Why denying claims doesn't lower healthcare costs

It started with good intentions. The finance team at a logistics firm in Jebel Ali, we were speaking to recently, were under pressure to cut costs. The HR director found a cheaper health insurance policy that promised “similar coverage” and saved AED 190,000. On paper, it looked like a smart move. But three months later, things started to unravel. Employees were calling HR daily, frustrated that routine claims were being rejected. One warehouse supervisor was told his diabetes treatment wasn’t covered anymore. Their marketing manager waited two weeks for a simple pre-approval. Then came the breaking point. A senior operations manager rushed his daughter to hospital after a sudden illness—only to discover their policy didn’t include that facility. The claim got denied. He resigned a few days later, furious. Replacing him cost the business over AED 500,000. By the end of the year, staff turnover was up 18%. Productivity had dropped. HR was firefighting every week. The company had “saved” AED 190,000 but lost over AED 1.2 million in hidden costs. Cheap insurance didn’t save them—it almlst broke them. So next time you renew your policy, ask yourself: are you protecting your people, or maybe just trying to protect your bottom line?

In 2025, the seven largest health insurers generated nearly $1.7 trillion in revenue and more than $54 billion in profit. They covered 10 million fewer people. Let’s talk about what that actually means for physicians and healthcare administrators. Employer-sponsored family premiums now average $26,993 a year. Deductibles and patient cost sharing are up more than 50% over the past decade. At the same time, insurers are under pressure to lower their medical loss ratio, or MLR. In simple terms: when more claims are paid, margins tighten. When fewer claims are paid, earnings per share improve. That incentive structure drives behavior. • More prior authorization • More claim denials and downcoding • Narrower networks • Lower reimbursement rates • Higher patient cost sharing Now layer in vertical integration. When the insurer owns the PBM, the specialty pharmacy, the ambulatory clinics and sometimes the physician groups, premium dollars do not just pay claims. They move within the same corporate structure. That changes contract dynamics. That changes referral patterns. That changes independent practice viability. Add another shift: a growing percentage of insurer revenue now comes from Medicare Advantage and Medicaid. This is not pure commercial risk anymore. This is publicly funded healthcare flowing through private, vertically integrated systems. So I want to hear directly from this community. Physicians: Where are you feeling the most operational pressure right now — prior authorization, denial rates, network restrictions or Medicare Advantage utilization management? Administrators: What is hitting your margin hardest — reimbursement compression, delayed payments, payer mix shifts or internal competition from payer-owned entities? COMMENT 👇🏻👇🏻👇🏻 #healthcare #physicians #healthcareadministration #MedicareAdvantage #priorauthorization #PBM

Where the alarms should ring is in the health benefits/insurance industry. I just did an interview in which I asserted, something I deeply believe, that these companies for the most part add only administrative costs and hassles to the healthcare industry and provide absolutely no value. Negotiated prices by insurers are often if not invariably higher than cash prices for the same procedures at the same places (see, for instance https://lnkd.in/gKk2UXaZ or do a search under the phrase are healthcare cash prices lower to find more evidence). Prior authorization has expanded in use even though the American Medical Association notes its effects to increase prices, red tape, and burdens on both healthcare providers and patients (https://lnkd.in/g_iAkgRQ). In fact, benefits administrators often deny payment of valid, even pre-authorized healthcare claims, further driving up costs and inefficiencies (see, for instance, https://lnkd.in/gBf66VEz.). Health insurers don't get better prices, don't improve access to care, and don't reliably even pay claims. In short, they add absolutely no value. One reason that the Kaiser health system is able to offer high quality at lower costs is because it is an integrated system that eliminates these third party administrators (https://lnkd.in/gUd9cnBE). Employers, when they use third party administrators, are for the most part NOT getting what they are paying for. They should change their purchasing behavior. #healthcare #KaiserPermanente #medicalcare #healthbenefits #healthcarecosts #healthinsurance #healthinsurers

Former UnitedHealth Group Chief Medical officer Archelle Georgiou says prior authorization was originally meant to control unnecessary care, but has evolved into a cost-saving tool where denials are often the goal. Her analysis of insurers like UnitedHealthcare shows high denial rates, low appeals, and frequent overturns, meaning plans keep millions simply because patients don’t fight back. What's framed as “quality control” is largely a financial strategy that delays care and boosts profits. https://lnkd.in/eGaeZ5Xu

I've spent my career helping both sides of a $217 billion argument. I have to admit, I've gone through a bit of a mid-life crisis lately. I've helped health systems maximize billing and lower denial rates. Then I've gone to the payer side and stood up cost containment strategies. I'm proud of my career, but it feels like pushing a boulder one way, then walking to the other side and pushing it back. So much of the healthcare spending problem is adversarial: $𝟳𝟬.𝟳𝗕 𝘁𝗼 𝗮𝗿𝗴𝘂𝗲 𝗮𝗯𝗼𝘂𝘁 𝗯𝗶𝗹𝗹𝘀 Providers hire appeals teams to get claims paid. Payers hire review teams to push them back. Between them, $70.7B annually goes to one question: should this bill be paid? $𝟲𝟬𝗕 𝘁𝗼 𝗲𝘅𝗽𝗹𝗮𝗶𝗻 𝘄𝗵𝗮𝘁 𝘆𝗼𝘂 𝗼𝘄𝗲 Health systems spend $40B helping you understand your bill. Insurers spend $20B on call centers to explain your EOB. You call one, they tell you to call the other. $𝟱𝟱𝗕 𝘁𝗼 𝗮𝘀𝗸 𝗮𝗻𝗱 𝗴𝗶𝘃𝗲 𝗽𝗲𝗿𝗺𝗶𝘀𝘀𝗶𝗼𝗻 Your doctor says you need a procedure, and the payer asks for proof. Providers spend $35B requesting authorization, payers spend $20B reviewing those requests - and 93% get approved anyway. $𝟮𝟬𝗕 𝗯𝗲𝗰𝗮𝘂𝘀𝗲 𝗻𝗲𝗶𝘁𝗵𝗲𝗿 𝘀𝗶𝗱𝗲 𝘁𝗿𝘂𝘀𝘁𝘀 𝘁𝗵𝗲 𝗼𝘁𝗵𝗲𝗿 Providers spend $8B proving they're not cheating. Payers spend $12B checking. $𝟭𝟭.𝟯𝗕 𝘁𝗼 𝗺𝗮𝗶𝗻𝘁𝗮𝗶𝗻 𝗹𝗶𝘀𝘁𝘀 𝘁𝗵𝗮𝘁 𝗮𝗿𝗲 𝘀𝘁𝗶𝗹𝗹 𝘄𝗿𝗼𝗻𝗴 $8.5B in provider credentialing, $2.76B in payer directory maintenance - and the lists are still wrong half the time. Add up the adversarial spending across healthcare, and you get $217 billion - roughly $650 for every person in America, spent not on care, but on providers and payers fighting each other. Other industries don't face this problem. In retail, Walmart and P&G negotiate hard, but both want products on shelves. In manufacturing, Toyota and its suppliers fight over price, but both want parts delivered. The transaction is the goal. In healthcare, one side's core function is often to prevent the transaction the other side is trying to complete. Payers benefit when they pay less. Providers benefit when they get paid more. So both sides hire armies of administrators - a growing arms race, even as every other industry sees transaction costs fall with scale and technology. The most prominent thing on this chart is actually hidden: the patient. They spend zero dollars on this fight, but they pay for every dollar of it - in premiums, in bills, and in hours on hold being told to call the other number.

These numbers are staggering and unfortunately also directly lead to increased premiums for employers. I have seen issues on both sides here. On the plan side, if there are high approval or overturn rates for specific items requiring authorization, plans should be reviewing to determine if the service should continue to require auth or if the provider is getting approval 95% of the time, they should look at provider gold carding. On the hospital side, there is a lot of variation as to inpatient or observation even among hospitals in the same system. Some hospitals were also hesitant to give read only EMR access which served to lessen denials, but they were fearful it would increase them. Some hospitals would just appeal everything overloading the system (from the below data - 69% ended up paid, but the 31% that remains denied would have cost associated with reviewing this on both the hospital/plan side). Data integration could solve the denials for lack of information, which is actually the largest reason for a denial. This type of denial is a waste of time for both sides and a huge driver of wasted cost. mechanisms to address this would be a huge system improvement. "Hospitals and health systems spent an estimated $25.7 billion in 2023 contesting insurers’ claims denials, translating to just over $57 in additional administrative costs per claim, according to a report from provider group purchasing organization Premier. Premier calculated the total spend by multiplying providers’ reported 15% denial rates against the 3 billion medical claims processed by insurers annually (as of 2020 statistics from the Council for Affordable Quality Healthcare). The group also found that 69% of those 2023 contested claims were eventually paid out by insurers, also up from 2022’s 54% ultimate payout rate. Extrapolating the 2023 rate suggests nearly $18 billion “was potentially wasted arguing over claims that should have been paid at the time of submission,” Premier wrote in its report. In 2022, that estimate was $10.6 billion. Both tallies represent the provider side of the face-off, Premier noted, and do not represent the billions spent by payers."