Health insurers have always faced a deceptively simple challenge: Paying just the claims that they should, in the appropriate amount. In practice, of course, this has been a deeply complex and important component of insurers’ businesses, with meaningful impact on their bottom lines.
Traditionally, in the face of fraud, waste, ineligibility, duplication and error, insurers deployed armies of claims adjusters armed with research and experience to try to identify and deal with claims problem. Often, adjusters only got involved after a claim was paid and then worked to recover wrongful payments from a policyholder, provider or third party, giving rise to the nickname “Pay-and-chase” for the process.
The rise of modern data analytics has created new opportunities for this component of insurers’ businesses. While new models certainly include fraud, waste and coordination of benefits components, the ability to build new proactive layers into the process and coordinate with utilization review and other functions creates new avenues for additional efficiencies. Data analytics allow for ever-more-useful scoring of existing and potential claims, as well as identification not only of which claims are most likely to prove fruitful for adjustment but also which claims have the potential for the biggest recoveries.
Underwriting and loss prevention teams armed with data analytics can blend human expertise with machine learning to both address specific incidences of waste, fraud as well as identify and address root causes and vulnerabilities to improve outcomes moving forward. This expanded and updated function has become broadly known as “payment integrity.”
As part of payment integrity, coordination of benefits and fraud, waste prevention functions have become more important than ever thanks in part to the pressures placed on insurers by the Affordable Care Act in the United States. That’s in part because the ACA’s mandates that insurers pay out specific percentages of premiums on claims has pushed insurers to become more efficient in their administrative operations. It’s also made it even more critical for insurers to identify opportunities to improve payment integrity through reduction of fraud and waste and improved coordination of benefits with the growing third-party marketplace.