Unforeseen Health Care Bills and Coverage Denials by Health Insurers in the U.S.

Americans are increasingly struggling to get their health insurance to work for them. High deductibles and copayments are causing nearly two of five working-age adults to delay visiting the doctor and filling prescriptions.¹ Those who do get care can become burdened by medical or dental debt, something almost one-third of working-age adults report experiencing.² Billing errors and denials of coverage by insurance companies may contribute to this problem. Media investigations have found that insurers are becoming increasingly adept in using technology to deny payment of medical claims and pressure their company physicians to deny care during prior authorization reviews.³ Doctors also report spending increasing amounts of time on the phone with insurance company physicians over denials of care for their patients.⁴

In this brief, we report findings from a Commonwealth Fund survey on the extent to which working-age adults say their insurance provider charged for a health service they thought should have been free or covered or denied coverage for care recommended by their doctors. We examined whether people challenged such errors or coverage denials, the reasons why they didn’t, and the implications for their health and well-being. People were grouped by the coverage source they reported at the time of the survey, such as employer or individual market or marketplace, though it should be noted that some may have switched insurance plans during the year.

The survey was conducted by SSRS with a nationally representative sample of 7,873 adults age 19 and older from April 18 through July 31, 2023. Our analysis focuses on the 5,602 working-age respondents — under age 65 — who were insured at the time of the survey. Analysis of billing issues was further limited to the 4,803 individuals who were insured for the entire year (see “How We Conducted This Survey” for more information).

Findings

More than two of five respondents reported either they or a family member received a bill or were charged a copayment in the past 12 months for a health service they thought was free or covered by their insurance.

Plan complexity and the heterogeneity of benefits across plans may leave people unable to identify what is and is not covered, and when a bill is incorrect.⁵ While the Affordable Care Act (ACA) requires all insurers to cover preventive services like colon cancer screening free of charge, some states and the federal government also require certain plans, such as marketplace plans, to cover additional services either free of charge, like annual checkups, or prior to meeting deductibles. Many employer plans exclude some services and prescription drugs from deductibles.

People across all insurance types reported such billing problems, but those covered by employer plans, marketplace or individual market plans, and Medicare reported them at higher rates.

Of the respondents who thought they had received a bill in error, fewer than half attempted to challenge the bill. People with marketplace or individual market plans challenged these bills at a rate lower than those covered by Medicaid or Medicare (the difference was not statistically significant). This is despite the ACA’s requirement for insurers to have systems in place for consumers to appeal and challenge their bills. There were no significant differences by race and ethnicity or poverty level.

Of those who did not challenge their bills, over half said it was because they were not sure they had the right to do so. Other reasons included not knowing who to contact (25%), lacking the time (25%), and viewing the amount as too small to spend time challenging the bill (29%).

People with low and moderate incomes, those younger than age 50, and Hispanic respondents reported at the highest rates that they were unsure of their right to challenge a bill. Those younger than 50 also had the highest rates of not knowing who to contact to challenge a bill.

People with higher income cited a lack of time and the amount not being worth the trouble at higher rates than those with low or moderate income.

Nearly two of five adults who challenged a bill said the amount was ultimately reduced or eliminated. People with Medicare or Medicaid reported higher rates of bill reduction or elimination. This may reflect more standardized and well-defined benefits in public programs compared to the heterogeneity of plan products and benefits offered by employers and commercial insurers.

Coverage Denials

Seventeen percent of respondents or one of their family members were denied coverage for care recommended by a doctor, and these rates were similar across insurance types. While we did not ask survey respondents why their coverage was denied, common reasons include a service that is deemed medically unnecessary by the insurer or delivered in a setting the insurer considers inappropriate, visiting an out of network provider, a medication that is not on a plan formulary, or an experimental procedure.

Many health insurers require a review of claims or prior authorization requests by a nurse and a doctor, both employed by the insurer.⁶ Recent media investigations have found that some insurance company doctors are not incentivized to spend the time needed to scrutinize patients’ medical records and follow guidelines for making informed decisions about approving or denying a care request.⁷ Rather, some doctors are incentivized to deny care using a “click and close” policy, which promotes bonuses based on the quantity of cases reviewed and hence incentivizes speedy reviews. This can lead to wrongfully denied care.⁸

The ACA granted people the right to appeal decisions made by their health insurers, regardless of their insurance type or state of residence.⁹ The law also put in place rules for how insurance companies should handle initial appeals and allowed consumers to request a reconsideration of decisions to deny payment.¹⁰ If an insurer upholds its decision to deny payment, people also have the right to file for an external appeal.

Despite these protections, less than half of those denied coverage for a recommended procedure challenged the denial. Rates were similar across insurance types.

Forty-five percent of those who did not challenge their insurers’ coverage denial reported they were not sure they had the right to do so. Despite the ACA’s rules for insurance companies to handle appeals and standardize appeals processes, 40 percent of those who did not challenge their denial reported that they did not know who to contact to appeal.

Half of respondents who challenged their coverage denial reported that some or all of the denied services were ultimately approved by the insurer.

Coverage denials can lead to significant delays in getting care while patients and their doctors’ appeal. Almost three of five respondents who reported that their insurer denied coverage for recommended care said they experienced delays in attaining care as a result.

We found that nearly half of respondents who experienced a delay in care following a coverage denial said that a health problem got worse as a result. Nearly one in six reported that care denials delayed the diagnosis of a serious health problem. Worry and anxiety among those experiencing delays were nearly universal.

Delays in care after coverage denials can have long-term health consequences. In a recent New York Times story, patients reported that denials of care led to lost vision, paralysis, and death.¹¹

Discussion

The complexity of the health insurance system in the United States has left many people struggling to understand what services are and aren’t covered, and their financial liabilities when they get care.¹² On top of this complexity, insurers are motivated to avoid paying for care. Many insurers appear to be utilizing increasingly aggressive tactics to do so, deploying technology and applying pressure to company physicians to scrutinize services recommended by patients’ physicians and often to deny coverage, leaving patients with unexpected bills or delays in care.

When looking at people’s billing disputes and denials of coverage, what emerges is that many realize positive outcomes when they appeal decisions they perceive to be in error. Yet only half of those who believed they were erroneously billed or denied care actually challenged the decision or had a doctor challenge it on their behalf. The survey shows considerable consumer confusion among patients and their families about their right to appeal and who to contact. This may stem from lack of transparency and standardization in the appeals process. The responsibility of appealing may not be clear between patients and providers, or between employers and employees, and the documentation requirements to appeal can create additional barriers.

The high frequency of successful appeals also suggests the initial determination process may be flawed, with many patients being denied coverage for care they need to access. The current system with its complicated appeals processes can be detrimental to patients who are most in need of services.

To ensure patients can access the care they need, federal and state policymakers and regulators could consider the following actions:

• Track claims denials: The U.S. Department of Health and Human Services could better fulfill the requirements of the ACA to monitor rates of claims denials in all commercial insurance plans, including those offered through the marketplaces, individual market, and employers.¹³
• Hold insurers accountable: Policies might be needed that penalize insurers for repeatedly wrongfully denying coverage or billing erroneously. Public reporting of such data can also incentivize insurers to limit such practices. As of May 2023, nearly 90 legislative bills had been considered across 30 states to reform prior-authorization requirements.¹⁴ Some states have passed legislation, such as New Jersey and Washington D.C.,¹⁵ while California¹⁶ and North Carolina have bills under consideration. Recently, the Committee on Education and the Workforce urged the U.S. Department of Labor to strengthen disclosure requirements for self-funded employer plans — how most employer-insured individuals receive their coverage — around the number of claims denied and appealed, and the outcomes of those appeals.¹⁷
• Promote consumer awareness: Promoting state- or federal-level consumer information systems to spread awareness about a beneficiary’s right to appeal their insurer’s billing and care denial decisions could help, particularly among those groups the survey revealed to be least aware of their rights: those with low income, Hispanic people, and younger adults. Though the ACA marketplace and Centers for Medicare and Medicaid Services (CMS) webpages explain such rights, this information may not be equally accessible or understood by everyone.¹⁸
• Support consumers: As the process of submitting an appeal can be complex, requiring the completion of several forms or communicating with the insurer’s customer service, a state or federal consumer support system could be helpful.¹⁹ While some states have set up customer assistance programs for those experiencing health insurance problems, 20 states lack such a resource.²⁰