Business Insurance RMIS Article

"Online systems help companies streamline claims handling"

December 13, 2004

by Rupal Parekh

Although companies have long been making the move from traditional paper-based claims reporting to automated systems, Web-based claims technology has not gone stale.

The latest wave of online systems offers ways to improve upon and streamline companies' claims handling processes, with the focus shifting from mere computerization to the technological capability of a system to harvest detailed claims data. Risk managers can analyze this data to help minimize on-the-job accidents, pre-empt the filing of claims and prevent related losses, experts say.

Technology vendors and consultants note that risk management information systems for claims are now, among other things, customized to be industry- and company-specific, Internet-based for the real-time capture of claims data, integrated for access across departments organizationwide and linked to insurance carriers.

"In the corporate marketplace, the reporting of claims has evolved from phone calls to faxes to all kinds of electronic means," said Mark Charron, a principal at Deloitte Consulting L.L.P. in Hartford, Conn. "What is standard now is a Web-based report of claims."

According to Mr. Charron, "The speed, the accuracy and the completeness of reporting is really what gets the ball rolling" in the claims process. But the biggest challenge associated with the Web-based method, he said, is the accuracy of the information.

"You don't want to have to go back and start asking the injured worker the same questions all over again," Mr. Charron said. "It's important to capture that information the first time."

Minneapolis-based retailer Target Corp. is one organization that recently modified its workers compensation and general liability claims reporting system to allow risk management to gather incident data more quickly and better keep tabs on Target's claims-related exposures.

"We're integrating safety into everything we do," from back-room functions to the layout of merchandise displays on the sales floor, said Maria Griffith, senior analyst, risk management, for Target. As part of this initiative, Target eliminated the toll-free telephone number store managers previously used to report claims. Though the system was efficient in relaying claims to Target's insurers, it was slow to impart the same information to its risk management department. With the help of Marietta, Ga.-based Risk Laboratories L.L.C., a unit of Aon Corp., Target opted instead to customize a RMIS that would provide the company greater control over the entire claims process from start to finish.

The customized platform, which was rolled out to all Target locations nationwide in mid-September, goes "above and beyond regular claim information," according to Ms. Griffith. Overall, she said, it is "a better process, and it's more cost effective."

To begin with, each of the information fields was developed by Target, enabling the risk management department to ask employees-referred to as "team members"-operational questions that a claims adjuster could potentially overlook. The system is "flexible enough that we can add questions at any time," Ms. Griffith noted.

In an effort to create an easy-to-use interface, questions were asked "on the front end in `store-speak,"' so that 18,000 store managers "who may not know anything about workers comp" could understand and accurately enter the required claims information, Ms. Griffith said. Certain data fields in the system were coded as "required," so that the claims handler would be unable to bypass vital sections of an incident report, thereby reducing the possibility that the insurer would have to return to Target to fill in missing information.

Also, a key feature of Target's electronic claims reporting system is that the new platform is linked to the company's payroll department. Now, entry of just one field-a team member's employee identification number-automatically completes a host of basic claim data, such as the store location, the nature of the team member's employment and his or her health benefits information, permitting more time to discuss the particulars of the on-site incident. And Target's RMIS incorporates the company's signature colors of red and white.

"Our ultimate goal is to make the process of reporting incidents as quick and painless as possible," Ms. Griffith said.

In contrast with Target's previous telephone-based claim processing platform, the nearly instantaneous capture of information makes it possible to complete the claims entry process in as little as 10 minutes, she said.

Once an incident has been reported by a supervisor, that information is relayed immediately via e-mail to risk management, insurers, human resources and the "safety captain" of the store-another timesaving measure.

Independently built RMIS such as Target's are commonly more expensive than packaged solutions; businesses wind up "wrestling with what the return is on investment," said Deloitte's Mr. Charron. Yet Target anticipates "huge cost-saving" with its new program, particularly because risk management can monitor which team members are missing work as a result of on-site mishaps and assist them in returning to work as soon as possible.

Anita Schoenfeld, a senior consultant in Dallas for the Tillinghast unit of New York-based Towers Perrin and a national practice leader for the firm's RMIS consulting support services, said she is seeing "a real spike in activity" both among companies looking to revamp their claims reporting systems and among vendors providing these services.

One reason Web-based claims reporting systems are attracting interest is that the technology is now far superior, having advanced from server or mainframe systems to browser-based Web technology, she said.

And new claims systems have started to become more affordable, Ms. Schoenfeld said. "The cost of the hardware and infrastructure is miniscule compared to what it was four years ago," she said.

In addition, fees for RMIS are increasingly being offered on a usage basis rather than a flat-fee basis, or license-based costs, which may benefit smaller companies, as well as larger companies that wish to restrict access to their claims systems to a few key personnel.

Sunnyvale, Calif.-based Vitria Technology Inc., is a provider of business process integration processes that offers both off-the-shelf and custom systems for streamlining claims processing. In addition to making modifications for other industries, Vitria has tailored its claims reporting technology for use in the health care sector, with customers that include Tulsa-based Blue Cross & Blue Shield of Oklahoma; Louisville, Ky.-based Humana Inc.; and Cypress, Calif.-based PacifiCare Health Systems.

John Ounjian, executive vp at Vitria, cites "the resolution of resubmissions" as one of the major advantages of the newer RMIS systems. "The later you find the problem, the more costly it is to fix it," he said.

In his experience, Mr. Ounjian said, the rejection of just 1% of claims due to entry errors at a midsize managed care company with 2 million plan members costs approximately $500,000. Companies that use applications for improving claims transaction management such as Vitria's SmartClaims, though, can catch entry errors early on. Mr. Ounjian said the short-term use of SmartClaims typically results in a 10% improvement on the claims pass rate, translating, he said, into a savings of nearly $5 million.

One problem with custom-built claims reporting systems is that "they're not repeatable," Mr. Ounjian said. In his view, an ideal Web-based RMIS for claims includes 70% standard components and is 30% custom-made. Installing a claims process that is mostly standardized is faster, taking an average of three to six months, whereas putting in a fully custom-driven program can take "easily six to 12 months," he said.

Tillinghast's Ms. Schoenfeld said that "the continued concern for security of information" is an issue inherent to all Web-based claims reporting systems. But she said she believes this problem can be addressed by conducting a thorough needs assessment and carrying out a careful implementation of the system. For optimal safety and control over claims, she recommends maintaining operation of the system within an organization, "rather than having your third-party administrator or insurer have control over your data."

Looking ahead, Mr. Charron predicts that "one of the leading-edge technologies" for claims handling will be "predictive technology," or the use of RMIS as tracking tools to identify, for example, what types of claims have a propensity for litigation.

"It's an evolving technology," Ms. Schoenfeld said. "We are building a tremendous opportunity to manipulate data."