Insurers Black Box

1 Center for American Progress | Insurers’ Black Box

Insurers’ Black BoxNow-Secret Claims Denial Rates Could Tell Consumers a Lot About Their Insurance Company

Scot J. Paltrow October 21, 2009

Key points

• Therateatwhichinsurancecompaniesdenyclaimsiscriticalforconsumerstoknowwhenshoppingforinsurance—buttodayinsurancecompaniesarekeepingthoseratessecret.

• Claimsdenialrateshavebeenreleasedinonlyonestate—California—andthedatashowsdramaticvariationsindenialratesamongcompanies,whichoneexpertsaysshouldraiseanalarmforregulators.

• Whenitcomestoclaimdenials,insurersmaybeputtingprofitsaheadofpatients’bestinterests.Mostmajorinsurancecompanieshavereassignedtheirmedicaldirectors—thedoctorswhoapproveordenyclaimsformedicalreasons—toreporttotheirbusinessmanagers,whosemainresponsibilityistoboostprofits.

Introduction

ThehealthcarereformbillspendinginCongresswouldrequirenearlyeveryAmericantohavehealthinsurance.Millionsofpeoplewouldhavetoshopforcoverageforthefirsttime.Yetsomeofthemostusefulinformationforchoosingapolicyremainstopsecret—lockedawayinhealthinsurers’computers.

Consumershaveastronginterestinpickingacompanythatwillreliablypaytheirlegiti-mateclaimswhentheyneedmedicaltreatment.Buthealthinsurancecompaniesdon’tdisclosethepercentageofclaimstheyrejectanddeclinetopay.AndinquiriesbytheCenterforAmericanProgressshowthatthenation’sinsuranceregulatorshavenotaskedthemtodoso.

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CAPinrecentweekslaunchedaninvestigationtodeterminewhetherdataoncommercialhealthinsurers’claimdenialratesisavailablenationwideorinanystates.TheresearchincludedinterviewswithmultipleseniorofficialsoftheNationalAssociationofInsuranceCommissioners,othercurrentandformerinsuranceregulatorsandgovernmentofficialsinstatesaroundthecountry,officialsathealthinsurancecompanies,academicexperts,andothers.Allsaidthatnosuchdataisavailable.Nostateinsuranceregulatorsorfederalagen-ciesrequireinsurerstodisclosetheirclaimdenialrates,exceptinCalifornia.California’sDepartmentofManagedHealthCarerequiresinsurerstoincludeitinreportstheyfile.

CAPalsoaskedeachofthenation’ssevenlargestfor-profithealthinsurers—Aetna,AnthemBlueCrossBlueShield,Cigna,Coventry,HealthNet,Humana,andUnitedHealthcare—ifforthepurposesofthisreporttheywoulddisclosetheiroverallratesofclaimsdenialsandbreakdownsbyreasonforthedenials.Allofthecompaniesdeclinedordidnotgiveanydirectresponsetotherequest.Spokesmenforthecompaniesingeneralsaidthattheinsurerspaythevastmajorityofclaims,andthatdenialsarefair,withmostoccurringforroutinereasonssuchasapatienterroneouslysubmittingthesameclaimtwiceoraphysiciansendingaclaimtothewrongcompany.

ButthereportsfromCaliforniaindicatewhyhealthinsurancecompaniesmaybereluctanttodisclosetheirclaimdenialrates.Thatdatashowsthatthreeofthesixlargesthealthinsur-ancecompaniesinthestateeachdenied30percentormoreofallclaimsfiledinthefirstsixmonthsof2009.Italsoshowedwidevariationsindenialratesamongthecompanies.

TheCaliforniaNursesAssociation—whichdisclosedthedata—saysthatthehighpercent-ageofdenialsbysomeCaliforniahealthinsurersstronglysuggeststhattheinsurersaregoingbeyondreasonablestandardstorejectclaimsandmaybeimproperlyusingclaimstoboostprofits.CaliforniaAttorneyGeneralJerryBrownhaslaunchedaninvestigationintotheclaimsdenialsinresponsetothisnewdata,althoughtheCaliforniainsurersdenymak-ingimproperdenialsandsaytherawpercentagesofrejectionsaremisleading.

Otherevidencealsosuggeststhatinsurersmayberejectingsignificantnumbersofvalidclaimsduetoconstantpressuretoboostprofitsandsatisfyshareholders.Informationhasemergedrecentlyincongressionalhearingsonthehealthcaredebate,pressaccountsofindividuals’confrontationswithinsurersoverpaymentfortreatment,andfromscoresofinterviewsbytheCenterforAmericanProgress.

“Claimsdenialsareprobablythemosteffectivewaytheindustryhastomanagemedicalexpenses,”saysWendellPotter,whoin2008resignedasaseniorpublicrelationsexecutiveathealthinsurancecompanyCignaCorp.Potterisnowanoutspokencriticofhealthinsur-ersandsaidthecompaniesputpressureonemployeestohelpcontrollossesandmeetthecompanies’financialgoals,includingdoctorsandnurseswhomakedecisionsonwhethertoalloworrejectclaimsbasedonmedicalnecessity.

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QuestionsaboutreliableclaimspaymentwillbeparticularlyimportantifCongresspassesfederalhealthcarelegislation,becauseitwouldrequirethegovernmenttosubsidize,throughtaxcredits,insurancecoverageforlow-incomeindividuals.MembersofCongressandthepublicmaydemandtoknowifthegovernmentisgettingitsmoney’sworth.

Blurring the lines of ‘medical necessity’

Aclaimsdenialoccurswhenaninsurerdeclinestopayrequestedreimbursementforspe-cificservicesforapatient,suchasdoctorvisits,treatment,medicalprocedures,orhospitalstays.Denialsfallintothreecategories:Eligibilityissues,whichoccurswhenapatient’scoveragehasexpiredoratypeoftreatment,suchascosmeticsurgery,isexplicitlyexcludedinthehealthinsurancepolicy;administrativeissues,suchaswhenaclaimformisfilledoutimproperly;andappropriatenessissues,ordecisionsthatcertaintreatmentsaren’tmedi-callynecessary,orareexperimentalandnotyetprovedeffective.

Themostsensitiveandpotentiallycontroversialclaimsarethosebasedonmedicalcriteria—suchaswhetheratreatmentismedicallynecessaryorshouldnotbecoveredbecauseitisdeemedexperimental.CAPlearnedininterviewswithformerseniormedicalpersonnelatseveralofthelargestinsurersthatbiginsurers—includingAetna,Cigna,andUnitedHealthcare—madeinternalchangesinrecentyearsthatgavebusinessexecutivesmoredirectauthorityoverthecompanies’doctorswhoevaluateclaimsbasedonthesemedicalcriteria.

Insurancecompanieshadpreviouslymaintainedaseparationbetweenthemedicalevalua-tionstaffandtheexecutivesresponsibleforfinancialperformance.Thedoctorsandnursesreportedtothecompanies’chiefdoctor—knownasthechiefmedicalofficer—whohadfinalsayonwhethercoverageforaparticularindividual’streatmentshouldbegrantedordeniedbasedonmedicalcriteria.Butbeginningaboutadecadeago,inashakeupthatevidentlyreceivednopublicattention,companieschangedtheirpoliciessothatthemedicalstaffreportedtoregionalbusinessexecutives.Theseexecutivesweregiventheauthoritytodeter-minethedoctors’pay,bonuses,andpromotion,andconsequentlytheygainedthepowertoinfluencethedoctors’decisions.Thenewsystemsgenerallykept“dottedline”reportingtothechiefmedicaloffice,whowouldstillweighinonthemostdifficultclaimsdecisions.

Insurers likely deny millions of claims annually

KevinLembo,theConnecticutstategovernment’shealthcareadvocateforHMOandmanagedcarepatients,saiddisclosureofclaimsdenialrates,“Wouldbeincrediblyuseful.Asastraightconsumerchoiceissue,reallyattheendofthedaywhatdoconsumerswant?Theywanttheirinsurancecarrierstopaytheirbills.”

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FormerIndianaInsuranceCommissionerSallyMcCartysaidclaimsdatashowingwidevariationsbetweencompaniesinrejectionrates,orthataninsurergreatlyincreasedclaimsrejectionsfromoneyeartothenext,couldbeanalarmforregulatorstoinvestigate.

Theissueofrejectedclaimshasreceivedrelativelylittlepublicattentioninthehealthcaredebate,whilenewscoveragehasfocusedmoreondisclosuresincongressionalcommitteehearingsaboutotherpractices,suchasrescissions.Rescissionsaremuchlesscommonthanclaimrejectionsandoccurwhenhealthinsurerscancelanindividual’scoveragealto-gether,oftenwhenapolicyholderfilesaclaimforanexpensivetreatment.Thecompaniesinvolvedcommonlyjustifyrescissionsonthegroundsthatthepolicyholderhadimprop-erlyfailedtodiscloseapre-existingcondition,evenifthiswasminorandunrelatedtotheillnesspromptingtheclaim.

Thereisnoreliableestimateofthetotalnumberofhealthcareclaimsthatinsurersdenyannually.ButMarkRieger,chiefexecutiveofNationalHealthcareExchangeServices,whichcollectsclaimsdatafromphysicians,saysthenumbercertainlyisinthemillionsannually.Rescissionsareestimatedtobeonlyinthethousands.

Insurerssaythattheybasedecisionstoturndownclaimsonlyonobjective,clear-cutstandards,butindividualstorieshighlightthatcompaniesattimescantakewidelatitudeinapplyingthem.Forexample,recordsfromafederallawsuitinNorthCarolinashowthatCignaofNorthCarolinarefusedtopayforspecializedtreatmentforababybornwithaseverelydeformedskull.Thebaby’sdoctorswantedtouseanorthoticdevicetohelpmoldherheadintoamorenormalshapeasshegrew.Thedoctorssaidthatwithoutthetreatmentmoremedicalproblemscouldensue,suchasaworseningmalformationofherjaw.Cignadeclinedtopayonthegroundthatsuchtreatmentwasa“cosmeticprocedure.”A2002federalappealscourtdecisionnotedthatCignaneverprovidedanydefinitionof“cosmeticprocedure”initspolicyandorderedthecompanytopay.1

JohnPowell,aNewYorkStateinsurancedepartmentofficialwhomonitorshealthinsurers,sayssomeseizeontechnicalitiesorminorflawsinclaimstomakewhathecalls“gotchadenials”ofdoubtfulvalidity.These,hesaid,canincluderejectionsbecauseofminorerrorsinhowpatientsfilledoutclaimforms,orbecausetheinsurancecompanysaysaclaimwassubmittedtoolateaftertreatment.

Data from California shows high claim denial rates

TheCaliforniaNursesAssociationsoundedanalarmonclaimsdenialsinearlySeptemberthisyearafteritsresearchersfounddataonastateagencywebsitethathadnotreceivedpublicattention.TheinformationwasburiedinascheduleattachedtofinancialreportsfiledbyinsurerswithCalifornia’sDepartmentofManagedHealthCare.Datainthereportsshowedthatthreeofthesixlargesthealthinsurancecompaniesinthestateeach

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denied30percentormoreofallclaimsduringthefirstsixmonthsof2009.Thesixcom-paniescombinedhave67percentofCalifornia’smanagedcaremarket,whichbyfaristhelargestinthecountry.

CaliforniaNursesAssociationCo-PresidentDeborahBurgersaidthenumbersshowthattheinsurersoftendenyclaims“simplybecausetheydon’twanttopayforit.”

Theinsurancecompaniesstronglyreactedtothedisclosureandthenursesassociation’sconclusionthatthedataindicatehighratesofunfairdenials,eventhoughthedatacamefromtheirownreports.Theycorrectlynotedthatthepatientsreceivedtreatmentinmostinstanceseventhoughthecompanieslaterdeniedthereimbursementclaimsfromphysi-ciansandhospitals.

CaliforniaAssociationofHealthPlansCEOPatrickJohnstonsaidthenurses’disclosureofthedenialrates“wasacursoryandinaccurateportrayalofthepatternofhealthcareandpaymentstoproviderstypicalinCalifornia.”

QueriedbyCAPaboutthedata,UnitedHealthcareSpokeswomanCherylRandolphsaidthat80percentoftotaldenialsatthecompany’sPacifiCareHMOinCaliforniawerebecausephysiciangroupserroneouslysubmittedclaimsfortreatmenteventhoughPacifiCarepaysthegroupsaflatratebasedonthenumberofPacifiCare-coveredpatientstheytreatunderso-called“capitationagreements.”Randolphsaidtheflatrateissupposedtocoverallofpatient’streatmentcostsbythegroups,butthatthephysiciansoftenerroneouslysubmitclaimsforspecifictreatmentsorprocedures.Shesaidthatthepatientsdidreceivethemedicaltreatmenteventhoughthecompanydeclinedtoreimbursethephysicians.

Randolphsaidthatofthedenialsforotherreasons,“95percentofthoseweredeniedbecausetheindividualwasineligible,meaningtheywerenotinsuredunderaPacifiCareplan.”

CignaSpokesmanChristopherCurranalsocitedbillserroneouslysentforpatientscoveredundercapitationagreements,whichhesaidaccountedforabouthalfoftheCignadenials.Hesaidalargeportionoftherestwerefor“duplicatebillings”submittedfortreatmentsthattheinsureralreadyhadpaidfor.Curransaidthat,“OutofalleligiblerequestsforcoveragesubmittedtoCIGNAHealthcareofCaliforniainthefirsthalfof2009,morethan95.9percentwerecoveredandthepersonreceivedthecarerecommendedbythedoctor.”

Yetdenialsbecauseofcapitationagreementsaren’tnecessarilyblack-and-white.Physiciansmaybillforservicesthataren’tcoveredundertheircapitationagreements.AndJamesG.Kahn,presidentoftheCaliforniaPhysiciansAllianceandprofessoroftheUniversityofCaliforniaSanFrancisco’sInstituteforHealthPolicyStudies,saysconfusionoccursduetoanincreasingnumberof“carve-outs”fromcapitationagreements.Theseexemptcertainspecializedtreatments,ormayexcludeseriousdiseasessuchasAIDS.Dr.Kahnsaysthereareoftendisagreementsbetweenphysiciansandinsurersaboutwhetheraclaimfallsunderoneofthecarve-outs.

Percentage of claims denied

January – June 2009

CompanyPercent of

claims denied

UnitedHealth care’s PacifiCare 39.6

Cigna Health care of California 32.7

Health Net 30.0

Kaiser Permanente 28.3

Blue Cross 27.0

Aetna 6.4

Source: California Nurse’s Association and the individual company reports posted on California Department of Managed Health care web site, available at http://www.calnurses.org/media-center/press-releases/2009/september/california-s-real-death-panels-insurers-deny-21-of-claims.html and insurers’ reports filed with DMHC, available at http://wpso.dmhc.ca.gov/fe/search/#top

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Aetna’sdenialrateof6.4percentwassignificantlylowerthanitssixmaincompetitorsinCalifornia,butAetnaSpokesmanMohitGhosedeclinedtocommentonthepracticesoftheotherinsurers.HedidsayAetnaadheresstrictlytotherequiredtermsofitscoverage,andsaid,“Wetakeanyclaims’non-paymentveryseriouslyatAetna.”

Insurers pressure their doctors to deny claims

Officialsfromthebiggesthealthinsurershavesaidpubliclyatcongressionalhearingsandelsewherethattheybasedecisionsaboutmedicalnecessityand“experimental”treatmentssolelyonmedicalcriteria.Theyhavestatedthatthesedecisionsareinsulatedcompletelyfrompressuretoboostprofits.

YetformerseniordoctorsatbighealthinsurerssaidininterviewswithCAPthatCigna,Aetnaandmostoftheothertopcompaniesmadeanimportantchangeinwhotheirmedi-calstaffsreporttooverthepast10years.Companiesreassignedmedicaldirectors,thedoctorswhoapproveordenyclaimsformedicalreasons,toreporttoregionalbusinessexecutives.Theypreviouslyreportedonlytothecompanies’chiefmedicalofficer,whowasresponsibleforhiringandfiringdecisions,promotions,payraises,andbonusesformedicaldirectors.Aftertheswitch,thebusinessmanagers,whosemainresponsibilityistobolsterprofits,hadauthorityoverthesepayandincentivedecisionsforthemedicalstaff.

FormerCignaExecutiveWendellPottersaidthathavingmedicaldirectorsreporttobusi-nessmanagers“meanstheyarepartofateamthatisverymuchinvolvedinmakingsurethatthecompanyisprofitableatalllevels.”

Arthur“Abbie”Liebowitz,chiefmedicalofficeratAetnauntil2001,saidthatfinancialpressureswhenhewasthereledtothereassignmentofthecompany’sdoctors.Inaninterviewforthisreport,Liebowitzsaid,“TheconceptwasthatbusinessleadershadPandL[profitandloss]responsibilityfortheregion.ThebusinessguyssaidifIhaveresponsi-bilityforprofitsandlossesIhavetocontrolforthethingsthataccountformycosts.Thebiggestthingaffectingcostwasmedicaldeliverydecisions.”

Liebowitzsaidheopposedthechange.“Ifoughtuntiltheveryend,”hesaid.“Ididn’tthinkthatpeopleshouldbemakingmedicaldecisionsbasedonbusinessneeds.”

Companyspokesmendeniedthatthechangeaffectedmedicaldecisions.Aetnaspokes-manGhosesaidtherestructuringhashadnoeffectonthedecisionsthatdoctorsmake.“Medicalnecessitydecision[s]aremadeatAetnabasedonmedicalevidence,”hesaid.“Thereisnootherthingthatcomesintothatequation.”

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CignaspokesmanCurransaidthat,“allcliniciansareaccountabletothechiefmedicaloffi-cerfortheirclinicaldecisions.”Headdedthat“therearenofinancialincentivesforclini-cianstoapproveordeny”claims.AndaUnitedHealthcarespokesmansaidthecompany’smedicaldirectorsarefocusedonly“onsupportingourmembers’care.”

Rep.ElijahCummings(D-MD)pressedapanelofseniorexecutivesfromfiveofthebiggestfor-profithealthinsurersataHouseOversightandGovernmentReformSubcommitteeonDomesticPolicyhearingonSeptember17tosaywhethertheircom-paniesgavemedicaldirectorsandotheremployees’financialincentivestorejectclaims.Noneofthemmentionedthechangesinwhotheirmedicaldirectorsreportto,orthattheircompensationandpromotionisnowsetbybusinessexecutivesmainlyconcernedwithprofits,ratherthanthecompanies’chiefdoctors.

Alloftheexecutiveseitherflatlydeniedthatthereisanyfinancialincentiveforemployeestodenyclaims,orsaidthattothebestoftheirknowledgetheircompaniesgivenosuchinducements.CignaSeniorVicePresidentThomasRichardssaid,“AtCigna,therearenofinancialincentivesforourclinicianstodenycoverage.”AetnaSeniorVicePresidentPatriciaFarrellsaidthattoherknowledge,“wehaveabsolutelynoincentives,financialincentives,tiedtothatdecision-makingprocess.”

States do not require disclosure and face difficulties in regulation

CaliforniaandRhodeIslandaretheonlytwostatesthathaveanindependentdepart-ment—separatefromthestates’insurancedepartments—specificallytaskedwithregulatingmanagedcareorganizations.AndCaliforniaistheonlystatethatrequirescom-paniestofileclaimsdisclosuredata—RhodeIslanddoesnotcollectsuchdata,accordingtoastatespokeswoman.

Allotherstatesregulatehealthinsurersthroughtheirinsurancedepartments.KansasInsuranceCommissionerSandyPraeger,recentpastpresidentoftheNationalAssociationofInsuranceCommissionersandcurrentchairmanofitsHealthInsuranceandManagedCareCommittee,saidthattheissuehadn’tcomeupinrecentdecadesatNAIC’smeet-ingstodiscusspolicyissuesandproposemodellawsandstandardsforallstatestoadopt.Praegersaidshedoesn’tknowwhytheregulatorshaven’trequestedit,butsaidonefactormayberegulators’assumptionthatinsurerswouldputupafightratherthanturnovermoredata.“Theindustrydoesn’treadilygiveanythingup,”Praegersaid.

Giventhepotentialusefulnessofclaimsdenialdatainindicatingwhetherinsurersaretreatingcustomersfairly,itmayseemsurprisingthatregulatorshaven’taskedthecom-paniestoprovidethedata.Theapparentlackofinteresthighlightsalargerproblemwithinsuranceregulationthatwillbeofincreasingconcernifhealthreformlegislationgoesintoeffect:Nearlyallinsuranceindustryregulationislefttothestates.

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TheSupremeCourtruledin1869thatthesaleofinsurancepoliciesdidnotamounttointerstatecommerce,andthereforewasn’tsubjecttofederalauthority.2TheSupremeCourtreverseditsearlierdecisionin1944,aftertheriseofmanylargeinsurancecom-paniesthatsoldacrossstatelines,openingthedoortofederalregulation.3Butinsuranceexecutives,panickedthatthefederalgovernmentmightimposeharshercontrols,rushedtolobby,andin1945CongresspassedtheMcCarran-FergusonAct.Thislawbillpreservedstatecontrolofinsuranceregulationandisstillineffect.4

Moststateinsurancedepartmentsarechronicallyunderfundedandhobbledbythelocalinsurancelobby’sinfluenceoverstatelegislaturesandotherstateofficials.Andtheeco-nomicdownturnhasledtofurtherstaffreductionsatmanystateinsurancedepartments.What’smore,stateinsurancedepartmentshavetraditionallybeenconcernedalmostexclu-sivelywithsolvencyorensuringthatinsurersarefinanciallysoundanddon’tgobust.Onlyinrecentdecadeshaveregulatorsinmanystatesbegunfocusingonhowinsurers,includinghealthinsurers,treatcustomers.Buttheirregulatoryeffortstodatehavebeensmallandfitful,partlyduetostrongoppositionfromtheindustry.

Somesenators—angeredbyinsurers’tacticsinopposinghealthcarereformlegislation—arethreateningtorepealportionsoftheMcCarran-FergusonActthatexemptinsurersfromfederalantitrustlaws.Stateinsurancedepartmentsrelymainlyonperiodic“marketconductexaminations”ratherthanrequiringinsurerstoroutinelyturnoverdatarelatingtotheirpolicyholderobligations.Statessendexaminersintoacompanytoreviewrecordsandlookatcustomercomplaints,timelypaymentofclaims,marketing,andadvertising.

Yetstatesconductrelativelyfewsuchexams.Thereisnonationwidedataontheannualnumberofmarketconductexaminationsspecificallyofhealthinsurers.ButtheNationalAssociationofInsuranceCommissioner’s2008InsuranceDepartmentResourcesReportshowsthat25statesconducted10orfewermarketconductexamsofalltypesofinsurancecompaniesin2008.Severalstatesdidsay,however,thattheylookedatcertainconsumer-relatedissueswhenperformingregularfinancialexaminationsofinsurers.

Thefederalgovernmentdoesimposecertainrequirementsonhealthinsurersunderthe1996federalHealthInsurancePortabilityandAccountabilityAct,suchaslimitingtherestrictionsinsurerscanputoncoverageforpre-existingconditions.Butthefederalgovernmentleavesenforcementoftheserulesalmostentirelytothestates.AsGeorgetownUniversityHealthPolicyInstitute’sResearchProfessorKarenPollitztestifiedrecently,manystateinsurancedepartmentsoftenhavedifficultyenforcingHIPAArequirementsduetoother,conflictingstatelaws,suchaslawsthatallowforuptotwoyearsof“contest-ability”—thatis,enableinsurerstorescindapolicybasedonpre-existingconditions.5

HIPAAallowsthefederalgovernmenttoactifthestatesdon’tenforceitsrequirements.ButthedepartmentofHealthandHumanServices,whichhastheauthority,hassofarnotintervened.

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ThehealthreformmeasurescurrentlybeingconsideredbyCongresswouldimposesig-nificantnewresponsibilitiesonstateregulators.Itwillrequirethemtodrawupstandardsspellingoutmoredetailedguidelinesregardingwhatinformationinsurersarerequiredtogivetoconsumersabouttheircoverage.Regulatorswillhavetodraftandenforcenewlawsregulatinginsurancemarketingpractices.AndtheHousebillH.R.3200,America’sAffordableHealthChoicesActof2009,wouldrequirestepstodiscloseimportantnow-confidentialinformation,suchasinsurers’claimdenialrates.

Yetthependinglegislationdoesnotallocateanymoneytohelpcurrentlyunderfundedandunderstaffedinsurancedepartments.However,insurancedepartmentsinmanystatescontributelargeamountstostatesrevenuesbycollectinginsurerlicensingfeesandtaxes.Themoneygoesintothestates’generalcoffers,andstatelegislaturesappropriaterela-tivelysmallamountstoruntheinsurancedepartments.Federalandstatesgovernmentswillclearlyneedtodomoretoensurethatinsurancedepartmentshavetheresourcesandauthoritytheyneedtoproperlyoverseehealthinsurancecompanies.

Other data

Thereisnopubliclyavailablenationwidedatafromregulatorsorinsurersthemselvesontotalratesofclaimsdenials,butseveralinsurancecompanyspokesmenininterviewspointedtodatacontainedintheAmericanMedicalAssociation’s“NationalHealthInsurerReportCards”publishedin2008and2009.TheAMAreportcardsaremeanttorateinsur-ersandMedicare’sperformanceinseveralcategoriesimportanttodoctorsandconsum-ers.Thespokesmancontendedthatacolumnofnumbersinthereportsshowthatclaimsdenialratesactuallyareextremelysmall.

Acloselookatthereportedcardsshowsthatthecolumnofdatacitedbythecompanies—labeled“Percentageofclaimlinesdenied”—actuallyshowsonlyoneportionofthetotalclaimsdenied.Thefigureshows,forexample,thatUnitedHealthcare’sdenialratewas2.02percent,Cigna’s2.56percent,andAetna’s1.81percent.Thesepercentagesincludeonlyinstancesinwhichentireclaimsweredeniedforreasonssuchasthattheindividualwasn’tactuallycoveredbythecompany,orwhenaclaimformhadbeenfilledoutimproperly.Thesenumbersdonotincludeinstanceswherecompaniesdeniedselecttreatmentsandproceduresratherthantheentireclaim.

Interviewsandacloselookatexplanationsofthedatacontainedinappendicesshowedthatitisnecessarytoaddtogethertwoseparatesetsoffigurestocomeupwithanesti-mateofactualtotalclaimsdenials.TheAMAobtaineditsdataforthereportcardsfromSacramento,California-basedNationalHealthcareExchangeServices,aprivatecompanythatprovidessoftwaretodoctorsandhospitalstohelpthemcontestunderpaymentsandclaimsdenialsbyinsurers.Thecompanyuseditsowndatabasecontainingclaimspay-mentinformationprovidedtoitbydoctorsandhospitalsthatareitscustomers.Mark

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Rieger,thecompany’schiefexecutiveofficer,saidinaninterviewthattofindanestimateoftotaldenialratesitisnecessarytoaddthecolumncitedbythecompanyspokesmanwithanotherlabeled“claimsedits.”Thattechnicaltermreferstotheselectivedenialofreimbursementformultiplechargesonaclaim,suchasbyrefusingtoreimburseforonetreatmentbutpayingforothersperformedduringthesameofficevisit.

TotaldenialratesderivedbyaddingMetric11A,“disclosedandundisclosedclaimedits,”andMetric12,“Percentageofclaimlinesdenied.”

Thefiguresarestillsignificantlylowerthanthoseinthe30percentrangereportedbyseveraloftheCaliforniainsurers,butRiegersaidtheyshowrelativelyhighratesofdenialsandsignificantvariationsamongthecompanies—also,thedataisn’tcomprehensiveornationwide.ItisbasedonlyonasamplingofclaimssubmittedbydoctorsandhospitalstoinsurersduringFebruaryandMarch2009,anddoesnotincludeclaimssubmittedbypatients.Thedataincludesclaimsfrom29states,includingallofthemostpopulousstates.

Conclusion

Thereisnotacertainwaytotellwhetherthecommercialcompaniesaredenyingunfairlylargenumberofclaimstolimitlossesandboostprofitswithoutcomprehensivedataontheinsurers’ratesofclaimsdenials.Bigportionsofthedenialsareundoubtedlybeingkeptsecretforcompletelylegitimatereasonsasinsurersmaintain.Butthelimiteddatacurrentlyavailableraisesredflags,highlightingtheneedformuchwiderdisclosure.

ThedatareleasedinCaliforniashowswidevariationindenialratesfromcompanytocompany,andexposesthatsomecompaniesaredenying30percentormoreofallclaims.Thesefindingsshouldcausestatestobeginlookingcloselyatdenialrates,andexploringwhethercompaniesarecitingvalidreasonsfordenials.Evenifnationwidedenialpercent-agesturnouttobelowerthanthoseinCalifornia,suchastheroughly10percentdenialratesindicatedforsomebigcompaniesintheAMAdata,thatstillrepresentsmillionsofdeniedclaims.Stateswillalsoneedtolookatthecompanies’compensationstructurestoseeifthereisanyfinancialpressureonemployees,includingmedicaldirectors,toturndownclaims.

Ifthecurrentsystemofrelyingonstateregulationremainsineffect,thefederalgovern-mentorstatelegislatureswillhavetocomeupwithmoneytomakesurethattheinsurancedepartmentshaveadequateresources.Statelegislaturesinmanystatesalsowillhavetoshowmorewillingnesstopasslawsgivingtheinsurancedepartmentstheauthoritytheyneedtothoroughlyoverseetheinsurerstheyregulate.

American Medical Association claim denial estimates

Company Total denial rates (%)

Aetna 9.51

Anthem 9.34

CIGNA 9.06

Coventry 10.39

Humana 5.13

UHC 9.92

Medicare 5.4

Source: American Medical Association 2009 National Health Insurer Report Card, available at http://www.ama-assn.org/ama1/pub/upload/mm/368/2009-nhirc-long.pdf.

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Endnotes

1 Bynum v. Cigna Health care of N.C., Inc., 287 F.3d 305 (4th Cir. 2002).

2 Paul v. Virginia, 75 U.S. (8 Wall) 168 (1869).

3 United States v. South-Eastern Underwriters Association, 322 U.S. 533 (1944).

4 The McCarran-Ferguson Act, 15 U.S.C. § 1011.

5 Karen Pollitz, prepared statement for June 16, 2009 hearing before the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigation, available at http://energycommerce.house.gov/Press_111/20090616/testimony_pollitz.pdf.

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