In recent years, many insurers have decided to take “quick pay” discounts for paying legal bills sooner, rather than later. I have written about this issue before in a short Q&A piece. However, I think that the issue deserves more attention.
As a starting point of reference, “quick pay” discounts generally involve taking up to a 3% to 5% discount if an attorney’s legal bill is paid within a certain timeframe. The timeframe is usually within 10-15 days of receipt.
It should come as no surprise that attorneys I have talked to do not like the having their bills cut by 3% to 5% just to have the bills paid sooner rather than later. As one attorney put it, “I would rather see them take an extra 15 days to pay my bill rather than take a ‘discount’ for paying it within 15 days.”
Attorneys’ feelings aside, the real bottom line question for insurers is do quick pay discounts really pay? To be charitable, I think that the results can be characterized as mixed at best.
According to one insurer, after imposing a 3% quick pay discount, they noticed a spike in attorney requested fee rate increases. The insurer, which has a very good legal bill review unit, also noticed a spike in the number of errors (i.e., padding) in legal bills. The speculation was that if attorneys could not make up for the discount with a fee rate increase, they were determined to try to recover it in other ways.
Another insurer, which does not have a separate legal bill review unit, found it difficult to keep up with their quick pay turnaround timeframe. The company found the quick turnaround timeframe worked okay in the months when legal bill volume was low, but that their litigation file handlers could not keep up as well in months when claim volume was heavy or other priorities took precedent.
I would also suggest that insurers who have imposed a quick pay discount, but do not have a dedicated legal bill review unit or have a staff trained to spot subtle forms of attorney overbilling are more likely than not to find out that their attorneys have found ways to more than make up for the quick pay discount. In such situations, all that the quick pay discount has done is to create more work for the staff with no resulting cost savings (or even worse).
Is there an alternative to prompt fee discounts that will promise even more savings while at the same time make attorneys happier? The answer is “yes,” there is such an alternative. I will discuss this miracle alternative to quick pay discounts in a future post.