When Insurers Need Ensuring: Tips for Navigating Payer Risks During COVID-19

May 28, 2020 |
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It’s the very nature of the industry. By definition, insurance is expressly designed for one thing—managing risk in good times and bad. But what happens when “bad” only begins to describe the status-quo?

Over the past few months, a once-in-a-lifetime perfect storm has challenged this sector like never before:

  • 1.7 million Americans infected with COVID-19 as of late May;
  • Premium shortfalls from 27 million Americans losing their health insurance amidst record unemployment levels not seen since the Great Depression;
  • Volatile financial market placing tremendous pressures on insurers’ balance sheets.

In recent conversations, we’ve found many leading payers are concerned about those who may have lost their coverage and relieved that states are stepping in to extend enrollment in their exchanges. We’re also seeing payers develop new products to include Health Exchange Plans and fully embrace telehealth to help reduce risk.

Reinsurance is also helping spread the risk of loss among a wider group of companies, mitigating the potentially destructive financial effect of an over-accumulation of risk.

“Three main factors—cost-containment, capacity and cybersecurity—are critical for keeping insurers running in an environment where claims are up, revenue’s down, and financial expectations don’t let up.”

Overall though, long-term challenges still remain. Our experience working with payers like these has been that three main factors—cost-containment, capacity and cybersecurity—are critical for keeping insurers running in an environment where claims are up, revenue’s down, and financial expectations don’t let up.

Cost Containment—Coding Errors Cost

Mandates from several states have eliminated cost-sharing for all medically necessary COVID-19 screening and testing. The aim is to alleviate concerns for individuals who are potentially infected from incurring significant medical bills. As a result, there’s been a major uptick in disability and worker comp claims as well as increased telemedicine claims, with many insurers designating—or manually tracking—pandemic patients. One of the best ways to handle this more efficiently is by strengthening company data analytics as well as medical review services to support pre-payment claims reviews.

This will probably become an even bigger issue once hospitals reopen. There will likely be more COVID-19-related coding errors as well as missing or improper patient flags with patients visiting healthcare practitioners for other consults or procedures.

Capacity Planning—Focus on Flexibility

Payers will likely face tremendous challenges trying to achieve the right level of staffing to process their COVID-19 plus regular claims—all at a time when social distancing and other factors are seriously challenging normal work routines. This includes peak season planning, on/offshore capacity and temp staffing as well as vendor rationalization. Cross-functional teams serving market geographies will also need to be organized including capacity models, organizational realignment and communication.

Flexible capacity models that better align staffing plans due to reduced call center volumes are key. Tech solutions also help. For example, we developed a solution for a major insurance carrier that helps them prioritize the enormous volume of COVID-19-related claims they expect to process—think funnel—while also helping them determine which claims are legitimately theirs and which one are covered by government funding—think lane divider—so claims are properly sorted, channeled and processed.

Cybersecurity—Ensuring HIPAA from Home

Even in times of great change, one thing is not changing: HIPAA protections. And rightfully so. But in an environment with more employees working from home, for example, the safe exchange of confidential information among new remote employees is more challenging than ever. This is especially true with HIPAA fines that can range from $100 to $50,000 per violation (or per record) and a maximum penalty of $1.5 million per year for each violation.

Although work-from-home arrangements are needed to keep operations running these days, they can also introduce new risks not necessarily addressed—or perhaps even considered—before. For example, remote claims and compliance services need be stress-tested for documentation, process gaps, cyberattack and other vulnerabilities. A breach easily handled by your IT department at an office or call center is one thing. Those same employees now working at home with varying levels of connectivity and security? That’s a different ballgame.

“Perfect storms can reveal what’s imperfect in any business. They may also be the best catalyst for real long-term change—but only if acted upon in time.”

Change Now, Benefit Long-Term

Finally, although these are definitely more bad times than good for payers, there are ways to mitigate the risk—something insurers would likely appreciate more than anyone. In fact, many insurance companies were already in the process of addressing the issues above, but they weren’t all fully implemented by the time the pandemic hit.

Perfect storms can reveal what’s imperfect in any business. They may also be the best catalyst for real long-term change—but only if acted upon in time. That’s true in any sector. It may be especially true for payers during COVID-19.

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