Health Insurers' Tactic Resurfaces With a Vengeance: Deny, Deny, Deny

I once had a Health Law student who had been an HMO employee in a previous life. She was the one who answered the phone when a provider (hospital, clinic, physician, etc.) dialed 1-800 for pre-authorization for a procedure, hospitalization, or prescription item (medication, wheelchair, PT, etc.). Her standing order was simple: Always deny the request first time around. In Texas, we call that "bad faith claims handling" and it's a tort that can result in compensatory and punitive damages. So much for the deterrence effect of tort law!

A lot has changed in health care in the intervening two decades, byt "deny, deny, deny" is still with us. It's frustrating for policy holders (a/k/a patients and human beings), and it's aggravating for the providers. It's also a form of Russian roulette that results in dangerous delays in providing needed health care goods and services.

A recent article in Becker's CFO Report (Aug. 14, 2023) highlights the problem. As described by a hospital CEO with 37 years of experience in health care, bare-knuckle negotiations over reimbursement rates get all the media attention when providers and a payor appear to be at impasse and termination of the contract is a looming reality for thousands of patients whose providers are about to be "out of network." Reimbursement rates are the "above the surface" story in these negotiations, but eventually both sides compromise and crisis is averted.

The "below the surface" issues, though, have an outsized effect on providers. These issues stem from denials of payment for any of the myriad reasons insurers can cite: service or medication not covered, no pre-authorization or referral from a gatekeeper, DRG down-coding, difference in clinical judgment about medical necessity . . . . The list goes on. Here's the eye-popping heart of the article:

Data and numbers on denial rates are not easy to find, but some examination paints a picture rich with variation. An analysis of 2021 plans on Healthcare.gov conducted by KFF found nearly 17 percent of in-network claims were denied, with rates varying from 2 percent to 49 percent. The reasons for the bulk of denials are unclear. About 14 percent were attributed to an excluded service, 8 percent to lack of pre-authorization or referral and 2 percent to questions of medical necessity. A whopping 77 percent were classified as "all other reasons." 

Adding to the inconsistency is the fact that health plan denial rates fluctuate year over year. In 2020, a gold-level health plan offered by Oscar Insurance in Florida denied 66 percent of payment requests; in 2021 it denied 7 percent.

And here's a refrain I hear from physician friends from all over:

"Nobody becomes a physician because they hope to feel like a cog in a factory," Michael Ivy, MD, deputy chief medical officer of Yale New Haven (Conn.) Health, told Becker's. "However, between meeting the demands of payers for referrals, denials of payment and increased documentation requirements in order to assure proper reimbursement and risk adjustment, as well as an increasing number of production metrics, it can be difficult not to feel like a cog." 

As for the government's role in policing the conduct of these insurers:

Authors of the 2010 Affordable Care Act worried that provisions to expand health insurance access — such as barring health insurers' refusal to cover patients with preexisting conditions — could cause them to ratchet up other tactics to make up for the change. With this in mind, the law charged HHS with monitoring health plan denial rates, but oversight has been unfulfilled, leaving denials widespread.  

When you consider insurance company profits and their executive salaries, it's apparent that the "middle men" in these transactions are getting rich at the expense of providers and patients alike. Where's a good, old-fashioned congressional or FTC hearing when you need one?