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.