to patient care and unnecessarily spike administrative costs

Are Health Plans Hurting Healthcare?

In recent report, AHA says commercial health policies create significant barriers to patient care and unnecessarily spike administrative costs.

By Pete Mercer

Private commercial health insurance

is a central component to the health insurance system in the United States, serving as the dominant source of health coverage for most Americans and employers. In addition to the prevalence of commercial health plans, Medicare and Medicaid programs often rely on private health insurance plans to administer their health benefits.

The American Hospital Association (AHA) recently released a report – “Commercial Health Plans’ Policies Compromise Patient Safety and Raise Costs” – on the current state of the private commercial health insurance system. In this report, the AHA identifies the areas with the most opportunity for improvement.

The findings of the report

Perhaps the most alarming revelation the AHA report discovered here is that health insurance policies dictate the bigger decisions regarding the care of a patient. The report says, “Some commercial health insurers have implemented policies that add billions of dollars in added unnecessary administrative costs to the healthcare system while compromising patient care. Commercial health plan abuses must be addressed to protect patient’s health and ensure that medical professionals, not the insurance industry, are making the key decisions in patient care.”

The AHA said that commercial insurance policies, like utilization management tools and prior authorization requirements, create significant barriers to patient care and unnecessarily spike administrative costs – while at the same time commercial insurance premiums have been steadily growing above the rate of inflation. Prices are up by 47% in the last 11 years.

Prior authorization requires physicians to submit their anticipated treatment plan to insurers and receive approval before they can move forward. Notably, not all treatments which have received prior authorizations will be covered by insurance. According to a previous study noted in the AHA report, physicians and staff spend as much as two days a week doing prior authorizations, a resourceintensive process, which contributes to physician burnout.

At the same time, prior authorizations can delay patient care, or even lead patients to switch treatment plans entirely. Around 82% of doctors say that the prior authorization process has motivated their patients to drop anticipated treatment plans.

Hurting patients, increasing costs

According to the report, massive administrative costs are due in large part to the complex payment and reporting requirements of various commercial health insurers. They often include excessive and unjustified application of utilization management tools and prior authorization requirements.

Oddly enough, commercial health insurers point to these processes and requirements as part of their efforts to manage healthcare spending. “What is often ignored are the complicated business and financial relationships between many health insurers and intermediary service providers,” the report says.

The AHA says that holding health plans accountable will alleviate the administrative process and services, all the while helping to improve care accessibility for patients and decreasing the burden on healthcare workers.

“We recommend identifying and measuring unnecessary administrative costs because of health plan abuses and excessive requirements,” the report said. “Currently, much of this information is reflected in national datasets as spending on hospitals, health systems and physicians because they are the ones who must absorb the cost of paying staff and acquiring the expensive products needed to comply with these commercial health insurer policies.”

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