Financial float is the difference between premiums paid by the patient (or anyone) to the insurance company, minus the claims paid by the insurance company to the provider or practice in question. That’s the simplified definition, but as you can see, it’s not really that simple. When the market changes, the value of the dollar changes, as well. However, people are still bound to previous payment arrangements to help insurance companies maintain the value of each payment.
Financial float is another way that insurance companies maintain the value of premium payments. That “float” is the amount left that isn’t being actually put toward medical costs. Rather than letting it sit in an account and risk serious loss or stagnation, many insurance providers will invest that float to help maintain value.
Insurance premiums are paid, but not all payments are actually used. The leftover is what companies use to make investments.
When insurance companies have extra funds and they are basically just “sitting” on them, they decide that they can do more than just sit and wait. The fact is that not all premiums that are paid will ever be engaged. That is, some people may never actually file insurance claims. Therefore, the insurance industry is left with a lot of cash just sitting around. At some point, they decided to attempt to use that to their advantage. Even if some of those premiums get paid out, there is a period of time in which the insurance company “owns” those funds and can invest them until they need to be paid out. Incentivizing insurance companies to not only deny claims but to delay them.
Simply put, financial float investments do result in profits. There are rules that specify how much insurance companies can invest, how much they have to keep on hand, and what they can do with the profits from the investments that they make. Imagine if there are 10,000 patients and they each pay $1,000 a month in premiums—that’s $1 million. The insurance company isn’t likely to spend this all on insurance claims, so they save some and invest the rest.
As with any investment, insurance companies are going to want to be sure that they’re getting the best return on their investments. They will choose the best investments based on their current situation and the funds they have available, all while ensuring that there is liquidity with money coming in to pay any bills that may arise.
Financial float affects medical providers in a few different ways. One of the biggest, of course, is the lack of desire to make timely payments. When insurance providers are investing in various products and services and they want to maximize their returns, they may want to minimize their insurance payments. Insurance companies are motivated to hold onto float in every way possible. The only real way to hold onto all that money is to delay payments or only make partial payments to providers on behalf of patients.
If practice owners aren’t getting paid, they aren’t able to continue providing the same level of service to patients. They are instead tasked with chasing down payments, trying to get bills cleared up, and looking for a better way to manage billing. The secret, though, is that it’s a lot simpler than most practice managers and providers realize. With the right tools, including a solid EHR and billing technology system, you can keep a stellar paper trail that ensures payments are made on time and in full. Billing technology systems can catch any mistakes in claims before they are sent out to mitigate delays and denials using AI technology. The right system will make you aware of anything that could result in a delay or a denial so you can easily fix it saving you time and money all while getting you paid faster. Billing technology systems often make practices far more money than they pay for the system.
Simply put, the payer wants to hold onto their float and not pay claims, providers want to get their claims paid. This is a conflict known as payer provider adversity and is something that all practices need to learn how to deal with. As mentioned, this is one of the biggest obstacles to overcome with medical billing, and it can affect your practice in several detrimental ways if not properly addressed and handled. This significant challenge can be addressed by practices, but many times they find it is more cost effective to enlist a third-party billing provider to handle this for them using billing technology and advanced industry knowledge so they can focus on what they went into practice for- patients.
Usually, a provider submits a bill to the insurance company, who then reviews the bill and pays the claim. If the claim is error-free and properly prepared, providers assume they will get paid. However, if a company is in the middle of a good “float” situation, they may attempt to balk at the bills or refuse payment for longer than necessary to maximize their profits. Of course, this is not something that’s often talked about because it’s done so quietly, but practice managers need to be made aware so they can handle it accordingly.
ClinicMind software is designed to provide streamlined payment solutions and billing options to improve payment collection and reduce delays and denials. This software can’t necessarily stop insurance companies from making money off the financial float, but it can ensure that companies are billed correctly and held accountable to make payments where they are necessary. The system catches any discrepancies using AI technology to make sure your claim will not be denied or delayed for any number of reasons the system has seen before. With over 20 years of experience, the system has thousands of rules to check your claims against. This allows you to fix them before they go to the insurance companies and eliminates a lot of back and forth action between the payer and the provider.
Providers need a dedicated EHR and billing system that handles billing and payments with confidence that practices will get the funds they are owed. The system provides access to streamlined and well-stored patient records, payments and billing issues, and so forth. With our dedicated solutions for practice management, you’ll improve your billing and make sure that you’re getting paid accordingly for each and every insurance submission. Our system allows for full-transparency so you can see everything in real time without compromising your access to information.
While it’s important that practitioners are aware of things like financial float, it’s more important for us to assist practice owners in streamlined payment collection and billing management to ensure that your patients’ insurance companies are paying their bills and premiums are being used accordingly. It is important to be aware of payer tactics so you can make an informed decision whether you want to tackle this internally, or enlist us for support for one-on-one training, full-service billing, and access to a team of subject matter experts (SMEs) that include physicians, insurance and finance experts, technology professionals, and more.
As a practice owner or provider, it is your job to be educated on all aspects of financial matters, including what insurance companies do with the money that they’re paid. While they can make profits on the excess payments that they receive, they must have the initial policy payments available for refund when necessary or requested, and they may not use all of the premium payments to invest in various market options. There are a lot of laws and regulations surrounding financial float but having a basic understanding will help you better understand how to deal with insurance companies and getting paid by them as a practice owner or provider. Understanding the insurance system helps you to make an informed decision whether to fight this on your own or enlist help from professionals.