Why Health Insurance Claims Are Denied

In their policies, health insurers list reasons they would deny a claim. Such language preserves the nature of insurance--that is, that many insured people pay a premium equal to their expected losses, and each insured has a low probability of a loss significantly larger than the premium. If many insured people have expected losses far higher than their premiums, then the assumptions behind premium calculations are understated and the insurer may not be profitable, or even sustainable. From the insured's side, claim rejections can seem subjective and arbitrary. Fortunately, legal procedures allow appeals to reconcile differences over claim validity.

Pre-existing Condition

• An insurer uncovering evidence that the claimed medical condition existed before the insurance policy began is grounds for claim rejection when the policy has a pre-existing condition exclusion clause. An insurer may even reject a claim for an unrelated illness that was not pre-existing, if it can find a pre-existing condition that was not disclosed in the original policy application. The basis of such a rejection is that the policy would not have been offered in the first place if the candidate had disclosed the pre-existing condition at the start.

Unlikely to Improve with Treatment

• Medicare claims adjusters may deny a claim because the treatment is unlikely to improve the patient’s condition. The denial may not state this explicitly, but instead use words like “stable,” “chronic,” and “no restorative potential.” Such a ruling can be overturned on appeal.

Lack of Progress

• If your condition requires long-term care, or you have received long-term care with only modest recovery, Medicare may deny you continued coverage.. Such a ruling might be overturned on appeal.

Incorrect Coding

• An insurer may not accept a claim because the coding was wrong. The patient can resolve this by having the physician resubmit the corrected code.

Other Reasons

• Other reasons that a health claim may be denied, as outlined in standard health policies, include the insured not providing certification of the condition by a licensed health care provider; the policy not providing coverage for the service, such as home nursing care; or the insured not having full-time employee status.