The American Medical Association's fifth annual National Health Insurer Report Card shows that the number of medical claims paid incorrectly by the nation's largest health insurers was cut in half last year, down to 9.5 percent of claims.

The result of the drop from the 19.3 error rate reported in 2011 is a saving of $8 billion due to reduction of administrative work needed to reconcile errors. While the past year has seen a dramatic increase in medical claims accuracy, the AMA points out that the current rate of errors still represents about one in every 10 claims that is still paid in the wrong amount. Elimination of these errors could save the industry an additional $7 billion.

"We are encouraged by (the insurance companies') response to our concerns regarding errors, inefficiency and waste that take a heavy toll on patients and physicians," said Robert M. Wah, MD, board chair of AMA, in a press release. "Paying medical claims accurately the first time is good business practice for insurance companies that saves precious healthcare dollars and frees physicians from needless administrative tasks that take time away from patient care."

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Among the seven large health insurers, UnitedHealthcare finished with the highest claims accuracy for the second straight year, processing 98.3 percent of claims without error. Anthem Blue Cross and Blue Shield, which last year had an accuracy rating of only 61 percent, saw the greatest improvement over the past year, finishing this year with a rating of 88.6 percent.

But the news wasn't all good. While claims accuracy was up dramatically, so too was the number of medical claims requiring prior authorization. Medical services requiring prior authorization rose to 4.7 percent of all claims, according to the AMA report, a 23 percent increase over the prior year and activity that cost the industry an additional $728 million in administrative expenses.

"The costly administrative burdens of the prior authorization process can complicate medical decisions and delay or interrupt patient care," added Wah. "The AMA calls for replacing the largely manual process with an automated decision support system that will enhance patient care and reduce paperwork costs."

Other significant findings of this year's report: