I believe it’s fair to say people take their health insurance for granted.  They expect health insurance to be there when they really need it. Nonetheless, a misalignment exists between people’s expectations of what health insurance should do and what it actually does. This point is most apparent when a claim is denied by your health insurance company.

The Kaiser Family Foundation analyzes the transparency data released by the Centers for Medicare and Medicaid Services (CMS) on claims denials and appeals for ACA Marketplace plans annually where over 140 health plans provide health insurance coverage for about 17 million people in the United States.

On average 18% of medical claims submitted to these health insurance plans  are denied.

Based upon our expectations, denials shouldn’t happen, but they do.  A glimpse at the different denial categories sheds light on the misalignment between the health care and health insurance industries raising the question WHY?

Let’s take a look at the major buckets for the denial reasons and try to shed some light on what might be happening, and whether you can do anything to avoid or fix if you have a denied claim.

Contractual denial – coverage excluded for a specific service 16%

The service performed just isn’t covered or included in the plan.

Prior authorization or referral not obtained. 10%

You or your doctor did not obtain (or did not complete the process) for prior approval from the health insurance carrier.

Claim or service was not medically necessary – 2%

Health care services or supplies needed to diagnose or treat an illness, injury, condition, disease or its symptoms did not meet accepted standards of medicine. This is still kind of vague, but is the guiding principle.  Here’s a deeper definition from BCBS of Massachusetts.

Experimental or investigational – <0.1%

The use of a service that is not recognized by the Plan as standard medical care for the condition, disease, illness or injury being treated.

Eligibility or rescinded health plan – <0.1%

The patient was not actively enrolled in the health plan for the date(s) of service.

Other Reasons – 59%

While this category appears to be a catch-all, it does include incorrect claim submissions, adjudication or administrative errors. This category interests me the most. While health insurance is technology intensive, it still relies upon manual intervention. People still need to complete a form or performing a task on a timely basis. Additionally, the technology that connect or holds processes together from different vendors or suppliers still needs to work properly. If one of those connections breaks, the downstream impact can be significant.

Most Claims are Not Appealed

In their analysis of the claims transparency data, Kaiser Foundation discovered how the vast majority of people do not appeal their denied claims. Approximately 1/10th of 1% of all claim denials were appealed. Surprisingly, in 2020 37% of ACA plan appeals were overturned.  That’s nearly 2 out of 5 which are pretty are good odds. I would venture to guess that if your claim was denied for an administrative error, nearly 100% of those claims would be overturned by appeal assuming they were eligible services to begin with.

It is unfortunate claims are denied and that we as covered members have to pursue and take action to reverse errors or gaps in care. All we want to do is get treated by our doctor and to have our health insurance help finance that service. We end up having to navigate a healthcare and health insurance system which are not always setup for success.  There are many hidden barriers, roadblocks, and snafus which are out of our control.

If you get your health insurance through an employer or group plan, not through the Open Market plans, I wouldn’t necessarily think you’re out of the woods; your plan could be denying the same percentage of claims.    Let me point out some information to support why we should take pause and believe that the high denial rate is prevalent in all types of health plans:

• Healthcare providers, doctors who are In-network are the same providers for the most part who participate in the networks offered to employer plans.  Same doctors.
• Type or kind of healthcare treatment received by people enrolled in these affordable care act plans through healthcare.gov are the same kinds of treatment people get who are covered by employer plan (and probably Medicare).
• The process to submit medical claims to insurance companies is the same as that for employer plans.
• The people who work at these insurance companies are the same.
• The computer systems, logistics, internal networks, pharmacy systems are the same.
• We’re all using the same healthcare and health insurance system.

Employer health plans are not required by law to report on their claims activity. One could only project that the same percentage and types of denials are occurring with claims that come from employer group or union plans.   It’s the same insurance companies who administer.

In 2021, the number of people covered by health insurance from their employer sits at around 156 million, or 49% of the country’s population.  This is according to research done by Kaiser Family Foundation. That’s a lot of people. This means a lot of claims are flowing through the insurance companies systems.  18% of claims, if accurate for employer plans, is a lot more claims and a lot more healthcare costs being passed on or paid for by the very same people the health insurance is supposed to health in their financing.

What actions can you take to avoid or handle your denied claims?

1. Ask up front whether the treatment your doctor is about to provide or recommends is covered by your health plan. 
2. If referred to a specialist for a special procedure ask up front if you need a referral.
3. Retain and provide your latest health plan ID Card to your healthcare provider at the time of service.
4. Verify timely that the claim was processed/paid by the insurance plan as expected
5. Read the Explanation of Benefits statement (EOB) online before you make any payments to your doctor. 
6. Engage your In-Network provider to go to bat for you.
7. File an appeal. It’s the official way to put the insurance carrier on noticed and they have to respond.  
8. If you get health insurance through your employer, ask your HR or Benefits contact for assistance. Can they get someone at the insurance company (account rep) to help intervene.
9. After you’ve exhausted other measures timely, you can contact your local state insurance department, they may have an ombudsmen or insurance complaint department who investigates. They will at the very least send a letter to the insurance company requesting details on your situation.  Insurance companies are accountable to these entities at least in providing visibility and getting an accurate assessment.

In summary:

• Pay attention to your claims on a timely basis
• Use the insurance website to track your claims
• Ask up front if your treatment is covered
• Don’t assume what you’re billed by the doctor is accurate or what you owe
• Keep notes

To learn more about how to improve your health insurance literacy, listen to the Maximize Your Health Insurance Podcast series which is based upon the book Maximize Your Health Insurance authored by William J. Pokluda available on Amazon.com.