It happens to the best of us: Life is going well until we get sick. Whether it's something minor or a major health crisis, the cost of health care in America can easily bankrupt a family – even with insurance.
What happens if your health insurance company denies your claim and won't cover the cost of your care?
Why Health Insurance Claims are Denied
There are a number of reasons why a health insurance company may deny a claim. The most common reasons include:
- Procedure is considered experimental, is not medically necessary or is cosmetic in nature.
- Procedure or treatment exceeds policy limitations.
- Pre-authorization or referral was required.
- Procedure or treatment is not covered by your policy.
- An out-of-network provider was used.
If your insurance company has denied your claim, your doctor, the hospital or your insurer should be able to explain the reason for the rejection.
Once you understand their reasoning for denying your claim, you'll have a better idea of your options.
What You Can Do if Your Claim is Denied
If your insurance company denies your claim, you have a few options.
You Can Appeal the Decision
Most of the reasons for a claim rejection can be appealed. If you chose to appeal, your case will be reviewed by a third party.
- Internal Review: If your insurer denies your claim, you can ask them to conduct a full and fair review of the decision. If your case is urgent, your insurer must expedite the process.
- External Review: You also have the right to appeal to a third party to review your case. In this case, the insurance company does not have the final say in whether or not they must pay a claim.
Some people prefer to file their own appeal, while others will enlist the help of a lawyer. If you choose to do this yourself, you can talk to your doctor about writing you a letter of appeal. In some cases, denied claims can be overturned by simply changing the way they are billed.
If your doctor can't help, try contacting the human resources department at your workplace. Some companies have case managers that can help with the appeals process.
What happens if your appeal is unsuccessful and your insurer still refuses to pay your claim?
You May Have Legal Recourse
If an appeal fails, you may be able to sue the company for what's called "insurance bad faith."
When you open a policy with a health insurance company, you're essentially entering a contract with the company. If the insurer denies your claim without a valid reason, their actions may be considered breach of contract.
Most lawsuits related to claim denial are based on breach of contract claims.
"Under an individual health insurance policy, the insurance company must: promptly pay all valid claims, investigate and evaluate all claims before denying or refuse to pay a claim, provide a valid reason for a claim denial, including a factual and legal justification for the claim denial. If an insurance company denies a health insurance claim without a valid legal or factual justification, the policyholder may have a claim for insurance bad faith."
Under contract law, your insurance company has a duty to deal in good faith. When health insurers deny claims without a valid reason, it may be considered acting in bad faith.
An insurance company may be considered to have acted in bad faith if they:
- Refuse to accept evidence
- Fabricate evidence
- Create an unreasonable delay in their investigation
- Refuse to conduct an investigation
In some cases, insurance bad faith claims can also allow for tort claims. Torts will allow the award of punitive damages.
If your insurance company doesn't have a valid reason to deny your claim, they may be liable for breach of contract.
When appeals are denied, it's time to call a lawyer. Don't wait to talk to a legal professional. States have statutes of limitations which limit the time you can file a lawsuit. Breach of contract claims and torts have their own statues of limitations, so act quickly to avoid having your case thrown out.