Why Your Health Insurance Claim Was Denied: Part 1

Episode In Depth

This and our next podcast episode will discuss the most common reasons for a medical denial of service. At the end, you will be able to have a better understanding of the reasons for denial and this will help you as you write your appeal, which we will cover in our third podcast.

It makes sense to arbitrarily divide the most common reasons for medical denials into 2 distinct but related buckets: administrative and medical. There is some spillover in these buckets but there are important differences we will explain.

One of the most common and simple reasons may be the result of missing or incorrect information. This typically is an administrative error as a result of a name misspelling or including an incorrect medical code called a “CPT” code. A call to your doctor’s office to explain what you have found in the denial letter is all that is usually necessary to correct or supply the missing information and have the denial overturned.

Basically, medical coding is a process of taking all of a patient’s health information that includes things like all of the diagnoses, procedures, and any medical equipment needed/used, or services provided from the doctor’s notes and transforming them into what’s called “medical alphanumeric codes.” There are people who have been specially trained to do this as well as regular teaching seminars for both doctors and those in charge of billing since it’s obviously quite complicated. Let me explain further:

And with good reason, as it gets technical.  There are essentially 3 different types of codes with a special system behind each. So, for diagnosis codes, there’s something called the International Classification of Diseases codes or ICD codes which are revised periodically. The 2^nd coding system is for medical services and procedures, called CPT codes which stands for “Current Procedural Terminology” developed by the American Medical Association (AMA). The 3^rd type of code is HCPCS which is also used for medical procedures, supplies, products, and services like transportation. To complicate things further, there are different types of both CPT and HCPCS codes.

So, with the mish mash and alphabet soup of codes and their overlap, it’s not difficult to see how a coding error can occur. The most important consideration for you is to be aware of what procedure you underwent, what device was prescribed, or you used, like crutches or a walker, or what products you have been given – like dressing supplies – so that you are billed accordingly. For doctor’s appointments, there are specific codes for an initial visit, a new problem, or a follow up of a prior problem for which you have been treated. Codes for each of these appointments, or office visits, are different and billed differently. If you see on your billing that you have been charged for an initial or extended visit when in fact it was for a follow up visit, it’s best to speak with the doctor’s office manager or billing department to make the necessary change.

One of the more common administrative reasons for a denial is the treatment is not a covered benefit. This is where it’s important to go to your Evidence of Coverage booklet yourself, or ask your broker, your benefits specialist, or your HR representative to help you understand the denial. In your EOC, there is a list of exclusions, so that’s a good place to start. When there is denial due to an exclusion, it is likely that you will be held responsible for the costs associated with the service.

Sometimes the claim is not denied, but it’s hard to tell from the paperwork.  Remember that most services are subject to an annual deductible.  When you receive your “Explanation of Benefits” (EOB) it will show the total charge, the amount by which the charge is discounted and then how the plan pays.

Pay attention to:

1. Am I responsible for the difference between the actual charge and the allowed charge?
   If you are seeing a PPO provider, you should not be responsible for the difference, but be sure that it is noted on the EOB and that your doctor doesn’t try to “balance bill” for the difference anyway.
2. Did they then charge the deductible against the remaining amount?  This will also be reflected in the EOB – actual charge, down to allowed charge, down to what the carrier owes you after the deductible and then…
3. What percentage of the remaining claim will the carrier pay and is it in accord with your contract?  Most plans pay 80% after the deductible, but it can easily be different. So be sure to check your plan summary (it’s usually in plain sight – no need to see the entire contract on this item)

Thus, you need to be sure that there is a claim to be made here.  Be sure to read your EOB carefully before proceeding.

Switching gears, a problem we sometimes see is failure to file a claim in the timeframe that your health plan requires. This may be due to an administrative error on the part of your doctor’s office in many cases, but if you’re the responsible person for sending in the claim, it must be within the requirements of your health plan. If the issue is an office failure, your doctor or other health professional will not be paid by the health plan and should not request payment from you since the fault is theirs. Other than your copay, you do not have further financial responsibility.

By now it’s obvious that health insurance is complicated, especially when there are two plans present if you and your spouse have separate plans. Sometimes, there may be a recent change in employment status and/or your health plan which is not reflected in the billing. A call to your health plan can often easily resolve this type of issue which may also require you to contact your doctor or healthcare professional’s office to provide the necessary correct information.

A few words about “double coverage”:

Even more complicated is a denial based on Coordination of Benefits – called COB – when there are two plans involved for payment.  The primary plan will pay for the normal covered benefits first. The secondary plan will either

1. Pay the difference between what the primary plan paid, and the total amount allowed; or
2. Pay nothing, depending on the language of the secondary plan (if it says “non duplication of benefits” then it looks at what the first plan pays, and if they would have paid the same, there is no additional payment to be had).  These provisions are less frequent, but they do exist.

How to determine who is primary when both you and your spouse/significant other have coverage through their respective employers?

1. If you are the patient, and you have your employer’s plan, they are primary.
2. If your spouse or partner is the patient, and they have a plan through their employer, that plan is primary
3. If your spouse or partner is the patient and they are covered under both plans, their employer’s plan is primary, but they can file a claim under your plan and then, what is paid depends on the COB provisions of your plan – either option as stated
4. If the claim is for a child, and the child is covered under both you and your spouse or partner’s plan, the “birthday rule” applies – whichever of you has the earlier birthday in the year (not who is older), that plan is primary
5. If you have Medicare and a Medicare supplement, Medicare always pays first and the supplement fills in some or all of the gaps left by Medicare, depending on how the supplement plan is designed.  There are 16 available designs, so we’ll skip a lengthy explanation.  Note, however, that if Medicare refuses to allow the expense, the supplement plan does not pay — there is nothing to supplement here.

Sometimes a denial is issued stating that a given benefit has been exceeded. A common example is when there are limits during a year – called “calendar limits” – that are applied to medical services. Physical therapy and occupational therapy are common examples where you have had too many visits and have gone over the calendar limit. Medicare used to have a maximum number of visits – called a “cap” – but this is no longer the case. However, there must be documentation that it is medically necessary – hence the old “medical necessity” comes into plan again.

In part II of this podcast, we will discuss the top medical reasons for medical claims denials.