Why Some Health Insurance Claims Are Denied

Without health insurance, a visit to the doctor can set you back several hundred dollars. If you need surgery, a name-brand medication, or if God forbid you get a life-threatening illness, medical care can run into the thousands and quickly become unaffordable. Health insurance can literally be a lifesaver, but what happens if the insurance company refuses to cover the services or treatment you need? Not everyone can afford to pay for medical care out of pocket while battling the insurance company for reimbursement, at least not without taking out a second mortgage on their home or plowing through their retirement savings.

You need your coverage, and you need it now. Sadly, health insurers are known to deny coverage just when you need it most. If they deny your claim, you have a right to appeal that decision and even go to court. If their denial was wrongful or in bad faith, you can get the benefits you are entitled to in addition to recovering compensation for any other damage caused by the insurance company’s wrongful denial or unreasonable delay. An insurance lawyer can help you get the coverage you need and hold the insurer accountable for their mistakes or wrongful conduct. Below we look at a couple of the most common reasons insurance companies base their denials on that can often turn out to be wrong.

Medical Necessity

No doubt your health insurance policy contains language buried deep within its bowels that says the company only pays for services or treatment that are “medically necessary.” This sounds reasonable until you discover a wide gulf between what you and your doctor think is medically necessary and what the insurer’s definition of the term is. A reasonable definition of “medical necessity” would be a treatment intended to reduce the effects of an illness or condition, prevent its onset, or help one to regain their full functional capacity. Alternatively, one could argue that a service that is needed to diagnose or treat a condition and accepted in the medical community should meet the definition of medically necessary. State and federal laws establish definitions for medical necessity that apply to Medicare health plans, but for private insurers who don’t participate in Medicare, “medical necessity” is defined in whatever way they choose to define it. However, insurers often define medical necessity very strictly or very vaguely, which enables them to hide behind this excuse to deny coverage for procedures they don’t want to pay for.

For example, a few years ago insurers were issuing blanket denials of requests for a specialized form of liposuction to treat a painful and debilitating condition known as lipedema. As soon as insurers see the word “liposuction,” they deem the procedure to be cosmetic surgery and hence not medically necessary. Such was not the case concerning lipedema, but it took a dedicated and experienced insurance law firm to file multiple lawsuits in court to get this message through to powerful insurers like Kaiser Foundation and Anthem Blue Cross.

The line between elective cosmetic surgery and medically necessary therapeutic surgery is sometimes a gray area that insurers use to their advantage. State laws can help. For instance, California Health & Safety Code section 1367.63 defines “Cosmetic surgery” to mean “surgery that is performed to alter or reshape normal structures of the body in order to improve appearance.” Meanwhile, “Reconstructive surgery” means surgery performed to correct or repair abnormal structures of the body caused by congenital defects, developmental abnormalities, trauma, infection, tumors, or disease to do either of the following: (A) To improve function. (B) To create a normal appearance, to the extent possible.” The same procedure, such as liposuction or excess skin removal, could be used to perform either cosmetic or reconstructive surgery. It is not the procedure that controls but the reason it is used. Blanket denials of claims for liposuction, without an individual review of the reason behind the claim, could be considered an unreasonable, bad faith, wrongful denial.

Experimental, Investigational

Another common reason insurers turn down claims is by alleging the requested treatment is experimental or investigational. This excuse is often used for a new procedure to treat an ailment when an older, less expensive treatment already exists, never mind that the newer procedure might be less invasive, more effective, or require less recovery time. When faced with this denial, the burden falls on the policyholder to prove the insurer wrong. Doing so can require appealing (twice) through the insurance company’s internal administrative channels, appealing to an independent medical board, and filing a civil complaint in court as an individual plaintiff or a class action if the insurer is denying a procedure across the board.

Insurance companies have been known to deny treatments as experimental even when they are being performed by doctors around the country for years, have received FDA approval, and have been the subject of numerous clinical studies that found them to be safe and effective. Sadly, litigation is often required before an insurance company will reverse itself.

Final Thoughts on Wrongful Insurance Claim Denials

The two excuses discussed above tend to work hand in hand. If older (and cheaper) practices are already established, any newer procedure could theoretically be termed either experimental or not medically necessary. Unfortunately, when you need to have something done, you might not have the time to wait to get the insurance company to come around. It’s best to talk to an attorney as soon as possible after a claim denial to explore your options, preferably at a firm that concentrates its practice exclusively in the arena of wrongfully denied claims.