The insurance industry, much like others, is grappling with the far-reaching effects of the current labor shortage and the phenomenon termed the “Great Resignation.” A substantial drop in employment levels, down by approximately 85,000 people or 15% in the past several years, has significantly impacted the workforce. Despite this reduction, the workload has not diminished, particularly considering the surge in claims, regulatory shifts, and the broader impacts of the pandemic.
The convergence of fewer personnel, diminished experience due to retirements, and a constrained level of training has led to a challenging environment in the industry. While not the sole cause, this perfect storm has played a significant role in the notable increase in claim payment errors.
Rise in Claims Processing Errors
Under ordinary circumstances, automated claims adjudication systems process and pay around 75-85% of claims. However, recent years have witnessed a rise in claims requiring manual processing. Insurance companies have been attributing much of this increase to the intricate administrative demands surrounding COVID-related care, including testing, treatment, and vaccination but now that those types of claims have slowed, we have noticed this trend continues. With fewer skilled staff available for manual claims adjudication, the risk of erroneous payments has surged. Manual claims error rates have nearly doubled over the last several years.
Forms of Errors
One prevalent mistake that contributed to increased errors was the incorrect assumption that all COVID-related care incurs no cost share. While policy adjustments, such as waiving co-pays for vaccination visits, were made by some insurance companies, many plan sponsors did not implement universal changes. State-specific regulations further complicated matters, with varying rules regarding cost-sharing for COVID-related services. Although these issues have now been addressed for the most part, insurance companies have been backlogged with projects to rework these claims.
Beyond COVID-related backlog challenges, issues like incorrectly processed coordination of benefit payments, misapplication of contract rates, improper coverage of excluded benefits, and incorrect payment of duplicate claims with overlapping dates of service are all on the rise. These complex claims require careful handling. Overworked claims processors seem to be struggling to navigate these intricacies, resulting in overrides of system warnings and improper payment approvals.
Advice for Plan Sponsors
Incorrectly processed claims that do not align with plan benefits can have a direct financial impact. While some errors are inevitable, a consistent pattern can significantly affect costs if undetected and uncorrected.
Plan sponsors are advised to scrutinize how their insurance company administers their plan in the face of these challenges. Key questions include assessing the impact of the talent shortage on payment accuracy rates for manual claims. Proactive discussions with insurance providers can shed light on their strategies for managing the talent shortage and mitigating the risks associated with claim payment errors.
In essence, it’s crucial for plan sponsors to stay informed, ask pertinent questions, and explore strategies to mitigate risks in collaboration with their insurance providers. If you have concerns or questions, engaging in dialogue and seeking additional tools for plan administration can prove beneficial.
Contact Us
For more information on this topic, please contact a member of Withum’s Self-Insured Health Plan Advisory Services Team.
