Many health insurers will need to upgrade their IT infrastructure in the next few years to meet coming mandates and respond to healthcare reform efforts, but cost and short timetables could be significant obstacles, a new survey reveals.

In a survey of 106 leaders from healthcare payers, 35% of respondents listed cost or return on investment as their top concern with implementing new, organization-wide IT systems. Nearly a quarter participating in the poll from HealthEdge, a Burlington, Mass.-based developer of management software for the health insurance industry, said that they were most concerned with disruption to regular business flows.

About 21% cited short deadlines to comply with mandates, such as the switch to ICD-10 coding by October 2013.

Only 22% said they were fully prepared to support ICD-10, with remediation plans in place and system upgrades underway. About 37% indicated that they were "somewhat prepared," but not sure that they would be able to meet the deadline, while 36% were just starting to ready themselves for ICD-10. Just over 5% have not finished evaluating their IT capabilities or created a remediation plan for the new coding system.

"This is not terribly surprising," HealthEdge executive VP Ray Desrochers, told InformationWeek Healthcare. "A lot of the largest payers got their act together early," Desrochers said, but noted that the tier just below the biggest insurance companies did not really start on ICD-10 until this year, even though federal officials set the deadline in January 2009.

The survey did not ask about readiness for ANSI X12 version 5010 transactions under the Health Insurance Portability and Accountability Act (HIPAA). Healthcare organizations are supposed to switch to 5010 by January 1, though the federal Centers for Medicare and Medicaid Services (CMS) has granted the industry a 90-day grace period.

[ Medical practices are considering going back to paper records because they're not ready for the new 5010 insurance claims standards. See Healthcare E-Transaction Change Needs More Time. ]

Desrochers did say that HealthEdge has seen a good deal of "anxiety" among payers related to 5010, however. "ICD-10, which is a larger challenge, is not too far away, either," he added.

The problem with ICD-10 preparations, according to Desrochers, is the fact that many payers still run on decades-old IT infrastructure. "The payer community lives in a world that is dominated by 30-to-35-year-old systems," he said. "There's no easy path from A to B when you're dealing with mainframe, green-screen, 35-year-old systems."

Indeed, health insurance is an industry very much in transition, thanks to changing payment models and an expansion in coverage brought on by the 2010 Patient Protection and Affordable Care Act.

When asked to name which new payment models their organization plans to support or participate in over the next three years, 54% said accountable care organizations (ACOs) and nearly 51% said pay-for-performance. A slim majority also cited unspecified other new payment models.

However, most payer organizations do not have the IT to support such initiatives right now, with the exception of pay-for-performance efforts. Notably, just 37% said they are ready to support ACOs from a technology standpoint today, and 35% said the same about value-based benefit designs.

"We're going from one-size-fits-all healthcare to this brave new world of personalization," Desrochers said. "It's very clear that payers have a lot of work to do [to participate in these new business models] from an IT perspective."

More and more insurers are investing in modernizing their policy administration capabilities, but joint research by SMA and Insurance & Technology has found that projects remain challenged because of poor understanding of needed business capabilities, deficient project management, and over-reliance on outside expertise. Download the report here (registration required).