Disclosures, mandated by the Affordable Care Act, provide a limited snapshot of claim denials
Claim denials have created financial headaches for virtually all healthcare providers, including clinical laboratories and anatomic pathology groups. Reliable data about denials is hard to come by, but a recent analysis by KFF (formerly the Kaiser Family Foundation) revealed that insurers selling plans on HealthCare.gov denied 19% of claims for in-network services in 2023, the latest year for which data is available.
This is the highest rate since 2015, when KFF began tracking the data, according to the analysis. Claim denials for out-of-network services were even higher, amounting to 37%.
Patients and doctors “are saying that it’s become an even bigger hassle in recent years than it has been in the past,” said Kaye Pestaina, JD, co-author of the report, in a video report from CNBC. Pestaina is a KFF vice president and director of the organization’s program on patient and consumer protection.
The analysis, released Jan. 27, noted that the Affordable Care Act (ACA) requires insurers to provide data about health plans to state and federal regulators as well as the public. “However, federal implementation of this requirement has so far been limited to qualified health plans (QHP) offered on the federally facilitated Marketplace (HealthCare.gov) and does not include QHPs offered on state-based Marketplaces or group health plans.”
“One thing that we’ve seen [when] surveying consumers across different insurance types is that they simply don’t know that they have an appeal right,” said Kaye Pestaina, JD (above), VP and director of KFF’s program on patient and consumer protection, in a video report from CNBC. “If appeals were used more often, it might operate as a check on carriers. From what we can see now, so few are appealed, so it’s not operating as a check.” Clinical laboratories and anatomic pathology groups don’t often see data about the rate of claims denials by payers made public. (Photo copyright: KFF.)
Scarce Information
The federal marketplace covers 32 states, which means that the data does not include the 18 other states or the District of Columbia, all of which have their own exchanges. Nor does it include employer-sponsored plans, Medicare Advantage plans, or Medicaid Managed Care plans.
“In the big picture, we’re still operating from a scarce amount of information about how carriers review claims,” Pestaina told the Minneapolis Star-Tribune.
Within this limited dataset, KFF found wide variation in denial rates among the parent companies of health plans. The companies with the highest rates were as follows:
Rates also varied by state, from a high of 34% in Alabama to a low of 6% in South Dakota. However, the report noted that these averages sometimes obscured wide variations within each state. For example, in Florida, the statewide average was 16%, but denial rates for individual insurers ranged from 8% to 54%.
In most cases, in-network denial rates did not vary much based on plan levels. Rates were 15% for Platinum plans, compared with 18% for Silver and Gold plans, and 19% for Bronze plans. The rate for catastrophic plans was 27%.
The data offered only limited insights about the reasons for claim denials. The federal Centers for Medicare and Medicaid Services (CMS), which administers the rules, requires plans to report denial reasons, but it allows for an “Other” category that accounts for the largest number of denials:
Other reason not listed – 34%
Administrative reason – 18%
Service excluded – 16%
Enrollee benefit limit reached – 12%
Lack of referral or prior authorization – 9%
Not medically necessary (excluding behavioral health) – 5%
Member not covered – 5%
Not medically necessary (behavioral health only) – 1%
“We hear anecdotal stories about certain treatments that are denied, that arguably should not have been denied,” Pestaina told the Star-Tribune. “How often is that happening? It’s difficult to come to a conclusion with the kind of ‘reason’ information we have here.”
Health Insurers Pushback
In addition to claim denials, CMS requires insurers to report the number of appeals once a claim has been denied.
“As in KFF’s previous analysis of federal claims denial data, we find that consumers rarely appeal denied claims and when they do, insurers usually uphold their original decision,” the report states.
In total, insurers on the federal exchange denied 73 million in-network claims. Among these, less than 1% (376,527) were appealed internally to the insurers, which upheld 56% of the denials.
The report notes that, in some cases, consumers have a right to an external appeal in which a third party reviews the claim. However, in a separate survey, KFF found that only 40% of all consumers, and 34% of Marketplace enrollees, were aware of that right.
Health insurers pushed back on KFF’s analysis. In a statement reported by the Star-Tribune, UnitedHealth Group described the numbers as “grossly misleading” because the dataset represents only 2% of total claims.
“Across UnitedHealthcare, we ultimately pay 98% of all claims received that are for eligible members, when submitted in a timely manner with complete, non-duplicate information,” the company stated. “For the 2% of claims that are not approved, the majority are instances where the services did not meet the benefit criteria established by the plan sponsor, such as the employer, state or Centers for Medicare and Medicaid Services.”
Legal actions highlight ongoing concerns about payer behavior and included a record-breaking settlement in antitrust case against Blue Cross and Blue Shield
Several high-profile federal lawsuits filed last year, along with settlements in older cases, demonstrate that providers, patients, and self-insured employers—including hospitals, clinical laboratories, and anatomic pathology groups—continue to have serious concerns about lack of transparency and certain business practices of health plans.
Self-Insured employers are suing because they cannot see their data and discovered their health plans overpaid providers from allowed charges (meaning a self-insured employer has greater health benefit costs).
Providers are suing because they are being paid less than agreed and have claims denied for spurious reasons.
These lawsuits show that there is increasing ill will and concerns by self-insured employers and providers as to how health insurers are properly conducting business.
Below is a rundown of the cases.
“Over the past 12 years we have dedicated an extraordinary amount of time, tireless effort, and resources to this historic outcome for providers,” said Co-Lead Counsel Edith Kallas, JD, of Whatley Kallas, a press release. The Blue Cross and Blue Shield Association settlement with healthcare providers is the largest healthcare-related antitrust settlement in US history, according to plaintiff’s attorney Whatley Kallas, LLP. Clinical laboratories and pathology groups can learn from these lawsuits. (Photo copyright: Whatley Kallas.)
BCBSA Settles Long-Running Antitrust Case
In October, the Blue Cross and Blue Shield Association (BCBSA) and the 33 independent Blue Cross and Blue Shield (BCBS) plans agreed to a $2.8 billion settlement in a 12-year-old federal antitrust lawsuit. Co-counsel for the plaintiffs Whatley Kallas, LLP, described the agreement as the “largest antitrust settlement in the history of the United States healthcare industry.”
Healthcare providers alleged that the BCBS plans had agreed “to allocate markets through the use of exclusive service areas and to fix the prices paid to providers through the BlueCard Program,” according to a news release.
In addition to the cash payment, the health plans also agreed to “invest hundreds of millions of dollars in system improvements for the benefit of providers,” the law firm noted, adding that the settlement would compel changes in how the plans “process claims, communicate with, and make payments to healthcare providers,” helping to “address resource-draining administrative burdens and inefficiencies currently experienced by providers.”
Whatley Kallas said the settlement would ultimately result in injunctive relief amounting to $17.3 billion during its first 10 years.
“Many important issues for providers are finally being addressed,” said Edith Kallas, JD, of Whatley Kallas in the news release. “We’re pleased that we have been able to achieve relief that will create a better system for healthcare providers and that will support the organizations and people we rely on to take care of us and our families every day.”
BCBSA also issued a statement: “This settlement ends a long-running legal challenge to the Blue Cross Blue Shield Association license agreements and related rules. We deny the allegations made in the lawsuit. However, to reach a settlement and put years of litigation behind us, we have agreed to make some operational changes and a monetary payment to the provider class involved in the case.”
As explained in court documents, plaintiff Sandra M. Peters was covered by an ERISA plan self-funded by Mars Inc. and administered by Aetna. The latter contracted with Optum to provide access to physical therapy, occupational therapy, and chiropractic services.
Peters alleged that Aetna, in collusion with Optum, fraudulently disguised the latter’s administrative fees as medical costs.
“These misrepresentations serve as the cover that allows Aetna to illegally (i) obtain payment of the Subcontractors’ administrative fees directly from insureds when the insureds’ deductibles have not been reached; (ii) use insureds’ health spending accounts to pay for these fees; (iii) inflate insureds’ co-insurance obligations using administrative fees; (iv) artificially reduce the amount of available coverage for medical services when such coverage is subject to an annual cap; and (v) obtain payment of the administrative fees directly from employers when an insured’s deductible has been exhausted or is inapplicable,” stated her original complaint, filed in 2015 in the US District Court for the Western District of North Carolina.
On Nov. 6, attorneys for Peters notified the court that they had settled the case. A month later, Optum said it had withdrawn from the settlement and was prepared to go to trial. Then, the parties appeared to resolve their remaining differences, and Peters’ attorneys filed notice on Dec. 17 that they had once again settled, Mealey’s reported. Terms of the settlement were not disclosed.
Owens and Minor Alleges Mismanagement of Self-Funded Plan
As reported by The Dark Report and various news outlets, Owens and Minor, a healthcare logistics company, filed a lawsuit in November against Anthem BCBS of Virginia, which had been administering Owens’ self-funded employee health plan since 2017.
The complaint further stated that “Defendant acted contrary to the fiduciary standards imposed by ERISA by, among other things, (i) paying more for healthcare claims than was even billed, (ii) securing kickbacks from providers, (iii) double-paying claims, and (iv) pocketing rebates belonging to Plaintiff.”
Owens initially requested plan data from Anthem in September 2021, but Anthem refused to do so, the complaint stated. “Eventually, Plaintiff had to sue Defendant to obtain its own data. Now that Plaintiff has a portion of that Plan data and has had the opportunity to analyze it, it is clear why Defendant fought so hard to prevent Plaintiff from accessing it.”
Becker’s Payer Issues noted that the lawsuit “reflects a wider legal trend for employers and health plan administrators navigating ERISA requirements. Under the law, plan fiduciaries must act in the best interests of beneficiaries by seeking the lowest reasonable costs for services. Recent amendments, such as the Consolidated Appropriations Act of 2021, have heightened transparency requirements, leaving employers with new tools—and new pressures—to ensure compliance.”
DOJ Alleges Overcharges Related to Military Managed Care
On March 13, the US Department of Justice (DOJ) announced that it had sued six health plans that participate in the Uniformed Services Family Health Plan (USFHP) program, which provides health benefits to military retirees and their families. The government alleged that the plans were aware of calculation errors that had inflated payment rates by more than $300 million between 2008 and 2012.
“The Plans failed to report or return any of those overpayments and, in fact, continued submitting claims to the government at the improperly inflated rates for several more months,” the complaint states.
Shortly after filing the lawsuit, US Family Health Plan Alliance issued a statement describing the allegations as “meritless,” Becker’s Payer Issues reported. The group said that the plans and the government had “expressly negotiated [payment rates] in a fixed-rate contract more than 10 years ago.”
These developments are clear signals in the market that self-insured employers, along with providers—including physicians, hospitals, and medical laboratories—have growing evidence that certain health insurance companies are gaming the system and not paying claims according to contractual arrangements. Expect to see more lawsuits against health plans, particularly by self-insured employers because, for them, the sums involved can be in the tens of millions of dollars.
In a handful of cases, health insurers reversed denials after physicians or patients posted complaints on social media
Prior authorization requirements by health insurers have long been a thorn in the side of medical laboratories, as well as physicians. But now, doctors and patients are employing a new tactic against the practice—turning to social media to shame payers into reversing denials, according to KFF Health News (formerly Kaiser Health News).
Genetic testing lab companies are quite familiar with prior authorization problems. They see a significant number of their genetic test requests fail to obtain a prior authorization. Thus, if the lab performs the test, the payer will likely not reimburse, leaving the lab to bill the patient for 100% of the test price, commonly $1,000 to $5,000. Then, an irate patient typically calls the doctor to complain about the huge out-of-pocket cost.
“There are times when you simply must call out wrongdoings,” she wrote in an Instagram post, according to the outlet. “This is one of those times.”
In response, an “escalation specialist” from BCBSIL contacted her but was unable to help. Then, after KFF Health News reached out, Nix discovered on her own that $36,000 in outstanding claims were marked “paid.”
“No one from the company had contacted her to explain why or what had changed,” KFF reported. “[Nix] also said she was informed by her hospital that the insurer will no longer require her to obtain prior authorization before her infusions, which she restarted in July.”
“I think we’re on the precipice of really improving the environment for prior authorization,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update. If this was to happen, it would be welcome news for clinical laboratories and anatomic pathology groups. (Photo copyright: Nashville Medical News.)
Physicians Also Take to Social Media to Complain about Denials
Some physicians have taken similar actions, KFF Health News reported. One was gastroenterologist Shehzad A. Saeed, MD, of Dayton Children’s Hospital in Ohio. Saeed posted a photo of a patient’s skin rash on Twitter in March after Anthem denied treatment for symptoms of Crohn’s disease. “Unacceptable and shameful!” he tweeted.
Two weeks later, he reported that the treatment was approved soon after the tweet. “When did Twitter become the preferred pathway for drug approval?” he wrote.
Eunice Stallman, MD, a psychiatrist from Boise, Idaho, complained on X (formerly Twitter) about Blue Cross of Idaho’s prior authorization denial of a brain cancer treatment for her nine-month-old daughter. “This is my daughter that you tried to deny care for,” she posted. “When a team of expert [doctors] recommend a treatment, your PharmD reviewers don’t get to deny her life-saving care for your profits.”
However, in this case, she posted her account after Blue Cross Idaho reversed the denial. She said she did this in part to prevent the payer from denying coverage for the drug in the future. “The power of the social media has been huge,” she told KFF Health News. The story noted that she joined X for the first time so she could share her story.
Affordable Care Act Loophole?
“We’re not going to get rid of prior authorization. Nobody is saying we should get rid of it entirely, but it needs to be right sized, it needs to be simplified, it needs to be less friction between the patient and accessing their benefits. And I think we’re on really good track to make some significant improvements in government programs, as well as in the private sector,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update.
However, KFF HealthNews reported that Kaye Pestaina, JD, a Kaiser Family Foundation VP and Co-Director of the group’s Program on Patient and Consumer Protections, noted that some “patient advocates and health policy experts” have questioned whether payers’ use of prior authorization denials may be a way to get around the Affordable Care Act’s prohibition against denial of coverage for preexisting conditions.
“They take in premiums and don’t pay claims,” family physician and healthcare consultant Linda Peeno, MD, told KFF Health News. “That’s how they make money. They just delay and delay and delay until you die. And you’re absolutely helpless as a patient.” Peeno was a medical reviewer for Humana in the 1980s and then became a whistleblower.
The issue became top-of-mind for genetic testing labs in 2017, when Anthem (now Elevance) and UnitedHealthcare established programs in which physicians needed prior authorization before the insurers would agree to pay for genetic tests.
Dark Daily’s sister publication The Dark Report covered this in “Two Largest Payers Start Lab Test Pre-Authorization.” We noted then that it was reasonable to assume that other health insurers would follow suit and institute their own programs to manage how physicians utilize genetic tests.
At least one large payer has made a move to reduce prior authorization in some cases. Effective Sept. 1, UnitedHealthcare began a phased approach to remove prior authorization requirements for hundreds of procedures, including more than 200 genetic tests under some commercial insurance plans.
However, a source close to the payer industry noted to Dark Daily that UnitedHealthcare has balked at paying hundreds of millions’ worth of genetic claims going back 24 months. The source indicated that genetic test labs are engaging attorneys to push their claims forward with the payer.
Is Complaining on Social Media an Effective Tactic?
A story in Harvard Business Review cited research suggesting that companies should avoid responding publicly to customer complaints on social media. Though public engagement may appear to be a good idea, “when companies responded publicly to negative tweets, researchers found that those companies experienced a drop in stock price and a reduction in brand image,” the authors wrote.
However, the 2023 “National Customer Rage Survey,” conducted by Customer Care Measurement and Consulting and Arizona State University, found that nearly two-thirds of people who complained on social media received a response. And “many patients and doctors believe venting online is an effective strategy, though it remains unclear how often this tactic works in reversing prior authorization denials,” KFF Health News reported.
Federal Government and States Step In
KFF Health News reported that the federal government is proposing reforms that would require some health plans “to provide more transparency about denials and to speed up their response times.” The changes, which would take effect in 2026, would apply to Medicaid, Medicare Advantage, and federal Health Insurance Marketplace plans, “but not employer-sponsored health plans.”
KFF also noted that some insurers are voluntarily revising prior authorization rules. And the American Medical Association reported in March that 30 states, including Arkansas, California, New Jersey, North Carolina, and Washington, are considering their own legislation to reform the practice. Some are modeled on legislation drafted by the AMA.
Though the states and the federal government are proposing regulations to address prior authorization complaints, reform will likely take time. Given Harvard Business Review’s suggestion to resist replying to negative customer complaints in social media, clinical labs—indeed, all healthcare providers—should carefully consider the full consequences of going to social media to describe issues they are having with health insurers.
