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By 2025, health plan CIOs should have their heads in the cloud

The emergence of cloud-based environments, new applications, and artificial intelligence (AI) could render legacy information technology systems obsolete, and could dramatically alter health plan IT within the next decade. As the health care industry continues its rapid transformation, I think some health plans could face an identity crisis. Carriers that thrive in this new environment will likely be those that can take advantage of vendor-based technologies and determine how to add value for their members and to the health care system overall.

The role of enterprise IT departments within health plans is commonly being threatened by what is sometimes referred to as new IT – digital technologies, cloud-based IT, social media, and automated operational processes. With the advent of cloud platforms and cloud-native application development vendors, bringing innovations to market can now take weeks rather than months or years. Core claims processing will likely become more of a commodity as cloud-based entrants move into that space. I think this could push administrative costs toward zero. Payment processing, benefits determinations, and call centers will likely have more cognitive and digital capabilities. At some point, all of these capabilities may exist in the cloud and be largely free. While that could level the playing field, I think it also could make it more challenging for health plans to distinguish themselves and create a competitive advantage.

Consider this: Health plans historically have had an 18-month release cycle for new IT offerings. The former CEO of a large health plan once told me that it could take years, and millions of dollars, to pioneer a ground-breaking IT innovation and bring it market. While the new offering created a competitive advantage, competitors were often able to replicate it in a fraction of the time and at a far lower cost. Within six months, much of that competitive advantage was erased. By 2025, innovations will typically be developed by outside vendors, and will be available to all health plans, regardless of their size or how deep their pockets are.

5 trends that could reshape health plans by 2025

Health plans of the future will need to develop longer-lasting changes that create a competitive advantage that lasts years instead of months. Care delivery and analytics, along with greater focus on the needs of the consumer, could help carriers differentiate themselves from competitors. Many chief information officers (CIOs) will move applications and infrastructure to cloud-based vendors as more operational processes become automated. The ability to plug and play more easily with IT through vendors will likely mean they will become part of the value chain.

Here’s a look at five possible trends that could shape health plans of the future:

  1. Vendors will drive technology advances: Within a few years, help desks, triage, and basic engineering services will likely largely be automated through robotics, AI, and other cognitive agents. We could see entire categories of jobs automated out of IT. While there will still be room for health plans to develop their own custom applications, I predict most innovation will come from vendors. This out-of-the-box technology has the potential to level the playing field significantly as technology becomes commoditized. Cloud-based IT technology offers health plans of all sizes access to capabilities that they previously couldn’t afford. That has the potential to transform health insurance and could alter the nature of competition.
  2. Security challenges will evolve but won’t be solved: Security, privacy, and regulatory constraints are among the biggest perceived impediments to the emerging technology. While some organizations are taking a progressive stance by working through these challenges, others are using them as an excuse to not move. Progressive CIOs and Chief Information Security Officers (CISOs) are already rethinking their security stance from one focused on protecting everything that exists within the health plan’s walls, to developing a security stance that expands the ecosystem. In this world, not everything can be locked down, and health plans will need to develop a security posture similar to those used by the largest internet firms and retailers. This is a different mentality, and many organizations will not be comfortable there. But this transformation is coming and already exists in other industries.
  3. Health plans may have multiple dance partners: AI and cognitive technologies will likely help health plans reduce costs by automating tasks, such as reviewing prior authorization requests and de-identifying patient care records.1 It will be difficult for a small health plan to have better AI than a national carrier or vendor. Some health plans might decide to partner with just one IT vendor for everything. But that could be a bad idea because it might make it difficult to adopt new technology from another vendor. But contracting with too many vendors could lead to uncoordinated relationships and interoperability issues.
  4. Consumers may move from active to passive management of health: Health care consumers typically don’t like to engage in health care if it disrupts their daily living. Wearable technologies that track steps may give way to passive technologies in our phones or our homes that monitor our health without requiring us to consciously engage with the device. Technology built into a phone camera, for example, might be able to detect certain health conditions, such as jaundice from a photo of a newborn. Such passive technologies will just be a part of living as opposed to being a part of a health regimen.
  5. Value-based arrangements may change provider relationships: Historically, health insurers have added value by managing risk and by serving as a gatekeeper for how health care dollars are spent. As value-based arrangements become more prevalent, health plans will continue to manage risk, but they will also need to help providers practice medicine more efficiently by removing friction points, such as administrative burdens. Health plans will likely need to offer analytics and insights that help doctors and clinicians provide better care outcomes at a lower cost. That will be a big deal. The ability to aggregate data in a fragmented local market will also be important.

One thing that won’t change for health plans is price sensitivity among consumers. Health plans that lag behind on technology could find it difficult to remain cost competitive. While the cost of change can be enormous, the cost of obsolescence could be even higher. Carriers in markets with few competitors could be safe, at least for a while. But those situations could erode quickly as provider-sponsored plans emerge or gain traction, or if other carriers could recognize vulnerabilities and move into those markets.

To be ready for this future world, health plans should consider radically transforming how they deliver IT to be more in line with a marketplace that relies heavily on cloud-based service providers. They should take advantage of rapidly evolving capabilities that can exist in the cloud rather than in the health plan’s data center. For the most part, health plans are only beginning to explore this area.

Author bio

Jason is a national leader in Deloitte Consulting LLP, for Health Plan Technology Strategy, Consumer Experience, and Information Management/Analytics. He specializes in health care business optimization, enterprise transformation, and technology strategy. Jason leads engagements focused on advanced retail and consumer capabilities, analytics, platform modernization, M&A, and IT delivery. Jason joined Deloitte in 1996 and won the Philadelphia Business Journal “40 Under 40” award in 2009.