Health Claim Denial Appeal Rates Should be Higher, Experts Argue

The ERISA Advisory Council in a hearing earlier this month highlighted serious issues with the appeals process for health insurance claim denials that might not be widely appreciated by the sponsors of those plans.

The council, which advises the Department of Labor and make recommendations on the department’s functions under the Employee Retirement Income Security Act, hosted experts on July 8-10 to discuss the issue of health plan claim denials and related appeals.

The witnesses at the hearing characterized the process of appeals as needlessly complicated and opaque such that very few health insurance plan participants know that they can appeal, how to appeal, or have any confidence that an appeal would be taken seriously.

The three-day hearing also discussed potential reforms to qualified default investment alternatives.

Representatives of the DOL’s Employee Benefits Security Administration addressed the council to explain some of the basic legal requirements for claim-denial appeals. Jeffrey Turner, the director for the Office of Regulations and Interpretations at EBSA, explained that “adverse benefit determination letters have a lot of requirements.” For example, a participant must have at least 180 days to file an appeal and “a fundamentally fair appeal is a basic right.” Urgent care appeals must be decided in 72 hours, and the insurer must accept the provider’s assertion that a claim is urgent.

In practice, however, things are not as simple. Meiram Bendat, the founder and president of PsychAppeal, a law firm that specializes in mental health insurance advocacy, explained to the council that urgent status determinations are “legally binding” and “there is no legal basis for health plans to second guess these judgements.”

“But in practice [second guessing] happen[s] fairly regularly,” Bendat explained, and insurers “routinely override such decisions, particularly with respect to outpatient services.” Bendat said that appeals to the DOL are unrealistic and “the DOL takes far too long to address complaints,” that is, if participants are even aware of their right to try.

Participants can appeal claims denials to independent review organization through an external review process to obtain benefits. But Bendat characterizes this process as riddled with conflicts and being deliberately hidden from participants such that it is “exceedingly difficult to access,” and insurers provide “no clearly visible web links” to access external review.

Bendat made two policy recommendations to the council. First, DOL should issue a FAQ clarifying that urgent cases are not limited to inpatient procedures, because urgent claim denials are disproportionately related to outpatient care. Second, since plans cannot change the urgent status determination of a provider, if a plan fails to respond within the required 72 hours, a claim should be automatically approved.

Brian King, the founder of the Brian S. King Law Office, said insurance companies are under a lot of pressure “to find reasons to deny claims,” and “there is a financial incentive for insurers to provide as little information as possible” to participants, such that participants often do not understand how to appeal or on what basis they can appeal.

He adds that participants challenging denials can often find plaintiffs’ attorneys who can work on contingency, but many claim denials for smaller amounts of money never get challenged because it is not economical to hire an attorney.

A statement provided by the Leukemia and Lymphoma Society to the Council agreed: “appeals are vanishingly rare, yet some research on appeals outcomes suggests that insurers may be issuing denials without sufficiently examining the validity or necessity of a claim before denying it.”

The Leukemia and Lymphoma Society said that only “a miniscule number” of appeals are made, estimating that about 90,000 of the 48 million denied claims are appealed. “Even when consumers do appeal, the process is daunting, opaque, and exhausting,” according to the statement.

The advisory council will likely issue later this year a report from the hearing that may contain policy recommendations to the DOL.