I've worked on the claims management process flow for payer like Anthem before. It's probably obvious, but this story hints at some serious deficiencies in the backend processes.
One way to look at it is that this Byzantine process helps Anthem by trapping valid claims in a black hole of bureaucracy. That way they don't need to pay, right?
It's not quite that simple. It's true that incentives are not usually aligned, but in reality the payment P&L impact is often far away from the claims processing administrative decisions. At many payers (like Anthem), the ultimate 'payer' for most of the cost may not actually be Anthem. They may be the third-party administrator charging back to an employer, or the Federal government. Even if it is Anthem, the owner of the cost center for this broken administrative process is almost certainly removed from whomever runs the actuarial accounting to decide what kinds of services to cover and how much to charge customers (except, as the author found, once they unite at the level of the CEO).
Ultimately for Anthem, this claim cost them a lot more to handle than if they had just paid out in the first place - even if they were the ultimate payer. Consider how much time the author spent on the phone with customer service representatives. Many of those were almost certainly contracted out and charged to Anthem by the minute. Then consider the claims processing backend, also likely contracted through third-party claims processing and management systems. It would have been simpler to manage the first one straight through.
Usually what it comes down to is that it is hard to estimate the ROI for investing in fixing a problem like this, because the benefits are spread out over many small cases. One way to prove it out is to highlight some of those small cases so that payers feel the pain and recognize the need for change. Thus, I am glad the author published this complete story.
> They may be the third-party administrator charging back to an employer,
can you please elaborate on this? does this mean that some companies (employers) directly see and pay their employees medical stuff on their books?
> Ultimately for Anthem, this claim cost them a lot more to handle than if they had just paid out in the first place
... well, of course, but the whole middleman game costs the US many many many serious percents of each year's GDP. and probably the whole culture of reimbursement despair makes a lot of money to insurance companies, and even probably keeps rates a bit lower than they ought to be, and keeps people sick (and of course eventually leads to more serious problems that in turn cost a lot more, but if those are shifted to pensioner age then they might be covered federally, right? again a win for the insurers)
This is how a lot of big companies work. They self-insure. They set the rules, pay all the bills, and the insurance company just administers things.
If you work for a company that does this, be aware that the things you dislike about your insurance coverage may well have been designed that way by your employer, not the insurance company. Don't curse the insurance company when you don't like the benefits. Ask your manager and HR department why your employer chose that rule or limit.
Almost every sufficiently large employer does this. Instead of paying premiums to an insurance company which owns the risk (and also makes a profit from that) the large employer pays the actual costs of care, and a percentage to the insurance company for the administrative work (using their provider network, claims processing systems, etc.).
okay, but surely then they get reinsurance, no? also does it make sense for every huge company to have their own insurance department?
isn't this simply a service that big corps can buy from these huge insurers? so they end up as the payers, they can manage their own plan(s), but of course they actually don't even have one single actuary on payroll, right?
Yes they also typically buy reinsurance (insurance that covers individuals whose claims exceed some amount in a given year, like say $150,000). The company will have some people in HR who administer this program but they aren't duplicating a lot of what the insurance companies do -- that's why they pay for administrative services.
They rarely have actuaries on payroll but there are several boutique actuarial consultant who serve these companies (e.g. "given the geographical distribution of your employees and the higher use of services X, Y, Z, you would save $xxx if you choose insurer A over insurer B").
One way to look at it is that this Byzantine process helps Anthem by trapping valid claims in a black hole of bureaucracy. That way they don't need to pay, right?
It's not quite that simple. It's true that incentives are not usually aligned, but in reality the payment P&L impact is often far away from the claims processing administrative decisions. At many payers (like Anthem), the ultimate 'payer' for most of the cost may not actually be Anthem. They may be the third-party administrator charging back to an employer, or the Federal government. Even if it is Anthem, the owner of the cost center for this broken administrative process is almost certainly removed from whomever runs the actuarial accounting to decide what kinds of services to cover and how much to charge customers (except, as the author found, once they unite at the level of the CEO).
Ultimately for Anthem, this claim cost them a lot more to handle than if they had just paid out in the first place - even if they were the ultimate payer. Consider how much time the author spent on the phone with customer service representatives. Many of those were almost certainly contracted out and charged to Anthem by the minute. Then consider the claims processing backend, also likely contracted through third-party claims processing and management systems. It would have been simpler to manage the first one straight through.
Usually what it comes down to is that it is hard to estimate the ROI for investing in fixing a problem like this, because the benefits are spread out over many small cases. One way to prove it out is to highlight some of those small cases so that payers feel the pain and recognize the need for change. Thus, I am glad the author published this complete story.