Marketplace plans deny in-network health insurance claims more than you might think

INDIANAPOLIS — The rate of uninsured Americans has been declining, thanks to the Affordable Care Act and expansion of Medicaid in many states.

But a recent report from the Kaiser Family Foundation suggests that having health insurance doesn't always mean the care you need will be covered, even if that care is provided in-network.

The KFF analysis examined data on claims denials and appeals reported by ACA Marketplace plans to the U.S. Centers for Medicare and Medicaid Services for the 2020 plan year. About 3% of Americans, or 11 million people, get their health insurance through ACA plans offered on HealthCare.gov.

The report finds in-network claims are denied about 18% of the time. The analysis excluded data from insurers that was incomplete.

That 1-in-5 denial rate has held fairly steady for several years, said Karen Pollitz, a senior fellow and co-director of the Kaiser Family Foundation project on patient and consumer protections in health insurance.

"There's a requirement under the ACA dating all the way back to 2010 that private health plans need to report data on how their coverage works in practice," she said.

It's an important reform because "insurance tends to be a black box. You can sort of read the policy, you can see how it's supposed to work — what's supposed to be covered, what you're supposed to pay — but you can't tell whether claims are actually paid reliably or on time."

There are many reasons claims can be denied for in-network services. About 16% of denials were because the claim was for an excluded service. Ten% were denied due to a lack of preauthorization or referral. Only about 2% were denied based on medical necessity. Most denials — 72% — were classified as "all other reasons," without a specific reason.

Claims denial rates vary across states. Among states that offer plans on HealthCare.gov, South Dakota has the lowest rate of in-network denials at 6%, and Indiana has the highest, at 29%. Other Midwest states with above-average rates of in-network claims denials include Missouri (23%), Michigan (23%), and Ohio (22%).

Drilling down to the level of individual health plans, there's even greater variation. Nationwide, some insurers deny claims at rates of less than 1%, while others are as high as 80%.

Data is gathered, but it's limited and not easily accessible

Part of the federal government's motivation to implement this data requirement was to make sure health plans are living up to certain requirements, Pollitz said.

For example, plans are not allowed to discriminate based on health status, and federal laws require mental health coverage to be on par with coverage of other medical issues.

So this data is a really important "oversight tool," she said, and could also help consumers.

"People might like to know, when they're looking at their plan choices, well, this one costs $10 a month more than that one, but this one seems to rarely deny claims, whereas this one seems to frequently deny claims," she said.

But Pollitz said the data-reporting requirement is not living up to its fullest potential.

Part of the problem is information about claims denial rates gathered by federal regulators isn't easily accessible and is not included among other plan information provided on HealthCare.gov.

"On average, people in [states that offer plans on HealthCare.gov] have a choice of more than 100 plans to choose from," she said. "You can sort them by premium, and that's what people tend to do, and then apply their premium tax credit that they're eligible for, and then pick the plan that is cheapest without knowing a whole lot more about what else is different between the plans. And frankly, without being able to tell a number of important factors, that may vary across plans."

Another issue, Pollitz said, is the federal government currently only collects data about in-network claims, and the data is limited to ACA Marketplace plans. Yet about half of all Americans get their insurance through their employer.

"Our main finding continues to be that this law has not been implemented, other than in a very limited fashion," she said. "There's no collection of this data for employer plans. Even though that requirement dates all the way back to the fall of 2010, that's just never been implemented [by] the Department of Labor."

Also, no data is collected on out-of-network claims, Pollitz said.

You have a right to appeal denied claims, but very few people do

Everyone has a right to appeal denied claims, regardless of where they get their health insurance. But the analysis finds the vast majority of claims — 99.9% — aren't appealed.

And that doesn't surprise Pollitz because of how confusing health insurance is for a lot of people.

"They pay for it, they go to the doctor, they lay down their card, and they just expect that that will take care of it, and often it doesn't," she said. "And when it doesn't, I think people are often surprised."

While some state insurance regulators have sanctioned health insurers that inappropriately deny claims, Pollitz said much more could be done.

Side Effects reached out to state and federal regulators to ask what is being done to ensure people aren't unfairly or inappropriately having their claims denied.

In a statement, a CMS spokesperson said the agency is aware of the KFF report and is "identifying appropriate next steps to further investigate and address the concerns raised." The agency has already conducted internal analyses of the data and is considering several strategies to ensure consumers are not facing inappropriate denials, "including instituting additional claims and denials data elements for reporting, which has already been approved for future data collection via an expanded Paperwork Reduction Act package."

The spokesperson also noted that routine errors made by insurers in the process of data submission may "influence some denial rates."

Several Midwest states' departments of insurance — including Michigan, Ohio, Missouri and Indiana — responded with statements saying they encourage people to file complaints with their agencies any time they have issues with insurers, so they can be aware and investigate when needed.