Why Are Health Insurance Claim Denial Rates Kept Private?

Published on July 7, 2023, by Law Office of Matthew L. Sharp

Insurance Bad Faith

Why Are Health Insurance Claim Denial Rates Kept Private
Your doctor wants you to receive a certain treatment, but your insurance company said “no.” And now you’ve learned that your insurer is well known for denying seemingly valid claims. If you had access to that information, you might have made a different decision when deciding on an insurance provider. So why are health insurance claim denial rates kept private?

Health insurance companies choose to keep their denial rates private for a very simple reason. Their priority has always been profits over people.

If you’re dealing with a denied health insurance claim, you have the right to take legal action. Whether through an appeal or a lawsuit, the Law Office of Matthew L. Sharp can help you stand up and fight for the benefits that you are rightfully owed.

Key Takeaways:

  • Reporting requirements for denied claims are largely unenforced.
  • Some insurers may have denial rates of nearly 50%.
  • Insurers like Cigna use computer algorithms to bulk deny claims.

How Often Do Health Insurers Deny Claims?

The passage of the 2010 Affordable Care Act (ACA) granted federal regulators the authority to collect data on how, when, and why health insurance providers deny claims.

Despite this, the government has collected very little of the information that it is otherwise entitled to by law. This means that we still know very little about how often health insurers deny claims. And what we do know often comes directly from insurance providers.

Current federal government data suggests that health insurers deny anywhere from 10% to 20% of claims. However, a 2023 analysis from KFF found that some insurers have denial rates as high as 49%.

There is still much that we don’t know about the actual rates at which health insurance providers deny claims. This means that actual denial rates could be much higher than current estimates.

Why Do Health Insurers Deny Claims?

According to KFF, the most common reasons for denials of in-network claims are:

  • Excluded service (14%)
  • Lack of referral or preauthorization (8%)
  • Lack of medical necessity (2%)
  • All other reasons (77%)

*Totals exceed 100% due to rounding of original figures.

It’s important to note that these are not necessarily valid reasons for denying claims. Doctors employed by Cigna (one of the largest health insurance providers in the United States) often deny claims without ever opening patient files. And this isn’t an error with the system—it was built to work this way.

During a single two-month period in 2022, Cigna denied more than 300,000 claims. On average, Cigna doctors spent only 1.2 seconds reviewing each case.

Cigna’s system skirts the edges of laws and regulations that require doctors to review claims before rejecting them on medical grounds. Instead of a human actively reviewing the claims, a computer algorithm called PXDX identifies claims that appear to have a mismatch between diagnoses and what Cigna believes to be the appropriate treatments or tests.

The only job for the doctor is to sign off on the denial. According to one former Cigna doctor, as many as 50 claims could be denied in as little as 10 seconds.

And all these denials are estimated to boost health insurance profits by an average of $11 billion each and every year.

Cigna is not the only health insurance provider with a poor track record of approving valid claims. Some of the largest health insurance companies regularly deny what are otherwise valid and covered claims:

  • Kaiser Permanente
  • UnitedHealthcare
  • Aetna
  • Anthem
  • Humana
  • Blue Cross Blue Shield

Insurance companies also often choose to deny claims because of the cost, even when a treatment or procedure should otherwise be covered. Insurers flag claims that they believe are too expensive or costly. Even when a claim for a treatment or medication is otherwise valid and covered under the policy, insurance providers will frequently choose to issue denials because of the cost.

For one man living with a severe case of chronic ulcerative colitis, a lawsuit revealed that UnitedHealthcare buried reports that would have approved the high cost of his care. Instead, they labeled Christopher McNaughton’s account as “high dollar” and highlighted the savings they would incur by denying his medically necessary care.

In 2021, while UnitedHealthcare officials were debating how to justify the review of McNaughton’s case, the company’s CEO earned a total of $140 million.

Denied Claims Are Becoming the Norm

Automation has increasingly turned denied claims into the norm rather than the exception.

Claim denials are no longer limited to complex treatments or procedures. Instead, patients and health providers alike are facing insurance companies who refuse to pay for things like asthma inhalers, mild medical interventions, and medications that people have successfully taken for years.

Know that you have the right to fight denied claims. When an insurer denies a claim for invalid or fraudulent reasons, it is engaging in a practice known as bad faith insurance. If you believe that your insurer acted in bad faith when it denied your claim, you have the right to file an appeal or pursue legal action.

When filing a bad faith insurance claim, it is advisable to work closely with an experienced attorney. Health insurance companies have billions of dollars and teams of their own lawyers at their disposal. Without the right legal representation, your chances of holding the insurer accountable are virtually non-existent.

Health Insurers Keep Claim Denial Rates Private To Protect Their Own Interests

Never forget that health insurers are for-profit companies. This means that their number one interest is not covering medical expenses for policyholders—it’s boosting their own profits. It goes against their own interests to provide any level of transparency regarding their claim denial rates.

Because denied claims aren’t just a nuisance or anomaly. They’re a feature of the health insurance industry.

Until federal regulators enforce reporting requirements as laid out by the ACA, we cannot expect health insurers to voluntarily supply any of this information.

Without access to this type of information, consumers have no way of making a fully informed decision.

How Denied Claims Impact Patients

Policyholders appeal fewer than 1% of all denied claims. According to Wendell Potter, former overseer of Cigna’s communications team and current consumer advocate, denying claims means leaving more money on the table for companies. Insurers know that most of their customers won’t appeal denials.

But just because people aren’t appealing denied claims doesn’t mean that they aren’t affected by them. Feelings of stress, anxiety, worry, and even depression are common among patients facing serious health problems who don’t have the financial backing of their insurers.

When dealing with the possibility of missing appointments, treatments, or scheduled surgeries while waiting for their health insurer to review a claim, many people choose to simply take on the cost by themselves. For this reason, it should come as no surprise to learn that 62% of all bankruptcy filings are the result of medical debt.

Patients with cancer, autoimmune diseases, life-threatening allergies, and other serious conditions don’t have the time or mental energy to go head-to-head with a multi-billion-dollar company.

But the Law Office of Matthew L. Sharp does.

Fighting Denied and Bad Faith Insurance Claims in Reno, NV

The average person in Nevada will pay $5,964 for health insurance each and every year. For a family of four, the annual cost of health insurance averages out to $23,855. To learn that your insurance company expects you to pay for denied claims on top of these exorbitant costs is more than just disheartening—it can be financially devastating.

We are prepared to help you appeal and fight denied claims no matter where you received care in Reno, including at any of our major hospitals:

  • Renown Regional Medical Center
  • Renown South Meadows Medical Center
  • Renown Children’s Hospital
  • Northern Nevada Medical Center
  • Saint Mary’s Regional Medical Center
  • Tahoe Pacific Hospital

Our law office handles denied claims for:

  • Prescription medications
  • Hospital stays
  • Surgeries
  • Pain management (including radiofrequency ablation)
  • Cancer treatment (including proton therapy)
  • Physical therapy
  • Specialist appointments
  • Experimental treatments
  • Long-term care
  • Emergency room visits
  • Urgent care visits
  • And more

Work With a Law Firm That Cares

Founding attorney Matthew L. Sharp has dedicated more than 30 years to standing up for the rights of Nevada residents.

At the Law Office of Matthew L. Sharp, we fight for people who have been taken advantage of by the insurance company. We know that for every bad faith insurance case we take on, we have the potential of impacting real and lasting change that can preserve the rights of other policyholders in Reno, Washoe County, and beyond.

We’re ready to talk about your case. Are you? Call our office or fill out our convenient online form and we’ll schedule you for a completely free case evaluation.