Denied Claims Blog
A Look at the Winners and Losers
June 6, 2013
They don’t call it the insurance business for nothing. And it is undeniably a business — a big business. The health insurance industry includes about 1,000 companies with a combined annual revenue of about $500 billion. In this business, it is very important to remember that the playing field is not even.
Who are the players in the game? Basically, there are non-profit insurance companies and for-profit insurance companies. How your claims are handled — and the ultimate goal in the game — may be quite different for each.
With billions of dollars of cash in play, claims denial becomes part of a massive shell game, especially for the insurer looking to make a profit. If the insurer initially denies a claim, it can keep its cash reserves for just a bit longer and continue to earn interest on that cash until they ultimately accept and pay the claim, usually a few months later.
The good news? If you continue to fight your insurance company to pay for a denied claim, there’s a chance they will do so in the end. The bad news? It costs you time and energy.
So, back to the original question: Who really wins when your insurance claim is denied? It’s not the hospitals, Medicare or your doctor. Let’s do the math. Wendell Potter reported in a recent Huffington Post article that in Vermont, where denial rates must be published, Cigna, a for-profit insurer, denied 21%, or more than 1 in every 5 claims, mainly for administrative reasons (as compared to 1 in 13 for its non-profit competitor). Even if they eventually paid the claims, they were able to “float” a considerable amount of their cash flow (your premiums) for at least several months.
What does this mean in layman’s terms? Basically, you have provided your dollars to the insurers as premiums to pay for future health care costs. Providers have agreed to provide services to insurance customers on a promise of (reasonably) prompt reimbursement by the insurance company. The insurer has rather arbitrarily refused to pay a bill it had previously agreed to cover. While it all gets straightened out, the insurer gets to keep that cash to run their business and invest as they see fit. It’s easy to see where flat-out claim denial would be good for their bottom line — but why deny claims that you know you’ll eventually pay? The cash stays in their investment pool and earns interest. That’s the value of “float.” Initially denying claims, even if they are eventually paid, translates into massive profits from interest earnings for the insurers.
Who wins? Not the hospitals. Not the health care providers. Certainly not you. The CEOs of the insurance companies, whose compensation is generally tied to a percentage of profits, definitely win. Cigna reported its CEO’s salary as nearly $13 million last year. Its board members made over $3 million. Investors enjoy record returns.
Meanwhile, you pay the bill for the unfairly denied insurance claim and continue to add to the insurer’s profits by making your premium payments.
If you feel you have been unfairly denied coverage for an insurance claim, contact us today for a confidential interview. We are here to help.