Insurance Claim Denial: The Staggering Costs

It would have been the holiday of a lifetime for Jennifer Huculak-Kimmel and her husband in 2014. The Canadians were in Hawaii, probably enjoying their last few weeks as a two-family household before they officially welcome a baby into the fold.

The early days of their vacation started all right until Jennifer started feeling labor pains. Although heavily pregnant, she didn’t expect to be giving birth anytime soon since she still had about two months to go.

But the baby did come out—and soon medical bills piled up. Unfortunately, the insurance coverage they thought could help him denied their claims. What was to be an exciting time for the family turned into a nightmare when they had to pay a whopping million dollars out-of-pocket.

Jennifer, though, isn’t alone. Every year, insurance companies deny hundreds of claims for a variety of reasons.

How Common Is Insurance Claim Denial?

The Affordable Care Act (ACA) didn’t only cover all Americans with health insurance but also compelled insurers part of the network or signed up in the marketplace to be transparent about their data. These include reporting how many claims they denied.

According to the 2017 report, insurers rejected about 19% of claims for in-network services during the year. But as shared by Kaiser, the percentage can widely vary among companies and states. In some, it could be as low as a percent. Others denied a whopping 45% of the claims.

In 2019, the data showed that these insurers rejected at least 17% of the in-network claims. This was slightly higher than the rate in the previous year, which was at 14%.

The Impact of Denied Claims and How All Parties Can Prevent It

While the percentages sound small, the impact, in figures, can still be significant. By 2017, there were already over 40 million denied claims.

However, consumers with denied claims are less likely to appeal the decision. Of the 42 million rejected claims, only 200,000 had requests for reversals. The reversal rate of only 14% wasn’t encouraging either.

A denied claim can create a huge medical burden on both the patient and the family. In 2019 alone, an American family spent an average of $5,000 per person on healthcare. Studies show the overall costs could increase in the future.

It also hurts the healthcare industry, who is largely dependent on collected insurance for their budget. In a study by Change Healthcare, denied medical claims could be equivalent to nearly $265 billion of losses. They also spent more money on administrative costs for every appeal they make.

As they say, though, prevention is always better than cure. How can patients and healthcare facilities reduce the risk of insurance claim denials?

1. Hospitals Need to Avoid Medical Billing Errors

One of the biggest reasons for insurance claim denial is when patients use services not covered by their policy. But in certain situations, the explanation is more clerical. The medical biller, for instance, inputted the wrong code.

Sadly, medical billing errors are common. That means many patients could be initially denied their claims.

Healthcare facilities can significantly reduce the chances of committing medical billing mistakes by investing in the right tech. A comprehensive portal software can already include a patient billing component, where patients can access billing reports quickly. They can also immediately call the staff for questions and concerns.

The platform can also contain all medical information pertaining to the patient and procedures performed. These data will come in handy when medical billers have to double-check charges and codes. They can also minimize delays, allowing the healthcare facility and the patient to file the claim before the provider’s deadline.

2. Patients Have to Fill Out Their Medical Records Correctly

Missing to fill in the blanks or tick the correct box may seem a minor error, but the consequences can be huge. In 2014, a study in the AMIA Annual Symposium Proceedings Archive revealed that these mistakes can have adverse effects on the outcome of patient care.

Doctors and nurses may fill out the wrong prescription or recommend an incorrect procedure, including surgery. In both situations, a simple error becomes life-threatening for the patient. Research labs may accept the wrong people for a study or a clinical trial.

From an insurance standpoint, wrong or missing patient information can potentially delay the claims process. The insurer may also deny the claim outright.

Although healthcare facilities can verify the patient data before they enter the medical records system, patients also need to exercise transparency and honesty at all times.

A denial of an insurance claim is frustrating, disappointing, and frightening. However, it doesn’t have to reach that point. Hospitals and patients can take simple but essential steps to minimize the likelihood of rejection.