The U.S. health care system is plagued by waste, and improperly paid claims are a major contributor. It’s widely reported that more than 20 percent of all medical claims contain errors that result in billions of dollars in overpayments each year. Employers are all too aware that claim overpayments are one of the inherent risks of self-insurance. Unfortunately, these overpayments also represent money – sometimes millions of dollars, depending on the size of the employer group – that should never have been spent in the first place.
It’s time to take a fresh look at the claims overpayment problem and stop accepting that the lost dollars are simply a cost of doing business. Thanks to the powerful combination of data and automation, today’s self-funded employer groups have new opportunities to recover these lost dollars for their business – and help stem the continually rising tide of health care costs for their employees.
Let’s take a look at how insidious the claims overpayment problem can be.
Costly errors: simple human error or sleight of hand?
Headline-grabbing stories of overt fraud, waste and abuse are certainly compelling – and at the very least, cautionary. Becker’s Hospital Review recounts a series of recent health care billing fraud cases, including one in which a nurse practitioner in Georgia was found guilty of five counts of health care fraud, aggravated identity theft and other charges after submitting more than $3 million of fraudulent claims to insurers. One bad apple, indeed.
Most employers won't experience this level of illegality, of course, but they’re most certainly losing money through more mundane errors.
Consider these scenarios inspired by real claims overpayment cases we’ve seen:
Sophia went to the emergency room complaining of a headache and disorientation. After being treated for dehydration, she was sent home with a clean bill of health. Her ER bill, however, was coded with a severity level of five – a clerical error resulting in a claims overpayment upwards of $2,500.
David’s worsening foot pain led to a routine outpatient bunionectomy – and a claims payment of $120,000 for a surgery that costs an average of just $6,000. An oversight that amounted to an overpayment of $114,000.
Nora’s hospital procedure to address hepatic failure was successful, but miscoded to indicate that the patient was comatose, when in fact, she wasn’t. An honest input mistake caused the employer to pay upwards of $168,000, when it should have paid $54,000.
There’s no shortage of overpayment stories like these. Even the most innocent and innocuous claim errors can be costly, especially when they’re chronic. Consider claims for in-network services that are unintentionally paid out as out-of-network: seemingly insignificant in the grand scheme of things when viewed individually, but en masse, even the smallest overpayments amount to costly waste, like water slowly leaking out of a loose faucet.
One by one, they can add up to hundreds of thousands to millions of dollars each year. The lost dollars represent lost opportunities for employers, who would otherwise have invested “back in the business” and into initiatives to attract and retain talent. And at the end of the day, the costs get passed to employee plan members in the form of higher premiums, copayments and deductibles.
“Covid-19 hangover” health care spending raises the stakes
Claim overpayments pose a major threat to the financial integrity of a self-funded health plan, and employees – the people employers are striving to protect from rising health care costs – are paying the price. This matters today, more than ever, as employers (and health insurance subscribers) brace for increases in post-pandemic-area medical cost and health care usage trends driven by the interconnected trifecta of deferred care, a rise in mental health services and worsening population health.
Uncertainty remains the name of the game, but according to Mercer’s 2021 National Survey of Employer-Sponsored Health Plans, as reported by SHRM, the average per-employee cost of employer-sponsored health insurance jumped 6.3 percent in 2021 as employees and their families resumed care after avoiding it due to the pandemic. What’s more, a Willis Towers Watson survey found that employers expect their costs for medical and pharmacy benefit expenses to increase 5.2 percent in 2022, even after taking cost management initiatives into account.
Claims overpayments have the capacity to exacerbate this problem. All the more reason, then, for employers to prioritize the issue. Learn about how Benefitfocus can help unlock the power of your health care data to help your organization control costs and improve health outcomes.
