Call it the age of the consumer experience. The way we engage with our banks has transformed, the way we buy our cars has been upended, the way we shop has done a 180 – it was only a matter of time before consumers demanded changes to the healthcare ecosystem.
For health insurers, meeting consumer expectations is not just a nice to have but a requirement to stay competitive. With new, more unencumbered entrants to the marketplace, the focus should be on deeply understanding each individual policy holder, reducing costs and complexity through automation, and equipping the business to react to change with agility.
The changes that need to take place within the health insurance industry to drive required outcomes are broad and will touch every aspect of the business. Given Aptitude's focus on the finance department, this article will touch on three areas of action that sit primarily within the realm of the CFO. However, if the CFO can execute, the value delivered will impact the organization at large.
Know your policy holders
CFOs sit on rich financial data that when combined with non-financial data can create a robust picture of an individual policy holder. However, the lack of investment in the finance architecture at most health insurance companies means that data is often siloed into various source systems, held at varying levels of detail, and hard for business units outside of finance (and often finance itself) to access. These are challenges that must be overcome. Taking actions based on data for groups of policy holders or personas is no longer accepted.
For one health insurance company, this involved a finance transformation program which centralized transactional systems and accounting into an accounting hub with a subledger to create a single source of truth for enterprise data – financial and non-financial. Feedback loops between an established data lake, the accounting hub and the General ledger linked the systems for source-to-post transaction transparency.
With the ability to access robust data, stakeholders can access a personalized view of each policy holder. This insight allows the company to offer more choice and control over plans and coverage as well as program offerings to improve health and well-being.
Effectively bringing financial and non-financial data together will allow organizations to develop new revenue streams, monetize data, and provide customized offerings to customers.
“70%-80% of what finance does today can be automated,” is a stat that’s been floated recently by everyone from the Big 4 Advisories to major financial publications like cfo.com.
In addition to reducing risk and costs, automation allows for faster and more accurate forecasting which gives management a better view of the business. For example, without the ability to generate a trusted forecast, one health insurance organization was required to hold extra reserves instead of releasing these funds to be used in more valuable ways.
Once the automation of processes around data integration, data standardization, accounting, and reporting have been applied, technologies like Robotic Process Automation (RPA), AI, and cognitive analytics tools can be applied to further automate key areas.
RPA is already helping health insurers automate processes like claims management and audit reporting (source.) Minimizing manual inputs and excel uploads not only speeds things up but also reduces errors and other risks like financial crime. According to Gartner, most businesses are just beginning this journey. Midway through 2018, less than 10% of large and very large organizations had deployed some form of RPA. This is expected to grow to 85% by the end of 2022 (source).
This idea of automation can also extend to the simplifying and optimizing of various aspects of the finance department – areas where things may be ‘automated’ but not optimized. For example, if accounting policy is coded into each individual source system, as it is for many organizations without an accounting hub, each source system must be updated individually when changes are made to accounting policies. This is expensive and risky and a good prospect for optimization.
As health insurance continues to move toward an increasingly digital future, the ability to view financial data in a faster, more automated manner is necessary for those who want to remain relevant. Today's healthcare CFO now requires detailed insight into what is driving financial results so that they may spend their time more efficiently; forecasting corporate strategy and paving the way for the entire business.
Prepare now for tomorrow’s future
While the health insurance industry may not have been as impacted by the recent changes to accounting standards that have impacted leasing, revenue recognition, and insurance – they will need to be prepared for future government program changes that could impact their business model and add additional reporting burdens.
Similarly, the pace of change all but guarantees the need to respond with agility to new market entrants, new lines of business and new customer types.
Implementing an infrastructure and data foundation that is flexible, scalable and provides easy access to data means the organization can adapt to new requirements in real time and respond quickly to market changes.
For example, investing in the technology necessary to enable a faster, near real time close puts valuable information into the hands of executives sooner and can help the business spot clear opportunities or problem areas. This can result in more agile pricing, better transparency into cost drivers, and identification of best practices across the organization.
Many of the trends reported for the healthcare industry focus less about separate initiatives for payers and providers and more around the integration and required convergence of the two groups in order to offer care that is more preventative, accessible and lessens the cost for all involved. For the health insurance CFO and team, it’s all about getting access to better data, preparing for constant change and continuing to drive automation.
For more information on how a digital finance transformation can impact your organization, please download the whitepaper: From governance to guidance: The finance department's digital journey.