AMA's new "administrative burden index" ranks cost of doing business with commercial insurers

July 08, 2013

The American Medical Association (AMA) recently unveiled its new Administrative Burden Index (ABI), which ranks commercial health insurers according to the level of unnecessary cost they contribute to the billing and payment of medical claims. The ABI reflects the overhead cost needed to bill and collect payment from each major payer and was introduced as part of AMA's annual National Health Insurer Report Card.

AMA found that administrative tasks associated with avoidable errors, inefficiency and waste in the medical claims process resulted in an average ABI cost per claim of $2.36. Cigna had the best ABI cost per claim of $1.25, or 47 percent below the commercial insurer average. HCSC had the worst ABI cost per claim of $3.32, or 41 percent above average.

AMA estimates that $12 billion a year could be saved if insurers eliminated unnecessary administrative tasks with automated systems for processing and paying medical claims. This savings represents 21 percent of total administrative costs that physicians spend to ensure accurate payments from insurers.

""The high administrative costs associated with the burdens of processing medical claims annually should not be accepted as the price of doing business with health insurers,"" said AMA Board Member Barbara L. McAneny, M.D. ""The AMA is a strong advocate of an automated approach for processing medical claims that will save precious health care dollars and free physicians from needless administrative tasks that take time away from patient care.""

Since 2008, the AMA’s National Health Insurer Report Card has examined the claims processing performance of the nation’s largest health insurers and provided an objective and reliable gauge of denials, timeliness, accuracy, and transparency.

Key findings from six years of data generated by the report card include:

Accuracy: Error rates for commercial health insurers on paid medical claims have dropped significantly from nearly 20 percent in 2010 to 7.1 percent in 2013. The AMA estimates that more than $43 billion could have been saved if commercial insurers consistently paid claims correctly since 2010.

Denials: Medical claim denials dropped 47 percent in 2013 after a sharp spike in 2012 among most commercial health insurers.

Timeliness: Health insurers have improved response times to medical claims by 17 percent from 2008 to 2013.

Transparency: Health insurers have improved the transparency of rules used to edit medical claims by 37 percent from 2008 to 2013. Reducing the use of undisclosed payer-specific edits unlocks the flow of transparent information to physicians and reduces the administrative costs of reconciling medical claims.

For more information, visit www.ama-assn.org/go/reportcard.



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