Everything You Need To Know About Collecting On Commercial Health Insurance Underpayments

Commercial health insurance underpayments are problematic. They occur when the health insurance company decides – for one reason or another – that it doesn’t need to pay your hospital or clinic for the full amount of the claim. Since the healthcare environment is always changing, you need to collect every penny that you can. Otherwise, your hospital may find itself in financial hot water. Thankfully, you do have some options when it comes to these underpayments, including collecting on them through the Federal ERISA laws.

Revenue Cycle Issues

The revenue cycle for businesses in the medical field remains somewhat unstable, making it even more important that they collect every possible dollar – including those underpayments. An article in Becker’s Hospital CFO Report points out that patient billing (as in, amounts due) makes up between 18 and 35 percent of every clinic’s accounts receivable. The rest consists of money owed by commercial health insurance companies. That’s quite a large balance and is one of the reasons why these underpayments can lead to a number of cash flow problems, especially if they have the chance to pile up. Other ways of dealing with revenue cycle issues include meeting certain claims benchmarks and setting up a system where “clean” claims get sent through quickly, while those that are more complicated get more attention paid to them. However, another great option, which isn’t mentioned in this particular article, is to ensure that those underpayments are cleared up and paid in full.

Why Underpayments Occur

Many underpayments happen for the same reasons as unpaid claims. Some of the reasons include payor miscalculation, contract issues and misinterpretations, general billing errors, and even accidentally using incorrect contract terms. The general billing errors are the easiest to avoid. In some cases, the documentation and all of the paperwork aren’t sent with the claim, or the wrong ones are included. The bill could also be for the wrong amount – or so the commercial insurance believes. They’ll end up just paying whichever amount that they think is correct.

Contract terms are another issue that causes these underpayments. Every clinic, practice, or hospital has a contract with each commercial health insurance agency. When those terms get interpreted wrong, billing issues occur. This leads to underpayments, as the insurance company thinks that they’re paying the correct amount, when they, in fact, are not. Incorrect calculations and other contract issues can lead to underpayments as well. Although these claims issues are tough to clear up, they can be avoided with some clear communication between your practice and the commercial health insurance company.


Communicate In Order To Work Through Those Underpayments

In general, there are three main ways to deal with those commercial health insurance underpayments. You can start by breaking them down by the payor, or the company that underpaid the claims in the first place. This makes it easier to see which companies tend to underpay the most. Once you have determined this, you can speak with your representative from that company to see if there are lingering billing issues that need to be cleared up. Remember that communication is important!

You can also set up a reporting system, such as a spreadsheet, that is handled by your billing personnel and the accounting staff at the commercial health insurance company. This also opens a line of communication, albeit in spreadsheet form, between your employees and those at the insurance company. If something ends up getting underpaid, everyone is aware of it, making it easier to ask that important question – “why?”

Finally, you need a way to store those underpayments. You don’t want them to get forgotten!

Don’t Let Underpayments Fall between the Cracks

This is the most important thing to remember is to keep an eye on those underpayments. It’s all too easy to let them fall through the cracks and get overlooked. After all, your billing staff is very busy sending out new claims and tracking existing ones to ensure that they get paid in full. Thankfully, you have some options here. You can:

  • Keep all of your underpayments on a spreadsheet, much like the one described above. Only this one will have all of those underpayments listed, not just the ones for a particular commercial insurance company.
  • Have a dedicated staff member (billing employee) who’s in charge of handling these underpayments. Ideally, this person will send those underpayments through the state-level appeals process as well.

No matter what, you don’t want to give up. Keep pushing until those underpaid claims end up getting paid in full.


Go Through Your Three State-Level Appeals

No matter the size of the underpayment, you still receive three state-level appeals on it. This means that when the insurance company refuses to pay them in full, you have three additional chances to get them to do so. Here’s how that process usually works:

The insurance company receives the claim, and for whatever reason, they end up paying only half of what’s due. The payment is sent to you, and then you send the balance out for an appeal. The insurance company might pay an additional 5 or 10% on it. Your employees then file another appeal.  This goes around and around until the appeals are exhausted, and a balance is still due. Thankfully, you have one additional option at this point.

File Federal ERISA Appeals on Your Underpayments

You’ve no doubt heard about Federal ERISA laws before. They’re a set of federal laws that govern things like employee retirement accounts and self-paid insurance plans. According to ERISA, those commercial health insurance companies need to clear up those underpayments. Otherwise, they’re running afoul of the law. The main issue here is that many hospitals, clinics, and even practices, never file those appeals.

Why? Because these businesses don’t know that they can file those Federal ERISA appeals, and even if they do, they aren’t quite sure how. Most medical billing and coding courses don’t cover ERISA at all. Even if they did, your billing employees are far too busy to go through the lengthy process. This would take away from the many other tasks that they tackle every day. To go even further, most law schools don’t cover the material at all. You need to find a company that specializes in these appeals, like us, ERISA Recovery.

Call In Reinforcements

If we haven’t already made this clear, you need help collecting on those commercial health insurance company underpayments. Once your three state-level appeals are gone, you need to file a Federal ERISA claim on them, lest your revenue cycle end up out of balance. We can do that for you. Just call us, ERISA Recovery, and ask to speak to one of our Federal ERISA experts. You can reach us at (972) 331-4140 or through the contact form on our website. We don’t charge anything upfront, and have a $1 million guarantee – that’s the amount that we’ll collect for you in 12 months, as long as you can provide all of the paperwork that we need. Don’t wait any longer to collect on those underpayments.