Friday, November 12, 2010

Damn Lies and Statistics

In 2001, Joel Best published a book called: “Damned Lies and Statistics: Untangling Numbers from the Media, Politicians, and Activists”. It, or the successor volume, should be required reading for everybody in High School civics class.
A recent letter crossed my desk that reminded me of that book. Written by the NAIC Consumer representatives to the Chairs of the NAIC Exchange Subgroup, it cites some rather unbelievable statistics and then goes on to draw some rather “interesting” conclusions. The entire letter can be found here.

Normally I ignore this type of hyperbole, but given the recipients of the letter, I thought it best to respond on a point-by-point basis.
“The National Association of Insurance and Financial Advisors released the results of a survey on health claims assistance provided by agents on October 15, 2010. The survey polled 806 NAIFA members who serve health insurance clients. It found that agents assist clients with an average of 223 claims per year.”
NAIFA represents licensed LIFE insurance agents and Financial Advisors. Although there is certainly some overlap in membership, there is a different organization, the National Association of Health Underwriters (NAHU) that represents Health Insurance professionals. I know of few health insurance agents who belong to NAIFA and it is unknown if the professional cross-section of NAIFA membership is at all representative of the health insurance agent community.
Although the NAIFA suggests that its findings are representative, the 223 claims per year per agent is much higher than seems reasonable. My own experience has about 0.75% claim assistance request per client per year. Based on that number, the average NAIFA agent would have almost 3000 active clients…a number far too high to be sustainable without substantial clerical assistance. Based on this alone, it appears that NAIFA membership is tilted towards larger agencies.
“The huge number of requests for assistance, multiple agent calls, and tens of millions of agent hours agents spend on claims indicate something is seriously wrong with the health insurance system.“
“Getting a claim paid should be straightforward with clear rules that are readily understandable to consumers.”
“If agents are in fact calling insurers more than 138 million times a year so that consumers get the coverage they contracted for, the problems that plague the health insurance system are even more serious than is commonly recognized.”
In general, claim problems fall into three categories: Inaccurate submission by the provider or insured; Services provided outside of the insurance policy; and Insurance company errors.
Claims are almost always filed by the medical provider and, in my experience, the bulk of problems arise from PROVIDER error. Claims are processed with minimal human intervention. That means that they have to be properly coded and the necessary information supplied…last week, a client had a claim rejected when his daughter's name was misspelled. If submissions are not properly prepared, they’re rejected.
Insurance policies are complex. They have to be to cover the myriad of conditions that can arise without providing blanket unlimited and unaffordable coverage. Unfortunately, that also means that occasional claims fall outside of the policy boundaries. Sometimes those limits can be appealed and a way found to provide additional services. Sometimes not. Claim problems can arise from the use of non-preferred providers. Depending on circumstances, that can sometimes also be fixed.
Insurance company errors happen. They’re inevitable given the sheer number of claims processed. Even Medicare has been known to occasionally mess up. I see nothing that will change in any system that involves humans.
“NAIFA notes that agents assist clients with claims “at no additional cost…while reducing the burden on state offices of insurance.” Agents may not directly charge clients for their assistance, but the cost is built into the price of coverage.”
The assistance that agents provide comes out of their own pocket. Agents and agencies are paid by the insurance companies, but the payments are independent of expenses. If I pay a person to help me with claim problems, I pay that salary. The carrier is out of the picture.
“The NAIFA survey confirms the extraordinary expense and inefficiency of the current system. The Affordable Care Act provides the basic tools for a better system—navigators, ratings of plans, greater use of the internet, standardization of administrative forms and processes, state insurance consumer assistance and ombudsman offices, and effective and efficient appeals systems.”
There is nothing on this list that isn’t here today.

Navigators are merely a replacement for agents. Without compensation levels to support them, the services provided by agents won’t be available.

Plan Rating has nothing to do with claims processing. Plans don’t process claims, carriers do.

All carriers already have internet access. Claims and plan descriptions can be viewed online.

Standardization of forms – Convenient, but how many claims are bounced because a Aetna form is used instead of an Anthem one? Especially since most claims are already being submitted electronically?

State Insurance Consumer Assistance and Ombudsman Offices – Call your local Insurance Commissioner's office. There's nothing new here.

Effective and efficient appeals – English translation: The insurance company is wrong and easily gives in.
Claims MUST be scrutinized. Failure to do so is an invitation for fraud and abuse…Look at the statistics on Medicare. The flip-side of looking at claims is that some are going to be rejected.
Agents provide a valuable service. We choose to spend time and money helping our clients resolve problems. Just like CPAs work with the IRS, it's a normal part of our business that isn't going to go away soon.
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