After using a diabetes insulin pump for nine years, David Lazarus suddenly received a denial letter from his insurer, Blue Cross Blue Shield of Illinois. The denial letter notified Lazarus that his employer’s health plan would no longer cover the cost of his diabetes insulin pump. He was now responsible for the cost of the pump: $8,703. The reason cited for his insurer’s sudden change of heart? Lack of medical necessity. His medical insurance claim was denied.
An insurer may deny a medical insurance claim before or after the medical service sought to be covered, either through the denial of preauthorization requests or denial of claims for payment after the medical service is provided. Some insurers require preauthorization requests before treatment, which may result in insurance denials where the policyholder is deemed ineligible for the service or the insurer determines the treatment inappropriate. Claims, on the other hand, may be denied for a variety of reasons: billing issues, documentation issues, duplication issues and various other reasons related to eligibility. One of the most litigated areas of medical insurance coverage denials is the insurer’s denial because the treatment is deemed experimental or not medically necessary.
In a recent column published by the Los Angeles Times, Lazarus shared his personal struggle with an improperly denied health insurance claim as part of a larger discussion of the widespread problem: when a health insurer denies a valid, legitimate claim. To some, including the attorneys of the McKennon Law Group PC, this story may sound all too familiar. Sadly, the fact that health insurers deny valid claims for a variety of reasons, including lack of medical necessity, is not surprising. This problem can be alarming based upon its sheer scale, which as Lazarus noted, is a problem that “applies to millions of people.”
Chuck Idelson, a spokesman for the California Nurses Association, described this conduct as “immoral and unconscionable.” Lazarus likewise expressed his outrage:
[I]t’s unacceptable for patients to have to do battle with monolithic corporations that are seemingly determined not to use common sense (or simple decency) in deciding what treatments to cover.
However, the reality is that health insurers, as do long-term disability insurers, life insurers and accidental death and dismemberment insurers, employ a small army of ‘claims specialists’ to closely scrutinize each claim for potential reasons for denial. While insurers may view this claims handling process as the “rigorous process of evaluating the medical need for a prescribed drug or treatment,” many describe it differently. As Idelson said of the claims handling process:
Insurers employ warehouses full of claims adjusters who, as a primary function, scrutinize claims for pretexts to deny care, saying it is ‘experimental’ or ‘not medically necessary’ even where the medical treatment, prescription medication, diagnostic procedure or referral to a specialist is recommended by doctors.
The column also notes that a significant portion of these claims are denied for reasons unrelated to the claim’s validity. In other words, there was a mishap in processing, such as billing errors, duplicate claims for the same underlying service, or just missing information, as found in a 2011 study done by the Government Accountability Office (“GAO”).
In Private Health Insurance: Data on Application and Coverage Denials, the GAO reviewed nationwide data collected by the Department of Health and Human Services. It covered 459 insurers providing individual and group insurance in all fifty states, including the District of Columbia. Because the data only included application denials for a three-month period from January through March 2010, only one quarter, GAO also supplemented the nationwide data with available data from six states: California, Connecticut, Florida, Maryland, New York and Ohio.
The GAO noted that coverage denials often occur as the result of billing errors and eligibility issues, and less often for reasons about the appropriateness of a service. For six of the largest managed care organizations licensed in the State of California, each with enrollment in 2009 of over 400,000, the rate of claims denials came in at 24% for the year of 2009. But, the data varied widely depending on the managed care organization. Specifically, California’s reported denial rates covered a wide range of 6% to 40% across the six managed care organizations.
As Lazarus discusses in his column, getting health insurance coverage is only half the problem. The other half is the quality of coverage you have once you are lucky enough to get it. Fighting with your insurer over a legitimate claim for health, life, long-term disability, or other insurance benefits can be a daunting task and while Lazarus managed his claims handling problem (after numerous calls and emails), many insureds’ coverage disputes are not so easily resolved.