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• One in five health insurance claims mishandled-report
• U.S. savings of $15.5 billion if claims processed right

By Andrew Stern
CHICAGO, June 14 (Reuters) - Claims-processing errors by health insurance companies create billions of dollars in unnecessary administrative costs, slow down payments to doctors and frustrate patients, the main U.S. doctor's group said on Monday.

The American Medical Association said one-fifth of all claims are mishandled by health insurers.

Begun in 2008, the association's annual "National Health Insurer Report Card" rated the nation's eighth largest health insurers in how they handle claims, and concluded that if all problems were resolved the system would save $15.5 billion annually in administrative costs.

Currently, the health care system spends as much as $210 billion annually on claims processing, according to the report issued at the AMA's annual meeting. Doctors have long complained about excessive paperwork required to satisfy insurance companies.

"Each insurer uses different rules for processing and paying medical claims, which cause complexity, confusion and waste," former AMA President Dr. Nancy Nielsen said in a statement accompanying the report.

"Simplifying the administrative process with standardized requirements will reduce unnecessary costs in the health system" that often requires doctors to file different forms to each insurer, she said.

The AMA described mishandling as claims processed with errors - underpaid, overpaid or incorrectly unpaid.

Among the eight companies, Coventry Health Care (CVH.N) was rated the best with an accuracy rate for processing and paying claims of 88.4 percent. Anthem Blue Cross Blue Shield was at the bottom with a score of 74 percent.

The overall accuracy rate was 80 percent, with each 1 percentage point improvement worth $778 million in savings in unnecessary administrative costs, the AMA said.
Still, the AMA said insurers led by privately owned United Healthcare made progress since 2008 in accurately reporting the fees paid to contracted doctors.

All except Cigna Corp (CI.N) had gotten slower since 2008 in responding to claims, with responses coming between five and 13 days. Insurers made better use of websites to disclose policies and fees to physicians, reducing disputes.

Denials of insurance claims remained a sore point for physicians, who called for insurers and employers to provide clarity about what is and is not covered. The percentage of claims denied -- usually because of eligibility issues -- ranged from 0.7 percent to 4.5 percent.

Other companies evaluated were Aetna Inc (AET.N), Humana Inc (HUM.N), UnitedHealthGroup (UNH.N), and Health Care Service Corp.