You’ve just experienced a devastating event—may it be a house fire, a car accident, or a medical emergency. You turn to your insurance policy, your safety net in times of crisis, only to find your claim has been denied. It can be frustrating and confusing, especially when you’re counting on that coverage. Sadly, this is the reality among many.
While the exact figures vary, available government data indicates that insurers reject between 10% and 20% of all claims submitted. But who do they deny these claims? That is what this article is about. This post also looks at some legal solutions that might help if you find yourself in this situation. (1)
Why Do Insurance Companies Deny Claims?
Insurance companies are businesses that make money by collecting premiums and lose money when they pay out claims. While most insurance companies operate fairly, there are instances when they deny claims.
Here are some factors that may affect their decision:
Policy Exclusions
Policy exclusions are specific situations or conditions that your insurance policy doesn’t cover. They’re usually listed in the fine print of your policy—which is often overlooked when purchasing insurance.
For example, a homeowner’s insurance policy might exclude damage from floods or earthquakes. So, if your home is damaged in a flood and you file a claim, it would likely be denied if flood damage isn’t covered in your policy.
Even in-network claims for health insurance—claims from health providers who have an agreement with your insurer—can also be denied. In fact, 14% of in-network claims were rejected due to the service not being covered by the insurance policy. (2)
Lapsed Coverage
Lapsed coverage happens when you’ve missed payments on your insurance premiums, causing your policy to be canceled or suspended. Insurance companies are pretty strict about this. Even if you’re just a day late on your payment, they might deny your claim. That’s why it’s crucial to keep your payments up to date.
Incomplete or Incorrect Information
When filing a claim, you need to provide accurate and complete information. If you make a mistake or leave out important details, your claim might be denied. This could be something as simple as getting a date wrong or as complex as not fully describing an accident.
Insurance companies use the information you provide to make a decision. If they feel they don’t have all the facts, they’re likely to deny the claim until they get the full picture.
In cases where there’s a dispute about the information provided, a denied insurance claim lawyer can help gather and present the necessary evidence to support your claim.
Lack of Medical Necessity
This reason is specific to health insurance claims. Insurance companies will often deny claims for treatments or procedures they don’t consider medically necessary.
Insurance companies often have guidelines for what treatments are approved for certain conditions. If your doctor recommends something that doesn’t fit these guidelines, your claim might be denied. This can be particularly frustrating when you and your doctor believe the treatment is important for your health.
Out-of-Network Providers
Out-of-network providers are health providers who don’t have an agreement with your insurance company. So, if you receive treatment from them, your insurance company might deny the claim or cover less of the cost. This is why it’s always a good idea to check if a healthcare provider is in your network before receiving treatment.
Missed Deadlines
Insurance policies frequently have deadlines to file a claim. So, when you miss such a deadline, it could be denied. Note that deadlines change with the type of insurance and the type of policy.
For example, some car insurance policies require that you report an accident within 24 hours. If you take too long before filing your claim, then you might not get paid for it.
Legal Solutions
If one or more of the above reasons apply to your situation, don’t worry. There is still a chance to overturn it. In the healthcare sector, more than 51% of initial claim denials were reversed, resulting in payment. This just means that, regardless of your circumstance, there are still ways to change it. (3)
Review Your Policy and the Denial Reason
Carefully review your insurance policy and the denial letter from your insurance company. Look for any discrepancies or misunderstandings that could have led to the denial.
This step is crucial because it helps you determine whether the denial was justified based on your policy terms. If you find that the insurance company made a mistake, you’ll have a strong case for appeal.
File an Internal Appeal
Most insurance companies have an internal appeals process, which allows you to dispute a claim denial. To initiate an appeal, submit a written request to your insurance company asking them to reconsider their decision.
Explain why you believe the denial was incorrect. Include any additional information or documentation that supports your case, too. Be thorough and specific—remember, you’re trying to convince them to change their mind.
Request an External Review
If your appeal isn’t granted, there’s the option of having an external review done. In this process, an independent third party will review your case and decide if the decision taken by the insurance company is justifiable. This can be a valuable approach, as the third party has no affiliation with the insurance company and can provide an unbiased evaluation.
File a Complaint with Your State Insurance Regulator
Every state has an agency that oversees the regulation of insurance companies. If you feel your insurance company is being unfair, this is where you first should file your complaint.
The regulator can be able to investigate your complaint and even help resolve the issue. Even if it doesn’t solve your problem, your complaint could spur investigations into the practice of the insurance company.
Consider Litigation as a Last Resort
A last resort might be to sue your insurance company. However, this should not be taken lightly, as litigation can be lengthy, stressful, and costly.
But if you are confident that the denial of that claim was wrongful, you can consider this approach. Just be prepared for a probably lengthy and hard process.
Conclusion
Dealing with a denied insurance claim can be frustrating, but remember that a denial isn’t always the end of the road. By understanding why claims are denied and knowing your options for fighting back, you can increase your chances of getting the coverage you deserve.
References
- “How Often Do Health Insurers Say No to Patients? No One Knows”, Source: https://www.propublica.org/article/how-often-do-health-insurers-deny-patients-claims#:~:text=The%20limited%20government%20data%20available%20suggests%20that%2C%20overall%2C%20insurers%20deny%20between%2010%25%20and%2020%25%20of%20the%20claims%20they%20receive.
- “Claims Denials and Appeals in ACA Marketplace Plans in 2021”, Source: https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans/#:~:text=Of%20in%2Dnetwork%20claims%2C%20about%2014%25%20were%20denied%20because%20the%20claim%20was%20for%20an%20excluded%20service
- “Unnecessary insurance claim denials compromise patient care and provider bottom lines”, Source: https://www.statnews.com/2024/05/01/insurance-claim-denials-compromise-patient-care-provider-bottom-lines/#:~:text=More%20than%20half%20of%20denied%20claims%20(51.7%25)%20were%20eventually%20overturned%20and%20paid.
