Coverage Denied: Examining Causes and Consequences of Health Insurance Denials

• In Event: The Welfare State: Tracing Changes Over Time

Abstract

This study evaluates health insurers' denials of coverage to insured patients. That is, while we often discuss the burdens of patients' ability to afford medical costs, much emphasis has been placed on the nature of health plans (e.g., size of deductibles, out-of-pocket maximums), whereas I examine patient financial burdens associated with insurers' failures to adhere to the insurance contracts in which patients enroll, and the policy interventions that might improve access to care for health care consumers.

The Kaiser Family Foundation reported in 2018 that 18% of marketplace health care claims are denied and while 50% of appeals are successful, only 0.5% of denied claims are appealed. This raised key questions as to who is most vulnerable to denials of coverage, who is more or less likely to appeal their denials, expected likelihood of success in appealing, other perceived barriers to coverage, and insurance denials’ impact on patients' subsequent health care utilization. That is, Are low-SES individuals less likely to fight to utilize their health benefits? Are those with language barriers less likely to appeal denials and less successful in doing so? Are the mentally ill more prone to face denials of coverage and less likely to be tenacious in fighting those denials? Do denials of coverage and arduous appeals lead patients to be more risk averse in pursuing further medical treatment?

Answers to these questions have important implications for closing the inequality gap between those who enjoy the full benefits of their health plans and those for whom their coverage is ultimately out of reach. Whether the low appeal rate is driven more information asymmetry or by resource constraints can help to inform hospitals, states, and the federal government as they shift policies and practices to improve health care access and reduce inequality.

The most recent in-depth academic analysis of the rates and rationales for denials of coverage was in 2003, well before the passage of both the Mental Health Parity Act and the ACA, both laws of which dramatically reshaped grounds on which insurance companies can legally deny coverage for medical services. To address this deficit, I conducted the first-ever nationwide survey of adult US patients across all insurance types – whether employer-provided, marketplace, university-provided, privately purchased, Medicare, or Medicaid – utilizing Amazon Mechanical Turk. I obtained responses from 743 individuals, with a 90% completion rate (669 complete responses). Respondents were nationally representative with respect to age, income, race, religion, language minority status, and sexual orientation, though were somewhat more educated than the general public.

I find that 35% of respondents have been denied for a medical claim, and that 22% have been denied coverage more than once. Moreover, 55% know someone who has been denied coverage for their health care. Thus, when extending analysis beyond marketplace insurance plans, one finds a wealth of more nefarious insurer behavior that had thus far been under-explored, and that cries for public policy reform.

I find respondents dramatically underestimate their odds of prevailing in appealing insurers’ decisions: while 48% estimate their odds of success as 0-20%, just 14% rate their odds of success as 40-60%, when the win rate is around 50% or a bit higher. And not surprisingly, respondents say that they would be more likely to appeal their denials of coverage if they believed they did have good odds of winning. A majority of those denied claims would have delayed or cancelled the medical treatment rather than pay for the cost of care, and amid the denial of coverage, 39% postponed additional medical treatment and 43% postponed further purchasing until it was resolved. 38% appealed the denial of coverage, and among those who did not appeal the denial, 44% were unaware that appealing was an option available to them. Nearly 55% said that regardless of whether they won their appeal, the mere experience of being denied medical care and undergoing the appeal process made them less likely to pursue medical treatment, indicating that there are long-term consequences to this insurer behavior. White and higher-income respondents were more likely to appeal denials, and more likely to prevail in doing so.

I supplement survey findings with in-person interviews with patients at federally-qualified health centers in Los Angeles to discuss their barriers (or perceived barriers) to utilizing their health benefits and what they see as useful policy changes that would improve their ability to access care. The findings of this survey and interviews not only highlight the ways in which health insurance practices help to deepen health and economic inequality in the US, but also shed light on opportunities for productive areas for health policy interventions to make health care more accessible not just in theory, but also in practice for the American people.

Author

• Miranda Elyse Yaver, University of California, Los Angeles