For years, claims processing has been a complex administrative challenge for the health insurance industry. Once performed almost entirely manually, adjudicating health claims requires reviewing and approving claims from multiple sources and providers, including physicians, hospitals, pharmacies, medical suppliers, other professionals or facilities, and health plan members. Under regulatory pressure to remit claims within a matter of weeks, insurers run risks of overpayment, or having claims cases ensnared in administrative tangles such as the reporting of wrong procedure codes, or eligibility questions. "Processing health insurance claims has historically been an intensive, rules-based endeavor," says David Rubenzahl, president and company counsel for The Maxon Co., a third-party administrator located in Irvington, N.Y. "As recently as 20 years ago, decisions regarding claims were entirely in the hands of claims examiners, who made decisions based upon their own knowledge and industry standard manuals. As computers became more sophisticated, more and more of the rules that apply to health insurance claims were incorporated into the processing applications, freeing the examiner to concentrate primarily on data input and the ultimate decision of pay or deny."

Automation and new technology has helped alleviate the problems, but many insurers still have a long way to go in bringing their legacy systems and procedures up to date. To meet these challenges, some insurers are engaging in a range of strategies to deal with this task, from deploying real-time e-claims Web sites to outsourcing.

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