Why Is Appealing a Health Insurance Denial So Complicated?

Published on September 22, 2023, by Law Office of Matthew L. Sharp

Insurance Bad Faith

Why Is Appealing a Health Insurance Denial So Complicated
It’s an experience so common that most people have been through it at least once in their lifetime—an unexpected insurance denial. But for as often as this happens, far fewer people ever appeal the decision. So why is appealing a health insurance denial so complicated, and is there anything we can do about it?

Insurance companies shouldn’t be allowed to play games with your health. If you’re dealing with a denied claim and need help, please contact the Law Office of Matthew L. Sharp. We’ll match you with a Reno health insurance dispute attorney who will fight for you.

Why Do Health Insurance Providers Deny Claims?

According to KFF, insurance providers deny an average of 17% of claims for in-network care. Denial rates vary drastically between insurers though, with one insurer denying a shocking 49% of all in-network claims.

Health insurance companies deny claims for all kinds of reasons, ranging from technical errors to coverage issues. Some of the most common reasons for denials include:

  • Coding errors
  • Incorrect information
  • Lack of proper documentation
  • Experimental or investigational treatment
  • Insufficient coverage
  • Unauthorized services (lack of preauthorization)
  • Claim filed too late
  • Lack of medical necessity

These might be the reasons that insurance companies list for denials, but some experts believe that these are explanations used to shield true intent. As one oncologist puts it, “death is cheaper than chemotherapy.”

In other words, health insurers aren’t interested in helping people—they’re interested in making money.

Paying for claims, even those that involve life-saving medical care, cuts into the bottom lines of these big, for-profit companies. The longer that an insurer can deny coverage or drag out a claim, the greater chance they have of the patient giving up and paying out of pocket.

And in many cases, claims aren’t even being denied by doctors or real people. Some insurers are increasingly using AI algorithms to review and deny claims in bulk. The only time a real person ever interacts with these claims is to sign off on the denial.

Appealing Denied Claims—What Makes It So Hard and Why Some People Never Try

ERISA (the Employee Retirement Income Security Act of 1974) “is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry.” As part of the requirements set forth by this law, health insurers must provide policyholders with important information related to their plans and coverage. This includes appeals and grievance processes.

While health insurance companies must establish and provide an appeals path for customers, most have made the process so unnecessarily confusing and convoluted that few understand how to use it. In fact, fewer than 1% of people who purchase coverage on the Health Insurance Marketplace ever appeal denied claims.

According to a ProPublica report, there are several complicating factors that make filing an appeal for a denied claim so difficult.

These include…

Differences Between Self-Funded and Fully Insured Plans

For example, few people understand the difference between self-funded and fully insured plans. So what does that mean?

Approximately 65% of employees in the United States receive health insurance coverage through their employer’s self-funded plan. In this type of coverage, employers pay for the medical costs but hire an insurance company to administer claims. If you are covered by a self-funded plan, the name on your insurance card might not actually be your provider and therefore would not be the party with whom you filed an appeal.

Fully insured plans are when employers hire an insurance company to pay claims and assume all the risk. For this type of plan, the name on your insurance card is your actual insurance provider. To appeal a denied claim, you file with them. Knowing who to file an appeal with is just the start, though. There are strict rules and hoops you’ll have to jump through to get your insurer to reconsider its decision.

State-Specific Rules

The federal government requires every state to comply with certain minimum standards for both Medicaid and Children’s Health Insurance Programs. While these rules are intended to create conformity among federal programs administered at the state level, many states impose their own additional rules for things like appeals.

Multiple Insurance Providers

Approximately 12.5 million people receive coverage from both Medicaid and Medicare. Depending on the claim that was denied, you have to file a claim with either Medicaid or Medicare, but not both. For vulnerable, sick, or elderly patients, it can be confusing trying to navigate which insurance provider to file an appeal with.

Many people are covered by multiple providers without even realizing it. Employers are increasingly offering separate health insurance and prescription drug plans. Policyholders may only learn about the differences when they are trying to figure out why their insurer denied payment for a medication.

The Impact of Insurance Denials on Patients and Medical Providers

For patients, there are few things more distressing than learning that the insurance company is refusing to pay for a claim. With a single decision, an insurer can put their own policyholder into tens- or even hundreds-of-thousands of dollars of debt.

Patients who have experienced a denied claim are at a heightened risk for:

  • Discontinuing necessary medical care
  • Avoiding future treatment
  • Filing for bankruptcy

Health care providers have also felt the impact of continued and ongoing denied claims. Instead of giving their full and focused attention to the patients who need them, doctors are having to be vocal advocates to get even the simplest procedures covered.

Many health care offices and hospitals now employ entire teams of workers whose sole job is to file, document, and appeal claims over and over again.

What Can I Do if My Claim Was Denied?

There is no one-size-fits-all guide to appeal a denied claim. The steps you take after a denial depend on your insurance provider and their appeals process. Keep in mind that this process can be further complicated by rules specific to your state and coverage provided by multiple insurers.

If you are sick, facing a mountain of medical bills, or otherwise simply confused about how to file an appeal, we encourage you to reach out to the Law Office of Matthew L. Sharp. We provide no-cost case evaluations.

And if you’ve exhausted the appeals process, we can help you evaluate your legal options for moving forward with a lawsuit. With three decades of experience, founding attorney Matt Sharp continues to be the fierce and uncompromising advocate that Nevada patients deserve.