What to Do When Your Health Insurance Company Denies Your Claim

Health insurance policies are contracts. The insurance company is legally obligated to pay claims covered by the language of the policy if the policy is in force at the time of the event that lead to the claim. Since policies are contracts, health insurance policies are governed by contract law. Insurance is a highly regulated industry. Policies are written to standard forms which are well defined and approved by state insurance regulation officials. The state regulatory agencies have broad enforcement powers, and have been known to expel insurance carriers from the state who repeatedly deny claims in bad faith.

Insurance Regulation

• Unlike the securities industry, which is subject to the authority of the federal Securities Exchange Commission, the insurance industry is regulated at the state level. This is a long tradition that goes back to the passage of the McCarran-Ferguson Act of 1945, in which Congress affirmed the states' purview over insurance matters. You therefore won't have to go all the way to Washington to press a claim against an insurance carrier.

Coverage and Exclusions

• All health insurance policies have exclusions, and no policy covers everything. Before disputing a denied claim, look carefully at the policy. Determine your deductible, which is the amount of health care expenses you must spend out of your own pocket before benefits become payable. Look at the list of exclusions. If your policy specifically excludes your case or the circumstances leading up to your illness or injury, you may not have a claim. Additionally, most policies impose a waiting period on covering preexisting conditions if you have had a break in coverage before buying the policy. You should also look at your policy's formulary, which is a list of covered prescription drugs.

Internal Appeals

• Health insurance companies have procedures for internal appeals of denied claims, which are different for each company. Generally, disputed claims go to the company's medical services director, who is usually a physician. This individual reviews each claim according to whether the policy covers the procedure; whether the procedure was medically necessary; whether the procedure was an emergency; and if it was not an emergency, whether the procedure was done by a member of the insurance company's provider network.

Documentation

• If you have reason to believe the insurance company will dispute your claim, or if your claim has already been denied, gather the documents you will need to appeal the claim. Examples of documents needed include an attending physician's statement from the doctor who performed the services for which your claim was denied, as well as your primary care physician (PCP), if your plan has one. (Generally, all HMOs use primary care physicians, who act as "gatekeepers" into the company's network of health care providers). You should get a letter from your physician or from a disinterested medical professional attesting to the medical necessity of the procedure.

External Appeals

• If you do not get satisfaction from your insurance company and you still feel your claim was unjustly or illegally denied, you have recourse to complain to your state's Department of Insurance Regulation. Every state has a government agency overseeing the insurers within its borders. You can find a link to your state's department of insurance regulation on the National Association of Insurance Commissioners page in the Resources section.