On August 3, the American Psychological Association (APA)
released an analysis of the profits that insurance and managed
care companies can generate by investing the money saved while
denied claims are in an appeals process-- a scenario based on
the recently passed Senate Patients' Bill of Rights Plus Act
(S. 1344). The PricewaterhouseCoopers analysis found that the
insurance and managed care industries could generate interest
income of up to $280 million each year if as few as one
percent of claims are denied and then reversed following an
independent review process.
"While an independent review process may reverse
inappropriate denial of services, there are no incentives to
insure that correct decisions are made by the managed care
company to begin with. In fact, there is a considerable
financial incentive to deny care and simply assume an
incorrect decision will be overturned later. Holding insurance
and managed care companies legally accountable for
inappropriate denials is one good way to ensure a correct
decision about care is made at the start," says Russ Newman,
Ph.D., J.D., executive director for professional practice at
the American Psychological Association.
Under the independent review process created by S. 1344,
insurers may avoid paying claims on services for up to 377
days, during which time the monies are invested.
PricewaterhouseCoopers assumed the typical interest rate on
investments of 6.16 percent and that the year 2000 national
health expenditures for private health insurance (excluding
out-of-pocket expenditures) will be about $440.1 billion, as
estimated by the Health Care Financing Administration. Thus,
even if only 1 percent of private health insurance
expenditures is delayed for the maximum period allowed, $280
million in interest is generated each year.
"Those opposed to health plan accountability stay focused
on the claim that costs will increase if the legal
accountability provision is included. What they don't tell you
about is the money they stand to make by simply denying a
claim and waiting for the review process to overturn the
decision," says Dr. Newman. Noting that S. 1344 offers only an
appeals process, "the issue is not about choosing between
legal accountability and an appeals process. We must have
both, because legal accountability is an incentive for health
plans to not abuse an appeals process," added Dr. Newman.
The American Psychological Association (APA), located in
Washington, DC, is the largest scientific and professional
organization representing psychology in the United States and
is the world's largest association of psychologists. APA's
membership includes more than 159,000 researchers, educators,
clinicians, consultants and students.