When Insurers Deny Coverage for Necessary Medical Treatment

Published on September 29, 2022, by Matthew Sharp

Insurance Bad Faith

When Insurers Deny Coverage for Necessary Medical Treatment

Insurers deny coverage for necessary medical treatment for varying reasons, sometimes legitimate and other times, unethical. Insurers may also deny coverage due to a mistake. When insurance companies refuse to pay claims for valid reasons, people may lack many options for recourse. 

However, if your claim was denied for illegitimate reasons, or otherwise in bad faith of your agreement, you may have options to appeal or pursue the action further.  

What Is Medical Necessity?

Medical necessity generally refers to a reasonable treatment, service, or procedure that helps someone function maximally, prevents a condition from occurring, or that decreases the effects of a condition or illness. Medical necessity is an element in all types of cases, whether you are sick with a disease or were injured at home or in a car wreck.

Different insurers have different requirements and guidelines for determining medical necessity. Some insurers are more flexible than others about accepting procedures that are a bit more invasive and expensive than the most economical, noninvasive options.

As a patient, your idea of what is medically required may differ from your insurer’s. Take experimental treatments, for instance. Insurance companies generally do not cover them, but many patients who have no other options may view them as lifesaving and medically necessary.

Can Insurers Deny Coverage for Necessary Medical Treatment?

Insurers generally cannot deny coverage for necessary medical treatment, but it does happen. Insurance companies often prefer economical approaches, and the less invasive the better. Before agreeing to pay for more costly procedures, insurers sometimes require patients to first seek relief through these other treatments. 

For example, a doctor recommends a patient undergo hip surgery. The insurance company denies the procedure, however, saying that the patient should try pain medications and physical therapy first. If the two approaches do not succeed, the insurer might then approve hip surgery.

An insurer may deny coverage for a medically necessary treatment if the medical office gives the wrong reason. Rhinoplasty is generally cosmetic and not deemed medically necessary. However, one that is needed due to a nose abnormality that affects a patient’s ability to breathe would likely fall into this classification. The insurance company might find issue with the necessity at first if the supporting evidence is insufficient or if the medical office used the wrong codes. 

Of course, some insurers do act in bad faith and unreasonably, unethically deny medically necessary treatment. You do not deserve to be at the mercy of your insurance company in these situations. Proton therapy is an example of something insurers might deny in bad faith. The insurers might claim that the therapy is not shown to be safer or more effective than standard cancer treatment or radiation therapy.

The major difference between proton therapy and typical radiation is that proton therapy reduces dosage amounts to the bones, heart, lungs, and non-cancerous tissues. The goals of the lower doses are more intensive effects on the tumor, along with fewer overall risky complications and side effects.

In reality, insurance companies might just not want to cover an expensive procedure. They deny coverage, hoping that consumers give up and do not pursue the claim, or hoping they end up accepting a delay or underpayment of claim. Their denial of coverage forces people to pay as much as hundreds of thousands of dollars out of pocket or delay or forgo treatment.

Who Decides Whether Necessary Medical Treatment Is Covered?

Insurance companies generally determine whether they cover medically necessary treatment. They do so according to these elements: type of treatment, frequency, extent, body site, and duration. Each area must have guidelines backing up the approach. Medically necessary generally meets these criteria.

  • It fits accepted standards in the medical community and is clinically validated.
  • It is safe and effective.
  • A doctor has attested that a service is medically necessary.
  • Medical records and other documents are present to show necessity.
  • The service or procedure is not cosmetic, experimental, or investigational.

Clinical validation ensures that a procedure has undergone the rigorous verification and analytical steps required to prove it is effective and safe. Insurers use diagnosis codes and/or the clinical conditions set out in the insured person’s policy to ensure medical necessity.

Medical providers typically submit preapproval (prior authorization) for treatments and services. However, preapproval does not always mean insurance will end up paying for the treatment or service.

Prior authorization serves several purposes in addition to increasing the chances insurance covers treatment. It is a way to ensure that medical providers follow nationally recognized care standards and use appropriate medications and services that do not conflict with existing conditions. It is also a way to check that doctors are qualified to administer that service or treatment.

When submitting a treatment for preapproval, doctors include information such as the diagnosis, the needed procedure, the seriousness or severity of the diagnosis, previous interventions or studies attempted, and the dangers to the patient if this specific procedure is not performed.

A physician and an insurer can disagree on medical necessity. An example is when a doctor sees treatment as necessary, but the insurer does not, perhaps because other interventions are cheaper.

Frequency is one limit that insurers place on medical necessity. An insurer may say that a certain procedure can be performed only a number of times over a set time period. Preventive services are typically restricted to just one per year.

The Role of the Doctor in Determining Necessity for Medical Treatment

Medical providers play an important role in documenting medical necessity. They provide thorough medical documentation and validation to support the services billed. They also record patients’ progress and response and track any changes to treatment and diagnosis. Doctors also record when patients are not following treatment recommendations. Insurers may stop covering tests, services, and treatments if patients continually miss appointments or are inconsistent about treating themselves at home.

What Happens When Insurers Deny Coverage for Necessary Medical Treatment?

When insurers deny coverage for necessary medical treatment, the first step many patients take is to review the denial of claims letter. Often, it explains the reasons for the denial. Patients should try to appeal decisions rather than paying for treatments themselves right away or skipping medical care. The letter should also outline the steps for appeal.

Otherwise, you should contact your insurance company to check whether an error is involved with your claim. There are many points where an error can occur, both in preauthorization and claims filing. Once someone has identified an error, it is usually straightforward to fix.

If there is no apparent mistake, ask to discuss the denial with the reviewer who decided your claim. Request an explanation of the denial, and take careful notes. Ask for the rationale in writing, too.

Preparing to Appeal Denied Coverage

Use the explanation of denial for the next step, which is filing an official appeal. The appeal explains that you disagree with the insurer’s decision and outlines the reasons why.

You probably need to work with your medical provider’s office on the appeal. Doctors are used to this. It is standard practice, so do not stress about having to reach out and ask for help.

Your doctor should write a narrative explaining the necessity of the treatment, service, or procedure, and include supporting documents such as treatment research and your medical records.

Both you and the doctor’s office should include details on previous communications with the insurance company. Ask for expedited review if you are in urgent need of the treatment. Depending on your urgency, you may want to investigate how to file both an internal and external appeal at the same time (more on external appeals soon).

Waiting comes next and may take 30 days, maybe longer. If the insurer sends a letter stating yet again that it is denying the claim, make sure a reason is given for the denial. It is legally required at this stage, as is an explanation for how you can have an independent third party review the decision if you appeal again. Follow the instructions outlined to appeal the decision to the third party. This is an external review, while your earlier appeal to the insurance company was an internal review. For internal review, someone at the insurance company reviews the decision.

If an external review fails, you may want to seek legal help. A Nevada insurance bad faith lawyer will help you understand your options and determine how to proceed.

How to File a Lawsuit When Insurers Deny Coverage for Necessary Medical Treatment

Insurance bad faith may be at play when an insurance company denies coverage for medically necessary treatment. Bad faith claims are fairly complicated, and many time-sensitive issues are involved. Move as quickly as possible to meet with lawyers about your case.

A good number of insurance bad faith attorneys offer free consultations, allowing you to gather a wealth of information upfront. Many also work on a contingency basis. That means you do not need to pay their fee upfront. Rather, they take money from an insurance settlement or trial win.

It is best to work with lawyers who have experience in bad faith insurance claims. Insurance is a complicated area of the law. Someone who practices, say, primarily probate law, divorce law, or criminal law is unlikely to have the necessary expertise to mount an effective bad faith insurance claim. Bad faith insurance lawyers can work with all types of insurance, including medical, health, homeowners, life, personal injury, disability, and auto.

The elements of a bad faith claim often cover the excessive delay in responding to claims, unjustified denials, fabrications about what a policyholder’s policy covers, lies about the circumstances of the denial of coverage, and failure to provide sufficient or prompt grounds explaining the denial of the claim. For example, if your insurer has repeatedly asked for the same types of records or documentation from you, which you have provided, that indicates purposeful stonewalling.

As mentioned above, it is essential to get moving as soon as you feel bad faith has happened. It is frustrating, unfair, stressful, and expensive when insurers deny coverage for necessary medical treatment. Even if you have not yet exhausted all of your reasonable appeals, you can get in touch with a lawyer if you think it is necessary. The conduct of insurance companies sometimes is so egregious as to be blatant at an early stage.

Another thing to keep in mind is that insurers cannot cancel your policies without a valid reason. Unfortunately, some cancel for unethical reasons if you are in a dispute or seeking coverage for expensive treatment. An example of a valid reason to cancel coverage would be if you did not pay your premiums.

How Can a Bad Faith Insurance Attorney Help Your Case?

Before filing a lawsuit, your lawyer makes sure you have exhausted all reasonable avenues for appeal. Your lawyer also reviews a copy of the insurance contract before the denials to ensure your requested treatments, procedures, or services are covered. If he or she relies on a copy made after the denials, the insurance company could have made sneaky modifications.

You and your lawyer review all communications with the insurance company. It helps quite a bit if you have been meticulous from the start about listing who you spoke to, how, when, where, for how long, the date, and the subject discussed. If you have not been tracking this, start taking notes right away while your memory is still relatively fresh. Your email, cellphone logs, and mailed letters can help jog your memory.

The lawyer conducts investigations based on the insurer’s reasons for the denial. It could be that most other insurers approve this certain procedure and yours should too, based on its definition of medically necessary. It just may be throwing up arguments to avoid paying a lot of money for a six-figure procedure.

Therefore, you may find it helpful to work with an attorney when insurers deny coverage for medically necessary treatment to ensure you receive the benefits you need and deserve.