You pay your health insurance policy premiums without fail — but that doesn’t mean your insurance company will be as reliable when you make a claim. It is very possible that your claim will be improperly denied.

Very few people bother to fight these denials. That’s unfortunate, because policyholders who intelligently contest health insurance claims denials often get them reversed.

If a seemingly valid health insurance claim you make is denied in whole or in part, ask the insurance company to send you a full explanation of why it was denied (or accepted for only a lesser amount). Then follow these steps to get your claim covered…

STEP 1: Enlist support. If you have a group health policy, ask the group benefits administrator to help you contest the denial. If you purchased an individual policy through an independent insurance agent, ask this agent to help. Not only do benefits administrators and insurance agents have experience with these matters, they have clout with the insurers. An insurance company might relent to an administrator’s or agent’s request to pay a claim simply to avoid losing future business.

STEP 2: Write a letter to the insurer requesting a formal review of the denial and explaining why you believe it is incorrect. Get the name of the person to write to from your benefits administrator or agent. Send this letter via certified mail, return receipt requested.

Cite the insurance company’s own literature if it seems to contradict the argument made in the denial. If the policy literature is vague or confusing — it often is — do not accept the insurance company’s position that it means what it says it means. In most states, the courts interpret insurance policy provisions as a layperson would understand them, not as a corporate lawyer would interpret them.

Example: Your insurance company refuses to pay for your home care following a serious accident, arguing that the care you received was “custodial” care, which is not covered, rather than “skilled” care, which is. If you received what the average person would consider skilled care and your policy does not specifically define these terms in a way that defends the insurer’s position, the law is likely on your side.

Some common reasons for claims denials and possible responses…

  • The procedure was not medically necessary. Ask your doctor to write a letter to the insurer explaining why the procedure was necessary in your case.
  • The procedure was experimental. Ask your doctor to write a letter to the insurer noting that Medicare or other insurers cover the procedure or citing statistics showing that it is widely used.
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  • There was a filing error, such as a missed deadline. In most states, the insurer cannot legally deny your claim because of a technical filing mistake unless it can show that it was harmed by this mistake.
  • The bill exceeds “reasonable and customary” charges. Ask your doctor if there were special circumstances in your case that would justify higher costs. If there were, have him/her write a letter to the insurer describing them. Another option is to call other medical facilities in the region and ask what they charge for the procedure. Insurers often rely on old data or data from other parts of the country when they set these “reasonable and customary” estimates. If you can establish that your doctor did not charge more than others in your region do, the insurer might back down.
  • STEP 3: If your letter doesn’t work, repeat your argument in a letter to the manager or supervisor of the insurance company’s claims department. Get the name of the individual from your claims representative. Work your way up the corporate ladder. You may need to convince only one person to agree with you for your denial to be reversed.

    Remain calm and polite. Contesting an insurance claim denial is frustrating, but insurance company employees are more likely to take your side if they like you. Write down the name of any person you speak to, as well as the date and time and what you were told.

    STEP 4: Contact your state’s department of insurance, and ask what it can do to help you. The quality and power of state insurance departments vary significantly. Some help policyholders stand up to unfair insurance company practices or conduct independent reviews of denied claims.

    Example: California’s Department of Insurance and Department of Managed Health Care offer “independent medical reviews” of denied health insurance claims. Approximately 40% of those reviewed are decided in the patient’s favor.

    Simply involving your state’s department of insurance may be enough to convince an insurer that it is easier to pay your claim than fight it.

    STEP 5: Call the media. Local TV news programs and newspapers love stories about people being treated unfairly by big health insurance companies. Insurers despise this bad press and sometimes relent when reporters call. Determine which local reporters cover human-interest stories of this sort, contact them and ask if they would be interested in your story.

    STEP 6: Go to court. If your claim is in the low four figures or less, it might qualify for small-claims court. If it is larger, you will need to hire an attorney. If your case appears strong, there will be plenty of attorneys willing to take it on a contingency basis (they get paid only if they win or settle).

    Hiring an attorney makes the most sense when the insurance company’s unfair claim denial has interfered with your medical treatment and endangered your health. Juries often award substantial damages when this occurs.

    IF YOUR INSURANCE COMPANY TRIES TO DROP YOU

    If you have an individual health insurance policy, not a group health plan, having a claim unjustly denied is not the only risk. If you develop an expensive health problem, your insurance company might attempt to retroactively terminate your coverage, a process known as “rescission.”

    When you file a major claim, your insurer could have an investigator examine your original policy application. If the investigator finds even the smallest error, the insurer may use this as an excuse to rescind your policy even if the application error has nothing to do with the current claim.

    Example: Blue Cross of California canceled the policy of a woman who needed surgery to remove her gallbladder and refused to pay her $60,000 medical bills. The insurer argued that the woman’s husband had failed to note on the couple’s original policy application that he once had an elevated cholesterol reading.

    States are beginning to enact rules to protect policyholders from this tactic, but for now, the danger remains. To minimize your risk…

  • Take your time with health insurance applications. If possible, obtain a copy of your health records from your doctor and use these to fill out the form, rather than rely on your memory.
  • Contact the insurance company for clarification if a question on the application is confusing. Don’t provide an answer until you truly understand the question.
  • Include your medical providers’ contact information on the application form. If the insurer later attempts to rescind your policy, you can argue in court that you didn’t intentionally hide anything and that the insurer should have contacted your doctors.
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