Reasons for Health Insurance Claim Denials and What You Should Do

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A health insurance denial happens when your health insurance company refuses to pay for something.

Also known as a claim denial, your insurer can refuse to pay for a treatment, test, or procedure after you’ve had it done or while you’re seeking pre-authorization before you’ve received the health care service.

Why Health Insurers Issue Denials

There are literally hundreds of reasons a health plan might deny payment for a healthcare service. Some reasons are simple and relatively easy to fix, while some are more difficult to address.

Common reasons for health insurance denials include:

Paperwork errors or mix-ups
For example, your doctor’s office submitted a claim for John Q. Public, but your insurer has you listed as John O. Public.

Questions about medical necessity
The insurer believes the requested service is not medically necessary. There are two possible reasons for this:

  1. You really don’t need the requested service.
  2. You need the service, but you haven’t convinced your health insurer of that. Perhaps you and your doctor need to provide more information about why you need the requested service.

Cost control
The insurer wants you to try a different, usually less expensive, option first. In this case, many times the requested service will be approved if you try the less expensive option first and it doesn’t work (step therapy for prescription drugs is a common example of this).

The service just isn't covered by your plan
The requested service isn’t a covered benefit. This is common for things like cosmetic surgery or treatments not approved by the FDA. It's also common if you've purchased a plan that isn't regulated by Affordable Care Act rules (such as a short-term health plan or fixed indemnity plan) and thus doesn't have to cover services that you might otherwise expect a health plan to cover—things like prescription drugs, mental health care, maternity care, etc.

Provider network issues
Depending on how your health plan's managed care system is structured, you may only have coverage for services provided by doctors and facilities that are part of your plan's provider network. If you're seeking prior authorization for a service to be performed by an out-of-network provider, the insurer might deny the authorization but be willing to consider it if you choose a different health care provider.

Alternately, you might try to convince the insurance company that your chosen provider is the only provider capable of providing this service. In that case, they can make an exception and provide coverage (be aware that the provider may balance bill you for the difference between what your insurer pays and what the provider charges, since this provider hasn't signed a network agreement with your insurer).

Missing details
Perhaps there was insufficient information provided with the claim or pre-authorization request. For example, you’ve requested an MRI of your foot, but your doctor’s office didn’t send any information about what was wrong with your foot.

You didn't follow your health plan's rules
Let’s say your health plan requires you to get pre-authorization for a particular non-emergency test. You have the test done without getting pre-authorization from your insurer. Your insurer has the right to deny payment for that test—even if you really needed it—because you didn’t follow the health plan’s rules.

In any non-emergency situation, your best bet is to contact your insurer before scheduling a medical procedure, to make sure you follow any rules they have regarding provider networks, prior authorization, step therapy, etc.

What to Do About a Denial

Whether your health plan denies a claim for a service you’ve already received or it denies a pre-authorization request, getting a denial is frustrating. But a denial doesn’t mean you’re not allowed to have that particular healthcare service. Instead, it either means that your insurer won’t pay for the service, or that you need to appeal the decision and potentially have it covered if your appeal is successful.

If you’re willing to pay for the treatment yourself, out-of-pocket, you’ll probably be able to have the health care service without further delay.

If you can’t afford to pay out-of-pocket, or if you’d rather not, you may want to look into the cause of the denial to see if you can get it overturned. This process is called appealing a denial, and it can be done in conjunction with a prior authorization denial or the denial of a post-service claim.

All health plans have a process in place for appealing denials, which was codified by the Affordable Care Act. The appeals process will be outlined in the information you receive when you’re notified that your claim or pre-authorization request has been denied. Follow your health plan’s appeals process carefully. Keep good records of each step you’ve taken, when you took it, and who you spoke with if you’re doing things on the telephone.

If you’re not able to resolve the issue by working internally within your health plan, you may request an external review of the denial. This means a government agency or other neutral third party will review your claim denial.

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Article Sources

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  1. US Department of Health and Human Services. HHS.gov. Appealing Health Plan Decisions.