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Insurance Company Denial Rates
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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.
2 Center for American Progress | Insurers’ Black Box
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.
3 Center for American Progress | Insurers’ Black Box
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
6 Center for American Progress | Insurers’ Black Box
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.
8 Center for American Progress | Insurers’ Black Box
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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