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What You Need to Know for When a Health Insurer Denies Your Claim

The chances for getting a denied claim reversed have always been better than you might suspect. But your odds are even better now that Obamacare has standardized the appeals procedure.
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(Photo: viviamo/Shutterstock)

(Photo: viviamo/Shutterstock)

A couple of years ago, sometime after a visit to the emergency room, I was baffled to receive a hospital bill for over 2,000 dollars—way too much for splinting a broken finger, especially considering I was on a decent health plan. It turned out my insurance company had declined to pay. I called up the plan’s 800 number and explained that my policy clearly covers emergency room services. With pleasant cheer, the customer service rep parroted my grievance, entered some notes in the system, and promised to be in touch. The plan paid my bill in full.

At the time, I failed to connect this experience with one of the less glitzy aspects of Obamacare—the requirement and standardization of appeals procedures offered by private health plans for challenging denied claims. In fact, I had no idea my five-minute phone conversation actually constituted a formal appeal. And I still wouldn’t know to this day had it not been for a similarly baffling notice my wife recently received from her insurer. She, too, was refused coverage for her own hospital visit, to manage premature labor contractions. The explanation: Her service was not “medically necessary.” Of course, preventing our child’s premature birth seemed a clear medical necessity to the both of us. I set out to investigate how to prove so.

In 2011, the U.S. Government Accountability Office published a report revealing that in the four states that tracked such data, 39 to 59 percent of private health insurance appeals resulted in reversal. That is, the success rate of challenging a denial of coverage was about as favorable as calling heads on a coin toss. The friendly statistics seemed to square with my experience—I’d gotten my ER bill handled with a single, short phone call. And yet, as a lawyer in a former professional life, I had a paranoid suspicion that the numbers didn’t tell the whole story. How could it be that powerful, profit-minded corporations would give up good dollars half the time just at the asking?

In 2011, the U.S. Government Accountability Office published a report revealing that in the four states that tracked such data, 39 to 59 percent of private health insurance appeals resulted in reversal.

The GAO report offered one clue. Coverage denials are based far more often on technical problems—billing errors and eligibility issues—than on subjective judgments about the appropriateness of the service—whether it is medically necessary, or whether it warrants coverage under the circumstances despite its experimental or investigative nature. According to a nationwide study cited in the report, the “subjective” category of denials made up only 10 percent of all cases. Intuitively, it made sense that for the other 90 percent, a sizable portion of which involve problems like putting down the wrong birth date, diligent patients would be able to spot the error and hash it out with their plans. Indeed, the GAO report noted that, according to insurance officials, appeals are frequently won simply because the patient provides more information.

This is welcome news for those whose denials are essentially technical glitches. But what about my wife’s rejected claim, which falls into the minority of cases that turn on the plan’s judgment? What are the odds of prevailing within that 10 percent? This information is presumably tallied by insurance companies; to my knowledge, it remains out of the public domain. But although I didn’t know whether my wife’s case stood as hopeful a shot at reversal as a coin flip, I could at least find out her rights to maximize her chances. Here, the reforms laid out in the Affordable Care Act seemed the place to start.

The law’s requirements for the appeals process certainly bear on a large number of individuals. According to 2012 census data, 63.9 percent of the U.S. population receives health insurance through private plans—the kind of coverage targeted by the reforms. (Government insurance programs such as Medicare and Medicaid have their own, quite different processes for appeals.) What immediately struck me was the patient’s entitlement to a “full and fair review”—more specifically, the nature of the procedural rights that are now guaranteed. The plan must allow individuals to review their claim file, present evidence, and offer testimony.

In fact, the judiciary sheds some light on the legalistic tinge of the appeals reform. The U.S. Supreme Court has ruled that when the funder of a health plan is the same entity that evaluates a claim, there exists an inherent conflict of interest. This is the case with most insurance companies. Certainly, the high court’s concern seemed pertinent to my wife’s denied claim for supposed lack of medical necessity; what’s healthy for her (and our child) may not be healthy for the insurance company’s bottom line. Thus, the courtroom allusions of Obamacare’s provisions reflect a certain insight: If patients are to be effective advocates for themselves against self-interested insurers, they must be given the tools to make their case.

This is also the rationale behind the ACA’s new requirements for “external review.” If unsuccessful in the plan’s internal appeal process, the patient has a right to another review, this time with a neutral third party, as long as the dispute relates to medical judgment (“medical necessity” is the quintessential example) or rescinded coverage. The external reviewers are typically medical experts approved by the state, and their decisions are binding on insurers. As with internal appeals, the process for external review is now a mandatory and standardized feature across the nation’s health care landscape.

To me and my wife, the prospect of getting two bites at the apple, the second with an objective audience, was heartening. And so, as I studied up on strategies for pursuing the first, internal level of appeals, I was surprised to hear veteran players in the system pushing an approach that can only be described as, well, lawyerly. In a training lecture for patient advocates, Mark Scherzer, legislative counsel for New Yorkers for Accessible Health Care Coverage, urges that the internal appeal be treated as nothing less than a “trial on paper.”

“Make your case for reversal as comprehensive as the case you put on in court,” Scherzer says. The reason? Insurers, self-interested entities that they are, are hip to what will hold up for the authorities. An appeal that’s worthy for the bench is likely one that will pass muster with external reviewers—and perhaps with actual judges, too, should it ever get there.

Of course, not everyone who appeals a denied claim has the benefit of legal representation. Nevertheless, much of what makes a persuasive case is a matter of common sense. Analyze the medical records. Submit those that help, explaining why they do. If possible, secure letters of support from treating physicians. Obtain the claim file to identify questionable areas in the plan’s rationale for denial. (The ACA requires insurers to provide all paperwork relevant to the claim free of charge, including the specific reason for denial, the additional information required to complete the claim, and, if lack of medical necessity or experimental factors are at play, an explanation of the scientific or clinical judgment supporting the denial.) And finally, pursue the appeal through paper—not over the phone.

With all the procedural tools I’d unwittingly left on the table, I wondered how I’d actually managed to pull off a reversed decision on my finger splint. Again, it was the law that saved the day. In subjecting emergency services to mandatory coverage, Obamacare established a “prudent layperson” standard to define what constitutes a medical emergency. Any reasonable, normal Joe who believes he’s suffering a condition that requires ER treatment is entitled to have those services insured. As unlawyerly a case as I’d put on, “emergency” turned out to be the lucky magic word to describe my broken bone.

As for my wife’s claim? We’re not leaving her chances up to fate, even if they are as good as a coin toss. My bar license is still active, and I’m acting as her attorney. The request for her medical records is out in the mail.