Why Your Health Insurance Claim Was Denied: Part 2

In Part 2 of the top reasons for an insurance plan to deny a medical claim, we review prior authorization, fundamental rules on prescription drugs, medical necessity, out-of network providers, emergency exceptions, service types, and bundling of codes.

Episode In Depth

In our prior podcast about the Top Reasons for Medical Claims Denials, we focused on the administrative reasons why a claim may be denied. We also spoke about billing codes and how complicated they can be. While it’s not important to know each of the codes – that would be impossible – it’s a good idea to know about your doctor’s visits – whether the visit was an initial visit and extended in nature or was for a follow up of a prior problem and therefore short in duration. Also, it’s best to know in general terms what procedure you underwent and any medical equipment, dressings, etc. that were prescribed and given to you so you can verify if billing was correct.

Those reasons are all basically contractual and fairly objective.  What about reasons that are more arbitrary?

A common denial reason is the result of not getting what’s called “prior authorization” for a given procedure, a test, or even a medication when it’s required by your health plan. Prior authorization is essentially a “mother may I” thing – you need to get approval first before a procedure or test can be done, or a drug can be obtained. That’s why it’s important to check with your health plan’s requirements to see if they have specific instructions that need to be followed. In many cases, a call to your doctor’s office to remind them to request the medical service especially if all the requirements have been fulfilled is all that’s necessary. Sometimes another step may be required:

  1. Getting a second opinion, especially when there is elective surgery or certain procedures.
  2. Trying a specific drug (usually 1 that’s less expensive and in common use) first before taking the drug your doctor has prescribed – called “step therapy.”
  3. Supplying documentation that a course of treatment has already been followed, as with physical therapy for joint or back problems.

Very often a denial will be issued due to the service not meeting medically necessary criteria or stated as “not medically necessary.”

A Question: If your health care professional ordered the test, prescribed the medicine, recommended he procedure or treatment, why is it not automatically medically necessary?

The answer is, not surprisingly, a bit complicated. Health plans include language in their Evidence of Coverage that tells you what services they will pay for – including any treatments, tests, or procedures that they determine are required to treat or diagnose a particular medical problem, or to restore your health if you have a medical condition that your healthcare professional has diagnosed. Our Podcast titled “Demystifying Medical Necessity” goes into more thoroughly and we encourage you to listen to it.

Sometimes, you receive a denial stating that you received a medical service or treatment that is out of your network. A review of your health plan’s network is always recommended prior to seeing any healthcare professional to make sure that they participate in the plan’s network. Essentially, your health plan’s network lists all the providers – doctors, nurse practitioners, medical groups, hospitals, x-ray units, and labs from which you must get all your of your care.

What if there is an emergency?

The restrictions are typically waived BUT it must be a true emergency – not a minor illness, such as a sore throat, fever, headache, or earache. It’s always required that you contact your primary care doctor with these common signs and symptoms.  In some cases, an after-hour clinic or Urgent Care center may be available, though they have costs of their own.

Can you still go out of network without approval or if it’s not an emergency?

With an HMO, there is no coverage unless there is an emergency, or you get prior approval.

Some HMOs have arrangements with unlisted providers for specialty care, but you can only use them with permission.

With a PPO, however, you typically see a separate calculation of benefits – a different deductible, a different percentage payment and a different liability limit.  Be sure to check your summary of coverage to be sure you have actually been denied and not just charged what the carrier should be charging.

But what about the charges themselves?  Does the carrier simply accept them?

Out-of-network charges are be treated as if you were in-network if you had a “true” emergency so there is no penalty applied.

If you receive advance permission, such as when there is no particular type of physician listed for what is needed (think of a highly specialized category like pediatric neurosurgeon), they will also treat the charges as if the provider were under contract.

When you see an out of network provider on your own, however, the carrier looks at their charges one of two ways, and this may or may not be spelled out in your Benefits Summary or Evidence of Coverage – you probably have to check in advance.

The first way is to pay according to Usual, Customary and Reasonable charges for similar physicians in the area.

The second, and more common way, is to look at the charges AS IF they were made by a network provider, which means they will be severely discounted.  Thus you would not only have a different deductible and out of pocket limit, but the calculation will be on a “lesser charge” – YOU are responsible for the difference entirely on your own.

The No Surprises Act – does that provide any protection

Some, particularly with emergency care. A good example is when you go to an in-network emergency room for severe belly pain and are found to have acute appendicitis. You’re then operated on by an in-network surgeon, but the anesthesiologist is not in your network. After you’re home and think everything is covered by your health insurance, you get a surprise bill from the anesthesiologist. In this situation, you didn’t have a choice to use an in-network provider.

So, Under the No Surprises Act, you cannot be charged out-of-network prices for services received from in-network health spaces. That means that Insurance companies and healthcare professionals cannot pass on the higher out-of-network costs to you. That doesn’t mean they won’t try, but just push back.

A more complex denial is called “right level of service.” That means that whatever service was given needs to occur in the right place. For example, if you needed an uncomplicated surgical procedure – like a routine hernia repair and are generally healthy – being admitted for an overnight stay in a hospital is not necessary. Rather, that procedure most often is performed in the hospital’s outpatient department or a free-standing surgery center. An admission would only be necessary when there’s a complication or a problem controlling your post-operative pain – both of which are rare.

Should you be admitted or be moved to different level of care – like a skilled nursing facility –

it is also matter related to medical necessity. In each instance, the documentation that supports what medical decisions were made, must be clear and in writing or in the electronic medical record. Such decisions are most often made by a health plan’s utilization management division which includes trained nurses using the health plan’s guidelines. These nurses regularly review all the documentation available.  There are also outside companies that often do these reviews as well for health plans, or review just a specific area – like radiology.

Some information about bundling

Bundling is when a number of medical services are included under a single billing code – CPT codes to be exact. These services can only be bundled when they are provided together.  The intended purpose of bundling is to cut down on the number bills that are made and sent out, making it easier for the healthcare professional’s billing department.

The flip side of things is when there is what’s called “unbundling.” That’s when your doctor bills for each part of a procedure. It would be like a surgeon who bills separately for making the skin incision, then doing the repair or fixing what’s necessary, and then closing each layer of the incision. Or, to use another example, imagine bringing your car into a repair shop.  They first put the car up on the racks, do a repair, then take it down and put it up again, and charge you the full cost for doing it again.  Why would they do that?

This example is an exaggeration to make my point. Both bundling and unbundling may occur as an honest mistake by the billing office, or an attempt to increase payments which is dishonest. Many health plans have sophisticated software that looks for bundling errors. Coding is complicated, so coding seminars are given throughout the year for each medical specialty so that doctors and their billing staffs learn how to correctly bill for services. Some of those seminars also show how to game the system

There is another type of coding option used by doctors, and that’s called “upcoding.”  It’s always best to examine your bill to be sure that you are being charged for the specific service being provided – was the exam for an hour with a doctor, or for five minutes with a nurse or nurse practitioner? If you underwent a procedure, was it just for a screening, or was something else done during the procedure? Certain common procedures, like colonoscopies, have separate codes for screening – looking for a problem like cancer – or diagnostic – when there are gastrointestinal symptoms. Under the Affordable Care Act (ACA), all private insurance companies and Medicare must cover the costs of a screening colonoscopy as recommended by the United States Preventive Task Force guidelines. The only exception to this is when a health plan “grandfathered” – in other words, the plan was in place before the ACA was passed.