Every time a health claim is denied, an insurance company makes more money.
But it's no "wonderful life" for healthcare providers and patients when faced with a denied claim. Claim denials create significant challenges for both parties. For providers, claims follow up is a time-consuming, costly and often unsuccessful process. For patients, a denied claim may mean significant out-of-pocket costs.
What makes matter worse is insurance companies are incented to deny claims, even those filed appropriately, as Wendell Potter, author of "Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans," notes in an April 2013 column:
"One of the things you need to know about the private health insurance business is that insurers make a lot of money when they delay paying a claim. ... When an insurance company delays paying a claim by days, weeks or months, it can take advantage of 'float'.
"The longer you can delay paying a claim, the more investment income you can make on the premiums you take in from your policyholders. And investment income is especially important to for-profit insurance companies because it contributes significantly to the bottom line. Shareholders and Wall Street financial analysts like that, even though much of the money on which the investment gains were made should have been paid to health care providers."
Potter made these statements as he wrote about claim denial rates in Vermont. A law passed in 2012 made claim denial rates in the state public. Potter's research revealed that of the three major health insurers in the state, Cigna — the only for-profit company of the group — had a significantly higher denial rate (21%) than Blue Cross (7.6%) and MVP Health Care (15.5%).
He found this discrepancy concerning, noting the following:
"Most of the claims denied by all three companies were categorized as 'administrative,' meaning they were denied because a provider presumably used an incorrect procedure code or made some other clerical error when submitting their claims for payment. It defies reason to think that the doctors and hospitals in Vermont submitted inaccurate claims to Cigna at almost three times the rate they did to Blue Cross."
Wrongful denial of health claims is not just a Vermont issue; it's a nationwide problem, as numerous reports published in just the past few months indicate.
In January, Cigna settled with the New York Attorney General's office after an investigation uncovered the wrongful denial of hundreds of mental health billing claims for nutritional counseling for mental health conditions.
A South Dakota legislative panel recently approved a package aimed at giving residents better protection against unfair practices by insurance companies, according to a January Insurance Journal report. A state review found existing laws failed to provide appropriate protection against unfair handling of claims by insurance companies. This came after an investigation into Ability Insurance's denial practices by the Argus Leader found that of 71 claims for long-term care benefits that Ability denied, 30 percent were wrongly denied.
In November, the California Department of Managed Health Care ordered Health Net, Anthem Blue Cross and Blue Shield of California to cease and desist from denying coverage of speech and occupational therapy claims without determining whether the services were medically necessary.
At PGM Billing, we see claims denied by payers for myriad reasons. These reasons are often unclear at best, wrong at worst. Fortunately, our 30-plus years of providing medical billing services allow us to work effectively with insurance companies to address denied claims. This ensures our clients are paid what they rightfully earn, and keeps money in patients' pockets. Contact us to learn what PGM can do to help you address the growing problem of wrongful denial of claims.