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4 Reasons Why Health Insurance Carriers Wrongfully Deny Claims

According to the Department of Labor, almost 15% of medical claims are denied. With such a high volume of denials, some medical providers are inclined to ask themselves whether payers wrongfully deny their claims. While coding errors, missing information, and untimely filing are to blame for a large portion of medical claim denials, sometimes denials are unfounded – a mistake on the part of the payer. Some believe that insurance carriers always have their ducks in a row, but this is not always the case. This article will fill you in on four reasons why health insurance carriers wrongfully deny claims. 

Outdated Claims Processing Procedures and Programs

Over the past several decades, the healthcare industry as a whole has adopted helpful technological advances that expedite medical billing and claim payment. Yet, some health insurers have not made the switch to better tech. 

Larger insurers like UnitedHealthcare and BlueCross BlueShield have technology-driven processes to increase claims payment accuracy. But smaller insurers, or those with limited capital, use outdated claims processing procedures and inferior adjudication programs that fail to reliably prevent processing errors. If you notice a high volume of wrongfully denied claims from one specific payer, this could be the issue. 

Humans Make Mistakes

The vast majority of claims are processed through auto-adjudication. Auto-adjudication refers to a system where a claim can be reviewed and paid or denied without a human reviewing the claim manually. AI programs scan claims, synthesize the claim information, and make payment decisions. 

Not all claims can be auto-adjudicated because of individual differences in the members’ plans, provider contract intricacies, or other claim-specific nuances. If a claim cannot be auto-adjudicated, it will need to be reviewed manually by a person. 

Any claim that has been manually processed has a chance of being denied (or paid) in error. Though training for claims processing may be intense in many cases, we as humans are imperfect and make errors. 

Automated Claims Processing Can Be Faulty

Even in cases where an automated program adjudicates claims, there may still be errors. The auto-adjudication program is only as good as its rules and edits. Claims processing rules and edits indicate to the auto-adjudication system how a claim should be processed. 

Consider a situation where a claim for a service is denied as non-covered in error. The claim may be incorrectly denied if there is no rule or edit integrated into the claims processing program to signal that the service should be covered. 

Automation issues can creep up in health insurance companies of all sizes, causing many types of incorrect claim denials. Issues like these are ongoing and require consistent attention from technical specialists and claims analysts. 

If you’re noticing that an insurer is repeatedly denying claims for a specific service, track the denials and inform the insurer of the problem. Direct outreach may prompt the health insurer to examine their claims processing procedures, rules, or edits to minimize future mistakes. 

Fraudulent Claims Processing

We’d like to think that all health insurers have their members’ best interests in mind. Unfortunately, that is not the case. Health insurers make money by collecting premiums, and they maximize their profit by paying out as little as possible in claims. For reputable health insurance companies, this means that they strive to: 

  • Ensure that patients receive the appropriate level of care. 
  • Pay only claims that they are liable for. 

Reputable insurers don’t make it a point to avoid paying claims that they are liable for. If a patient receives a covered service from a contracted provider and payment is due, an upstanding insurance company will pay that claim. 

On the other hand, health insurance companies that don’t operate with integrity will do anything to maximize profits, even if it means fraudulently denying claims. Fraudulent denials are more likely to be seen in high-dollar claims. 

It is difficult to determine whether you’re dealing with a fraudulent insurance company, as the claims payment process is complicated. There could be various reasons why a claim is denied, and an insurance company can cite many denial reasons to avoid payment. 

Spot and Remedy Incorrect Denials

Chances are you don’t know the inner workings of all of your payers, and that’s okay. For that reason, you as a medical provider cannot prevent incorrect denials on the part of health insurance companies. What’s important is whether you can spot and remedy an incorrect denial. 

Being able to recognize incorrect denials is vital for the financial health of your practice. Review every single denial letter your office receives – allowing your denials to stack up in the corner of your office is akin to burning money. If your office hasn’t made it a point to review all claim denials, you could be missing out on chances to recover funds due. 

You should also have denial management processes in place. You’ll need to find efficient ways to gather information about denied claims and determine if the denial is substantiated. You’ll also need to submit documentation/a reconsideration or request claim reprocessing, and then track each claim’s reprocessing. Throughout the entire process, you should be keeping track of each of the denials from receipt to resolution. 

Comprehensive claims denial management takes a lot of time and a dedicated team member, or even a full denial management team. However, all of this is necessary to recover payment on previously denied claims. Improper denial management has a negative effect on the cash flow and profitability of a practice, which is why your business needs to focus on denial management. 

Get Denial Management Help from The Experts

Denial management is an involved business function that is best handled by experts. Why? It takes a considerable amount of time, focused effort, and specialized expertise to effectively manage claim denials. Data Search Inc. works as an extension of your practice, drawing upon decades of accounts receivable experience to recover funds from insurance companies on your behalf. Partnering with Data Search, Inc. can help you alleviate the burden of mounting insurance denials and get to the hard work of providing stellar patient care.