Studies indicate that vehicles are safer than ever with rates of death and serious injury at an all-time low. The Insurance Institute for Highway Safety reports that motor vehicle deaths are the lowest they have been since 1949. But these improvements have not translated into reduced premiums and lower costs for auto insurance. Though claim frequencies and serious injuries have decreased, severity has steadily risen, driven by an increase in medical treatment costs. Undoubtedly, improvements in medical diagnostics and treatment modalities may legitimately warrant an increase in fees – and hopefully lead to improved outcomes. But the rate at which severity has grown suggests a less altruistic motive. According to the Insurance Information Institute, both no-fault and workers compensation medical claim costs are running at nearly double the rate of general medical inflation.
New approaches in medical billing
Medical providers face increasing complexities and pressure from government and private medical plans. Anti-fraud measures have been aggressive in recent years, and providers are being squeezed to provide more services at lower reimbursement rates. This has led to some creative approaches in an attempt to replace the lost revenue. One approach involves billing associated with accidental injuries, which mostly affects auto injury and workers compensation claims.
"The rise in bodily injury and personal injury protection severity is the result of a significant shift of the total cost of national health cost burden from the government and private health insurers to the property and casualty insurance industry," explains insurance claim executive Mike Rowe.
The use – and billing – of medical diagnostic testing has dramatically increased. Some of these tests may actually improve outcomes. But there is little evidence to suggest that the dramatic rise in diagnostics is fully warranted. The increased testing also drives an increase in perceived severity. Not only do the costs of the diagnostic treatment itself increase the claim costs, the fact that several diagnostic tests were ordered serves to establish a position that an injury is more severe.
Turning to technology
Some insurers use technology to help address these medical billing concerns. For example, medical bill re-pricing is common but often only adjusts the bills to ensure that the proper amount is paid for a particular service. Vendors are beginning to modify their programs to offer more advanced analytics in this area. In order to truly address the issue, a holistic approach is necessary to evaluate the injury and determine whether a course of treatment is appropriate. This can be challenging when claim departments are facing tighter budgets and fewer trained medical personnel to aid in this type of evaluation.
Other technologies, like predictive modeling or expert rule systems, can help identify and prioritize files that warrant a more detailed evaluation. But finding the claims is only half the battle. The bigger issue is how claim departments address those files once they are identified.
"The fundamental problem is the gap between expert systems and claim adjusters abilities to make use of the information," says Rowe.
The recently announced national fraud prevention partnership may help address some of these concerns by opening up the lines of communication among health payers, government medical benefit programs, casualty insurers and law enforcement. But even with the additional information at their fingertips, insurers must modify the way in which they address this threat.
Increasingly, special investigation units are focusing on a growing organized fraud problem. As they do, so-called "soft fraud," including abusive medical billing, needs to be handled by the claim department. So far, most companies have not been successful at stemming the rising tide of this medical cost shift, as most claim departments do not have the requisite staff or training programs to properly address the rising tide of creative medical billing now being thrust upon casualty insurers.
"The industry has gotten much better at detecting fraud,” Rowe says, “but has a long way to go toward stopping it.”