Billing System Overload?
Insurance Networking News, June 2008
When the talk among insurance IT experts worldwide turns to legacy systems—and what to do with them—the discussion usually pertains to either policy administration or claims systems. But increasingly, say experts, insurers should start discussing replacing legacy billing systems.
Using billing to create a more positive customer experience has become a competitive necessity, prompting carriers with legacy systems to reexamine their core billing functions, according to a report from New York-based Novarica.
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“Insurers need to support multiple channels, new payment methods and more flexible plans that enable different segments and distribution channels to serve their markets effectively,” says Matthew Josefowicz, director of Novarica’s insurance practice. “Unfortunately, legacy billing systems are often not up to the job.”
Josefowicz says the good news is that most of the vendors in this space realize that ease of integration is a critical element to a billing offering.
“Billing systems need to be able to accept data from multiple systems, including all vintages of policy admin and financial systems and share data back to these as well as with document automation and e-business systems,” he says. “The newer systems on the market have been designed with this in mind, but most of the older, COBOL-based systems have been updated with services-based integration layers.”
REPLACE OR ENHANCE?
When it comes to replacing a legacy system, most automatically think about policy administration or claims systems, but Katie Doyle, San Mateo, Calif.-based Guidewire Software Inc.’s BillingCenter product manager, believes replacing a billing system before the other two may prevent headaches in the future. “Billing system replacement might be a better place to start, rather than with a policy admin system replacement because policy admin is at the heart of the insurance business and the largest and most complex of all of the systems a carrier will have,” she says. “It’s going to take the longest amount of time and effort to replace that system.”
That’s not to say replacing the billing system won’t take a while. “Be prepared for about two years of work to replace a billing legacy system,” says Jerry Smolinski, VP of operations, at Ralston, Neb.-based DocuLynx Inc. “That’s just the nature of the beast. The billing process touches almost every department of an insurance organization, and you really need to include all those players to have a successful project—whether it’s an enhancement or a rip and replace.”
That disruption to the various departments and the extended time of replacement were factors in Blue Cross Blue Shield of Arkansas’ (BCBS Arkansas) decision to enhance its system. “It wasn’t simply an issue of upgrade versus replace,” says Steve Spaulding, VP of internal operations for Little Rock-based BCBS Arkansas. “We wanted to find an option that allowed maintenance of our legacy systems, while also offering something new. Rather than only replace or upgrade legacy systems, we chose to implement Benefitfocus eBilling as another option for customers.” BCBS Arkansas continues to send paper bills to customers and has chosen to manage the roll-out of the eBilling technology to make sure customers understand the functionality and get feedback for continued enhancements.
As a result of the automation, the organization was able to remove some of the latency of the billing process, Spaulding says. “Previously, it took two or three weeks before the due date of the bill to make the cutoff, and there are many changes between that time and the cutoff date,” he says. “The billing date and all of those changes had to be done manually with reconciliations, etc. Now, we can generate that billing pretty close to the due date. As long as the group has gotten the information on their changes—additions, deletions, etc.—we can have those on the billing pretty much the next day.”
BCBS Arkansas is not alone in its improvement efforts, Doyle says. “Carriers have done a great job of making enhancements to these systems over the years, and where they can’t make enhancements, they’ve created workarounds. I think they’ve really maxed out on the capabilities of these systems.”
Doyle recalls visiting a P&C customer to assess the state of its billing operations and determine if it could benefit from a billing system replacement project. “They had a really sophisticated set of billing systems—more than 30 years old—with functionality that met its current needs quite well,” she says. It had automated reconciliation between the billing system and the back-end general ledger, implemented equity dating so it could apply equity dating to customer segments or accounts they deemed necessary and had almost no uncollected earned premiums. “On the flip side, they had only two employees left in house who understood these systems at all,” Doyle adds. “The folks who built these systems and maintained them over the years were retiring. They also outsourced the ongoing maintenance of these systems to an offshore team, but while that team likely had good technical skills, they didn’t really understand how these systems were designed and developed, so they could only make simple enhancements.”
While the system is working for the insurer today, the future capabilities are in question. So, the company is in the midst of migrating all of their legacy policy systems onto a set of modern policy systems.
“More and more carriers are coming to the realization that replacing is the way to go. It’s costing them a lot of money to replace these systems, but they’re just not getting much value out of them anymore,” Doyle says.
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