Managing Payer Claims Processing Errors

Understanding and Addressing

Balance Application Errors in Healthcare Claims Processing

By Susan Carlen, CEO Reliance Consulting and Management Group

?

Balance application errors—such as miscalculations of copayments, coinsurance, deductibles, patient due balances, and provider adjustments—are common in Explanation of Benefits (EOBs) and Electronic Remittance Advices (ERAs). These errors can significantly impact healthcare

providers’ revenue cycle and lead to administrative inefficiencies. Though the exact percentage of balance application errors can vary, estimates suggest that errors affect between 5% and 20% of claims. These errors are caused by multiple factors, including payer mistakes, system glitches, human error, and inaccurate information, and they can lead to underpayments, overpayments, and delays in reimbursement. Providers should understand the root causes of these errors and how to effectively address them to ensure accurate reimbursement and minimize operational challenges.

?

Estimates for Error Percentages:

General Payer Error Rates

Payer error rates in claims processing—including balance application errors—can range from 10% to 20%. These errors encompass mistakes like the incorrect application of copayments, coinsurance, and deductibles. According to the American Medical Association (AMA), about 14% of all claims are either denied or incorrectly processed, which includes balance application issues along with other common claim-related problems such as incorrect coding or eligibility errors. These statistics highlight the prevalence of errors that healthcare providers face in claims processing, which can lead to delays, payment discrepancies, and administrative burdens.

?

Denial and Underpayment Errors

Studies estimate that between 5% and 15% of claims experience underpayments or misapplied balances due to errors in the calculation of copayments, coinsurance, deductibles, and provider adjustments. A 2020 report by the Council for Affordable Quality Healthcare (CAQH) found that 19% of claims submitted by providers are denied or require resubmission, many of which are due to incorrect balance applications. Miscalculations of patient responsibility, such as copayments and coinsurance, can result in delays in reimbursement and additional effort for both providers and payers to correct these issues.

?

Coordination of Benefits (COB) and Patient Balance Application Errors

When multiple insurance policies are involved—such as primary and secondary insurance— balance application errors become more common. In these situations, errors can occur in about 10% to 15% of claims due to misapplication of patient responsibility balances. These errors can lead to inaccurate charges for patients and confusion regarding which insurer is responsible for paying which portion of the claim. The complexity of managing COBs means that payers may fail to apply the rules correctly, resulting in payment delays and the potential for incorrect billing to patients.

Overpayment and Underpayment Errors

Overpayment and underpayment errors, which result from misapplications of patient balances, occur in approximately 5% to 10% of claims, depending on the payer and type of service.

Underpayments are typically caused by errors in applying deductibles or coinsurance, while

overpayments can happen due to incorrect adjustments on the insurer’s end. Both types of errors disrupt the revenue cycle, requiring providers to spend additional time tracking and resolving discrepancies, which can affect cash flow and increase administrative costs.

?

Root Causes of Balance Application Errors:

System Errors

Automated claims processing systems, which are essential for managing large volumes of claims, can sometimes fail to correctly apply patient responsibility amounts, such as coinsurance, copayments, or deductibles. Software glitches or system malfunctions may lead to incorrect payment calculations, affecting a significant portion of claims. These errors are often not immediately visible to providers and can take time to detect and correct.

?

Manual Input Mistakes

Although many claims are processed automatically, human error can still occur, especially when manual intervention is required to adjust payments. In cases where claims or balance applications involve complex scenarios or require exceptions, incorrect manual entries can result in errors.

These mistakes can lead to inaccuracies in calculating patient responsibility, deductible amounts, and provider reimbursements.

?

Incorrect Contractual Adjustments

Payers often apply contractual adjustments—discounts or negotiated price changes based on agreements with providers. However, mistakes can happen if the payer incorrectly applies these adjustments or uses incorrect pricing rules for claims. When such errors occur, providers may receive less than expected reimbursement or face discrepancies between the agreed-upon rates and the amount actually paid.

?

Outdated Information

Errors can also arise when payers have outdated or inaccurate information regarding a patient's coverage, deductible status, or the terms of the contract with the provider. If the payer’s system is not updated with the latest details on patient coverage or payments already made, it can lead to miscalculations in the patient’s responsibility or adjustments that should be applied to claims.

This can ultimately affect the accuracy of payment calculations and result in financial discrepancies.

?

How Providers Can Address Balance Application Errors:

Regular Review of EOBs and ERAs

Providers should consistently review Explanation of Benefits (EOBs) and Electronic Remittance Advices (ERAs) to ensure that copayments, coinsurance, deductibles, and patient balances are

being correctly applied. Regularly reviewing these documents allows providers to detect discrepancies early on and address them before they result in significant financial or administrative issues.

?

Appeal Incorrect Payments

When a balance application error is identified, providers should appeal the payer's decision by submitting the necessary documentation to correct the mistake. Many denials or misapplications can be resolved through timely and well-documented appeals. Providers should ensure that they follow up promptly and maintain a thorough record of all communication and supporting materials to facilitate a smooth resolution.

?

Communication with Payers

Providers should maintain open communication with payer representatives to address any discrepancies related to patient balances, payment calculations, or adjustments. A proactive approach to resolving issues can help ensure that providers receive the correct reimbursement for their services and prevent further administrative delays.

?

Use of Claims Management Software

To streamline the process of tracking claims and identifying discrepancies, many healthcare providers use claims management or revenue cycle management (RCM) software. These tools can automate the tracking of claim payments, flag potential errors, and simplify the appeals process. Investing in such software helps providers ensure accurate reimbursement and reduces the risk of overlooking errors in claims processing.

?

Patient Communication

When balance application errors result in patient confusion, providers should communicate clearly with patients to explain any discrepancies and outline steps being taken to resolve the issue. Transparent and proactive communication with patients helps prevent misunderstandings and ensures that patients are only responsible for the correct amounts.

?

Conclusion:

Balance application errors in EOBs and ERAs are common in healthcare claims processing, with estimates suggesting that they affect 5% to 20% of claims. These errors, which involve mistakes in the calculation of copayments, coinsurance, deductibles, patient responsibility balances, and provider adjustments, can lead to financial discrepancies, underpayments, overpayments, and administrative burdens. Providers should carefully monitor claims, work closely with payers to resolve errors, and take proactive steps to address balance application issues. By doing so, healthcare organizations can ensure accurate reimbursement, minimize the impact of errors, and streamline their revenue cycle management.

?

Sources Cited:

1.????? American Medical Association (AMA). (2020). Physician Practice Benchmarking Report. AMA.

o??? This source provides data on claims denial rates and processing errors, including balance application issues like incorrect copayments and deductibles.

2.????? Council for Affordable Quality Healthcare (CAQH). (2020). CAQH Index 2020: The State of Healthcare Administration. CAQH.

o??? The CAQH report provides insights into claims processing errors, including those related to balance applications, and offers statistics on claims denial rates and the need for resubmission.

3.????? National Healthcareer Association (NHA). (2019). Revenue Cycle Management and Healthcare Billing Insights. NHA.

o??? This source offers insights into the revenue cycle management process, including common payer errors in claims processing and strategies for resolving discrepancies.

4.????? Healthcare Financial Management Association (HFMA). (2018). Best Practices in Revenue Cycle Management. HFMA.

o??? This report provides a detailed analysis of revenue cycle management practices, focusing on the importance of correct balance application and the challenges of payer errors.

5.????? American Academy of Professional Coders (AAPC). (2019). Understanding Explanation of Benefits (EOBs) and Remittance Advices (ERAs). AAPC.

o??? This source explains how EOBs and ERAs work, highlighting common errors such as miscalculations of copayments, coinsurance, and deductibles.

6.????? National Association of Insurance Commissioners (NAIC). (2021). Health Insurance Claims and Payment Processing: A Regulatory Guide. NAIC.

o??? This guide outlines the regulatory framework for insurance claims processing, including payer responsibilities in applying balance amounts and the impact of misapplications.

7.????? Centers for Medicare & Medicaid Services (CMS). (2020). Medicare Claims Processing Manual. CMS.

o??? CMS provides guidelines and best practices for claims processing in the Medicare system, with a focus on the correct application of patient responsibility balances.

8.????? American Institute of Healthcare Professionals (AIHP). (2019). Healthcare Claims and Billing Manual. AIHP.

o??? This manual offers insight into common healthcare claims errors and solutions, focusing on payer mistakes and how providers can address balance application discrepancies.

?

Susan Carlen is the CEO of Reliance Consulting and Management Group, a provider RCM support company. She is an innovative and strategic practice management consultant with decades of experience in the healthcare industry. She is an intuitive problem-solver, able to cut through administrative chaos bringing medical practices from surviving to thriving. This drives her passion to see medical practices run efficiently and profitably.

Susan has a proven history of successful practice development and profitability restructuring. From first appointment to treatment completion, 100% reimbursement, every visit, every time – this is the primary goal of each practice engagement. She gets results.

She holds a degree in Healthcare administration from the University of Phoenix and is an active member of the Medical Group Managers Association, Ohio chapter.

Phone: 828-421-6859 * [email protected] * www,myreliancegroup.com