Managing healthcare expenses can be a daunting challenge for employers striving to balance quality benefits with rising costs. In 2022, per-employee medical expenses rose by 3.2% according to Mercer’s annual survey, and projections indicate another 5.6% increase for 2023. These escalating costs underscore the importance of understanding how healthcare claims are processed and exploring strategies to reduce unnecessary expenditures. With many organizations seeking innovative methods to control costs without compromising employee health benefits, a clearer grasp of the claims process becomes essential.

One of the significant hurdles in healthcare management is the labyrinthine nature of claims processing. This complex system not only complicates billing but also creates opportunities for errors, which can lead to inflated costs for employers and employees alike. By examining the standard steps involved in traditional claims processing, organizations can identify opportunities to streamline procedures and implement smarter solutions—such as engaging with claims review specialists like 6 Degrees Health—that help detect inaccuracies before payments are finalized.

What Are the Healthcare Claims Processing Steps?

Healthcare claims resemble billing statements, yet they contain additional layers of verification and validation to ensure proper reimbursement. When healthcare providers deliver services, they submit claims to insurance companies to seek payment for those services. These claims also cover the coinsurance contributions made by both employers and employees, which are typically a percentage of the total service cost. In addition, claims facilitate the payout to providers from private insurance firms.

While many are familiar with submitting claims, few understand the detailed process behind their approval. Unfortunately, the traditional claims pathway is unnecessarily complicated, often leading to errors that can have costly consequences. Although insurance companies may have slight variations in their procedures, the core process remains largely similar. To better comprehend this intricate system, here are the most common healthcare claims processing steps:

  • File claim: The initial step involves submitting a claim either physically or digitally. If submitted on paper, it must be converted into a digital format for processing.
  • Initial review: Upon receipt, the insurance carrier conducts a preliminary review to ensure the claim is within the allowable filing period. Automated software also screens for duplicate charges or inaccurate data entries.
  • Verify member: The insurer verifies the patient’s eligibility by confirming their active insurance status within their system.
  • Verify network: The next step is to ensure that the services provided were performed by a healthcare provider within the insurer’s network.
  • Apply negotiated price: Insurance companies have agreements with network providers that establish discounted rates, which are applied once the member and network are confirmed.
  • Verify member benefits: This step involves detailed checks of the patient’s coverage, including which benefits are applicable, the scope of coverage, and the cost-sharing responsibilities of the employer and employee.
  • Verify medical necessity: The insurer assesses if the services listed on the claim are medically necessary for the patient’s condition.
  • Evaluate claim risk: Automated algorithms flag claims that may be suspicious or indicative of potential fraud.
  • Issue payment to provider: After validation, the insurance company processes and sends the payment to the healthcare provider.
  • Communicate Explanation of Benefits (EOB): Members receive an EOB statement, which explains the billed amount, what insurance covers, and their remaining financial responsibility—not a bill.
  • Bill patients and employers: If services are not fully covered, the provider sends a bill to the patient and employer for the remaining charges, typically mirroring the details on the EOB.

Billing Errors: Common, but Unacceptable

The multitude of steps involved in claims processing results in complex billing procedures prone to errors. While redundancies can sometimes serve as safeguards, the overall system often exacerbates issues stemming from billing inaccuracies. Data indicates that approximately 80% of medical bills contain errors, making it difficult to identify and correct mistakes amidst such complexity.

Common billing mistakes include duplicate charges, incorrect coding, errors related to network status, or intentional practices like upcoding—where providers inflate costs to compensate for resource use. These errors, once embedded in the system, can lead to significant financial consequences for employers and employees. The convoluted process, combined with a lack of incentives for insurance companies to investigate discrepancies, perpetuates a cycle where billing mistakes go unchallenged.

Insurance providers tend to prioritize profit, benefiting from negotiated discounts and the steady revenue from premiums and deductibles paid annually, regardless of actual service utilization. This situation often results in employers and patients paying for charges they shouldn’t, with insurance companies acting as middlemen with little motivation to prevent unnecessary costs.

However, there is a positive shift underway. Employers can work with claims processing experts to scrutinize medical bills carefully. These specialists can identify and eliminate billing errors before payments are made, saving organizations thousands of dollars annually. For instance, comprehensive review services like revolutionizing modern medicine how servreality is bridging the gap with xr demonstrate how technology is transforming healthcare billing accuracy.

6 Degrees Health’s Clean Claim Reviews Deliver Huge Savings

At 6 Degrees Health, we do not function as an insurance provider. Instead, we offer tailored cost containment solutions to help employers manage increasing healthcare expenses effectively. Our approach is rooted in data and precision, utilizing services such as Clean Claim Reviews as part of our broader payment integrity program. These reviews involve meticulous examination of medical bills to uncover and correct errors or inconsistencies, ensuring your organization only pays the correct amounts. Partnering with experts like us could lead to savings of up to 40% on your annual healthcare costs.

By proactively reviewing claims and identifying inaccuracies, organizations can significantly reduce wasteful spending. Our team’s expertise and advanced analytics help streamline claims processing and improve financial outcomes. If you want to explore how to optimize your healthcare spending, learn more about how AI is revolutionizing modern healthcare practices or speak directly with a representative about our services.

Are you interested in learning more about the steps involved in healthcare claims processing or how our claim review services can benefit your organization? Contact us today to discover how 6 Degrees Health can assist you in achieving substantial cost savings and operational efficiencies.

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Note: For visual context, see our overview of the claims process here.