Survey Exposes Pervasive Billing Errors, Aggressive Tactics in US Health Insurance

Patterns of medical billing errors and coverage denials appear to be pervasive among Americans enrolled in health insurance coverage. A new report published by The Commonwealth Fund has revealed that within the last year, 45% of insured adults received a medical bill for a service they believed to be covered by their insurance.¹ Even when a service was recommended by a physician, 17% were denied coverage.

This discrepancy not only leads to financial strain but also contributes to worsening health outcomes for many patients. The survey, which included responses from over 7800 insured Americans of working age, found that about 60% of those who experienced coverage denials reported delays in care, with 47% indicating that their health conditions deteriorated as a result.

The gap in knowledge is compounded by insurers' motivation to avoid paying for care, with many using increasingly aggressive tactics, including deploying technology and pressuring company physicians to scrutinize and often deny services recommended by patients’ doctors.

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Some individuals also reported that they found out about serious health problems later than they would have liked due to the delays in care. Aside from the negative impact these adults experienced related to their condition, denials and delays created additional emotional turmoil, with 80% reporting that the situation caused worry and anxiety.

Last year, insurance coverage in the US peaked at the unprecedented rate of 93.1%. However, it was accompanied by another historic increase: national health expenditures reached $4.8 trillion. This trend indicates that health spending will continue to outpace economic growth, with expenditures projected to reach $7.7 trillion by 2032.²

According to the CDC, 90% of US health spending encompassed care for individuals with chronic and mental health conditions.³ The agency stated the benefit of intervention and preventive care can improve health outcomes while also mitigating national spending.

Insurance Claim Denials Are Swift and Lack Scrutiny

Recent media investigations have found that some insurance company doctors are not incentivized to spend the time needed to scrutinize patients’ medical records and follow guidelines for making informed decisions about approving or denying a care request, survey authors wrote.¹ The survey itself didn’t name specific health plans or insurers, although a couple appeared in its references.

An article published in ProPublica delved into PXDX, Cigna’s review system, which was developed more than a decade ago by Alan Muney, MD, ScB.⁴ Muney was recruited by Cigna to help “spot savings” in its processes because of his work with UnitedHealthcare.

With this system, the speed of rejecting claims is instantaneous, citing “medical grounds without opening the patient file, leaving people with unexpected bills,” according to the ProPublica investigation.

“Over a period of 2 months last year, Cigna doctors denied over 300,000 requests for payments using this method, spending an average of 1.2 seconds on each case, the documents show. The company has reported it covers or administers health care plans for 18 million people,” the article stated.

Muney’s system was designed “to prevent claims for care that Cigna considered unneeded or even harmful to the patient." He told ProPublica that “the policy simply allowed Cigna to cheaply identify claims that it had a right to deny.” However, the article explained that while Cigna was generating the system to swiftly sort through denials, some executives had concerns about its legality. One stated that Cigna’s legal department approved it, and the executives considered “it might fall into a legal gray zone.”

Patients and providers are not the only ones affected; there's evidence that Cigna used fraudulent tactics to inflate payments from its Medicare Advantage plans.⁵ Last year, the company paid $172 million to settle claims of wrongful reimbursement after using false diagnosis codes.

Another extensive ProPublica investigation on denied claims found that UnitedHealthcare misrepresented and ignored recommendations and warnings from a patient’s doctor.⁶ Among other alarming findings was a report submitted by a doctor, paid by UnitedHealthcare, that stated the patient’s health would be at risk if coverage was terminated—the company buried it without consideration.

Providers and experts across specialties have expressed frustration with the excessive barriers they face while trying to ensure their patients have access to the personalized, recommended care they provide. Jeffrey Sippel, MD, MPH, associate director of inpatient clinical services and associate professor of clinical medicine in the Pulmonary Sciences and Critical Care Medicine Division at the University of Colorado School of Medicine, told The American Journal of Managed Care^® (AJMC^®) he’s been inundated with denied insurance claims from Medicare Advantage plans for prescribing his patients amyotrophic lateral sclerosis noninvasive ventilators.⁷

“It's driven by money. It's driven by a lack of appreciation of how dynamic these patients are, and how quickly they can change from sort of stable to doing quite poorly,” he explained. “And then the final thing that [insurance companies] don't appreciate is that when we admit these patients appropriately, the costs associated with that admission are huge. They could have saved an admission and saved themselves tens of thousands of dollars. It's a short-sighted approach to making this quarter's profit statement look better.”

Private health insurance covers over 200 million Americans, and when looking at state and federal regulators' data, ProPublica found that insurers reject about 1 in 7 claims for treatment.⁶ Additionally, when coverage is denied, formal appeals are very rarely filed—only 0.1% of cases denied by insurers under the Affordable Care Act in 2021.⁸

Why Aren't Americans Appealing Denied Claims?

One of the most concerning aspects of the survey is the lack of awareness among patients regarding their rights to challenge billing errors and coverage denials. Only 43% of adults reported that they or their doctor appealed the insurer's denial of care.¹

Among those who did not contest their bills, 54% were unsure if they had the right to do so. This knowledge gap was particularly pronounced among low- and moderate-income individuals, younger adults, and Hispanic respondents. For instance, 60% of individuals aged 19 to 34 were unaware of their ability to challenge a bill. Another finding indicated that 40% of adults who did not appeal were uncertain about how to go about doing so or who to contact, further emphasizing that lack of education and awareness is a critical barrier to accessing care.

A key determining factor in the decision to challenge a denied claim among those with higher income was the amount of time it would take, with 23% reporting they didn’t have the time to put forth the effort it would entail. However, 50% of individuals who did dispute their coverage denials reported that they were able to get some or all of the denied services approved. Similarly, more than one-third (38%) of individuals who contested medical bills saw their balances reduced or eliminated. Success rates were even higher among Medicare and Medicaid recipients, with 61% of Medicare beneficiaries and 46% of Medicaid beneficiaries reaching favorable outcomes after challenging their bills.

The multidimensional burden of coverage denials of clinical care has been well documented. Respondents reported that they consider altering clinical decisions to avoid prior authorization requirements and related burdens, even in cases in which use of the medication was clinically appropriate, a study published in AJMC found.⁹

Health benefits are not only expensive, they’re complicated, according to Bruce Sherman, MD, medical director of North Carolina Business Coalition on Health, and adjunct professor at the Department of Public Health Education, University of North Carolina-Greensboro.¹⁰ He emphasized the responsibility of employers in ensuring appropriate access to care and education, especially for those in lower-wage categories or minority subpopulations.

“That's an area where I think we have a great deal of opportunity to improve the health benefits that employers provide,” Sherman, a longtime member of the AJMC editorial board, said in an interview. “It could be a simple thing to lower health care costs to improve access, but that by itself is insufficient to affect meaningful change.”

Consumer Confusion and Insurer Accountability

“Considerable consumer confusion” surrounding patient rights and how to appeal denials was apparent in the findings.¹ A lack of transparency and standardization in the appeals process is likely the cause, according to the authors, who stated that the responsibility of appealing may not be clear between patients and providers, or between employers and employees, while the documentation requirements to appeal can create additional barriers.

The Department of Labor’s Employee Benefits Security Administration (EBSA) joined AJMC in discussions about legal entitlements in employer health plan coverage.^11,12 The agency has been working to educate Americans about their legal rights to obtain necessary information from health plans and claims denied on appeal.

“From the beginning of this [EBSA] administration, over 3 years ago, we made enforcement of this federal parity law one of our highest priorities,” Ali Khawar, principal deputy assistant secretary with EBSA, said in an interview.¹¹ “And so we put a lot of resources into conducting investigations, highlighting problems, and actually getting them fixed within health plans.”

Lisa M. Gomez, assistant secretary of EBSA, further emphasized the agency's educational efforts so people can be better informed of what they're legally entitled to from their health plan to address the knowledge gap.¹² EBSA's website offers a wealth of resources and simple methods to contact its benefits advisors with questions.

"We have an enforcement team; we have investigators who will go to [insurance] plans, contact plans, and try to find out either if there's an individual claim that is not being properly paid or if it seems like there's some kind of systematic problem," she explained. "We have investigators who go out and look at those things and try to help with making corrections, having the plan make corrections, and if needed, we can take enforcement action against those plans to have them comply with the law."

This gap in knowledge is compounded by insurers' motivation to avoid paying for care, the survey stated.¹ Many insurers are using increasingly aggressive tactics, including deploying technology and pressuring company physicians to scrutinize and often deny services recommended by patients’ doctors, resulting in unexpected bills or delays in care for patients.

“The high frequency of successful appeals also suggests the initial determination process may be flawed, with many patients being denied coverage for care they need to access,” survey authors wrote. “The current system with its complicated appeals processes can be detrimental to patients who are most in need of services.”

The survey called for HHS to track claims denials to "better fulfill the requirements of the ACA to monitor rates of claims denials in all commercial insurance plans, including those offered through the marketplaces, individual market, and employers." Holding insurers accountable was strongly advocated for. By publically reporting data, insurers would be incentivized to limit these practices.

"As of May 2023, nearly 90 legislative bills had been considered across 30 states to reform prior authorization requirements," the survey stated. "Some states have passed legislation, such as New Jersey and Washington, DC, while California and North Carolina have bills under consideration. Recently, the Committee on Education and the Workforce urged the U.S Department of Labor to strengthen disclosure requirements for self-funded employer plans—how most employer-insured individuals receive their coverage—around the number of claims denied and appealed and the outcomes of those appeals."

Ensuring that patients understand their rights and have access to support systems for challenging erroneous denials is crucial. Moreso, the findings underscore the urgent need to address these issues through concerted efforts from federal and state policymakers, regulators, and insurers to enhance transparency, accountability, and consumer awareness.

References

1. Gupta A, Collins SR, Roy S, Masitha R. Unforeseen health care bills and coverage denials by health insurers in the U.S. The Commonwealth Fund. Published August 1, 2024. Accessed August 1, 2024. https://www.commonwealthfund.org/publications/issue-briefs/2024/aug/unforeseen-health-care-bills-coverage-denials-by-insurers

2. Grossi G. US health spending hits $4.8 trillion, insurance coverage peaks in 2023 projections. AJMC. June 12, 2024. Accessed August 1, 2024. https://www.ajmc.com/view/us-health-spending-hits-4-8-trillion-insurance-coverage-peaks-in-2023-projections

3. The impact of chronic diseases in America. CDC. July 12, 2024. Accessed August 1, 2024. https://www.cdc.gov/chronic-disease/data-research/facts-stats/index.html

4. Rucker P, Miller M, Armstrong D. How Cigna saves millions by having its doctors reject claims without reading them. ProPublica and The Capitol Forum. March 25, 2024. Accessed August 1, 2024. https://www.propublica.org/article/cigna-pxdx-medical-health-insurance-rejection-claims

5. Payerchin R. Cigna to pay $172M to settle claims of wrongful reimbursement by medicare advantage. AJMC. October 7, 2023. Accessed August 1, 2024. https://www.ajmc.com/view/cigna-to-pay-172m-to-settle-claims-of-wrongful-reimbursement-by-medicare-advantage

6. Armstrong D, Rucker P, Miller M. UnitedHealthcare tried to deny coverage to a chronically ill patient. He fought back, exposing the insurer’s inner workings. ProPublica and The Capitol Forum. February 2, 2023. Accessed August 1, 2024. https://www.propublica.org/article/unitedhealth-healthcare-insurance-denial-ulcerative-colitis

7. Grossi G. Dr Jeffrey Sippel: ventilator claim denials are driven by cost. AJMC. November 20, 2023. Accessed August 1, 2024. https://www.ajmc.com/view/dr-jeffrey-sippel-ventilator-claim-denials-driven-by-cost

8. Politz K, Lo J, Wallace R, Mengistu S. Claims denial and appeals in ACA Marketplace plans in 2021. KFF. February 9, 2024. Accessed August 1, 2024. https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans/

9. Salzbrenner SG, Lydiatt M, Helding B, et al. Influence of prior authorization requirements on provider clinical decision-making. AJMC. July 13, 2023. Accessed August 1, 2024. https://www.ajmc.com/view/influence-of-prior-authorization-requirements-on-provider-clinical-decision-making

10. Grossi G. Health plan design: Employers as the architects of health equity. AJMC. December 22, 2023. Accessed August 1, 2024. https://www.ajmc.com/view/health-plan-design-employers-as-the-architects-of-health-equity

11. Grossi G. Ali Khawar on addressing the mental health crisis through parity law. AJMC. June 13, 2024. Accessed August 1, 2024. https://www.ajmc.com/view/ali-khawar-on-addressing-the-mental-health-crisis-through-parity-law

12. Grossi G. Lisa Gomez: Efforts to increase health care access must acknowledge systemic barriers. AJMC. July 31, 2024. Accessed August 1, 2024. https://www.ajmc.com/view/lisa-gomez-efforts-to-increasing-health-care-access-must-acknowledge-systemic-barriers