As medicine continues to develop, insurance companies continue to limit their treatment options and complicate their approval processes. Thus, the likelihood of insurance companies to initially deny coverage for various treatment options increases. From minor administrative errors to larger insurance plan problems, it is important to not only understand the reasons why treatments are being denied, but also understand the intricate process that is involved in obtaining coverage for treatments. The major reasons along with the vast number of insurance plans and their different nuances make it extremely difficult for treatments to be approved. As a consequence, patient health is affected and additional effort is exerted on obtaining medically necessary treatments for patients.
Insurance companies offer a magnitude of unique plans specific to patients, which can lead to variations in the coverage of treatments, procedures, and medications. However, most patients and providers are unaware of the specific treatments options that each plan covers. In addition, each insurance company has their own unique and specific protocols that must be followed when trying to obtain a prior authorization. It is nearly impossible to be knowledgeable about all treatment options and all insurance plans. These differences between insurance companies and plan types can lead to major problems when it comes to coverage. In fact, the American Medical Association’s National Health Insurance Report Card, indicates that the primary reason for rejected claims by Aetna, Anthem, and Cigna in 2013 is non-covered charges. Other commons reasons for coverage denial includes: increasingly difficult PA processes, coding errors, primary care physician mismatch (PCP), “medically unnecessary”, physician not within network, treatment not FDA-approved, lifetime limits, administrative errors, etc. The sheer number of insurance plans and the common reasons mentioned above makes it extremely difficult for necessary treatments to be approved.
Common Reasons for Coverage Denials
Increasingly Difficult PA Processes
The process of being pre-approved by insurance companies has become more complicated in the most recent years. A prior authorization (PA) is a process that involves insurance companies pre-approving patients to receive a specific treatment that is seen as necessary. The PA would normally take anywhere between 24 to 72 hours for an insurance company to process and reply with a denial or approval, if denied then it will take additional time for providers to appeal for the treatment on behalf of the patient. The process for a PA is very strenuous and it may include work such as, calls made to insurance phone trees, submitting forms, gathering medical records, physician review, and much more. A recent study estimates an average of 20 hours a week is spent by medical practices just on managing PA requests. During the interim, this can have a negative effect on the patient’s health. In addition to the already complicated process, each insurance plan has their own set of PA procedures and protocols that must be followed otherwise the chances of a PA for treatment coverage will most likely be denied. Thus, it creates multiple layers delaying the practice from obtaining a prior authorization within a timely manner for the medication or treatment needed.
Errors in Coding
One of the main problems that occur when trying to obtain coverage from insurance companies deals with basic errors in coding. Incorrect diagnostic codes affects how the prior authorization is billed through the insurance company and can lead to a denial in coverage. Without the correct codes, insurance companies do not have the correct information about the patient’s condition and possible treatment plan. This misinformation can result in insurance companies denying coverage for prior authorization. Correct coding is a necessary step when seeking coverage from insurance companies and it is extremely important for the correct diagnostic codes to be used in order to provide the insurance companies with the correct information.
PCP Mismatch
Patients can also be denied treatment coverage based off of a PCP mismatch. Certain insurance plans require that patients declare a primary care physician. Sometimes patients either do not pick one at all or do not inform their insurance companies if they have a new primary care doctor. When these situations occur, many insurance companies will simply assign a provider to the patient and declare this physician their primary care doctor. This can lead to discrepancies between the primary care physician that the patient actually sees and the physician that the insurance company has on record. A PCP mismatch will cause insurance companies to be unable to identify the correct PCP and therefore will be unwilling to provide a service that was not originally ordered by the PCP. The denial status will remain until this has been rectified by the patient on his insurance files. Additionally, the PCP must be within the patients’ network otherwise the patient will not be covered for their medication or treatment.
Treatment “Medically Unnecessary”
Often times, insurances can deny a medication or a treatment they deem as “medically unnecessary”. Insurance companies have the right to deny coverage to patients if they do not agree that the treatment is medically necessary. This reason is normally given when the step therapy established by the insurance was not followed or was not documented in their records. A step therapy is a sequential set of medication or treatments that needs to be trialed first, and failed, prior to authorizing the next medication or treatment in the sequence. Insurance companies strategically created this therapy to prescribe less expensive alternatives prior to more costly treatment. This may seem reasonable in most aspects; however if the less expensive alternatives have been trialed or the more costly treatment was deemed absolutely necessary by the provider then this process hinders the treatment of the patient. Medical practices and providers will then need to provide evidence of medical necessity for the insurance companies to reprocess the PA.
Out of network physicians
Another reason for insurance companies to deny coverage would occur if a patient is seeing a provider that is considered out of network. Insurance companies create lists of providers that are considered in network and that patients may see based on their specific plan types. Many insurance companies require patients to only receive care from physicians who are in their specific network. Seeking care outside of the network created by insurance companies can lead to problems when trying to obtain prior authorization for treatments. If a patient decides to see a provider that is outside of their insurance network, they are at high risk of not receiving coverage from their insurance company.
FDA Approval
In addition, the Food and Drug Administration approves many treatments, procedures, and medications that require prior authorization and referrals. In some cases, the treatments that providers recommend for patients are not yet approved by the FDA. If a treatment or procedure is not approved by the FDA it is known as an “experimental” treatment or procedure. Insurance companies may deny coverage for treatment of a particular condition based on the fact that it is not approved by the FDA and is therefore dubbed as experimental. Even if the treatment may not be seen as harmful or dangerous for a patient, it may not be FDA approval, and insurance companies use this reason to deny coverage.
Lifetime Limits
Furthermore, insurance companies may deny coverage for infusible drugs due to lifetime limits on spending that certain plans have. Lifetime limits on spending are a set amount of money that an insurance company will spend on a specific patient during the entire time that they are enrolled in the plan. Due to high costs of certain treatments, patients may meet their life time much sooner than expected. This will cause insurance companies to deny coverage and leave patients with a bill. Lifetime limits are not easy to recognize due to all of the variations between insurance companies.
Administrative Errors
Administrative errors account for a large portion of why insurance companies deny coverage for treatments. Although an administrative error may seem like a minor issue, these small mistakes can result in major problems for patients and insurance companies. Incomplete requests sent to the insurance companies or primary care offices also leads to various difficulties in obtaining PA or referrals. Not meeting all the criteria set forth in order to obtain these requests not only slows the process down for the patient receiving treatment, but also may result in overall denied coverage. Other examples of administrative errors include claims not matching pre-authorized products or simply inaccurate information being provided to insurance companies.
It is clear that the process of obtaining coverage from insurance companies through prior authorizations can lead to many problems for patients, as well as providers and administrative staff. It is not clear, or well-documented, if requiring prior authorizations leads to increased savings for insurance companies over the long run. The process alone results in increased costs for hospitals and patients. One study examined the records of over 4,000 patients with Type 2 diabetes who were prescribed medications requiring prior authorizations. Those who were denied the medications had higher overall medical costs during the following year. The consequences for this increasingly complex process of obtaining prior authorizations can also go beyond the financial aspects. The more complicated this administrative process becomes, the more roadblocks that develop which prevent us from delivering the best possible care to our patients. The complex nature of the healthcare system requires that various processes, such as obtaining prior authorizations, be understood, streamlined, and standardized in order to provide our patients with the best quality of care.
About the author:
Ashish Buttan BDS, MBA is a seasoned healthcare administrator / strategist specializing in areas of patient access, revenue cycle operations / productivity and clinical program development. Currently working as Service Line Administrator for Neurosciences at Children’s Hospital Los Angeles.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker’s Hospital Review/Becker’s Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
