Administrative Frictions in US Health Insurance: Evidence on Coverage Loss, Claim Denials, and Eligibility Churn

Session Submission Type: Panel

Abstract

The US health insurance system is characterized by pervasive administrative complexity, much of it shaped at the state level. Coverage is fragmented across employer-sponsored insurance (ESI), the individual market, Medicaid, and Medicare, each with its own eligibility rules, enrollment processes, and billing infrastructure. Individuals move between coverage segments frequently because of job changes, employer decisions, income fluctuations, or periodic redeterminations, and each transition imposes costs on patients, providers, and insurers. Consistent with the theme of this year’s conference, this session brings together three empirical papers across three states—Colorado, Massachusetts, and Wisconsin—to examine distinct manifestations of administrative friction in US health insurance, spanning commercial and public coverage. Each paper exploits detailed enrollment, claims, or survey data available in a single state to produce evidence that is directly relevant to state policy choices and difficult to generate with national data alone.

The first paper studies what happens when small group employers exit the fully insured market. Using the Colorado All-Payer Claims Database (APCD) the authors track more than 30,000 workers and dependents whose employer terminated its health plan between 2021 and 2022. They find that substantial increases in having no observed health insurance in the month after exit, and that this gap narrows only modestly over the following year. Transitions to other ESI, the individual market, Medicaid, and Medicare account for only a minority of displaced members. The findings highlight small group market instability as an important and understudied source of coverage disruption.

The second paper examines denied health insurance claims as a visible manifestation of billing friction. Using the Massachusetts APCD, the authors document that 13 to 15 percent of claim lines are denied across market segments, that denials are concentrated among low-price and routine services, and that a substantial share of denials are predictable ex ante. They show that denials spike sharply when enrollees switch insurers, vary widely across insurers for identical procedures, and are lower for vertically integrated provider–insurer pairs.

The third paper investigates procedural denials in Medicaid, which now represent a majority of coverage losses at redetermination. Using a unique survey of Wisconsin Medicaid members linked to administrative enrollment data, the authors show that member beliefs about eligibility are highly predictive of subsequent coverage loss: roughly three quarters of those who believe themselves eligible remain enrolled, compared to one in five who believe themselves ineligible. About half of those who experience procedural denials believed themselves eligible shortly before redetermination. The results suggest that procedural denial rates conflate intentional exits by likely-ineligible members with administrative screen-outs of eligible members, complicating their use as a standalone measure of administrative burden.

Together, these papers offer new evidence on how fragmented enrollment, heterogeneous insurer rules, and burdensome eligibility processes shape who stays covered, who gets paid, and who bears the cost of administrative complexity in US health insurance—and illustrate how state administrative data can be used to generate policy-relevant evidence on these questions.

Policy Area

• Health Policy

Chair

• Jean Marie Abraham, University of Minnesota - Twin Cities

Discussants

• Andrew Olenski, Lehigh University

• David M Anderson, University of South Carolina

Organizer

• Mark Katz Meiselbach, Johns Hopkins University

Individual Presentations

• The Effect of Small Group Employer Plan Terminations on Health Insurance Coverage - Presenting Author: Mark Katz Meiselbach, Johns Hopkins University

• Fragmented Insurance and Billing Frictions: Understanding Denied Health Insurance Claims - Presenting Author: Mark Shepard, Harvard University

• Perceived Medicaid Eligibility and Procedural Denials - Presenting Author: Laura Dague, Texas A&M University

• Healthcare Administrative Burden as Community Power Suppressant - Presenting Author: Bailey Flynn, Cornell University