The Lost Costs With Administrative-Related Tasks With Group Health Plans

According to studies in the field, noted by the CAQH Index, in 2019 they noted that

"SPENDING ON HEALTHCARE ADMINISTRATION COSTS AN ESTIMATED
$350 BILLION ANNUALLY IN THE UNITED STATES DUE TO IT'S
COMPLEXITY."

Data from the 2019 CAQH Index indicates that $40.6 billion or 12 percent of the
$350 billion spent on administrative complexity, is associated with conducting
administrative transactions tracked by the CAQH Index. Of the $40.6 billion spent on
these transactions, $13.3 billion or 33 percent of existing annual spending on
administrative transactions could be saved by completing the transition from manual
and partially electronic processing to fully electronic processing. The progress that
the industry has already made to automate these administrative transactions has
saved the industry over $102 billion annually."

Administration is, of course, an important aspect of any industry, especially one as
complex as medical and related fields. The difficulty with modern health insurance
means extensive administrative hours as they tend to a myriad of issues on multiple
fronts. This means, as noted earlier, a great deal of expense that filters throughout
the medical field.

Unfortunately, small business owners tend to bear the brunt of these costs, at least
when it comes to businesses rather than people. As noted here,

"NOT SURPRISINGLY, THE COST OF PROVIDING HEALTH COVERAGE TO
EMPLOYEES LOOMS LARGER THE SMALLER THE BUSINESS,
BUT THIS ISSUE PLAGES BUSINESSES REGARDLESS OF SIZE"

The price tag on health insurance is a significant pain point for small employers. The
problem extends to recruiting and retaining talent, as well. To compete with larger
employers, small employers are hard-pressed to offer benefits like health insurance,
even as the benefit takes up a larger share of the bottom line. Two-thirds of
businesses (69%) said the problem has been getting worse. They reported that costs
have increased over the last four years; one-third of this group reported annual
increases of 10 percent or more. Businesses with fewer employees cited bigger
increases than larger businesses. Employers cited prescription drugs and lack of
choice of health care plans as pain points.

There are ways to curb this expense without impacting the medical field or health
insurance. One method is the increased use of digital materials. According to the
previously cited Index, "Although partially electronic transactions often cost less and
are less time consuming than manual transactions, there are savings opportunities
associated with moving from partially electronic web portals to fully electronic
transactions. For the medical industry, $2.7 billion of the $9.9 billion total savings
opportunity could be achieved by switching from partially electronic transactions to
fully electronic transactions. The greatest per transaction savings opportunity for
medical providers is a prior authorization. Medical providers could save $2.11 per prior authorization transaction by using the federally mandated electronic standard rather than a web portal. Understanding the impact of portal use in more detail is important as the industry focuses on opportunities to decrease administrative costs and burden."

The medical field is one area where increased use of digital technology has lagged in
comparison to other fields. Concerns over confidentiality and security, combined with
outdated legislation, mean much in the medical field is handled with pen and paper.
That said, the COVID-19 pandemic has resulted in rapid inroads in digitization. Still,
administrative costs remain high, with subsequent effects throughout healthcare.
Along with the use of digital technology, another way to reduce costs is through increased automation. As noted by the previous study, "The 2019 CAQH Index estimates that the medical industry has avoided over $96 billion in annual administrative costs through efforts to automate administrative transactions. By comparison, the dental industry has avoided over $6 billion annually. For both industries, the largest annual savings has been achieved for eligibility and benefit verification at $68.8 billion for the medical industry and $3 billion for the dental industry. However, although the industry has already avoided significant administrative costs through automation, 33 percent of existing spending could be saved through further automation.

To continue to drive progress, harmonization is needed across all stakeholders to
reduce administrative costs and burdens. Aligning on a common understanding of the
barriers to electronic adoption and the business needs of the future is imperative for
plans, providers, vendors, standards development organizations, operating rule
authoring entities and government to maintain and improve upon industry
achievements to date."

There are other ways to mitigate costs as well, without subsequent suffering in quality. One way is to reduce what one article sites as administrative waste. As noted by said
article,