By converting from paper to e-billing, companies can reap appreciable cost savings, achieve significant efficiencies, hasten incoming payments, gain greater accuracy in accounting and invoicing systems, and reduce labor operations.But only a relatively few carriers have thus far converted to e-billing, also known as Electronic Invoice Presentment and Payment (EIPP).

"The insurance industry as a whole is relatively primitive when it comes to [adopting new] technology," says Chris Cameron, CEO of Main Street Insurance, a Southeast Michigan-based benefits consultant and administrative services organization.

Others suggest that startup costs might scare off carriers, or that responsibilities such as addressing regulations and marketplace vacillations have a higher priority. And some believe an industry inherently fearful of taking on risk will never embrace a new technology as quickly as other business groups.

But that fear might slowly be dissipating when it comes to EIPP.

"Most insurance companies are going to do something within the next two years," predicts Annie Mueller, director of e-billing for Inc., a benefits administration software provider based in Mount Pleasant, S.C.

"Because there's so much complexity to it, this industry has been slow to adapt to the technology," she speculates. "But they've been thinking about it for a while. They're automating a lot of their processes now. Everyone is looking at it."

Customers' demands

Ironically, the impetus for change from paper to e-billing might be emanating from below. Employers and their employees are calling for insurers to switch to e-billing.

Blue Cross/Blue Shield of South Carolina recently began rolling out e-billing to some of its accounts. The reason? "Market demand," says Mike Griggs, vice president of marketing for the Columbia, S.C.-based company. "We're just trying to respond to our customers. There was an increasing customer demand from our larger employers. We responded."

Blue Cross/Blue Shield of Kansas, based in Topeka, also is in the midst of implementing e-billing. The reason for doing so, according to Jeanie Schuler, the company's director of member relations, is "to meet customer requests and to achieve administrative efficiencies."

Groups served by the Kansas Blues have requested that invoices be sent to them electronically so they can download the billing information. "It just makes it much more workable for them," says Schuler, "rather than getting a stack of paper from us."

The Columbus, Ga.-based health insurer, Aflac (American Family Life Assurance Co.), began offering its customers e-billing a couple of years ago. But only recently did response to its EIPP service really begin to percolate.

"It hasn't been until this year that we noticed a spike in interest in this service," says Tyler Bennett, second vice president, technical support, for Aflac. "We found a really strong response in the marketplace."

Paperwork and costs

Benefitfocus cites figures from the United States Census Bureau showing that Americans will spend $1.9 billion on health care this year, and that 31% of that cost is devoted to administrative paperwork. Based on studies by Cambridge, Ma.-based Forrester Research Inc., Benefitfocus also claims that EIPP can reduce up to 75% of the cost of administrative paperwork related to invoicing.

"Businesses can expect to realize savings of 20% to 40% in their accounts payable and accounts receivable processing costs by converting from a paper-based system to an electronic one," states Benefitfocus, quoting Gartner Inc., Stamford, Conn.

The level of cost savings, however, might hinge on a carrier's current billing system.

Chad Hersh, a senior insurance analyst with Celent, LLC, a Boston-based research and consulting firm for financial services, says the conversion cost for companies with old billing systems is far greater than it would be for carriers with new systems.

"In cases where insurers have modern systems, it's much easier and makes more sense," he says. "If you can reduce the number of paper bills, there are very significant savings." And with the reduction or elimination of printing, postage and even paper-folding costs, those savings are ongoing, he adds.

Main Street's Cameron agrees that insurance companies should be able to realize enormous savings once they move to e-billing. "I bet it's even in the billions," he says.

If a bill costs 30 to 40 cents or more for printing and postage, according to Cameron, an insurer can get a sense of potential annual savings by multiplying the cost by the number of bills sent out each month, and then by multiplying again by 12. And that doesn't even include savings that can accrue by eliminating or reducing handling and check-processing costs and errors.

Celent's Hersh says there also is more incentive for insurers working on monthly billing cycles to turn to EIPP than life insurers, for example, which generally bill quarterly, semi-annually, or annually.

Insurers have found that one important advantage they gain from EIPP is that records are far more accurate than when bills are restricted to paper.

"The level of accuracy and the timeliness of the information we're able to provide through e-billing is greatly enhanced," says Aflac's Bennett. "Our [group] accounts want more control, and online billing is one way we can put control back into the customers' hands."

In a paper billing environment, it usually takes from three to seven days for invoices to reach customers, and then another three to seven days for the bills to be returned to the carrier-with several days in between for the customer to peruse the data.

With online billing, the mail time is instantly eliminated. Even changes in the data can be carried out electronically, rather than through the slower postal process. "It increases the level of accuracy of information we're able to provide back to them in the billing cycle," Bennett says.

The enhancements in accuracy made possible through EIPP cannot be overstated-especially in terms of cost savings.

As Hersh points out, "It is a huge-and costly-pain in the neck [to an insurer] if a company pays a premium for someone who shouldn't have been on their billing list, or doesn't pay a premium for some who isn't on the list but should be." List billing works much better when a modern, e-billing system is used, he says. A single paper-billing mistake can easily cost the carrier $50 or more in labor, according to Hersh. And such mistakes are far more likely to occur when people are filling out forms than when data is being transmitted via the Internet. "So accuracy is very critical," he says.

Larger health carriers

So far, most of the insurance companies that have adopted e-billing are the larger health carriers, and, similarly, it's generally been larger employers that have been interested in establishing an EIPP process with their health insurers. Griggs says Blue Cross/Blue Shield of South Carolina is offering the service now only to larger employers, those with at least 300 employees.

One hurdle that might need to be crossed before more small companies accept e-billing is the establishment of universal standards for EIPP.

Main Street's Cameron suggests that the insurance industry has to set up standards to govern e-billing practices, just as the procurement industry did more than a decade ago. "Eventually," he anticipates, "the insurance industry will be pushed into the same posture."

Cameron also says e-billing might not really take off until carrier cooperation is reached and more clients feel comfortable participating in electronic systems with their insurance companies.

One reason companies like the Blues of South Carolina and Kansas are introducing e-billing is because they had an existing relationship with their e-billing provider Benefitfocus, which provides enrollment services for them.

Intermediaries like Benefitfocus not only help encourage the move toward EIPP but they greatly facilitate implementation of a new system.

Benefitfocus offers its e-billing software and services for a fee based on the size of the carrier as well as the services used and the complexity of the system.

It also offers its customer a chance to consolidate different billing systems.

"Our e-billing applications allow insurance carriers to consolidate invoicing data into one combined invoice from multiple systems," says Benefit-focus' Mueller. "We combine it by linking to a common identifier in our system. So the customer will get one invoice from their provider, rather than two or three or four."

Benefitfocus uses EDI (electronic data interchange) and has its own proprietary exchange, which allows data to be moved between the insurance carrier, the carrier's customers, and itself.

Blue Cross/Blue Shield of Kansas, with about 650,000 individual customers, uses Benefitfocus technology. As it was arranging to offer e-billing to its customers, the Kansas Blues hoped to have sent Benefitfocus a file by the end of November with all its billing invoices. Kansas BC/BS will provide a link on its Web site enabling its customers to view their invoices online and pay electronically through a credit card or ACH. Or, if they prefer, they can still send in a check.

Not all customers are expected to use e-billing, according to both insurers and consultants. There are still holdouts that prefer the old paper system. But that shouldn't keep insurers in the Dark Ages, they say.

E-billing offers benefits in speed, accuracy and efficiency, says Griggs of Blue Cross Blue Shield of South Carolina. "It's part of the whole cycle of using technology as opposed to the older way of doing business," he says.

Louis Berney is a freelance writer based in Baltimore.

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