Turning point: The API revolution comes to insurance technology

A tipping point is near, as all players managing healthcare benefits seek to makes changes to elevate efficiency in enrollment and ascertaining eligibility.

We expect to see significant improvements this year in how the health insurance industry handles enrollment and eligibility data for employer-sponsored benefits.

This is important because nearly half of Americans have these types of benefits packages, including healthcare, dental, vision and more. And a tech upgrade is likely to bring advancements and innovation that will help people better understand and use these benefits to their fullest to enhance individual and population health, as well as reduce our nation’s healthcare costs.

The slow-motion revolution that has been underway in health insurance data management will pick up steam this year. And it must – for years, the status quo has been viewed to “work.” With 2023 bringing forward massive artificial intelligence advancements with OpenAI’s launch of ChatGPT,  the decades-old tech entrenched in the insurance benefits industry – electronic data interchange, email, faxes and manual data entry – now appears even older than before.

The health insurance benefits infrastructure is beyond ripe for an upgrade.

Many factors are pushing carriers and benefits administrators toward API-based technology that delivers improved experiences in managing the enrollment and eligibility process – not only for them, but for plan members, brokers and HR teams at employers. All the players in the benefits ecosystem are sure to benefit from the upgrade.

Sometimes, new technology takes an industry by storm. One day, every company is using A then, seemingly overnight, B replaces A, and everyone is left wondering why they didn’t make the move sooner. In other cases, the new technology takes over gradually, inevitably hitting the tipping point of mass adoption. The slower approach has been the case in the insurance benefits industry.

The reasons for the gradual conversion to APIs are many. Companies are invested in their legacy systems and may not have the budget or IT resources to replace them. Corporate inertia makes it easier to stick with the familiar even when a better alternative is available. Being an early adopter can appear risky. Many companies don’t have an API strategy or roadmap.

But carriers are increasingly switching to API technology because it provides an immediate return on the investment and gives them an edge in a competitive marketplace.

Below are some of the factors that will accelerate API adoption:

Employer emphasis on budget   

To no one’s surprise, health plans are costing employers more this year; an additional 5.4 percent to 8.5 percent, depending on the source. As a result, businesses are scrambling to control costs while remaining competitive on benefits and out-of-pocket expenses for their associates.

Automation brings cost reduction. The greatest improvements in efficiency and performance for benefit administrators and carriers can be realized through automation of repetitive tasks and the current system’s high-touch processes.

That’s why employers will look to reduce costs by demanding better efficiency in the administration of their benefit plans. In fact, employers will place a greater priority on the digital capabilities of benefits technology. That emphasis will power the move to automation, with 79 percent of employers planning to invest more in benefits technology.

This will affect the role of the broker, too. They will be expected to be familiar with carriers’ enrollment technology and able to advise employer clients where technology can drive efficiency accordingly.

Clarity for members

Consumers are confused about health insurance: how to choose plans, coverage, how much it costs and why claims are denied. Many benefit administrators share their frustration. The industry is belatedly responding to their concerns with cleaner and more accessible data, as well as useful decision support tools and navigation software as part of the employers’ benefit technology stack.

The new priority on providing a better experience for employers and employee members is another reason more carriers will abandon their inefficient EDI-based systems in favor of faster and more capable API-powered systems.

A demand for interoperability

According to a recent JD Power Insurance Intelligence Report, experts predict that insurance carriers will look to automation and “interaction” technology to offset the rising premium costs in 2024.

Today, a diagram of the health insurance industry, its clients and vendors would show a lot of straight lines connecting only two companies. For a long time, partnerships in this sector have required custom solutions that are one-to-one, human resource intensive and one-way, batched processed data exchanges. The relationship might work for the two firms involved, but it makes it difficult to achieve interoperability across the entire ecosystem of partners, which all must work together to execute benefits enrollment, eligibility and seamless benefits use by members. 

Instead of straight lines that don’t intersect, the diagram should resemble a spider web network with multiple intersecting strands, each capable of transmitting accurate data to where it’s needed, quickly and without interruption.

This year, we expect more carriers and benefit administrators will help build that network by making real-time connectivity and interoperability a priority. They will abandon inefficient one-to-one strands in favor of an expansive, API-powered ecosystem that enables real-time data transmission and management.

To make that ecosystem work, there will be greater emphasis on keeping benefits data clean, organized, synchronized and accessible among partners.

Everyone who works in health insurance knows it’s slow to change, particularly compared with other industries. The tipping point will be achieved when more players make the switch to API-based technology. Each conversion will push that company’s partners to follow suit until it becomes the new industry standard.

Gary Davis is national practice leader at Noyo, where he leads digital transformation efforts. He has nearly three decades of experience driving innovation through the insurance benefits ecosystem.

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