Where do health care dollars go?
Health care costs can be complex. Understanding how costs are determined and paid may help employers and their teams make more informed decisions.
Given the continued rise in health care costs, it’s no surprise that there is a lot of confusion surrounding where the increases are coming from.
What’s important to recognize though is the vast majority of health plan spending goes to pay for medical services, including hospital and doctor visits, prescription drugs, lab tests, x-rays and medical supplies, and for-profit health insurance companies only make 2.4% in net profit from every health care dollar spent, according to America's Health Insurance Plans (AHIP).1 Additionally, that profit is what oftentimes enables insurers to invest and lead efforts to make health care more accessible and affordable, which includes ensuring that each health care dollar is billed and paid appropriately, accurately and in a timely manner.
Health plan dollar cost breakdown1
Still, it’s also important to know about the protections that the industry and government have put in place to protect consumers, namely that rates must be certified by actuaries, reviewed by regulators and made available for public comment. While 80 to 85 cents out of every health plan dollar typically goes toward medical care,1 with the bulk going to hospital care, insurers are also mandated to adhere to that Medical Loss Ratio (MLR) for many plans under the Affordable Care Act (ACA).2 If insurers fail to meet these requirements, they are legally obligated to issue rebates to consumers, which works to ensure a high degree of transparency.
How health insurance companies help make health care more accessible and affordable
Health insurance companies play a crucial role in working to ensure care is accessible and affordable for every client and member they serve by:
- Spreading costs across a large group, ensuring that no individual bears the full financial burden
- Negotiating for lower drug and service costs
- Helping to ensure claims are processed and paid accurately
- Driving innovation to improve the health system for everyone
- Supporting more effective care coordination and management for better health outcomes and lower costs
Understanding the billing process
Before a member receives a health care bill, many steps take place — starting even before they get care. Accuracy early in the process helps ensure smoother billing and fewer issues later.
Claim is created by the hospital/provider office: The process begins with the hospital or provider office registering the patient and verifying their insurance eligibility. Medical codes are captured, and a medical bill claim is created.
Claim is review by the health insurance company: This claim is then sent to the health insurance company for review, where it is evaluated for validity and processed appropriately.
Claim is sent to the member for payment by the hospital/provider office: Once the claim is processed, the appropriate payment is made, and the hospital or provider office sends a statement to the patient for any remaining balance, following up as necessary.
For UnitedHealthcare’s commercial business, the majority of claims — 97.9% — do not require prior authorization review, streamlining the process for most patients.3 However, of the 2.1% of claims do require review, almost 9 in 10 of those were approved within 24 hours.4 Common reasons for claims being denied or flagged for further review include services or procedures not covered by the member's plan, the patient not being a valid member of the insurance plan, errors or missing information in the claim or even duplicate claims.
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