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A Project of The Annenberg Public Policy Center

Denial of Claims

Insurance companies aren’t very popular these days, and it’s certainly not too difficult to dig up a horror story or two of how a patient’s medical claim was denied unfairly. But do companies really "deny payment for 1 out of every 5 treatments doctors prescribe," as a new ad says?

Health Care for America NOW, a liberal group supporting health care overhaul efforts in Congress, makes the claim in a new ad campaign:

The ad, airing for two weeks on national cable, leaves out a couple of caveats:

  • The statistic comes from data from six companies in California – not any kind of nationwide study, as viewers may be left to believe.
  • And it’s unknown why these claims were denied. As the Los Angeles Times reported: "State health plans say claims often are denied because they are duplicates, because patients are no longer members, and because a particular treatment is not a covered benefit."

HCAN cites a press release on this data from the California Nurses Association/National Nurses Organizing Committee, which looked at information insurance companies submitted to state regulators over a seven-year period. It’s true that CNA/NNOC announced in early September: "[R]esearchers analyzed data reported by the insurers to the California Department of Managed Care. From 2002 through June 30, 2009, six of the largest insurers operating in California rejected 47.7 million claims for care – 22 percent of all claims."

And the news prompted the state attorney general (and former Gov. Jerry Brown) to announce an investigation into insurance company practices. "These high denial rates suggest a system that is dysfunctional, and the public is entitled to know whether wrongful business practices are involved," Atty. Gen. Brown said in a statement.

We asked HCAN if it had any additional information other than CNA/NNOC’s press release. It didn’t. CNA/NNOC spokesman Chuck Idelson told us that the group was conducting more research, and with the state investigation, it’s "hopeful that more information will come out." Idelson also said that the data don’t include any information about why the claims were denied. "All the data shows is denials, so the data doesn’t have any appendages to it," he said.

The group’s press release, however, implies that every one of the 47.7 million rejected claims caused medical hardships. "Every claim that is denied represents a real patient enduring pain and suffering. Every denial has real, sometimes fatal consequences," said Deborah Burger, RN, CNA/NNOC co-president. CNA has been an advocate for a single-payer health care system, and its press release is a strongly worded condemnation of insurance companies.

HCAN’s ad mischaracterizes the data, saying that companies "deny payment for 1 out of every 5 treatments doctors prescribe" (emphasis added). But the data actually show 1 in 5 claims submitted for payment are denied. It remains to be seen how many of these rejected claims are due to duplications, greedy business practices, negligence or administrative mistakes. Nicole Kasabian Evans, a spokeswoman for the California Association of Health Plans, told the L.A. Times: "We believe that the attorney general’s office will learn that the California Nurses Assn.’s mischaracterization of health plan claims data does not accurately reflect denials of care for consumers or widespread denials of insurance coverage," adding that "a good deal of the so-called denials are merely paperwork issues."

State regulators, however, have looked into complaints about claims and obtained millions in disputed payments for doctors. But a spokeswoman for the state Dept. of Managed Health Care emphasized that these denials didn’t mean that patients didn’t receive care, but that the medical provider wasn’t paid for it.

Idelson told us that "even it was just all paperwork denials, it shows why insurance administrative cost and waste eats up 30 cents of every healthcare [dollar] and drives up costs."

The six companies in question are PacifiCare, Cigna, Blue Cross, Kaiser Permanente, HealthNet and Aetna. "What it clearly shows is there’s a problem here," Idelson says. "We don’t know the full scope of the problem … but it raises a critical issue that we don’t think is being adequately addressed, which is the ongoing practice of insurance companies’ denials of medical care."

But viewers of HCAN’s ad won’t know the full story behind this statistic.