Most Common Reasons for Health Insurance Claim Denials

Insurance claim denials can significantly disrupt your practice’s financial health and efficiency. According to the Medical Billing Advocates of America, these denials often stem from avoidable issues like technical errors or administrative oversights, with one in seven claims being denied industry-wide.

There are multiple reasons for claim denials. Let’s explore the most common reasons:

Delay in filing claim

Most insurance providers let you submit a claim 90 days after the service was rendered. Some insurance providers, nevertheless, only permit a 30-day window.

A claim will be turned down if submitted too long after the service was rendered. Make sure you know the deadlines for filing a claim and, in the case of a denial, appealing the denial.

Lack of documentation and authorization

Insurance claims may be rejected if the payer disputes the procedure’s or service’s medical necessity. The solution is to have comprehensive and easily accessible documentation that backs up the quality of service rendered.

The risk of denial because of insufficient evidence of medical necessity can be decreased by using an integrated Electronic Health Records (EHRs) and a Practice Management (PM) platform to help guarantee that all essential data is readily available.

Insurance companies often require preauthorization before receiving specific treatments, especially for non-routine procedures including operations, hospital stays, and mental health therapies.

An insurance claim may only be allowed if the required preauthorization is obtained. Healthcare professionals should proactively seek preauthorization on the patient’s behalf to avoid this problem, ensuring all conditions are satisfied before providing services.

Duplicate Claims

Administrative mishaps by medical providers are one of the most common reasons for a claim denial. Accidentally resubmitting a claim before the insurance company even processes the appeal request or filing a new claim instead of following up on an earlier submission.

To minimize the risk of duplicate claims and administrative errors, many providers choose to outsource medical billing services. This approach leverages expert teams and advanced systems to ensure accurate claims submission, robust tracking, and timely follow-ups. By outsourcing, healthcare practices can enhance billing efficiency and focus on delivering quality care.

Incorporating vital claim monitoring and reporting features and a robust management system can ensure billing efficiency with reduced denials. This also enables the workflow to be well-established and stress-free.

Lack of medical necessity

For many routine services, medical necessity is a given. However, insurance companies often require proof of medical need for some specialized procedures and surgeries.

Most health plans use their own standards to determine medical necessity; if the claim is unnecessary, it will be rejected until you can provide evidence to the contrary.

Coverage exclusion or exhaustion

Most health insurance providers have a list of procedures they do not cover, including infertility treatments, gastric bypass surgery, and cosmetic surgery.

There might also be limitations on the number of services the plans cover.

For example, a health plan might only pay for thirty days of inpatient care for a specific illness. Your claim will be rejected if submitted for benefits that are not eligible or exceed the limit.

Non-Payment

The claims might be accepted if the premium fee for the prepaid insurance plans is paid on time.

Pre-existing condition

According to the Department of Health & Human Services, “Under current law, health insurance companies can’t refuse to cover you or charge you more just because you have a ‘pre-existing condition’ — that is, a health problem you had before the date that new health coverage starts. These regulations became operative on January 1, 2014 and continue.

Incorrect coding or issues with IC-10

An insurance provider could reject a claim if the coding needed to be completed or accurate. Resubmitting the claim with the updated coding will fix this.

Even though medical professionals and providers now catalog treatments with greater accuracy according to the most recent version of the coding language, mistakes happen frequently as medical professionals and billing personnel continue learning about the most recent standards.

Purchasing a contemporary PM system with integrated automatic billing rules helps identify coding problems before the claim is filed, enhancing collections and lowering overhead. The clinical coding knowledge base, integrated into your PM solution, streamlines the billing process by alerting you to any problems before the claim leaves your system.

Now, your employees can handle more claims, spend less time following up on payments, and be paid immediately.

Lack of Improvement in Health

Many insurance companies will refuse to continue covering a patient if their disease necessitates long-term care, or if they receive long-term care with minimal improvement.

However, this can be reversed on appeal, depending on the circumstances.

Denial Management: A Key to Reducing Claim Denials

Proactively addressing insurance claim denials can significantly boost your practice’s revenue and efficiency. Opting for professional denial management services helps ensure claims are processed correctly the first time and minimizes rejections. These services provide expertise in tracking, analyzing, and resolving denied claims, enabling healthcare providers to recover lost revenue while focusing on patient care.

Bottom Line

Proactively preventing denials before they occur can streamline your revenue cycle and boost profitability. Addressing denied claims or navigating the appeals process raises administrative costs and hampers cash flow.

Implementing strategies to reduce denial rates can significantly enhance your practice’s financial performance and overall stability.