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Artificial intelligence and automation offer health payers promising opportunities to weather tough economic times.
“We estimate that by using currently available technologies, payers could save 13-25% in administrative costs and 5-11% in medical costs, while increasing revenues by 3-12%,” says a new report from McKinsey & Company. “While this calculation is based on average-performing payers, it suggests that lower-performing payers have the potential to make further improvements and have an opportunity to surpass competitors.”
The researchers analyzed each function and process within health insurance and found that insurers that adopt emerging technologies, such as AI and generative AI, have the potential to significantly reduce administrative and medical costs and increase revenue.
The magnitude of the opportunity suggests that companies that choose to wait will need to have a response plan ready if a competitor succeeds in getting ahead of them.For example, a follower may find themselves in a position where an industry leader can cut healthcare costs by 10% or administrative costs by 20%.
Generally, most insurers are not ready to pursue this opportunity, and McKinsey encourages insurer CEOs to assess the situation by answering a few questions.
- How do you stack up against a competitor that has 20% lower administrative costs or 10% lower medical costs?
- What is the most valuable area for our business? Is it a domain? A business unit? A function?
- Even if we're not ready to take the plunge right now, can we “re-engineer” parts of our business so we know what to do if we need to move forward? Do we have access to talent that is familiar with new technologies? Does this technical talent understand how our business works?
- Do our leaders and managers understand how these technologies work, at least enough to identify opportunities and collaborate with technologists?
- Do you have the underlying technology infrastructure to enable fast and smooth modeling and innovation?
- Is our data clean and clear so it can be used by those who need it to do their jobs better?
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“Seizing this opportunity presents a major leadership challenge for CEOs and their top teams,” the report concludes. “They will need to establish governance and risk frameworks and mobilize the entire organization. It won't happen overnight, but given the scale of the opportunity and the mounting pressures on the industry, now is the time to start asking yourself the tough questions.”
