The American Medical Association (AMA) today announced that one in five medical claims are processed inaccurately by health insurers, according to the AMA’s third annual check-up of the nation’s commercial health insurers and the systems they use to manage and pay claims. This was the key finding of the AMA’s 2010 National Health Insurer Report Card, which for the first time, benchmarked the overall claims processing accuracy of the nation’s largest health insurers.
“The finding that one in five medical claims are processed by insurers with errors emphasizes the huge potential for reducing administrative costs for physicians and insurers,” said AMA Immediate Past President Nancy H. Nielsen, M.D. “Creating a single transparent set of processing and payment rules for the health insurance industry would create system wide savings and allow physicians to direct time and resources to patient care and away from excessive paperwork.”
According to the AMA’s findings, the health insurance industry as a whole has about an 80 percent accuracy rate for processing and paying claims. Coventry Health Care Inc. came out on top of the seven commercial health insurers measured by the AMA with a national accuracy rating of 88.41 percent. Anthem Blue Cross Blue Shield rounded out the list with a national accuracy rating of 73.98 percent.
The AMA estimates that $777.6 million in unnecessary administrative cost could be saved if the health insurance industry improves claims processing accuracy by one percent. Increasing the health insurance industry’s accuracy rating to 100 percent would save up to $15.5 billion annually that could be better used to enhance patient care and help reduce overall health care costs.
“Each insurer uses different rules for processing and paying medical claims, which cause complexity, confusion and waste,” said Dr. Nielsen. “Simplifying the administrative process with standardized requirements will reduce unnecessary costs in the health system and eliminate the variability that makes it necessary for physicians to maintain costly claims management systems for each health insurer.”
Currently, the health care system spends as much as $210 billion annually on claims processing. One recent study estimated physicians spend the equivalent of five weeks annually on health insurer red tape. To keep up with the administrative tasks required by health plans, physicians divert as much as 14 percent of their revenue to ensure accurate payments from insurers.
To encourage a more efficient and streamlined payment system, the AMA’s National Health Insurer Report Card provides a useful snapshot of how each of the nation’s seven largest commercial health insurers can improve their claims processing performance. The systems health insurers use to process and pay claims were measured according to:
· Accuracy. In addition to measuring overall claims processing accuracy, the report card examined how accurately insurers reported the correct contract fees to physicians. Commercial health insurers made large improvements during the last three years. Contracted fees were correctly reported 78 to 94 percent of the time in 2010, compared with 62 to 87 percent of the time in 2008. UnitedHealth showed the largest improvement in reporting correct contract fees, while Health Care Service Corporation scored the highest. The performance of insurers varied significantly by state, ranging from 58.6 to 96.9 percent.
· Denials. The inconsistency found among health insurers in 2008 continued to be demonstrated in 2010. There is wide variation in the frequency of denials by insurers, ranging between .7 to 4.5 percent. Lack of eligibility continues to be the most common reason for claim denials, signaling the need for employers and insurers to help educate patients about the limits of their insurance coverage. Physicians can help reduce denials by ensuring all claims are complete and accurate.
· Timeliness. The report card found that insurers’ response time to a claim varied from five to 13 median days. Except CIGNA, all the insurers measured last year showed slight increases in the number of days needed to respond to a claim.
· Transparency. Payers have made significant improvements since 2008 in their efforts to disclose vital policies and information to physicians through their Web sites. Greater transparency in insurer fee schedules is likely responsible for more consistency in the payment process and fewer payment disputes and less paperwork.