In speaking with clients I find that few of them know much about each other’s organizations and how they operate. This blog post is an attempt to help current and potential healthcare clients understand the liability insurance industry.

What are expense and loss payments?

Let’s start with a loss payment for a bill submitted by one of our providers through the Claim Connector platform.

Most liability insurance policies have policy limits. In Texas an auto liability policy requires a minimum of $30,000 for bodily injury liability per individual and $60,000 per accident as well as $25,000 for property damage. From the carrier’s point of view reimbursement of a provider’s bill is not legally owed until the court says it, which is one of one of the reasons that reimbursement for a third party claim can take over 200 days. Carriers want to make sure they are liable for your bills. Once fault is determined, 95%+ of claims do not go to court and are settled without a trial.

Additionally, insurance carriers are going to consider expense payments. These are payments which represent additional resources carriers need to run their organization. For example, when a hospital accepts a client they use an EHR (electronic health record) to register their patient’s information. That EHR would be considered an expense payment because it has nothing to do patient care. It exists to make the hospital’s job easier and more efficient.

Why are these payments important?

When a payor chooses a DER (discounted early resolution) they have a choice between a DER that works for them and is considered an expense payment or a DER that works for the hospital and is considered a loss payment.

Both are beneficial to the payors, but because most payors limit their expenses they are cautious when sending bills through a DER as an expense. We designed the Claim Connector platform with this in mind and are teaming up with providers across the country to help them resolve their third party bills as a loss payment.

For Payors:

A discounted early resolution platform (DER) only makes sense when the payor does not have prenegotiated rates with a healthcare network. This is typically the case for all third party claims whether they are motor vehicle accidents, work place accidents, slip and fall, etc.

What payors would use a DER?

All DERs are different and you need to choose the one that fits your organizations needs. The Claim Connector DER platform was designed to be a loss payment, and as such we have found our platform best suited to carriers, third party administrators and personal injury attorneys.

For Providers:

A discounted early resolution platform (DER) makes sense only when your healthcare network is servicing third party accident victims. Most other cases are covered by a patient’s health insurance or by self-pay when the patient is uncovered.

Who uses a DER in a healthcare network?

Again, all DERs are different, so you need to choose the one that fits your organization’s needs. The Claim Connector platform was designed for organizations of all sizes from the single doctor/chiropractor who handles all billing internally to the large network hospital that farms out third party liability claims to a specialized revenue cycle management corporation.

What is a DER?

A new concept that is gaining popularity in the ever complex industry of third party liability claims reimbursement is the Discounted Early Resolution platform or DER. To expedite reimbursement on auto accident and workers comp claims this concept makes use of a cloud-based platform that can connect a hospital or their revenue cycle management company directly to the adjuster processing their claim.

These platforms are becoming popular for two reasons. 1. The Hospital/RCM is allowed to directly negotiate an early settlement in exchange for a reduction in the bill. 2. Conversely, the insurance carrier can clear out its books faster while receiving a discount on the provider’s bill for doing so.

Why would a provider negotiate a reduction in its bill?

In today’s world, processing these complex claims is a very tedious process that can involve waiting over 6 months for reimbursement. When the carrier finally submits payment that payment is typically sent to the claimant or their attorney. The attorney then turns around and negotiates with all the providers for discounts so they can receive their fee out of the lump sum. When all is said and done the hospital receives, on average, 30% of their total billed amount.

The DERs allow the providers the ability to expedite reimbursement and potentially double the amount received for services provided.

Why are carriers excited?

Healthcare cost is outpacing the economy at such a rate that many studies say it is unsustainable and major changes need to be made. Insurance carriers need to raise their rates but the economy won’t allow it. Many carriers are facing a negative Combined ratio.

The DERs allow the carrier to mimic a contractual adjustment that isn’t currently available to third party liability claims. This gives the carrier the ability to cut loss payments which in turn will improve their Combined ratio (with volume).

What does this mean for the two industries?

Opening communications between both parties will improve the system. DERs will provide that communication. Using these platforms the overall goal pf additional profits for both the providers and carriers will be attained.

In a followup blog we will discuss the differences between DERs and how to choose the one best suited to your needs.