Is Artificial Intelligence About to Change the TPA as we Know It?

At the start of this century, artificial intelligence was the stuff of sci-fi movies, not a recognizable part of the average person’s life. What a difference a few decades makes: Although we’re hardly living in a real-life version of “Minority Report,” AI technology is now all around us. Its applications have already started changing the healthcare and manufacturing fields, and the same thing is starting to happen within the insurance space. Some third party administrators (TPA) are already using artificial intelligence to streamline their processes and cut costs. More change is likely coming for TPAs  and ASO Carriers (such as Aetna, Blue Cross and Cigna) of all sizes.

How AI and TPAs Intersect

In some ways, TPAs and AI are a natural fit. The TPA’s role in self-funded insurance is complex. A TPA may provide a range of services including claims management, onboarding and reporting. Because the TPA touches so many processes, it makes sense that AI could be helpful in many contexts. Also, technology based on machine learning requires a tremendous amount of data from which to learn, and insurers and TPAs have mountains of it.

Machine learning technologies can be used to detect fraud, perform underwriting tasks, project costs, and much more. Specifically, claims management is one of the areas that AI technology is expected to revolutionize. In the traditional system, claims may be submitted, reviewed and then denied, a process that can take weeks. If the claim is appealed, the process starts again. Managing claims denials and appeals requires a ton of time and effort for providers, TPAs and customers. When AI is integrated, deniable claims can be reviewed and flagged before they’re even submitted, allowing the submitter to rework the claim and potentially bypass the appeals process.

It’s also likely that TPAs will outsource some customer service tasks to AI technology in coming years. Virtual assistant or chatbot programs driven by AI can help customers perform a range of simple tasks and are accessible 24/7. Speech analysis programs built on AI technology can be used to monitor calls between TPA agents and customers, gathering data that can be used to improve the customer experience and maximize the TPA’s efficiency.

One significant drawback of the trend toward AI is the potential for job loss. Assuming this technology becomes more widely integrated – both within and beyond the insurance field – some workers will inevitably lose their jobs when their tasks become automatable. (As with any growing technology, AI will also create some jobs, too.) Its critics say that automation will most hurt low-income workers but that both blue- and white-collar jobs will be made obsolete. Earlier this year, AI expert and investor Kai-Fu Lee made headlines when he predicted on “60 Minutes” that AI would replace as much as 40% of the world’s jobs within the next 15 years.

Looking Ahead

Just how imminent is the rise of AI technology in the insurance space? It’s safe to expect that artificial intelligence will increasingly become integrated into insurance processes over the next decade.

Major carriers have already begun implementing AI solutions. Chatbots are already functional on some carrier’s sites, and we’ve seen other AI-driven technologies rolled out over the last few years. For example, Aetna employs AI for fraud prevention, and earlier this year had 350 machine learning models used just for security.

But for TPAs, how AI is already changing claims management is perhaps the most compelling aspect of the growing trend. Earlier this year, Change Healthcare (a health IT company based in Nashville) introduced an AI capability into its claims processing system. Change claims that the new AI service was trained on more than 500 service lines made up of more than 200 million claims. The technology is being used in several applications, which the company says will help both customers and providers identify likely claims denials before they happen. Change says that the AI service will flag 35% of claims that would be denied before they’re submitted, and estimates that those claims represent a savings of $6.2 billion in allowed amounts and millions of dollars in administrative costs related to denials and appeals.

Evolving technologies make this an exciting yet unnerving time for TPAs, insurers and their self-funded customers. Stop Loss Insurance is always here to answer your questions and provide information about the latest innovations affecting stop loss insurance. Contact us today!


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    In 2011, the top 5 most expensive medical conditions treated in US hospitals were: Septicemia, Osteoarthritis, Complication of device, implant or graft, Liveborn, and Acute myocardial infarction

    From 2010 to 2013, the number of claims that were individually $1 million or above rose by 1,000%

    In 2017 approximately 18% of the American public will purchase insurance through exchanges, radically transforming the health insurance landscape.

    In 2014, 98% of large firms (= 200 Workers) offer 1+ wellness programs to their employees.

    The most costly 1% of patients account for 20% of national health expenditures – accruing average annual expenses of nearly $90,000 per person.

    6% of firms offering fully-insured plans report they intend to self-insure because of Obamacare.

    In 2014, PPO plans remained the most common plan type, enrolling 58% of covered workers.

    In 2012, 93% of businesses with 5,000+ employees and 80% of companies with 1,000-4,999 employees were self-funded

    Massachusetts has the third-highest prevalence of self-funded insurance in the small-group market (Fewer than 50 employees).

    In 2013, the average deductible was $2,906 for individuals selecting plans from marketplaces. This compares with average deductibles of $1,135 for an individual with employer coverage.

    In 2013, the average annual premiums for employer-sponsored health insurance are $5,884 for single coverage and $16,351 for family coverage, up 5% and 4% respectively from 2012.

    From 2010 – 2013, cancer followed by chronic/end stage renal disease and leukemia accounted for the top 3 costliest illnesses.