processed. This is often the case even when the various products are purchased from subsidiaries of the same parent company.

Even in instances where some of the premiums can be consolidated onto a single bill, allocating payments across multiple product lines remains an arduous process. It is also a reconciliation nightmare for the customers on the receiving end of those premium bills.

Clearly, these traditional premium billing practices have a significant impact on customer satisfaction, and thus, retention levels thanks to the inevitable delivery delays of premium bills and carrier payments.

Despite the inherent complexities, it is possible to streamline the premium billing and payment process to the benefit of both carriers and their customers. Advances in automation and support technologies make it possible to not only migrate to paperless billing and payment, but to also consolidate premiums for multiple products and even multiple carriers onto a single electronic bill that the customer can easily reconcile, adjust and pay via a self-service portal.

eBilling Comes of Age

Electronic billing and payment is already commonplace. According to a study by BAI and Hitachi Consulting, published in January 2009, 62 percent of recurring consumer bills were being paid electronically, up from 45 percent three years ago.

Further, the number of automated clearing house (ACH) payments in the 4th quarter 2008 increased by 4.5 percent over the same period in 2007, topping 3.8 billion. The growth of Internet-initiated ACH payments during that period was even more robust, increasing 16.5 percent to reaching 552 million transactions accounting for $220 billion in transfers. Corporate trade exchange (CTX) entries, which are business-to-business payments in which remittance information is exchanged electronically, grew by 15 percent, reaching 14.4 million and accounting for $691 billion.

Despite its popularity in other industries, the health insurance industry has been slower to adopt electronic billing and payment processing. One of the primary obstacles has been the need to present individual bills for each product. A second has been the complexity of properly allocating premium payments across multiple products.

Another challenge is providing the right level of detail on electronic bills. Also at play are concerns over compliance with the Health Insurance Portability and Accountability Act (HIPAA) and, for multi-state carriers, addressing the variances in state regulations governing business practices.

Technology is the means by which carriers can overcome these challenges and begin to reap the rewards of eBilling and consolidated list billing.

Platypus Paves the Way

A prime example of leading-edge technology that streamlines the premium billing process is Platypus – a patent-pending proprietary platform from HealthPlan Services (HPS). It facilitates the generation of a HIPAA-compliant electronic bill that is submitted to the customer via email with a link to a secure website. Once on the site, customers can review and reconcile their bill, make any necessary adjustments and submit an electronic payment – without generating a single piece of paper.

But eBilling and payment is just the beginning. Via Platypus, HPS has the ability to accurately and efficiently aggregate premiums for multiple core or voluntary products – even those offered by different carriers – under one customer account and generate a single, detailed eBill for all premiums. When payment is received, it is automatically and appropriately allocated to each product and separate electronic feeds are generated and sent to each carrier.

One of the most significant benefits carriers realize from eBilling and consolidated list billing is increased customer satisfaction. When the opportunity to receive just a single premium bill is bundled with the ability to process changes online in real-time, it reduces the time customers spend managing their insurance coverage. Also, eBilling eliminates the human errors that plague paper processes by automating bill generation, delivery and payment.

As value-added services, eBilling and consolidated list billing can also help increase customer retention. That alone is worth the outsourcing investment, given Gartner’s estimates that the cost of acquiring a new health insurance customer is 5-10 times greater than the cost of retaining an established one.

Carriers also realize direct benefits, including reduced lapse rates. When customers can reconcile their bills and submit their payment in one step, without having to generate paper or write checks, they are less likely to miss due dates. Finally, because eBilling and consolidated list billing is far more efficient, administration costs are lower.

Making the Right Outsourcing Choice

Many organizations claim to offer consolidated or eBilling, but they are not all equal. Careful vetting of outsourced providers is critical to ensure that carriers – and their customers – reap the full benefits these services can provide.

Top tier organizations like HPS have proven track records in service and process automation, as well as turnkey self-service tools for maximum efficiency.

HPS, for example, offers a comprehensive, integrated suite of solutions designed specifically for the insurance market to ensure quality and compliance. Its administration platform is built for scale and flexibility to ensure rapid ROI in the form of improved profits, enhanced efficiencies and cost savings.

With its deep domain experience in this segment HPS is the ideal partner who will stand behind its claims with guaranteed service level agreements (SLAs) that increase retention rates, improve product density, grow participation post-sale and reduce overall administrative costs.

Those differentiators, combined with an ongoing investment in innovative technologies and deep expertise in administering a full range of products make HPS the smart – and safe – outsourcing choice.




[1] Hough, Daniel; Riddle, Mark; Allen, Chris; and Fox, Melissa. “World of Choice: Consumer Payment Preferences.” BAI Banking Strategies. January/February 2009. Available at: http://www.bai.org/bankingstrategies/2009-JAN-FEB/cover/index.asp.
[1] Press Release. “ACH Transaction Volume Grew in 4th Quarter Despite Tough Economy, NACHA Reports.”NACHA – The Electronic Payments Association. Feb. 11, 2009. Available at: http://www.nacha.org/docs/News%20Release%20Q4%202008%20ACH%20Volume.pdf.
[1] Burns, Carrie. “Leave a Good Impression With Electronic Payment.” Insurance Networking News. June 2007. Available at: http://www.insurancenetworking.com/issues/20070601/4723-1.html?type=printer_friendly
[1] Galimi, Joanne. “Health Insurers Must Create Member Acquisition and Retention Strategies.” Gartner RAS Core Research Note. July 30, 2008. Available at: http://www.healthcaremars.com/_media/pdf/GartnerMARSResearchReport.pdf.




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