Dive Brief:
- There are three main ways payers pay providers: paper checks, ACH (automated clearinghouse) transactions, and virtual card payments. Each comes with its own set of issues to consider, according to Tom Dean, senior vice president of financial services at Emdeon.
- Paper checks, for their part, offer simplicity, as the only requirement for the provider is to have a bank account where the checks can be deposited. However, processing paper checks involves many steps which must be taken manually. Also, paper checks are the form of payment most susceptible to fraud.
- Another popular form of accepting payment is ACH, in which payment goes from bank to bank. ACH payments are relatively faster, less expensive, and require less manual processing. On the other hand, to accept ACH payments, providers must do set up the specific systems, which incurs IT expenses. In some cases, providers will incur significant upfront IT costs in setting up the electronic remittance in devices before they can automate posting from electronic files provided by each payer.
- The latest option for accepting health insurance payments is virtual card payments, which take advantage of payment card infrastructure. In this situation, Explanations of Payment are mailed along with card payment information, which providers enter into their point-of-sale terminals to deposit their payments. Advantages of this method include that virtual card payments require no enrollment and no action beyond entering the data into the terminal at the point of service system. However, providers are charged by their merchant services provider for each transaction.
Dive Insight:
As Dean notes, each of these payment approaches have strengths and weaknesses, and while providers may focus on just one, most choose a mixture of all three to collect payment from providers. As he explains, however, the provider industry is going increasingly digital in how it accepts payments, even if that means spending some money on IT to make the money flow possible.
But it doesn't stop there. The next step for payers is likely an approach known as straight through processing, in which health insurers issue remittances to payers, and payers receive them, largely without human intervention. This approach, which Dean says will make current models seem "quaint," can conceivably take advantage of merchant relationships to eliminate the need for enrollment or sharing bank account information. According to Dean, this method includes advanced capabilities for making sure the payments are deposited into the merchant account, which eliminate reconciliation processes and provide very tight controls.
For the foreseeable future, providers are likely to keep using checks, ACH, and virtual card payments, as switching to the next big thing always comes with risk and expense. Still, it's interesting to note that trends are underway which could simplify and speed collections for cash-strapped providers.