When Your Health Insurance Plan Won't Pay

The very nature of managed care health insurance plans increases the likelihood of a legitimate health insurance claim being denied, or a prior authorization request is denied. Bear in mind that managed care (health maintenance organizations, or HMOs, and preferred provider organziations, or PPOs) exist for the purpose of controlling costs for the health insurance company. Many health care procedures, surgeries, durable medical equipment and drugs, particularly the more expensive ones, must have prior authorization from the health insurance plan before the plan will pay. Claims are reviewed to determine "medical necessity" of the claim. Health care services or products deemed "not medically necessary" will almost certainly be denied for payment by the health insurance plan.

Health insurance companies do make mistakes, however, and it's certainly possible that a covered expense will be denied. What recourse does the health plan member disagrees with the decision of the health plan? Here are some steps to take in dealing with a denial of payment.

1. Review the explanation of benefits (EOB) sent to you from the health insurance company. The EOB should state briefly why benefits were denied.

2. Review your health insurance policy. What benefits does the health insurance policy state for the particular service or product? Should the claim be covered according to the policy?

3. Does the health plan have special criteria to be met in order for an expense to qualify as "medically necessary" and be considered a covered expense? For example, many managed care plans will cover drugs on their formulary. Other drugs may not be covered at all, or only if the formulary drugs have been tried and failed. An expensive MRI procedure may only be covered if certain symptoms are present. Check your policy to determine whether the expense qualifies as "medically necessary" by the health insurance company.

4. Is the health care provider "in-network" (contracted) with your health insurance plan? If not, does your managed care plan cover "out-of-network" (non-contracted) providers? Most HMO plans do not cover "out-of-network" providers; many PPOs will pay for services by "out-of-network" providers, but usually at at lower rate than paid to "in-network" providers.

If, after reviewing the health insurance policy and the EOB, you feel that the claim should have been a covered benefit by the insurance company, you should first request that the insurance company provide you with the information that they used to base their denial. The health insurance company is required to provide you with this information on request. Review this information carefully. Many times the health insurance company was not provided with appropriate documentation from the provider to justify the claim. Contact the provider and request that they submit more medical records that support the claim for benefits. It may also be helpful for the provider to write a letter to support the claim in addition to the medical records. Your claim may be resolved in this manner.

All insurance companies have a process in place for plan members to appeal decisions made by the health insurance company. If providing further documentation does not resolve the dispute, then an appeal must be filed. Your provider may help you with this, and they may not. Read the member handbook and/or policy and follow the procedure for appealing the denial of the claim. Be prepared to submit more documentation to support your appeal. Keeping a record of your interactions with the insurance company is vital. Record all phone conversations and include the name of the person you spoke with, a brief summary of the conversation, and the date and time. File all correspondence sent and received.

Bottom line is that health insurance plans are "for-profit" entities; in business to make money. They look for reasons not to pay. Indeed, their goal is to not pay, increasing their profits and keeping costs down for the members. It's up to you to ensure that legitimate claims for covered benefits are paid.