More people, more problems: Risks in automating insurance payments

Automating the Workers’ Compensation payment process is a great way for payers to control costs and streamline processes while mitigating risk.

What payers may not realize, however, is that if the automation process involves multiple parties, they may actually be exposing themselves to a host of new risks and complications.

In its most basic form, the Workers’ Compensation payment process involves only three parties: The payer, the provider and the injured worker. The payer reimburses the provider for medical services rendered to the insured. As claims have become more complex, payers have incorporated additional entities into the revenue cycle, further complicating the payment process.

Today, you typically see more parties involved in the payment process, with money and data exchanged multiple times over the course of an insurance payment from payer to provider. For example, in the current Workers’ Compensation revenue cycle, insurance carriers and self-insured organizations commonly outsource payment processing to a third-party administrator. The third-party administrator may then contract out the financial portion of the payment process to a payment company, which often hires a card company to execute the payment.

While the insurance payment process may begin as a fairly simple exchange, the reality is much more complicated and involves multiple entities that transfer information many times, each with its own set of processes and structures. As the series of corporate handshakes increases, so does the potential for risk.

Related: Is your Workers' Comp program award-worthy?

Continue reading ...

When you increase the number of parties that process Workers' Compensation claims and payments, you increase the likelihood of errors and fraud. (Photo: iStock)

Effects on cost and efficiency

When involving multiple parties in the insurance payment process, a number of logistical considerations must be taken into account.

For example, each entity has its own set of processes, workflows and guidelines. Adding in another set of processes not only slows down the payment, but adds overhead and operational costs, which increase the cumulative total of the transaction.

It also creates more opportunity for errors, further complicates communication and makes accountability harder to establish, impacting the accuracy and timeliness of payments to providers and injured workers.

Ensuring accurate and timely payments is more important than ever when considering today’s widespread use of social media. A delay in payment could quickly put your organization in the spotlight, and indemnity payments are especially susceptible. With more than 74% of online adults using social media, complaints from an injured worker who receives inaccurate or untimely indemnity payments can quickly spiral into public criticism.

Fraud and compliance issues

The biggest risk of involving multiple parties in payment processing is the effect on security.

Every time personal information is transferred from one party to another, it increases the potential of a data breach, which could lead to fraud and monetary loss. The more parties involved in the revenue cycle, the more vulnerable the payer’s personal information becomes. This is huge for payers when you consider that 73% of all U.S. companies experienced payments fraud in 2015, according to the 2016 AFP Payments Fraud and Control Survey. This percentage increased from the 62% reported in 2014, proving that the risk of fraud is a serious and growing issue.

Another important concern to take into account is compliance. Payers must ensure all that parties involved in the insurance payment process are fully compliant with Health Insurance Portability and Accountability Act, the Payment Card Industry Data Security Standard and all other associated regulatory stipulations. This is a crucial, yet daunting, task that only gets more difficult with each new party involved.

Continue reading ...

Using an end-to-end card processor is one option for controlling the risks of automated workers' compensation payments. (Photo: iStock)

Mitigating risks and challenges

The good news is that there is a way for insurance carriers, self-insured organizations and third-party administrators to overcome these potential payment processing risks: Limit the number of parties involved by using an end-to-end card processer, run by a single company.

An end-to-end processor is capable of handling every aspect of the Workers’ Compensation payment process, from receiving the data file to disbursement of funds. This ability eliminates the need to involve multiple parties which, in turn, mitigates many of the hidden risks.

Involving fewer entities results in greater efficiency and lower operational costs, as doing so eliminates additional workflows and guidelines from the insurance payment process. Payments can be issued more quickly, which decreases transaction costs. Furthermore, an end-to-end card processor can produce more accurate, real-time reporting and analytics within a single report, whereas a multiple-party relationship means assimilating several reports into a single coherent, comprehensive document.

The biggest benefit of using an end-to-end card processor is stronger privacy and security. Because a single processor manages the entire revenue cycle, the number of times personal data and money changes hands is greatly reduced. This increases flexibility and speed of processing, while reducing the potential for security and privacy risks like data breaches and fraud. In addition, the processor maintains a relationship with the payer and the bank, guaranteeing full HIPAA and regulatory compliance. This saves your team time and money by eliminating the need to monitor parties and ensure they are following guidelines.

Whether an insurance carrier, self-insured organization, or third-party administrator, establishing a secure, efficient and cost-effective payment process is crucial to protect your organization and control operational costs. Partnering with a single entity allows payers to take advantage of the many benefits that come from automating the workers’ compensation payment process, including the promise of greater efficiency, security and cost savings.

Bryce Teater is product manager for insurance payment solutions for Little Rock, Ark.-based DataPath. E-mail him at bteater@dpath.com.

Related: 10 ways in which Workers' Compensation needs to evolve

Save

Save

Save

Save

Save

Save

Save

Save

Save

Save

Save

Save

Save

Save