Slow Payment of Provider Claims Accounts for Most Health Insurer Fines Since 1997

May 25, 2010

May 25, 2010 — State regulators fined health insurers $236 million from December 1997 through December 2009, usually because of how these companies treated — or rather, mistreated — healthcare providers, according to a report released yesterday by the American Medical Association (AMA).

A Medscape Medical News analysis of the report shows that roughly 7 of every 10 fines involved the failure to pay provider claims on a timely basis. However, the number of these fines declined dramatically in recent years, suggesting that state prompt-pay laws and lawsuits filed against health insurers over claims processing are speeding up physician pay as intended.

The AMA released the report on health insurer fines as part of an initiative to persuade these companies to embrace what it calls "Health Insurer Code of Conduct Principles," which the association developed in conjunction with 68 state and specialty medical societies. The principles address long-standing grievances that physicians have with insurers regarding such issues as claims processing, medical necessity, physician profiling, administrative simplification, coverage cancellation, and the percentage of premium dollars spent on medical services. The last 2 issues were specifically addressed in recent healthcare reform legislation.

The health insurance industry has its own standards of conduct, but its track record of compliance is "questionable," the AMA stated in a press release.

A written response to the AMA initiative from the trade association representing health insurers emphasized the good deeds of these companies.

"Health plans have pioneered innovative programs to reward quality, promote prevention and wellness, coordinate care for patients with chronic conditions, streamline administrative processes, and provide policyholders with greater peace of mind," said Robert Zirkelbach, a spokesperson for America's Health Insurance Plans. "We will continue to work with policymakers and other health care stakeholders to improve the quality, safety, and efficiency of our health care system."

Some Insurers Have Promised to Pay Electronic Claims Within 15 Days

Organized medicine has fought with health insurers over slow pay for years. One major battleground was a federal class-action lawsuit that the AMA and other medical societies brought against the nation's leading managed care companies over various aspects of claims processing. Six of the insurers settled and promised, among other things, to pay clean electronic claims within 15 business or calendar days, depending on the insurer, and 5 insurers promised to pay clean paper claims within 30 calendar days. The AMA won a similar settlement from the Blue Cross Blue Shield Association and 30 of its subsidiaries and plans in 2007.

In addition to these victories, physicians have seen many states enact prompt-pay laws that impose fines on insurers if they fail to pay clean claims within a specified time.

The settlements and prompt-pay laws appear to be achieving their goal. Although slow pay accounts for most of the 469 health insurer fines from December 1997 through December 2009, state regulators levied only 5 fines explicitly related to prompt pay in 2008, and only 6 in 2009, according to the AMA report. California regulators, for example, hit Blue Cross of California last year with a $15 million fine over rescissions and claims processing that included instances of slow pay, according to the AMA. And failure to pay claims in a timely manner was one reason the Colorado Division of Insurance fined United Healthcare nearly $500,000 in 2009.

Six Major Insurers Earned $12.4 Billion in 2009

The AMA used the debut of its campaign promoting the Health Insurer Code of Conduct Principles as an opportunity to shine a spotlight on the financial bonanza these companies are enjoying. It reported that in 2009, 6 major insurers — Aetna, CIGNA, Coventry Healthcare, Humana, UnitedHealth Group, and Wellpoint Health Networks — earned an aggregate $12.4 billion, while Health Net lost $49 million. The chief executive officers of all 7 companies earned a total of $74 million — about $10.6 million on average — counting salaries, bonuses, stock options, and other forms of compensation.

At the same time, at least 3 of these companies — Humana, UnitedHealth Group, and Wellpoint — were spending less than 85% of their premium dollars on medical services in 2009, according to the AMA (figures for Aetna and CIGNA were not available). The new healthcare reform law requires insurers to give rebates to consumers if the percentage of premium dollars spent on clinical services and quality is less than 85% for plans in the large group market and less than 80% for plans in individual and small group markets.

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