Employer-sponsored benefits play an essential role in American life, providing over 180 million people with healthcare. Yet inefficiencies abound in their administration and management, due in large part to a lack of transparency and coordination between ecosystem players: Insurance carriers, benefits software, brokers, and employers. With so many business models in varying states of modernization, it’s no surprise that data quality issues are a persistent and widespread problem.
Yet data quality is the linchpin upon which each of these players’ success rests. For consumers, frictions such as access-to-care issues, surprise bills, or coverage delays simply shouldn’t exist in a world where they can checkout with same-day shipping from Amazon. They want to be able to understand, access, and use their benefits when they need them most.
To make that happen, the benefits industry must turn its attention alongside other digital transformation efforts to solving its data quality. Here’s a breakdown of the industry’s roadblocks and opportunities — and why I believe some of the most interesting data innovations will soon be happening in benefits.
Many Players, Many Layers
Like many complex and traditional sectors, the benefits industry suffers from a severe lack of interoperability. In addition to the insurance carriers who provide health, life, AD&D, and disability insurance coverages that make up the benefits products, the ecosystem also includes the software that employers rely on to manage and administer their benefits programs. Many of these different systems are not connected with each other. To add to the complexity, it’s not uncommon for additional silos to exist within a single organization — e.g. a carrier might have disparate systems for managing benefit groups of varying sizes, one for groups with 150+ employees and one for smaller groups.
In addition to connectivity challenges, there is a scarcity of standardization in integration and file format. Electronic data interchange (EDI) remains the most common method for collecting enrollment and eligibility data in benefits. But since it is a one-way, batch method, many companies have had to learn how to work around its limitations. One such adaptation is the reconciliation period between benefits software and carriers, which lets two entities reconcile differences in enrollment data and get things into sync group by group. (In insurance, a group is a company who has bought insurance from a carrier, but manages their benefits, payroll, and more through a separate software.) This process is still largely file-based, with benefits software responsible for generating a file in the carrier’s preferred format. Since each carrier has different preferences, this frequently varies from carrier to carrier. Once the file is received, the carrier ingests and validates the data and returns the differences.
Pairing APIs with ETL for Success
This is beginning to change with growing adoption of API-enabled data exchange. Since APIs provide the ability to connect software that would otherwise be unable to interact with each other, they are an elegant solution for the benefits industry as ecosystem players navigate highly individualized paths to digital connectivity. While some carriers have already taken the plunge by building their own suite of APIs, a growing category of benefits technology providers are making it way less work for carriers and benefits software to connect seamlessly over APIs. These third-party solutions are leading the way with modern ETL capabilities that also clean and standardize benefits data on top of faster connections.
In parallel, a persuasive cohort of forward-thinking benefits companies are embracing data standardization, specifically LIMRA’s Data Exchange Standards® (LDEx), to help reduce the problems associated with a lack of standard formatting. LDEx currently supports almost all group insurance lines of coverage across medical, ancillary, worksite, and flex spending – and recently extended over to Employee Assistance Program (EAP) and leave management as well. Implementation solutions come as XML Structured File or Batch API (JSON or XML). Last year saw releases including Benefits Configuration Management (spanning plan rules, rates, and details) that integrate with benefits software and an upgrade of all connection transmission types to a REST API, which brings near real-time eligibility, micro services, and enrollment member transactions to finally replace weekly full batch files.
Replacing labor-intensive data exchange processes with standardized formats and API-powered connectivity is key to freeing the industry’s data and using it to deliver modern benefits experiences. With an eye on both speed and accuracy, e.g. APIs and ETL, the benefits industry can drastically reduce the number of coverage-impacting issues for members and open up new pathways for innovation.
Looking Ahead
None of this work is easy. If it was, it’d already be done, which is why I think the benefits industry is on the cusp of an exciting period of data innovation — much like the financial services industry ten years ago. Increasing participation in current insurance products alone represents a $70 billion opportunity – meanwhile McKinsey predicts digital insurance ecosystems could encompass $60 trillion in revenue by 2030. To help the industry realize these opportunities, the most successful data solutions will meet carriers and benefits software where they are today. The rest of this notoriously risk-averse industry will follow once the value is apparent, ushering in a new world of frictionless benefits.
About the author
Peter Nagel is an experienced technology leader in both the financial services and employee benefits spaces. He is currently the VP of Engineering at Noyo, a leading benefits data platform. Prior to Noyo he spent time leading engineering teams at both Earnest and Lob.
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