Why Your Health Insurance Won't Pay for Your Health Care

Understanding the Reasons Behind Health Insurance Claim Denials

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When your doctor recommends a test, medication, or procedure and your health insurance won’t pay for it, it can be frightening. If there’s an alternate test, medication, or procedure that will work and your health plan will cover, then this situation is just an irritating nuisance. But, if the test, medication, or procedure is the only thing that will work, the situation can be life threatening.

When this claim or pre-authorization denial happens to you, it’s common to be angry and want to fight the denial.

However, before you spend your energy on this battle, first make sure you know exactly what happened and why your health plan won’t pay.

While investigating the cause for the claim denial or refusal of your pre-authorization request, you’ll gain valuable insight into the standards of treatment for your particular medical problem, as well as how your health insurance company “thinks.” You’ll be a more competent warrior if a fight with your health insurance company becomes necessary.

Reasons Your Health Insurance Won’t Pay for the Care Your Doctor Says You Need

1. What you need isn’t a covered benefit of your health plan.

When your health plan denies your claim or refuses your pre-authorization request for this reason, it’s basically saying that your policy doesn’t cover that test, treatment, or drug no matter what the circumstances are.

Your insurer should know exactly what benefits your policy provides and what isn’t covered, but sometimes your insurer is wrong.

Check your policy carefully. If your health insurance is through your job, check with your employee benefits office to see if you actually do have coverage for the service your health insurance says isn’t covered.

In the United States, small group and individual health plans now have to cover the essential health benefits, but large group employer-based plans and grandfathered plans don’t have to provide this same coverage.

If you feel you’re being denied the benefits of coverage your policy says you actually have, follow the appeals procedure your health plan booklet outlines. Also, enlist the help of your employee benefits office if your coverage is job-based, or your state’s insurance commissioner if your insurance isn’t job-based.

2. You got the care from an out-of-network provider when your health plan coverage is limited to in-network providers.  

If you have an HMO or EPO, with very few exceptions, your coverage is limited to in-network providers that your health plan has a contract with. Your health insurance won’t pay if you use an out-of-network provider.

If you’re asking for pre-authorization and your pre-authorization request was denied due to your chosen provider, you can simply re-submit the request using an in-network provider rather than an out-of-network provider.

However, if you’ve already gotten the care and your health plan won't pay your claim because you went out-of-network, you’re going to have a more difficult fight on your hands.

You may be successful if you can show that no in-network providers were capable of providing that particular service so you had to go out-of-network. You might also be successful if you can show that it was an emergency and you went to the closest provider capable of rendering the care you needed.

3. Your health plan doesn’t think the test, treatment or drug is medically necessary.

If your claim or pre-authorization request has received a medical necessity denial, it sounds as though your health insurance won’t pay because it thinks you don’t really need the care your doctor has recommended. This might be what your health plan is actually saying, but it might not be.

There are some reasons for a medical necessity denial that don’t really mean your health plan thinks the care is unnecessary. In order to figure out just what, exactly, your medical necessity denial means, you’ll have to do some digging. The good news is this digging may well show you the path to getting your pre-authorization request approved, or your claim paid, if you just tweak your approach a bit.  

Learn more in “Why Does My Health Plan Say the Care I Need Isn’t Necessary?

4. Your health plan doesn’t recognize you as benefited member, and other mix-ups.

This type of scenario is more common than most people would imagine. In today’s complex health care system, information about your coverage must flow correctly from your employer, insurance broker, or health insurance exchange to your health plan. If there’s a glitch or delay anywhere along the way, it can appear as though you don’t have health insurance even though you actually do.

Along these same lines, it’s common for health insurers to outsource to a medical management company the decision making about whether or not your test, treatment, or drug will be covered. In this case, information about your coverage must flow correctly from your health plan to the medical management contractor. Likewise, information about your medical situation must flow correctly from your physician’s office to the health plan or its medical management contractor. Any glitch in the flow of this information can result in a claim denial or a refusal of your request for pre-authorization.

The good news is that these claim denials or pre-authorization refusals can be relatively easy to overturn once you understand exactly what the problem is. For more information, see “How Silly Mix-Ups Cause a Health Insurance Claim Denial.”

5. Your hospital stay was incorrectly classified as inpatient vs observation.

If Medicare or your health plan is refusing to pay for a hospital stay, the reason may have to do with a disagreement about the correct status of your hospitalization rather than a disagreement about whether or not you actually needed the care.  When patients are placed in the hospital, they’re assigned either observation status or inpatient status according to a complex set of rules and guidelines.

It’s common for the hospital and your admitting physician to believe you should be admitted to inpatient status, while Medicare or your health plan thinks you should have been hospitalized in observation status. Here’s the catch: if you’re admitted to the wrong status, your health plan or Medicare might refuse to pay for the entire admission even though your insurer agrees that you needed the care the hospital provided. It’s kind of like a technical foul.

 Learn more about this observation vs. inpatient status problem in “Hospitalized in Observation Status? You’ll Pay More.”

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