Millions of Americans in the past few years have run into this experience: filing a health care insurance claim that once might have been paid immediately but instead is just as quickly denied. If the experience and the insurer’s explanation often seem arbitrary and absurd, that might be because companies appear increasingly likely to employ computer algorithms or people with little relevant experience to issue rapid-fire denials of claims — sometimes bundles at a time — without reviewing the patient’s medical chart. A job title at one company was “denial nurse.”
It’s a handy way for insurers to keep revenue high — and just the sort of thing that provisions of the Affordable Care Act were meant to prevent. Because the law prohibited insurers from deploying previously profit-protecting measures such as refusing to cover patients with preexisting conditions, the authors worried that insurers would compensate by increasing the number of denials.
And so, the law tasked the Department of Health and Human Services with monitoring denials both by health plans on the Obamacare marketplace and those offered through employers and insurers. It hasn’t fulfilled that assignment. Thus, denials have become another predictable, miserable part of the patient experience, with countless Americans unjustly being forced to pay out-of-pocket or, faced with that prospect, forgoing needed medical help.
A recent KFF study of ACA plans found that even when patients received care from in-network physicians — doctors and hospitals approved by these same insurers — the companies in 2021 nonetheless denied, on average, 17% of claims. One insurer denied 49% of claims in 2021; another’s turndowns hit an astonishing 80% in 2020. Despite the potentially dire impact that denials have on patients’ health or finances, data shows that people appeal only once in every 500 cases.
Sometimes, the insurers’ denials defy not just medical standards of care but also plain old human logic. Here is a sampling collected for the KFF Health News-NPR “Bill of the Month” joint project.
- Dean Peterson of Los Angeles said he was “shocked” when payment was denied for a heart procedure to treat an arrhythmia, which had caused him to faint with a heart rate of 300 beats per minute. After all, he had the insurer’s preapproval for the expensive ($143,206) intervention. More confusing still, the denial letter said the claim had been rejected because he had “asked for coverage for injections into nerves in your spine” (he hadn’t) that were “not medically needed.” Months later, after dozens of calls and a patient advocate’s assistance, the situation is still not resolved.
- An insurer’s letter was sent directly to a newborn child denying coverage for his fourth day in a neonatal intensive care unit. “You are drinking from a bottle,” the denial notification said, and “you are breathing on your own.” If only the baby could read.
- Deirdre O’Reilly’s college-age son, suffering a life-threatening anaphylactic allergic reaction, was saved by epinephrine shots and steroids administered intravenously in a hospital emergency room. His mother, utterly relieved by that news, was less pleased to be informed by the family’s insurer that the treatment was “not medically necessary.”
As it happens, O’Reilly is an intensive-care physician at the University of Vermont. “The worst part was not the money we owed,” she said of the $4,792 bill. “The worst part was that the denial letters made no sense — mostly pages of gobbledygook.” She has filed two appeals, so far without success.
Some denials are, of course, well considered, and some insurers deny only 2% of claims, the KFF study found. But the increase in denials, and the often strange rationales offered, might be explained, in part, by a ProPublica investigation of Cigna — an insurance giant, with 170 million customers worldwide.
ProPublica’s investigation, published in March, found that an automated system, called PXDX, allowed Cigna medical reviewers to sign off on 50 charts in 10 seconds, presumably without examining the patients’ records.
Decades ago, insurers’ reviews were reserved for a tiny fraction of expensive treatments to make sure providers were not ordering with an eye on profit instead of patient needs.
These reviews — and the denials — have now trickled down to the most mundane medical interventions and needs, including things such as asthma inhalers or the heart medicine that a patient has been on for months or years. What’s approved or denied can be based on an insurer’s shifting contracts with drug and device manufacturers rather than optimal patient treatment.
Automation makes reviews cheap and easy. A 2020 study estimated that the automated processing of claims saves U.S. insurers more than $11 billion annually.
But challenging a denial can take hours of patients’ and doctors’ time. Many people don’t have the knowledge or stamina to take on the task, unless the bill is especially large or the treatment obviously lifesaving. And the process for larger claims is often fabulously complicated.
The Affordable Care Act clearly stated that HHS “shall” collect the data on denials from private health insurers and group health plans and is supposed to make that information publicly available. (Who would choose a plan that denied half of patients’ claims?) The data is also supposed to be available to state insurance commissioners, who share with HHS the duties of oversight and trying to curb abuse.
To date, such information-gathering has been haphazard and limited to a small subset of plans, and the data isn’t audited to ensure it is complete, according to Karen Pollitz, a senior fellow at KFF and one of the authors of the KFF study. Federal oversight and enforcement based on the data are, therefore, more or less nonexistent.
HHS did not respond to requests for comment for this article.
The government has the power and duty to end the fire hose of reckless denials harming patients financially and medically. Thirteen years after the passage of the ACA, perhaps it is time for the mandated investigation and enforcement to begin.
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I am once again going to tell this story: it was the late 1980s, my aunt and her husband were visiting our family from Colorado. Sitting around the dinner table one night, the husband tells us about his job, answering phones at a large health insurer’s office. According to him, they were trained to automatically reject all claims the first two times they were submitted, and to only check the caller’s policy on their third attempt to get the claim covered.
My guess is that this has been SOP at a lot (if not most, or all) health insurance companies for the last 3 or 4 decades, at least.
Can someone with industry knowledge shed some light on how Self-health-insured companies play into this? Our family has been covered by health insurance through corporate employment for decades.
The companies are self-insured. The premiums rise, the co-pays rise, the coverage shrinks, and denials have increased.
Is this a case of the Employer using the 3rd party health insurance benefits manager simply as a risk-and-ROI manager?
How much profit is the insurance company making in the self-insured corporate market? How much of the employee health insurance contributions can the self-insured corporate employer itself keep?
Even in the early 2000s, living in the US as an expat (with what HR called “Rolls-Royce medical coverage”), I had to deal with similar nonsense, and my wife’s diagnosis with a serious illness was the primary factor in our decision to leave the US permanently. Presumably all US citizens and residents have had similar or worse experiences than mine. And yet, in 2008, Sarah Palin brought up the scare tactic of “death panels” of bureaucrats who decide who is “worthy of medical care”. I am amazed that least half the population bought into this, as if there weren’t already death panels run along the lines of maximizing shareholder value.
Based on my own limited experience I suspect denials and hold-ups increase toward the end of a quarter/year.
Denying claims has been going on for decades, especially since ACA, health insurance companies figured out how to make even more profit.
They hire a company to review paid claims and claw-back paid claims, that had been overpaid and/or should had been denied. There’s no time limit how far the third-party can go back and basically deny the already paid claims. Generally, the third-party gets-30-40% clawed back claims and everyone wins, except the members of course. The profit from this claw-back can be 10s of million dollars for the insurance companies and 3+ million for the third-party. Even this profit generating activity has been going on 15-10 years. In my previous life, I dealt with such a company and while I hated it, the board just pushed it through.
Anthem pulled that one on me for my hip replacement. The hospital billed me for about a third of my annual income.
Since it was more than a year later, and a different calendar year, I knew I had them. The billing department said it was because their computer, unmonitored over a long weekend, had spit out the bill automatically, and it was a mistake. I fired Anthem a complaint — California had just fined them big-time for slow walking their dispute process — and hoped they could start working on their next penalty. Finally, with the hospital VP for customer service on the line, she looked into it, found it was a mistake, sent me a signed letter telling me I didn’t owe anything, and it wouldn’t happen again. Two months later it happened again; all I had to do was leave a phone message for the VP to get another letter.
I was going to report both the Anthem and the hospital to the California Attorney General, but, by then, the consumer-friendly Lockyer had been replaced by Harris, and the AG’s office was not forthcoming in soliciting consumer complaints.
Kamala Harris’ ratf***ing of Californians both as San Francisco’s and California’s attorney general in favor of the wealthy and connected, aside from her looks and gender, is likely why the witch was chosen as President Biden’s vp. Her being the California Democratic Party’s candidate for both offices was one of the reasons for leaving the party. One could have made a credible case for not knowing when she was in San Francisco, but after that, her propensities and vices were known, but they still chose her.
I wonder why nobody sues. Wouldn’t having to defend be more costly than paying out? So said insurance company is going to have to deploy lawyers to podunk city. You can file yourself, or am I mistaken? The surely can’t afford not to show up, right?
John – IANAL, but as I understand it, in Alabama suing a health care provider is very difficult.
The plaintiff has to find another doctor in the state who is in the same specialty to testify against the defendant. There aren’t a whole lot of docs who are willing to throw their colleagues under the bus. That’s a fast road to being blackballed and cut off from referrals.
“I wonder why nobody sues.”
While everybody can sue, after all this the US, it’ll lead to nowhere. Health insurance companies have their own legal department with a substantial number of lawyers on staff. Some of these lawyers only job is to address lawsuits related to claims.
In addition, each insurance company has it’s own, arduous appeal process that the members need to follow with a ton of paperwork. Without following this procedure, there’s very little chance that the court will hear the case, much less render a judgment. In which case, back to the appeal process where after 2-3 denial, it can be appealed to the state’s insurance department. Generally, the states are favorable to the member, if the case is on solid ground. Most people get tired to follow up on their denied claims, or give up after first, or subsequent appeal denial. And that’s what the insurance companies are betting on…
The lawyers suing the insurance company quickly learn, to either don’t take a client with denied claim(s), or hire a patient advocate to oversee the appeal process…
Why people don’t sue over denied claims – they’re dealing with illness, rehabilitation, lost income, disability, death. IOW, overwhelmed. Then there’s the problem of finding an attorney who will take your case on contingency,. That’s before you reach the stage of finding a doctor who will testify against another doctor.
The fact that you can legally sue a corporation with a trillion dollars in cash reserves – after exhausting all the internal appeals, of course – is a classic example of having totally meaningless “rights” under the law.
The overwhelming majority of people have neither the time nor money to do so under the best of circumstances. When dealing with the consequences of illness in the U.S., it’s unimaginable.
But not to worry! Just go get your health care anyway. If the claim is denied, just gather every scrap of paper you have about your financial circumstances, fill out the hospital’s forms in triplicate for their generous charity care policy. And if they deny you, just negotiate a discount with that particular billion-dollar behemoth, and when they garnish your wages and drain your bank account, well, you can sue them!
Best. Government. Money. Can. Buy.
It strikes me that the three examples given above are all medical fraud on the part of the insurer and should be prosecuted as such. In all three cases anxiety as to whether the expense can be met and many hours of wasted time occur as a result of the fraud. Regardless of the lack of “studies” should not the HHS inspector general have the power to settle such issues? Fining the insurance company triple the amount in question might change the insurer’s behavior. In Mr. Peterson’s case the insurer would pay the $143,206 with an additional $429,618 fine for the fraud.
RJM – HHS may be able to do something about such fraud if it involves Medicare, Medicaid, or other federal government programs, but for the most part insurance regulation is left to the states.
The state insurance commissioner or the attorney general would have to be the agencies filing suit and since they are elected officials, making too much trouble for these companies would cause a drop in their campaign contributions. Na ga happen.
Stay safe out there, folks.
Medicare/Medicaid fraud, some of it mandated by regulations, had become a $100B business in a year. Certainly HHS could do something about that, right? Well, not really when people at the HHS were health insurance executives in their prior life….
Publish the denial letters, and tally up the denials insurer by insurer.
Linda Peeno’s testimony
https://www.c-span.org/video/?c4569390/user-clip-linda-peeno-confession-managed-care-medical-director
Wow. That video. Looks like First, do no harm got left in the ditch.
I once had an issue where even though I had an “approval” letter, the claim was denied. I thought it would be a simple matter of pointing to the letter, and the insurance would say “my bad” and pay up. Silly me. First, they said the approval letter wasn’t actually an approval, and it went downhill from there. Months and many calls and letters later, it was finally approved. At least this is my theory. Maybe my hospital is extraordinary, but please try this before going it alone.
Since then, I’ve had good luck putting this back on the hospital. If something is denied, my first call is to the hospital billing dept, and i say something like “maybe you billed this wrong”. So far (2 denials), the billing person had said “we’ll look into it”, and the problem has gone away with no more effort from me. After all, they have people who work with insurance all day, and it is in their interest to get the insurance company to pay. They also have more clout since they a larger financial stake (and more lawyers) than a single person.
Duke, I’ve found it’s SOP in the event of those ghastly “pre authorizations” to have absolute nonsense boilerplate that states something such as “even though we’ve authorized this does not mean we will pay for it.” Smdh. I used to defend these companies way back when, though not health insurance companies, but institutions (hospitals). But all insurance is insurance. Deny deny deny. And with health insurance, hope the person is too debilitated and overwhelmed to fight. And it’s gotten so much worse. There is no such thing as bad faith anymore. We used to jokingly call it “no faith”. Glad things worked out for you.
FIRE is in control of the system:
Claims denied I(nsurance wins)
Denied claims result in victims borrowing money F(inance) wins.. When victims can’t pay, F(inance) wins. Foreclosure occurs RE wins. Property sale RE wins again.
The healthcare system is rigged. Regulators are paid to look the other way. Corporate heads of the insurance companies need to go to jail.
This is what lack of accountability looks like. Where’s the jail? Rich executives need to be indicted, tried, and convicted for committing a crime here. There must be credible instances of manslaughter for this, where denial of claims led to subsequent inability to pay for care, and death.
The Health Extortion Mafia denied your claim? Now you are heavily in debt because of “medical” expenses? Don’t be surprised, that’s the way it’s supposed to work. The US has a declining average life expectancy and declining health outcomes and rising “consumer” debt. So, in aggregate, folks will die younger with MORE DEBT. That’s good for GDP figures, as this is counted as productive economic output.
US denizens pay the most expensive health extortion in the world, and what do they get?
Don’t take it personal, it’s strictly business.
Coding errors can contribute to denials: all CPT and ICD10 codes should be checked.
These days even when a claim has not yet been denied simply filling out the paperwork can be worrying. My sister is a nurse practitioner in Texas, actually in the same city with the currently infamous birth control pill judge. About a fifth of all pregnancies naturally end in losing the fetus, very often before the woman even realizes that she was pregnant. Almost always the fetus is passed without a problem. But sometimes a serious issue can arise when the dead fetus, in whole or in part, is retained. The term for this is “missed abortion”. It absolutely does not imply in any way that anyone, patient or doctor, had attempted to abort a viable fetus. But after the recent restrictions my sister has had to spend valuable time explaining to insurance company personnel not only why they should cover the treatment, but now, why the medical staff shouldn’t have the law called on them.
I am reminded of the John Grisham novel “The Rainmaker”. In the novel an insurance company hatches a plan to sell life insurance to poor people, and then deny every claim, betting that a large number of poor people won’t go to a lawyer. (https://en.wikipedia.org/wiki/The_Rainmaker_(novel). It looks like someone decided to enact that novel IRL. What a [family blog] mess.
J. Zelnicker is quite right about state authority residing in the insurance commissioner. In the 1970’s and 1980’s a physicians letter or the threat of a letter to the insurance commissioner in Indiana concerning insurance non-payment was generally effective in getting payment, however by the 1990’s that was not longer the case. As has been pointed out hospital coding can also be an issue that makes it difficult to sort out for the insured. There is one other issue that hasn’t been mentioned and that is the Obama administration’s war on whistle-blowers. Shining the light of fraud on health care providers (physicians, pharm houses, hospitals, insurance companies, nursing homes and other medical service entities) has generally been by insider whistle-blowers which can be verified by the US Attorney General’s reports through the Bush administration. Toward the end of the Bush administration and forward to the Obama administration whistle-blowing became anathema. The whistle-
blower frequently knows how the fraud is committed and can be instrumental in prosecuting the fraud either in court or administratively.