Digital Payments May Help Individual Market Premium Collections

September 03, 2019 - Only half of individual health insurance market members pay their premium bill on time, potentially pointing health plans toward digital payment tools for premium collections, finds a recent Aite Group report, provided to HealthPayerIntelligence.com by email.

“What is happening in the individual market should not be drowned out by the noise of uncertain policy decisions on ACA,” Michael Trilli, research director at Aite Group, said in a press release. “This market is churning and will only get stronger, meaning the time is now for insurers to go on the offensive and digitally transform the premium payment experience.”

The report drew on the survey responses from 2,425 consumers, over 30 percent of whom paid their premiums to the health plans directly, by means of, for example, a Medicare Advantage plan or the Affordable Care Act’s Exchanges.

As individual health insurance market premiums are projected to rise, health plans should look for ways to help streamline the payment process for members.

The study identified four major trends in the individual health insurance market in payment regularity, the amount of time spent communicating with members, recurring payments, and mobile technologies used for streamlining payments.

READ MORE: Experts Debate Impact of HRAs on Individual Health Plan Market

First, the study found that health plans are struggling with members’ irregular payment patterns.

Barriers to consistent cash flow, such as members forgetting to pay their premium or not having the funds, are driving this trend. As health plans look to create a rhythm to their payments that is less erratic, they are turning to new payment technologies.

Forty-three percent of those ages 25 and 40 failed to pay a bill on time either because they did not have the funds available or because they forgot.

The results can be financially significant for both the health plans and their members. Delinquent, late, or past-due payments may result in the health plan canceling the account.

Members and health plans also spend time and funds addressing payments with member-initiated calls.

READ MORE: CMS Seeks New State Waivers to Boost Individual Insurance Market

Thirty-seven percent of members initiate a conversation with their health plan a couple of times per year. Only 11 percent reported never having to contact their health plan, whether by email, chat, phone, or email, regarding their premium bill payments.

Younger people were more likely to jump online or on the phone to reach out to their health plan. This coincides with a trend indicating that those who were delinquent on payments or who fail to pay their health plan were more likely to contact the health plan.

Health plans have begun to automate payments or set up recurring payments as one strategy to address these financial challenges, the survey showed.

Seniors appear especially inclined towards recurring payments, though they are not the only ones. Of individual policyholders, 57 percent choose to make recurring payments.

This approach is designed to establish a known payment amount and payment period that prevents members from having to inquire regarding either situation.

READ MORE: Revised Tax Policies Needed to Reduce Individual Market Premiums

The remaining 43 percent pay for their premium in individual, one-time payments.

Medicare Advantage members in particular preferred setting up an automatic payment than members ages 18 to 24 and 41 to 64. This statistic took the researchers by surprise. However, they reasoned that recurring payments work well with seniors’ budgeting needs.

Recurring payments may also help explain why seniors are more likely to pay their bills on time. Among older members between 55 and 64 years old, 64 percent claimed they consistently paid their bill. In general, 62 percent of those with zero late payments had also set up a recurring payment.

Most individuals pay their premium bills either immediately when they receive the bill (37 percent) or around payday (30 percent).

The report suggests that health plans consider age as a determining factor in how individuals will respond to their bill and, consequently, in how health plans should assist members in meeting payment deadlines.

Lastly, the study found that mobile technologies are enabling greater member engagement.

Over eight in ten of those who pay health plans directly own a mobile device, compared to 71 percent who own a laptop, or 57 percent who own a tablet.

The report suggests using electronic reminders, a health plan payment platform, starting a health plan payment card, instant payments, and payments by text. These digital payment options can decrease costs and streamline the payment process.

Electronic reminders helped 62 percent of participants ensure that they paid their bills in a timely fashion. Just as transparency is key in notifying patients of provider bills, transparency about the bill amount and the due date is essential to successful electronic alerts.

Health plan payment platforms enable self-service which decreases the number of inbound calls, although in order for platforms to be effective health plans must make sure that members are aware of the platform and enroll.

Payment cards appear to be a strong method for payment among members, as 37 percent use a payment card for their bill transaction.

Real-time or instant payments, while not well-known among members, have helped to set apart businesses, banks, and other institutions that offer the service. Of those who have used the tool, 48 percent found it extremely helpful in paying their bills on time.

Text payments, like instant payments, are not pervasive and have low recognition among members. However, the report recommends it as a way to allow members to pay immediately by responding to the message or clicking on a link in the text that leads to their payment options.

These solutions demonstrate that immediacy is the top priority for and in the best interests of health plans and members alike. A mobile-enabled payment structure can raise cash flow, decrease expenditures, and further member engagement.