How 3 Health Plans Took Unique Approaches to Lowering Administration Costs

Administration costs attributable to outdated technology and manual processes result in one of the biggest sunken costs in healthcare. For example, in 2016 there were an estimated 72 million patient benefit verifications done manually, each costing approximately $8. Verifying benefits electronically costs an estimated 49 cents per member.

Even a task as seemingly simple as verifying benefits - when done manually - can have a huge cost impact for health insurance plans. Those costs multiply when considering the resources necessary to accurately and effectively process claims.

diagram of transaction stats

The more administration costs increase – now estimated between 12 and 18 percent of every premium dollar spent -- the tighter margins become, and the less money health plans have to reinvest in crucial differentiators such as customer service, care coordination, new lines of business, and other innovations.

Needless to say, health plans are feeling the squeeze. With changing regulations and shifting business models putting further pressure on health plans, lowering administration costs is one key area they can and should master.

Here’s how three health plans recently took different approaches to lowering their administrative costs.


Regulatory changes such as the passage of the Affordable Care Act and new consumer expectations around wanting a more retail-like experience combined to create a critical need for change for Medica, based in Minnetonka, MN., with more than a million covered lives. “We’ve chosen transformation to hit these expectations head on,” says Kimberly Branson, Medica’s VP of Operations.

With adjudication rates in the “high 80s”, another big win for Medica after implementing HealthEdge’s HealthRules® core administration platform was empowering its call center employees. Training was reduced from ten weeks to six because HealthRules is “so intuitive and easy to use,” says Branson. Not only that, but they are also able to put representatives out on the floor during training to give them real-world experience dealing with actual customers.

“Customer service is probably the hardest job at any health plan,” says Branson. But with HealthRules, Medica has been able to transform that entire experience leading to higher customer satisfaction and reduced costs related to employee training.

McLaren Health Plan

The core administration technology McLaren Health Plan, a fully integrated health network based in Flint, MI, was using was outdated. It was a technology stack approaching 30 years old, that couldn’t be updated in a timely manner and worse - only a few people in the organization even knew how to use it.

For a health plan servicing more than 20,000 physicians, that outdated technology led to a claims auto-adjudication rate of exactly zero percent, says Sara Mavredes, Director of Strategic Initiatives. “It was not going to take us into the future. We wouldn’t be in business if we didn’t make a change,” she says. McLaren came to the decision that they needed to implement new technology that would allow the business to work more efficiently, intelligently, and give them the margin to implement new strategic initiatives.

Now, with auto-adjudication rates exceeding 90%, McLaren doesn’t have to add additional claims staff as they expand with new physicians and members. They’ve even been able to reallocate people resources to other aspects of the business. That scalability has allowed McLaren to lower administration costs while rolling out value-add services, such as new types of health plans and even a mobile app.

Neighborhood Health Plan of Rhode Island

By the end of 2018, 80% of health plan contracts in Rhode Island are required to have quality or alternative payment models built in to them, per recently signed legislation by Gov. Gina Raimondo. Neighborhood Health Plan has always focused on quality for its underserved members by taking care of them holistically. But providing the necessary services to achieve that quality of care requires them to work as efficiently as possible.

That means having technology that is easier, faster, more efficient every time an employee at the health plan gets on the phone with a member, say executives at NHPRI. That wasn’t possible with their previous technology investments. But with HealthEdge’s HealthRules, employees now have the data and real-time information available to them to help patients as quickly as possible, cutting down on future administration costs in the process. 

With efficient processes in place thanks to a modern core administration technology system, employees also have near instant access to back-end member data that provides insights resulting in quality and cost-effective care to members.  

No matter how a health plan decides to strategically lower its administration costs, it’s clear that making it part of an overall strategy, including a roadmap and executing against it is crucial for not only the business but also for the health and satisfaction of members.

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