20% Error Rate in Processing Claims, AMA Study Finds

Mark Crane

June 21, 2011

June 21, 2011 — Almost 1 in 5 claims physicians file with commercial health insurers have a processing error that often mistakenly delays payments or rejects them entirely, according to the American Medical Association’s (AMA's) 2011 National Health Insurer Report Card.

The overall rate of inaccurate claims payments increased since last year among leading commercial health insurers, said the report, released Monday at the AMA 2011 Annual Meeting in Chicago. Most of the health insurers measured by the AMA failed to improve their accuracy rating since last year.

Commercial health insurers have an average claims-processing error rate of 19.3%, an increase of 2% compared to last year. The increase in overall inaccuracy represents an extra 3.6 million in erroneous claims payments compared to last year and added an estimated $1.5 billion in unnecessary administrative costs to the health system, the report said. The AMA estimates that eliminating errors in health insurer claim payments would save $17 billion.

"A 20 percent error rate among health insurers represents an intolerable level of inefficiency that wastes an estimated $17 billion annually" AMA board member Barbara L. McAneny, MD, said in a news release. "Health insurers must put more effort into paying claims correctly the first time to save precious health care dollars and reduce unnecessary administrative tasks that take time and resources away from patient care."

UnitedHealthcare was the only commercial health insurer included in this year’s report card to demonstrate an improvement in claims-processing accuracy. UnitedHealthcare came out on top of 7 leading commercial health insurers, with an accuracy rating of 90.23%. Anthem Blue Cross Blue Shield scored the worst of those measured, with an accuracy rating of 61.05%.

The report card provides an annual check-up for the nation’s largest health insurers and benchmarks the systems they use to manage, process, and pay claims.

Key findings from this year’s report card include:

Insurer Nonpayment. Physicians received no payment at all from commercial health insurers on nearly 23% of claims they submitted. The most common reason insurers didn’t issue a payment was deductible requirements that shift payment responsibility to patients until a dollar limit is exceeded. Real-time claims processing would save time and money, the AMA said.

Denials. Denial rates have decreased dramatically since last year at Aetna, Anthem Blue Cross Blue Shield, Health Care Service Corporation, and UnitedHealthcare, which cut its denial rate by half to 1.05%. CIGNA maintained its industry-leading low denial rate of 0.68%. Lack of patient eligibility for medical services continues to be the most frequent reason for denials.

Administrative Requirements. CIGNA had the highest rate (6%) of claims requiring prior authorization for various services and procedures. A recent AMA survey of physicians indicated that insurers’ requirements to preauthorize care delayed or interrupted medical services, consumed significant amounts of time, and complicated medical decisions.

Accuracy. In the last 4 years, UnitedHealthcare has shown consistent improvement in accurately reporting the correct contract fees to physicians. Other commercial health insurers showed progressive improvement over 4 years but had slight declines this year. The exception was Anthem Blue Cross Blue Shield, which scored 14% lower on this measure than it did 4 years ago.

Timeliness. CIGNA and Humana have cut their median claims response time in half during the last 4 years. Response time varied for commercial health insurers from a median of 6 to 15 days.

The Report Card is an important part of the AMA’s "Heal the Claims Process" campaign to spur improvements in the industry’s billing process so that physicians and patients are no longer at the mercy of a chaotic payment system.

"Precious health care resources are wasted because each insurer uses different rules for processing and paying medical claims," said Dr. McAneny. "This variability adds no value to the healthcare system and only increases unnecessary administrative costs."

Health Insurers Have Made Progress, Trade Group Says

America’s Health Insurance Plans (AHIP), a trade association that represents health insurers, was quick to defend its members.

"Health plans continue to streamline healthcare administration to cut costs, improve efficiency, and slash paperwork," Robert Zirkelbach, AHIP press secretary, told Medscape Medical News. "In fact, the AMA report card found 'dramatic reductions in denial rates' and 'improvements in claims response time and reporting correct contract fees.' Government data also show that the portion of health insurance premiums going to health plans' administrative costs has declined for 6 straight years.

"Health plans and providers share the responsibility of further improving the accuracy and efficiency of claims payment," Zirkelbach said. "Health plans are doing their part by collaborating with providers and investing in new technologies to improve the process for submitting claims electronically and receiving payments quickly. At the same time, more work needs to be done to reduce the number of claims submitted to health plans that are duplicative, inaccurate, or delayed."

"A previous AHIP survey found that nearly one fifth of all provider claims are not submitted to health plans electronically, and more than 1 in 5 claims are submitted by providers at least 30 days after the delivery of care," he said.

The findings from the AMA’s 2011 National Health Insurer Report Card are based on a random sampling of approximately 2.4 million electronic claims for approximately 4 million medical services submitted in February and March 2011 to Aetna, Anthem Blue Cross Blue Shield, CIGNA, Health Care Service Corporation, Humana, the Regence Group, UnitedHealthcare, and Medicare. Claims were accumulated from more than 400 physician practices in 80 medical specialties providing care in 42 states, the AMA said.

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