Over the past several years, state legislators have passed a growing number of healthcare laws expanding the coverage health insurance companies must include to help prevent patients from acquiring vast amounts of medical debt. Unfortunately, health insurers don’t always comply, and in some cases, they don’t have to. In extreme cases, patients have even been denied or overcharged excessive out-of-pocket costs for lifesaving health care services.
A study of the the 230 major health insurance providers in HealthCare.gov found that approximately 17% of health insurance claims are denied, but only .02% of consumers with denied claims appeal the decision.
Claims are sometimes denied due to data errors caused by computer algorithms and other automated processes.
Self-regulated insurance plans must adhere to national healthcare laws but not state laws.
The 2022 "No Surprises Act" added consumer protection for our out-of-network emergencies.
If your claim is denied or overbilled, there are steps you can take to appeal the decision.
How often are claims denied?
A study of adults with health insurance by Kaiser Family Foundation found that roughly 6 in 10 insured adults experience problems related to healthcare coverage. Problems studied include denied claims, network adequacy issues, and preauthorization delays and denials. Another study by KFF found that in 2021, the 230 major health insurance providers in HealthCare.gov received 291.6 million in-network claims, of which 48.3 million (16.6%) were denied. The reasons for denials were as follows:
- Lack of preauthorization or referral
- Exclusion of a service
- Lack of medical necessity
- Other reasons, including errors by the insurance company or physician’s end
When claims are denied, consumers can appeal, but they rarely do. The 2021 KFF study found that insurers reported 44.7 million reasons for denying in-network claims, with approximately three million being paid later. Yet of the 48 million denied claims, only 90,599, or .02%, of consumers appealed the decision. Of the .02%, 41% of the appeals were overturned.
As a consumer, you can appeal insurance claims or bills with the insurance company. If that doesn’t work, you can also try to appeal with an external agency or a lawsuit. It’s important to know this, as insurance companies sometimes make mistakes and break the law.
How algorithms lead to data errors
Some insurance companies use computer algorithms that automatically review multiple claims at once without studying individual patient charts. This kind of system can save insurers money; a 2020 study estimated that automating the claims process could save companies as much as $11.1 billion per year. However, it also increases the risk of making illegal mistakes.
Many state insurance laws require that before a claim can be denied on medical grounds, a medical director must examine patient medical records and coverage policies to determine whether a specific treatment is medically necessary. However, a 2023 article by ProPublica investigated one well-known health insurer that has designed a system encouraging doctors to instantly reject claims for medical reasons without ever studying the patient files; the average time spent on each case was 1.2 seconds. While the article focuses on one company, it adds that insurance executives said similar systems have existed throughout the industry for decades.
According to a story by PBS, these reviews and denials are now used for more routine medical needs, such as asthma inhalers and heart medications. The story also mentions that insurance companies may change what’s covered based on their contracts with pharmaceutical and other medical device companies. KFF Health News-NPR even created a joint project called the "Bill of the Month," which exposes outrageous medical bills and researches why insurance doesn’t cover them.
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Self-funded policies have different coverages
While all health plans must provide the coverage listed under the Affordable Care Act (ACA), not all plans must comply with state laws. According to a 2021 KFF study, 64% of individuals who get their health insurance through their employer are in a self-funded or self-insured plan; this number jumps to 82% for those who work for large organizations. Companies often utilize self-funded plans because they tend to be less expensive.
With a self-funded plan, the employer pays their employee’s bills for healthcare rather than paying private insurers to cover them. Employers often use a third-party administrator (TPA), usually a commercial insurance carrier, so they have access to their provider network and receive insurance cards with the insurance carrier’s name on them. Still, the employer takes the financial risk by covering their employees’ healthcare costs out of pocket.
Self-insured plans are regulated at a federal level, meaning
that specific state insurance requirements, which are usually stronger, do not
apply. Instead, these plans fall under the Employee
Retirement Income Security Act of 1974 (ERISA), a federal law that creates the
minimum standards that private-industry health plans must provide. Until 2022,
these plans also did not protect individuals against “surprise” billing, which
refers to higher costs for out-of-network care during emergencies or care from
an out-of-network provider in an in-network hospital.
The No Surprises Act
Starting in 2022, the No Surprises Act was created to provide added consumer protections from receiving unexpected medical bills. The Act applies to most emergency services, including out-of-network facilities, ambulance services, and non-emergency services at an in-network facility from an out-of-network provider. Individuals with Medicare, Medicaid, TRICARE, or those who receive treatment through the Veterans Health Administration already have these protections.
The Act also helps uninsured and self-pay consumers who receive a much higher bill than the estimate initially given by a provider. In these situations, healthcare providers must provide you with a good-faith estimate beforehand. If your bill is at least $400 higher than the estimate, you can dispute it within 120 days of your claim.
Who monitors insurance companies?
The Federal Department of Health and Human Services has Center for Medicare and Medicaid Services (CMS), which manages how adequate the provider network is for government-funded programs. State insurance departments are in charge of enforcing state healthcare laws. The Department of Labor oversees national ERISA laws.
State insurance departments will investigate individual complaints. However, complaints take time to research and these coverage issues often arise when people need healthcare services and don't have the time or energy to dispute denied coverage.
For example, in 2017, a woman in Maine complained to the state’s insurance department that her insurance company overcharged her for services related to her daughter’s birth. The insurance company issued her a refund, but they overcharged her again a few months later after the birth of her second child. After issuing a second complaint, the state insurance regulators investigated deeper and found the insurance company had overcharged over one thousand claims during four years. The company had to issue over $1.6 million in refunds and agreed to pay a $150,000 fine if it violated the consent agreement conditions.
How to appeal a health claim
To appeal a health claim, carefully review the reason why the insurance company denied it.
Review your insurance plans' explanation of benefits (EOB)
This should be included with the letter denying your claim.
Call the medical provider to ask about the problem
They may help you better understand why the claim was denied. If a claim was denied due to medical necessity, your physician can request to speak with the medical director.
Review the denial letter
To understand how to appeal the claim and how long you have to do so. Insurance companies are required to provide this information. Ensure you meet the required deadlines; otherwise, the health insurance company can automatically deny your claim.
Gather your research and paperwork
You will need the following:
- A copy of your policy or Summary of Benefits Coverage (SBC). Health insurers must provide you with this before enrolling in their plan and each renewal. If you don’t have a hard copy, you may be able to access a copy on the company’s website.
- Your explanation of benefits
- Your denial letter
Contact the insurance company
You must let them know your concerns and ensure you understand how to start your appeal. Take notes, and you may even want to record the phone conversation (check your local laws to find out if you must notify the company you are doing so). Document the date and time of the call and the names of anyone you speak with.
Submit a written appeal
You will need to submit the following:
- A letter requesting the company reconsider your claim and why the care is needed.
- A letter from your doctor explaining why the care is needed.
- Any research or other peer-reviewed articles that explain the importance of the care for situations like yours.
- Your medical records and test results that contribute to your need for care.
- Any additional forms the insurance company requires.
The ACA requires that insurance companies provide a response to your appeal within the following timelines:
- Urgent medical needs - within 72 hours
- Care not yet received - within 30 days
- Care already received - within 60 days
Request an external review
You can ask for an external review if your insurance provider denies the claim. These reviews bring in independent third parties to reevaluate the claim. The reviews must be completed within 45 days of your request, although urgent health situations require a decision in 72 hours. Insurance companies must legally accept the decision.
File a complaint
If all of these methods fail, you can file a complaint with your state's insurance commission. The commission generally looks at whether the insurance company illegally denied your claim or overcharged you.
Hire a lawyer
If all else fails, you may decide to take the insurance company to court.
What if I'm charged too much for my medical bill?
The process for appealing a medical bill that seems to high is similar to appealing a denied claim except that in this case you'll need to talk with the medical provider's office, not your health insurance company.
- Ask your healthcare provider for an itemized bill.
- Research fair prices for services in your area. The FAIR Health Consumer's website can help you locate the average price for services in your community.
- Write a letter to the medical facility protesting the bill.
- Appeal through your insurance provider. Follow the guidelines in the denial section for more on how to do this.
- File a complaints through your state insurance departments.
- Talk with a lawyer.
Talk with your medical provider if all these methods fail and you are still stuck with a higher-than-expected bill. They may be willing to reduce your bill or set up a payment plan for you.
Is health insurance regulated in the US?
Yes. Health insurance plans are regulated in the U.S. and must meet specific requirements outlined in the Affordable Care Act. However, not all plans have the exact requirements. For example, self-insurance plans must meet federal standards, not more stringent state laws.
Does everyone in the U.S. have health insurance?
No. The United States does not offer universal health insurance, so not everyone has health insurance coverage. However, with the creation of the Affordable Care Act (ACA), the number of uninsured Americans continues to drop, with 2023 reporting an all-time low of 7.7 million uninsured Americans.
Do insurance companies have to cover mental healthcare?
Yes. The 2008 Mental Health Parity and Addiction Equality Act (MHPAEA) was passed to ensure patients with mental health concerns, including substance abuse, have access to the same amount and quality of care as those with physical health issues. The Affordable Care Act (ACA) also added mental health disorders to its list of essential health care benefits.
Why was my health claim denied?
Health claims may be denied for several reasons. The most common is that the health plan does not cover the service, the service requires preauthorization or a referral, the service is not deemed medically necessary, or the service is out of network. However, insurance companies deny claims for various reasons, some of which may be due to data entry or medical coding records.
- U.S. Department of Labor. Health Plans and Benefits: ERISA.
- CMS.gov Information on Essential Health Benefits (EHB) Benchmark Plans.
- CMS.gov. Ending Surprise Medical Bills.
- ProPublica. Insurance Executives Refused to Pay for the Cancer Treatment that Could Have Saved Him. This Is How They Did It.
- KFF. KFF Survey of Consumer Experiences with Health Insurance.
- KFF. Claims Denial and Appeals in ACA Marketplace Plans 2021.
- PBS News Hour. Analysis: Health insurance claims denials are on the rise, to the detriment of patients.
- NPR. NPR-Kaiser Health News Bill of the Month.
- CMS.gov. Submit a Complaint.
- ProPublica. How Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them.
- National Association of Insurance Commissioners. Insurance Department Resources Report (Sept. 2023).
- State of Maine Department of Professional And Financial Regulation Bureau of Insurance. Consent Agreement and Order (Docket No. INS-19-213).
- Fair Health Consumer. Estimate your healthcare expenses.
- ProPublica. When Health Insurers Break State Laws.