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.”
By negotiating directly with healthcare providers, employers cut health insurers out of the loop, at least for certain specified healthcare conditions and surgeries
It’s a new trend in how employers provide healthcare benefits for their employees. In order to save money, a growing number of employers are going to low-cost hospitals, physicians, and other providers to contract directly for their services. This may be the opening that allows some clinical laboratories to approach larger employers in their region and negotiate pricing and contract terms without the need to involve a health insurer.
What’s motivating more employers to reach out and contract directly with low-cost healthcare providers is the realization that their health insurance plan typically pays much more than Medicare to hospitals, physicians, clinical laboratories, and other ancillary providers. This fact is supported by a study conducted by the Rand Corporation that found “large employers generally lack useful information about the prices they are paying for healthcare services,” and that of the 1,600 hospitals in 25 states that Rand surveyed, “employer-sponsored health plans paid hospitals an average of 241% of what Medicare would have paid for the same inpatient and outpatient services in 2017,” which is up from 236% of Medicare in 2015, Modern Healthcare reported.
Thus, to better control the skyrocketing cost of healthcare,
and the health benefits plan they offer their employees, employers are
increasingly turning to self-coverage and implementing company benefits plans
that reward employees for price shopping and for selecting the lowest costs
healthcare services.
This trend is another reason why clinical laboratory leaders should be tracking changes in federal price transparency requirements, along with the increased consumer interest in accessing healthcare prices in advance of service.
Employers Negotiate Directly for Healthcare Services
Innovative employer plans to decrease healthcare costs
include:
Contracting directly with medical providers,
Opening primary care clinics within their
corporate facilities,
Referring employees to contracted providers for certain
procedures, and
Creating bundled-payment deals with select
providers.
Modern Healthcare reports that both public and
private employers in five states (Colorado, Connecticut, Michigan, Montana,
Texas, and Wisconsin) are “considering or launching group purchasing
initiatives with narrow- or tiered-network plans, onsite primary-care clinics,
and contracts with advanced primary-care providers,” as well as “direct-contracting
with providers, such as referring employees to designated centers of excellence
for some procedures and conditions under bundled-payment deals with warrantied
results.”
Cheryl DeMars, CEO of The Alliance, a Wisconsin healthcare purchasing cooperative, says there is a movement afoot. “I’m seeing a level of boldness on the part of our members that I haven’t seen before in my 27 years here,” she told Modern Healthcare.
“Almost 100 million employees covered through self-insured plans not only represents a staggeringly large market for healthcare cost containment, it is an extraordinary opportunity for America to meaningfully reduce our national healthcare bill,” Kirk Fallbacher (above), President and CEO of Advanced Medical Pricing Solutions (AMPS) told Healthcare Finance News. (Photo copyright: NextGenRBP.com)
Self-insured Employers can Reduce the Nation’s Healthcare
Bill, says KFF
A 2018 US Census Bureau report states that more than 181 million people in the US were enrolled in employer-sponsored health plans in 2017, and that the estimated average premium for employer-sponsored family coverage increased at an annual rate of 4.5% from 2008 to 2019.
That increase was approximately twice the rate of overall
inflation and growth in average hourly earnings during the same time period, according
to the report, which also states that the surge in premiums was driven by price
increases for medical services and that use of most healthcare services among
employees has actually been declining.
For US employers, “the steep increase in their healthcare
cost crowds out financial resources that could be used for employee wage
increases, capital investments, and other spending priorities, such as
retirement plans,” the report notes.
However, an estimated 94 million of the 156 million workers in the US—approximately 61%—are currently covered under a self-insured medical plan through their employer, the KFF Employer Health Benefits 2019 Annual Survey states.
Healthcare.gov defines the self-insured health insurance plan as a “type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third-party administrator, or they can be self-administered.”
“It doesn’t signal the end of the insurance industry,” he
said. “On the cost side of the equation, the PPO approach is beginning to come
to an end. The costs are outstripping inflation and wages.”
Moving to self-insurance is another part of the current trend for price transparency in the healthcare industry and may offer opportunities for clinical laboratories to increase profits. Clinical laboratories and anatomic pathology groups might want to contact the Human Resources Departments of local major employers to educate them on the costs and quality value of their labs. Such a proactive and innovative move could encourage employers to include those labs in the provider networks of their self-insured health benefit plans.
Increased medical laboratory test utilization might result from this new policy
Last month, another Obamacare mandate took effect which may lead to an increased volume of laboratory tests referred to the nation’s clinical laboratories and pathology groups. Effective on September 23, 2010, health plans must cover a host of screening and preventive medical services for which patients are not to be required to pay any money out-of-pocket.
It would appear that this mandate was included in the 2,700-page healthcare reform law as a benefit to consumers—thus giving democratic lawmakers a positive feature that they could talk up with their voters. These 75+ preventative and screening services (thanks to the new health reform legislation) have the potential to increase the volume of laboratory testing specimens, if large numbers of consumers were take advantage of these “free” medical services. (more…)
