DENIED: Medical Insurance Claims

Kurt Brouwer October 7th, 2009

Most of us have experienced a medical insurance claim denial.  On the form from the insurance company, we see a big zero in the amount the insurer will pay.

In all the furor over the many and varied health insurance reform proposals, we have heard over and over again about how heartless private insurance companies are when it comes to denying insurance claims.  We are left with the impression that a government insurance program would be much less likely to deny insurance claims.

However, statistics on claims denial among various insurance providers may tell a different story.   A 2008 report from the American Medical Association was on The Drudge Report and it has been picked up in many other places:

2008 National Health Insurer Report Card  (American Medical Association)

The purpose of the AMA’s National Health Insurer Report Card (NHIRC) is to provide physicians and the general public a reliable and defensible source of critical metrics concerning the timeliness, transparency and accuracy of claims processing by the health insurance companies that are responsible for paying these claims…

The chart below is based on statistics from this AMA report.  Specifically, it covers the percentage of insurance claims that are denied completely.  That is, where the insurance payment is zero.  Here is how the AMA report describes claims denial:

…Percentages of claim lines (i.e., records) denied

Description: What percentage of records submitted are denied by the payer for reasons other than a claim edit? A denial is defined as: allowed amount equal to the billed charge and the payment equals $0…

carpe-diem-medicare-claims.jpg
Data: American Medical Assocation

Chart: Carpe Diem

Medicare claims denial — Is it 6.85% or 4.0%?

I suspect many readers will be surprised by this data because they might have thought that overall claims denial was much higher, across all insurers.  And, many would also be surprised that Medicare was the highest insurer for claims denied.  The next highest was very close — Aetna at 6.8%.  However, the average for all private insurers on this chart was 3.89%, including Aetna.  That’s just a bit more than half of the Medicare rate for claims denial.

2009 AMA National Health Insurer Report Card

To see if the denial rates had changed. I also looked at the AMA’s 2009 National Health Insurer Report Card.   In general, the story is the same, although most insurers had lower rates.

For the 2009 report, Anthem BCBS (i.e. Blue Cross/Blue Shield) was the highest at 4.34% and Medicare was next at 4%.  Aetna was the lowest at 1.81%.  The private company denial average was 2.79% versus Medicare at 4%.  So, Medicare was above average versus private insurers, but Medicare definitely closed the gap quite a bit.

As the Healthcare Economist wrote about this data in a post from last year [emphasis added]:

…the fact that Medicare denies more claims than commercial insurers should dispel the myth that the government is simply a benevolent entity, while commercial insurers are ruthless, profit-hungry wolves…

I don’t want to make too much of this particular report because there are many other issues involved in the healthcare or the health insurance debate.  Nonetheless, this information from the AMA certainly flies in the face of conventional wisdom found in Washington DC and in the media.

See also:

Healthcare: Underestimating the cost

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4 Responses to “DENIED: Medical Insurance Claims”

  1. medicare supplement insuranceon 08 Oct 2009 at 7:56 pm

    I think the best thing that insurers can do is to ask payment certificate to the company so they can show a proof that they have the rights in that health insurance when they experience that situation.

    Because I guess it really hurts to hear that after all of the efforts we have given to that medical insurance we just ended up with nothing. And what addends the burden is when we are in that situation that we really really need to claim or to have that health insurance but then they will just deny us.

  2. Kurt Brouweron 09 Oct 2009 at 11:14 am

    The point to consider here is that Medicare has over this two-year period denied more claims than the average private insurance company. I’m not knocking Medicare just pointing out that Medicare denies claims too.

    And, just because someone paid their premium for car insurance or home insurance or life insurance, that does not mean the car (home or life) insurance company is going to approve a claim it considers inappropriate. The same goes for health insurance. Anyone who believes that it is only private insurance companies that deny claim is arguing in the face of clear evidence to the contrary.

  3. [...] reality, Medicare has a higher denial rate compared to the top commercial insurance plans. Expanding Medicare will lead to less choice in the [...]

  4. [...] reality, Medicare has a higher denial rate compared to the top commercial insurance plans. Expanding Medicare will lead to less choice in the [...]

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