How Insurance Denials and Appeals Work
Few experiences in healthcare are as frustrating as receiving a denial letter. Your doctor recommended a treatment. You received the care. Now your insurance says they won't pay, leaving you with potentially thousands of dollars in bills. The denial letter offers vague reasons and bureaucratic language that doesn't help you understand what went wrong.
Insurance denials affect millions of claims annually. Some are legitimate enforcement of coverage rules. Others are errors or questionable interpretations. The appeals process exists to challenge denials, and many appeals succeed, but most people don't appeal because they don't know how.
This article explains how denials happen, what the appeals process involves, and why persistence often pays off.
What Insurance Denials Are Meant to Do
Denials enforce the boundaries of what insurance covers. Your policy doesn't cover everything; it covers specific benefits under specific conditions. Denials occur when claims fall outside those boundaries—or at least when the insurer believes they do.
From the insurer's perspective, denials prevent inappropriate utilization. Paying for everything without review would increase costs and premiums. Denials are a cost control mechanism, ensuring that payment flows only to covered, appropriate care.
The appeals process provides recourse when denials are wrong. Recognizing that automated systems and human reviewers make mistakes, regulators require insurers to offer appeals. The appeals system is meant to correct errors and provide due process.
How Insurance Denials and Appeals Actually Work in Practice
Denial triggers: Claims can be denied for many reasons. Common causes include: services not covered under your plan, services deemed not medically necessary, missing prior authorization, coding or billing errors, out-of-network providers without out-of-network benefits, and exhausted benefit limits.
Initial denial notice: When a claim is denied, you receive an Explanation of Benefits showing the denial and a stated reason. The reason is often a code or brief phrase that may not clearly explain the problem. Federal law requires specific denial information, but implementation varies.
Internal appeal: The first appeal level is internal, reviewed by the insurer. You submit a request explaining why the denial was wrong, often with supporting documentation from your provider. A different reviewer examines the case. Internal appeals must usually be filed within 180 days.
External review: If the internal appeal fails, you can request external review by an independent third party. External reviewers aren't employed by the insurer and can overturn denials. This level is particularly valuable for medical necessity denials, where an independent medical opinion may differ from the insurer's.
Expedited appeals: When delays could seriously harm your health, expedited appeals provide faster decisions. These are available for urgent situations where waiting for standard timelines would be dangerous.
Why Insurance Denials Feel Unfair or Arbitrary
Denial rates are high. Studies suggest significant percentages of claims are initially denied. While many denials are resolved through corrections and resubmission, the volume creates a sense that insurers deny first and ask questions later.
Denial reasons are often unclear. "Not medically necessary" doesn't tell you what information was missing or what standard wasn't met. This vagueness makes it hard to know how to respond. Clearer explanations would help but aren't always provided.
The process advantages insurers. Most people don't appeal. Those who do often give up after the first rejection. Insurers face little cost from denying claims that won't be appealed. This dynamic creates incentives for aggressive denial practices.
Appeals require expertise and persistence. Successfully appealing often requires understanding how to write appeal letters, obtaining supporting documentation from providers, and knowing the relevant regulations. This expertise is unevenly distributed, disadvantaging those without resources or knowledge.
Timing adds stress. Appeals have deadlines. Denials often arrive when you're already dealing with health issues. The administrative burden of appealing compounds the stress of illness.
What People Misunderstand About Insurance Denials and Appeals
Most appeals are not filed. Only a small percentage of denied claims are appealed. Yet studies show that appeals frequently succeed, especially external reviews. The first denial is often not the final word.
Your doctor can help. Providers often assist with appeals, writing letters of medical necessity or providing documentation. Their involvement significantly strengthens appeals. Don't assume you must navigate the process alone.
Persistence matters. Denials that seem final can often be overturned with additional information or escalation. Multiple appeal levels exist specifically because initial reviews may be wrong. Giving up too early forfeits legitimate claims.
State regulators can intervene. If internal and external appeals fail, state insurance commissioners handle complaints. Regulatory complaints sometimes resolve issues that the normal appeals process didn't. This isn't always effective, but it's another avenue.
Insurance denials are a significant feature of the American healthcare system. They serve legitimate purposes but also create barriers to care and payment. The appeals process offers recourse but requires knowledge and persistence that many patients lack. Understanding how denials work and that appeals often succeed empowers patients to challenge inappropriate denials rather than simply accepting them.