Health insurance claim denials and rejections happen when insurers refuse to cover or pay for medically necessary services. Some common reasons for these denials include incorrect or duplicate claims, a lack of medical necessity or supporting documentation, absence of prior authorization, or claims submitted after the required deadline. Additionally, complex denials, such as those categorized as experimental, investigational, or non-covered, are also frequently denied.
Providers should not become discouraged when faced with denials or rejections. These setbacks do not necessarily mean the claim is lost. Mistakes can be corrected, or the claim can be resubmitted with supporting documentation to confirm its eligibility for coverage. Additionally, it is important to refer to the negotiated contract, payer policy, or other clinical criteria that support evidence-based clinical protocols for managing denials.
Why insurance claims are denied
Understanding the reason behind the denials (CARC and RARC) is crucial to streamlining the reimbursement process and optimizing your claim reimbursements.
Trends behind insurers’ claim denials include:
- Protections against fraud put into place by insurance companies employ rigorous checks, sometimes flagging legitimate claims for further review and leading to temporary denials.
- Evolving payer policies and guidelines require providers to stay informed and continuously meet all new and updated requirements.
- Increased scrutiny of claims by payers can cause even minor discrepancies to lead to denials, making accurate documentation and coding that much more critical.
- The complexity of healthcare billing, with numerous codes, regulations, and policies to adhere to, can inadvertently lead to claim denials.
- Misunderstandings or lapses in communication among healthcare providers, billing teams, and patients can cause claims to be submitted inaccurately.
Most common denial of claim reasons
What are the most common reasons insurance companies reject claims? The most common denial of claim reasons include:
Missing or incomplete information or documentation
Clear and comprehensive documentation is the backbone of any successful insurance claim. Missing or inaccurate details about a diagnosis, treatment, or procedure can cause a denial. Information on or submitted with a claim must be accurate and complete. This includes:
- Patient information including name, date of birth, address, and insurance policy number(s)
- Provider information including name, address, and National Provider Identifier (NPI) number
- Codes including procedure (must match the provided service or treatment), diagnosis (must be medically necessary and supported by the medical records), and place of service (must match the location where the service or treatment was provided) codes
- Documentation including medical records, prescriptions, and referral forms
COB (Coordination of Benefits) Issues
COB denials occur when a patient has two or more insurance policies, and there is confusion or lack of clarity about which plan is primary and which is secondary. Many factors can contribute to COB denials, including:
- Complex payer COB policies that can be difficult to understand
- Incomplete or inaccurate information on the claim form, like the patient’s insurance information and the dates of coverage for each plan
- Communication errors between payers to determine and agree on which plan is primary and which is secondary (or tertiary, etc.)
Lack of medical necessity or supporting documentation
Insurers may deny a claim if they believe that the service or treatment was not medically necessary, if the medical documentation does not adequately support the service, or if the claim does not meet their MCG (Milliman) or InterQual criteria. For instance, they may determine that the patient could be effectively treated with physical therapy instead. These denials often require appeals that provide:
- Additional documentation that may include medical records, prescriptions, or referral forms
- Comprehensive justifications for any treatments or tests ordered
- Incorrect coding
- More detailed information about the visit or condition
- Information specific to that policy’s coverage criteria
- “Gold Standard”’ Information from The Academy of Ortho Surgeons or American College of Cardiology.
- A “Letter of Medical Necessity” from the physician
Failure to obtain prior authorization
Providers often struggle to obtain prior authorization due to various factors, and the frequent updates to payer policies exacerbate the issue. Some insurance policies require prior authorization for certain procedures, medications, or medical equipment before these services or treatments can be provided. Examples of services that may require prior authorization include:
- MRI and CT scans
- Certain medications
- Specialist referrals
- Elective surgeries
- Durable medical equipment
Coverage exclusions or limitations
Insurance plans have specific guidelines on which services or treatments they cover and which they don’t. Common examples of non-covered services or treatments include:
- Elective surgeries
- Durable medical equipment
- New or experimental procedures
- Chiropractic care
- Physical therapy
- Dental or vision care
- Hearing aids
Most policies also have defined limitations, such as a set number of visits or procedures – for example, a set number of physical therapy visits – allowed per year.
Duplicate claims
A duplicate claim denial occurs when a claim is submitted multiple times for the same service or procedure performed on the same day. This can happen for reasons such as:
- A provider submitting a claim multiple times by mistake – more likely to occur when claims are sent manually
- A billing software or system inadvertently submitting the same claim multiple times
- Glitches in a payer’s system resulting in duplicate claims processed
You may also see denials for services not paid separately, meaning that service or procedure was included in the payment or allowance for another service or procedure that has already been billed, processed, and paid.
Timely filing
A timely filing denial occurs when a claim is submitted after the deadline, typically 120 to 180 days from the date of service, set by the insurance company.
Reasons a claim may be filed late include:
- Delays in receiving patient information or other necessary documentation from the patient
- Inaccurate or incomplete claims returned to the provider for correction
- Administrative errors such as typos or miscoding
- Lack of knowledge of, or failing to keep up with, the timely filing deadlines for each insurance company (even rare or out-of-state payers)
Denials are not always the fault of the provider
To reduce the rate of denials, providers should analyze the 80/20 rule (or Pareto Principle) applied to claims denials which means that 80% of claim denials problems are caused by about 20% of the issues. A crucial first step is to perform a root cause analysis to discover issues caussing denial, rather than just focusing on individual incidents.
Clear communication, accurate documentation, and staying informed about payer policies are key elements in navigating the complex landscape of insurance claims and avoiding denials.
You can also invest in claims management software and training to help you identify and avoid potential denials or consider utilizing a partner who specializes in complex claims.
Partnering with experts allows your team more time to focus on higher-priority, less complicated claims. EnableComp understands the challenges of complex claim denials and is proficient in denial prevention and resolution. Our team of experts uses proprietary technology and proven expertise to reduce, appeal, and resolve denials, getting you more of the revenue you deserve.
