Health care benefit service providers have invested billions in setting up and updating systems that can process claims.

Unfortunately, few traditional systems can communicate directly with flexible spending accounts, health reimbursement arrangements, health savings accounts or other next-generation consumer-directed health plan payment vehicles.

The older legacy systems — and many relatively new legacy systems — do not have the capacity to integrate real-time claim and CDH payment processing for patients, health care providers, benefits providers and financial institutions. The practical result is that many CDH plan members end up feeling as if they are trying to steer a car using traffic information that’s at least two weeks old.

Benefit plan administrators could address this problem by building and customizing new software, just as motorists could address shortcomings in automobiles by building and customizing their own cars. In reality, integrating a pre-built CDH platform into the existing claim systems is bound to save time and money.

This issue is important to benefits brokers, group insurance manufacturers and plan administration firms because the fate of the CDH movement will depend partly on how quickly and how well CDH plans can give members feedback about the true out-of-pocket costs of health care.

Consider XYZ Insurance Services, a hypothetical claim processing firm.

XYZ could:

- Use an outside, soup-to-nuts CDH vendor. That might make life simpler in some ways, but it would force XYZ to depend on the vendor’s vision of how a CDH system ought to work and how well it ought to perform.

- Develop custom software. Of course, the project might take longer than expected and cost more, and many custom software development projects fail completely.

- Use a commercial CDH system.

What are some of the ways XYZ Insurance Services could evaluate the alternatives? XYZ could, and probably should:

1. Hire an outside consulting firm to look at the options and develop a request for proposals.

A good consulting firm can walk a benefits firm through the product demos and put commercial products and vendor systems through rigorous tests for factors such as functionality, flexibility and scalability.

2. Look for good communication skills.

If a vendor’s CDH system or a commercial CDH system cannot talk with XYZ’s existing claim processing system or employers’ or health insurers’ systems, that’s a problem. Similarly, a good CDH system should be able to accommodate a wide variety of plan designs.

3. Avoid having to install software.

XYZ may want a flexible system, but it may also want to avoid the hassles of running CDH software on its own servers. XYZ may be able to maximize performance and minimize headaches by getting access to a CDH system through a hosted “application service provider” arrangement.

4. Think hard about what plan members will need a few years from now.

The old CDH plans might be able to get along with a mechanism for helping patients use claim forms to tap a medical savings account. Today, XYZ has to be prepared to administer a CDH that offers multiple payment options, with the bank of the plan account’s choosing, and gives the patient the ability to choose which accounts to pay which bills. In addition to pleasing employers and plan members, flexibility might create opportunities for XYZ to expand partnerships with other financial services companies.

5. Remember ancillary benefits.

The ideal CDH system should help XYZ manage dental benefits, vision benefits and other forms of non-medical insurance coverage, as well as medical coverage.

6. Understand that speed is the product.

If XYZ’s new CDH system allows for real-time processing of claims and real-time debiting of plan members’ CDH accounts, it could make the entire health care system work better by improving members’ ability to manage their health care spending.

Madan Moudgal is chief operations officer at CareGain Inc, East Windsor, NJ , a unit of Fiserv Health, Brookfield, WI. He can be reached at info@caregain.com

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Kicker: The Growth

The Accounts Are Here

Percentage of Employers That Offer Employees Health Savings Account-Compatible Health Plans

2005

2004

2003

All employers

20%

10%

5%

Employers with 5,000 or more employees

33%

20%

17%

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2003-2005