Private Health Insurance
Data on Application and Coverage Denials Gao ID: GAO-11-268 March 16, 2011The large percentage of Americans that rely on private health insurance for health care coverage could expand with enactment of the Patient Protection and Affordable Care Act (PPACA) of 2010. Until PPACA is fully implemented, some consumers seeking coverage can have their applications for enrollment denied, and those enrolled may face denials of coverage for specific medical services. PPACA required GAO to study the rates of such application and coverage denials. GAO reviewed the data available on denials of (1) applications for enrollment and (2) coverage for medical services. GAO reviewed newly available nationwide data collected by the Department of Health and Human Services (HHS) from 459 insurers operating in the individual market on application denials from January through March 2010. GAO also reviewed a year or more of the available data from six states on the rates of application and coverage denials and the rates and outcomes of appeals related to coverage denials. The six states included all states identified by experts and in the literature as collecting data on the rates of application or coverage denials and together represented over 20 percent of private health insurance enrollment nationally. GAO conducted a literature review to identify studies related to application and coverage denials and reviewed data from selected studies. GAO interviewed HHS and state officials and researchers about factors to consider when interpreting the data.
The available data indicated variation in application denial rates, and there are several issues to consider in interpreting those rates. Nationwide data collected by HHS from insurers showed that the aggregate application denial rate for the first quarter of 2010 was 19 percent, but that denial rates varied significantly across insurers. For example, just over a quarter of insurers had application denial rates from 0 percent to 15 percent while another quarter of insurers had rates of 40 percent or higher. Data reported by Maryland--the only of the six states in GAO's review identified as collecting data on the incidence of application denials--indicated that variation in application denial rates across insurers has occurred for several years, with rates ranging from about 6 percent to over 30 percent in each of 3 years. The available data provided little information on the reasons that applications were denied. There are also several issues to consider when interpreting application denial rates. For example, the rates may not provide a clear estimate of the number of individuals that were ultimately able to secure coverage, as individuals can apply to multiple insurers, and the rates do not reflect applicants that have been offered coverage with a premium that is higher than the standard rate. The available data from the six states in GAO's review and others indicated that the rates of coverage denials, including rates of denials of preauthorizations and claims, also varied significantly. The state data indicated that coverage denial rates varied significantly across states, with aggregate rates of claim denials ranging from 11 percent to 24 percent across the three states that collected such data. In addition, rates varied significantly across insurers, with data from one state indicating a range in claim denial rates from 6 percent to 40 percent across six large insurers operating in the state. There are several factors that may have contributed to the variation in rates across states and insurers, such as states varying in the types of denials they require insurers to report. The data also indicated that coverage denials occurred for a variety of reasons, frequently for billing errors, such as duplicate claims or missing information on the claim, and eligibility issues, such as services being provided before coverage was initiated, and less often for judgments about the appropriateness of a service. Further, the data GAO reviewed indicated that coverage denials, if appealed, were frequently reversed in the consumer's favor. For example, data from four of the six states on the outcomes of appeals filed with insurers indicated that 39 percent to 59 percent of appeals resulted in the insurer reversing its original coverage denial. Data from a national study conducted by a trade association for insurance companies on the outcomes of appeals filed with states for an independent, external review indicated that coverage denials were reversed about 40 percent of the time. GAO provided a draft of the report to HHS and the Department of Labor (DOL). HHS agreed with GAO's findings, noting the need to improve the quality and scope of existing data, and suggested clarifications, which were incorporated. HHS and DOL also provided technical comments, which were incorporated as appropriate.
GAO-11-268, Private Health Insurance: Data on Application and Coverage Denials
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United States Government Accountability Office:
GAO:
Report to the Secretary of Health and Human Services and the Secretary
of Labor:
March 2011:
Private Health Insurance:
Data on Application and Coverage Denials:
GAO-11-268:
GAO Highlights:
Highlights of GAO-11-268, a report to the Secretary of Health and
Human Services and the Secretary of Labor.
Why GAO Did This Study:
The large percentage of Americans that rely on private health
insurance for health care coverage could expand with enactment of the
Patient Protection and Affordable Care Act (PPACA) of 2010. Until
PPACA is fully implemented, some consumers seeking coverage can have
their applications for enrollment denied, and those enrolled may face
denials of coverage for specific medical services. PPACA required GAO
to study the rates of such application and coverage denials. GAO
reviewed the data available on denials of (1) applications for
enrollment and (2) coverage for medical services.
GAO reviewed newly available nationwide data collected by the
Department of Health and Human Services (HHS) from 459 insurers
operating in the individual market on application denials from January
through March 2010. GAO also reviewed a year or more of the available
data from six states on the rates of application and coverage denials
and the rates and outcomes of appeals related to coverage denials. The
six states included all states identified by experts and in the
literature as collecting data on the rates of application or coverage
denials and together represented over 20 percent of private health
insurance enrollment nationally. GAO conducted a literature review to
identify studies related to application and coverage denials and
reviewed data from selected studies. GAO interviewed HHS and state
officials and researchers about factors to consider when interpreting
the data.
What GAO Found:
The available data indicated variation in application denial rates,
and there are several issues to consider in interpreting those rates.
Nationwide data collected by HHS from insurers showed that the
aggregate application denial rate for the first quarter of 2010 was 19
percent, but that denial rates varied significantly across insurers.
For example, just over a quarter of insurers had application denial
rates from 0 percent to 15 percent while another quarter of insurers
had rates of 40 percent or higher. Data reported by Maryland”the only
of the six states in GAO‘s review identified as collecting data on the
incidence of application denials”indicated that variation in
application denial rates across insurers has occurred for several
years, with rates ranging from about 6 percent to over 30 percent in
each of 3 years. The available data provided little information on the
reasons that applications were denied. There are also several issues
to consider when interpreting application denial rates. For example,
the rates may not provide a clear estimate of the number of
individuals that were ultimately able to secure coverage, as
individuals can apply to multiple insurers, and the rates do not
reflect applicants that have been offered coverage with a premium that
is higher than the standard rate.
The available data from the six states in GAO‘s review and others
indicated that the rates of coverage denials, including rates of
denials of preauthorizations and claims, also varied significantly.
The state data indicated that coverage denial rates varied
significantly across states, with aggregate rates of claim denials
ranging from 11 percent to 24 percent across the three states that
collected such data. In addition, rates varied significantly across
insurers, with data from one state indicating a range in claim denial
rates from 6 percent to 40 percent across six large insurers operating
in the state. There are several factors that may have contributed to
the variation in rates across states and insurers, such as states
varying in the types of denials they require insurers to report. The
data also indicated that coverage denials occurred for a variety of
reasons, frequently for billing errors, such as duplicate claims or
missing information on the claim, and eligibility issues, such as
services being provided before coverage was initiated, and less often
for judgments about the appropriateness of a service. Further, the
data GAO reviewed indicated that coverage denials, if appealed, were
frequently reversed in the consumer‘s favor. For example, data from
four of the six states on the outcomes of appeals filed with insurers
indicated that 39 percent to 59 percent of appeals resulted in the
insurer reversing its original coverage denial. Data from a national
study conducted by a trade association for insurance companies on the
outcomes of appeals filed with states for an independent, external
review indicated that coverage denials were reversed about 40 percent
of the time.
GAO provided a draft of the report to HHS and the Department of Labor
(DOL). HHS agreed with GAO‘s findings, noting the need to improve the
quality and scope of existing data, and suggested clarifications,
which were incorporated. HHS and DOL also provided technical comments,
which were incorporated as appropriate.
View [hyperlink, http://www.gao.gov/products/GAO-11-268] or key
components. For more information, contact John E. Dicken at (202) 512-
7114 or dickenj@gao.gov.
[End of section]
Contents:
Letter:
Background:
Federal, State, and Other Data Indicated Variation in Application
Denial Rates and Provided Little Information on the Reasons for
Denials:
State and Other Data Indicated That Coverage Denial Rates and the
Reasons for Denials Vary and That Denials, If Appealed, Are Often
Reversed:
Agency Comments and Our Evaluation:
Appendix I: Methodology for Selecting States and State Data Reviewed
by GAO:
Appendix II: Methodology for and Studies Identified by Structured
Literature Review:
Appendix III: Comments from the Department of Health and Human
Services:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Range of Application Denial Rates among State-Licensed
Insurers, Based on HHS Data, January-March 2010:
Table 2: Range in Application Denial Rates across Insurers Licensed in
Maryland, 2008-2010:
Table 3: Rates of Claim or Preauthorization Denials across States in
GAO's Review and Characteristics of the State Data:
Table 4: Number and Outcomes of Internal Appeals Filed with Insurers
across States in GAO's Review:
Table 5: Number and Outcomes of Appeals Submitted for External Review
across States in GAO's Review:
Table 6: Information on Denial Data Collected by and Private Health
Insurance Enrollment for States in GAO's Review:
Table 7: Index of Studies Examining Private Health Insurance Denials,
by Topic:
Figure:
Figure 1: Application Denial Rates by Age Group for 2008, as Reported
by AHIP:
Abbreviations:
AHIP: America's Health Insurance Plans:
AMA: American Medical Association:
DOL: Department of Labor:
ERISA: Employee Retirement Income Security Act of 1974:
HHS: Department of Health and Human Services:
HIPAA: Health Insurance Portability and Accountability Act of 1996:
HMO: health maintenance organization:
HRP: high-risk health insurance pool:
NAIC: National Association of Insurance Commissioners:
PPACA: Patient Protection and Affordable Care Act:
PPO: preferred provider organization:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
March 16, 2011:
The Honorable Kathleen Sebelius:
Secretary of Health and Human Services:
The Honorable Hilda L. Solis:
Secretary of Labor:
A large majority of Americans--nearly 64 percent as of 2009--rely on
private insurance for health care coverage, most through employer-
sponsored group health coverage.[Footnote 1] With the enactment of the
Patient Protection and Affordable Care Act (PPACA) in March 2010,
[Footnote 2] enrollment in private health insurance could expand
significantly, particularly for individuals and families that do not
have access to group coverage through their employer. While there are
certain federal requirements protecting against the denial of
applications for enrollment for individuals eligible for group
coverage, until PPACA is fully implemented, these protections do not
apply to some consumers seeking individual coverage from private
health insurers.[Footnote 3] In addition, once consumers are enrolled
in either group or individual coverage, coverage can be denied for
specific medical services, either through a denial of authorization of
a service before it has been provided or payment for a service that
has been delivered.[Footnote 4] There are some national data on the
extent to which applications for enrollment are being denied; however,
there is not yet any comprehensive, national information on the extent
to which coverage for medical services is being denied when consumers
seek health care. The federal government plans to collect additional
information on the extent of denials of applications for enrollment
and coverage for medical services and the reasons for those denials,
with the intent to make it easier for consumers to shop for coverage.
According to experts, those data may also help with government
oversight of private health insurance.
Oversight of private health insurance has been a responsibility of
state departments of insurance, and states vary in what they require
of insurers and the degree to which they track insurers' activities,
including the extent to which insurers are denying applications and
coverage. The federal government's role in the oversight of private
health insurance has included, for example, the establishment of
certain consumer protections for states to enforce. It also includes
oversight of employer-based coverage performed by the Department of
Labor (DOL). However, the federal government's role has expanded with
the enactment of PPACA. PPACA required the Department of Health and
Human Services (HHS) to begin collecting, monitoring, and publishing
information on health insurance products. HHS began publishing data
from insurers on denials of applications for enrollment in October
2010 and intends to collect data in the future on denials of coverage
for medical services.
PPACA directed us to study denials of applications for enrollment and
coverage for medical services by considering samples of data related
to such denials, including the reasons for the denials and favorably
resolved disputes resulting from the denials.[Footnote 5]
Specifically, we reviewed (1) the data available on denials of
applications for enrollment and (2) the data available on denials of
coverage for medical services.
To describe the data available on denials of applications for
enrollment--referred to as application denials in this report--we
reviewed federal, state, and other data including data on the rates of
and reasons for such denials. First, we reviewed data recently
collected by HHS from 459 insurers operating in the individual market
in all 50 states and the District of Columbia.[Footnote 6] The data
included application denial rates by insurer for a 3-month period--
January through March--in 2010.[Footnote 7] To supplement the single
calendar quarter of HHS data, we contacted insurance department
officials in six states regarding data on application and coverage
denials.[Footnote 8] The six states include all the states identified
by experts and in the literature as states that collect data from
insurers on the incidence of application denials, coverage denials, or
both. Because we did not survey all states to determine whether they
collect data on the incidence of application or coverage denials, or
both, there may be other states that collect such data that were not
known to experts or discussed in the literature.[Footnote 9] Of the
six states, we identified one, Maryland, that collected data on
application denials. We reviewed data from Maryland for 2008, 2009,
and the first half of 2010 on the rate of application denials by
insurers operating in the individual market in that state. (See
appendix I for more information about our methodology for selecting
states and the state data we reviewed.) We also conducted a structured
literature review to identify studies related to application and
coverage denials. We determined that a study was directly relevant to
our objective on application denial data if it included empirical
analyses of the frequency of application denials.[Footnote 10] Through
our review, we identified four studies that met our criteria. Two of
these four studies, produced by America's Health Insurance Plans
(AHIP), included data on application denial rates in 2006 and 2008,
and we reviewed those data. (See appendix II for a description of the
literature review methodology and the list of studies identified
through the review.) Finally, we interviewed officials from HHS,
Maryland, and AHIP about factors to consider when interpreting the
data. We also interviewed officials from three large insurance
companies about the data they collect on application denials.
[Footnote 11]
To describe the data available on denials of coverage for medical
services--referred to as coverage denials in this report--we reviewed
state and other data, including data on the rates of and reasons for
denials and the outcomes of appeals related to denials, such as
disputes resolved in favor of consumers. First, of the same six states
we contacted regarding application denial data, we reviewed the most
recent year of data available on the rate of coverage denials from the
four that reported collecting such data.[Footnote 12] Second, we
reviewed data on the outcomes of appeals related to coverage denials
from all of the six states for the most recent year available. We also
interviewed officials from departments of insurance and other
departments involved in overseeing insurance or responding to appeals
in the six states about considerations for interpreting the data. To
supplement the information from selected states, we reviewed data
reported by 49 states and the District of Columbia to the National
Association of Insurance Commissioners (NAIC) on the number of
complaints related to coverage denials resolved in 2009 and the
reasons for and outcomes of those complaints.[Footnote 13] We also
reviewed information on the outcomes of complaints and appeals
submitted by 35 states and the District of Columbia to HHS in
applications for Consumer Assistance Program grants.[Footnote 14] As
part of our literature review, we identified studies that included
empirical analyses of the frequency of coverage denials, the reasons
for such denials, the frequency of appeals of coverage denials, or the
outcomes of such appeals. Through the review, we identified annual
studies produced by the American Medical Association (AMA) in 2008,
2009, and 2010 that included data on the incidence and reasons for
claim denials. We reviewed data from the 2010 study and interviewed
AMA officials about factors to consider when interpreting the data.
Finally, we reviewed data from DOL on complaints related to coverage
denials for those with employer-sponsored coverage from fiscal year
2010, including the number and value of financial recoveries made by
the department on behalf of consumers as a result of complaints.
To assess the reliability of the data we reviewed on the incidence of
application and coverage denials, the reasons for such denials, and
the outcomes of appeals and complaints related to those denials, we
interviewed federal, state, and other officials about their efforts to
ensure the quality of the data. This included discussing whether they
required insurers to certify the accuracy of data reported on the
incidence of application or coverage denials and what steps were taken
to ensure the quality of data tracked by states and DOL on the
outcomes of appeals and complaints related to denials. We also asked
officials about the limitations of the data and reviewed any
statements about data limitations in published reports of the data. We
determined the data to be sufficiently reliable for the purposes of
describing the (1) denial rates, (2) reasons for denials, and (3)
outcomes of appeals related to denials indicated by the data; where
relevant we stated the limitations of the data in the findings.
We conducted our performance audit from September 2010 through January
2011 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
In 2009, approximately 156 million nonelderly individuals obtained
health insurance through their employer and another 16.7 million
purchased health insurance in the individual market. Of those with
employer-sponsored group health plans, in 2009, 43 percent were
covered under a fully insured plan where the employer pays a per-
employee premium to an insurance company.[Footnote 15] The remaining
57 percent were covered under self-funded plans where instead of
purchasing health insurance from an insurance company the employer
sets aside its own funds to pay for at least some of its employees'
health care.[Footnote 16]
Application Denials:
Application denials result when an insurer determines that it will not
offer coverage to an applicant either because the applicant does not
meet eligibility requirements or because the insurer determines that
the applicant is too high of a risk to insure. Underwriting is a
process conducted by insurers to assess an applicant's health status
and other risk factors to determine whether and on what terms to offer
coverage to an applicant.
Many consumers are protected from having their application for
enrollment denied. Consumers who obtain health coverage through their
employment by enrolling in a group health plan sponsored by their
employer have certain protections against application denials. For
example, under federal law, individuals enrolling in group health plan
coverage are protected from being denied enrollment because of their
health status.[Footnote 17] Under federal law, insurers also generally
are prohibited from denying applications for individual health
coverage for certain individuals leaving group health plan coverage
and applying for coverage in the individual market.[Footnote 18]
Currently, some consumers who apply for private health insurance
through the individual market can have their applications denied for
eligibility reasons or as a result of underwriting. For example,
applications filed by some consumers with preexisting health
conditions can be denied, unless prohibited by state or federal law.
[Footnote 19] Additionally, insurers may accept the application but
offer coverage at a premium level that is higher than the standard
rate or that excludes coverage for certain benefits. The options for
appealing application denials in the individual market can be limited
to filing a complaint with the state department of insurance. However,
in 35 states, individuals who--due to a preexisting health condition--
have been denied enrollment or charged higher premiums in the
individual market are typically eligible for coverage through high-
risk health insurance pools (HRP).[Footnote 20] Additionally, as
required under PPACA, individuals who have preexisting health
conditions and have been uninsured for 6 months are eligible for
enrollment in a temporary national HRP program.[Footnote 21]
Coverage Denials:
Coverage for medical services can be denied before or after the
service has been provided, either through denial of preauthorization
requests or denial of claims for payment. As a condition for coverage
of some services, providers or consumers are required to request
authorization prior to providing or receiving the service.
Preauthorization denials occur when a determination is made that (1)
the consumer is not eligible to receive the requested service, for
example, because the service is not covered under the individual's
policy, or (2) the service is not appropriate, meaning that it is not
medically necessary or is experimental or investigational. Denials of
claims occur for various reasons. Claims may be denied for billing
reasons, such as the provider failing to include a piece of required
information on the claim, such as documentation that the provider
received preauthorization for a service, or submitting a duplicate
claim. Claims may also be denied because of eligibility issues. For
example, a claim may be submitted for a service provided before an
individual's coverage began or after it was terminated, or a claim may
be submitted for a service that has been excluded from coverage under
an individual's policy. Another reason for denials reported by some
insurers is that the individual has not met the cost-sharing
requirements of his or her policy, such as the required deductible.
Finally, claim denials can occur when a determination is made that the
service provided was not appropriate, specifically that the service
was not medically necessary or was experimental or investigational.
Depending on the reason for a claim denial, either the provider or the
consumer may bear the financial responsibility for the denied coverage
amount. Claims that are denied because of such billing errors as the
provider not providing a required piece of information can be
resubmitted and ultimately paid.
For claim denials, the full claim may be denied or, if the claim
contained multiple lines, such as a surgery with charges for multiple
procedures and supplies, only certain lines of the claim may be
denied. How insurers and self-funded group health plans track claim
denials and the reasons for denials may vary. For example, AMA
officials noted that there is no guidebook for how reason codes should
be assigned to claim denials. Officials noted that denials are often
assigned the code for the most general reason even though the denial
may be for a more specific reason.
Consumers have several avenues available to dispute coverage denials.
First, consumers can file an appeal of a denial with the insurer or
self-funded group health plan for review, referred to as an internal
appeal. Internal appeals can result in the denial being upheld or
reversed. In addition, consumers in most states can have their appeal
reviewed by an external party, such as an independent medical review
panel established by the state.[Footnote 22] These appeals, referred
to as external appeals, can also result in denials being reversed and
in states recovering funds for consumers for the cost of the denied
service. State external appeal options may only be available once the
consumer has exhausted the internal appeal process or for consumers
with certain types of coverage. Historically, those with self-funded
group health plans generally did not have access to an external appeal
process, but consumers could file suit against a health plan in court
to challenge a denial. PPACA, however, required that group health
plans, including self-funded plans, provide access to an external
appeal process that meets federal standards for plan years beginning
on or after September 2010.[Footnote 23] Finally, consumers may file
complaints regarding coverage denials with the state, generally the
department of insurance, or, for those with group health plans, with
DOL. Filing a complaint can be a less formal mechanism for disputing a
coverage denial than filing an appeal; however, complaints can result
in reversals of denials and in financial recoveries for consumers.
State and Federal Oversight of Private Health Insurance:
States have responsibility for regulating private health insurance,
including insurers operating in the individual market and the fully
insured group market. In overseeing insurer activity, states vary in
the data they require insurers to submit on denials and internal
appeals of denials. According to NAIC officials, few states require
insurers to report data regularly on the frequency of denials and
internal appeals, and NAIC has not issued any model laws or
regulations that include requirements for insurers to report such
data. States also may use data on complaints and external appeals to
identify trends in the practices of insurers and target examinations
of specific insurers' practices. Nearly all states and the District of
Columbia regularly report complaint data, which includes information
on the numbers of, reasons for, and outcomes of complaints, to NAIC.
Historically, the federal government's role in oversight of private
health insurance has included establishing requirements for states to
enforce. For example, the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) established consumer protections on
access, portability, and renewability of coverage.[Footnote 24] In
addition, with respect to group health plans, the federal government
enforces disclosure, reporting, fiduciary, and claims-filing
requirements under the Employee Retirement Income Security Act of 1974
(ERISA).[Footnote 25] DOL conducts a number of efforts to enforce the
ERISA requirements. For example, the department conducts civil
investigations that can result in corrective actions, such as monetary
recoveries for consumers who are enrolled in employment-based plans.
In addition to these formal methods, DOL also works to resolve
complaints filed with the department. These efforts are considered
informal resolutions, although complaints can also serve as a trigger
for formal enforcement actions.
PPACA expanded the federal oversight role by requiring HHS to begin
collecting, monitoring, and publishing data from certain insurers.
Specifically, PPACA required the establishment of an internet Web site
through which individuals can identify affordable health insurance
coverage options in their state.[Footnote 26] To implement this
requirement, in May 2010, HHS issued an interim final rule requiring
insurers in the individual and small group markets to submit data to
HHS on their products, including data on the number of enrollees,
geographic availability of the products, and customer service contact
information, by May 21, 2010, and annually after that.[Footnote 27] In
July 2010, HHS began publishing these data on the new Web site, which
is designed for individuals and small businesses to obtain information
on coverage options available in their state. In October 2010, HHS
began posting additional data collected from insurers, including data
on the percentage of applications denied for each product offered in
the individual market. The interim final rule also required insurers
to submit other data, such as data on the percentage of claims denied
in the individual and small group markets, and the number and outcomes
of appeals of denials to insure, pay claims, and provide
preauthorization, in accordance with guidance to be issued by HHS. As
of December 2010, HHS had not issued any guidance on reporting these
additional data.
Federal, State, and Other Data Indicated Variation in Application
Denial Rates and Provided Little Information on the Reasons for
Denials:
Nationwide data from HHS showed variation in application denial rates
across insurers operating in the individual market. Specifically, data
collected by HHS from 459 state-licensed insurers on the number of
applications received and denied from January through March 2010
indicated that, while the aggregate rate of application denials was 19
percent nationally, the rate varied significantly across insurers. For
example, just over a quarter of insurers had application denial rates
from 0 percent to 15 percent while another quarter of insurers had
rates of 40 percent or higher.[Footnote 28] However, the insurers with
rates of 40 percent or higher reported fewer applications. See table 1
for additional information on the range in application denial rates
across insurers.
Table 1: Range of Application Denial Rates among State-Licensed
Insurers, Based on HHS Data, January-March 2010:
Application denial rates (percentage of applications denied): 0 to 15;
Number of insurers reporting rates in range[A]: 132;
Number of applications received[B]: 499,239.
Application denial rates (percentage of applications denied): 16 to 23;
Number of insurers reporting rates in range[A]: 102;
Number of applications received[B]: 471,878.
Application denial rates (percentage of applications denied): 24 to 39;
Number of insurers reporting rates in range[A]: 113;
Number of applications received[B]: 230,846.
Application denial rates (percentage of applications denied): 40 or
higher;
Number of insurers reporting rates in range[A]: 112[C];
Number of applications received[B]: 57,923.
Source: GAO analysis of HHS data.
[A] Data were reported to HHS by 459 state-licensed insurers operating
in 50 states and the District of Columbia. Data on insurers operating
in states with guaranteed issue requirements that prohibit any insurer
from denying coverage to an individual based on his or her current
medical conditions or risk of poor health were included in the
analysis.
[B] Insurers were instructed to report the number of applications
received for products offering comprehensive medical coverage. HHS
officials told us that they identified instances where insurers
included data on applications for more limited products, such as one
that covers only hospital services. The application data may also
include applications for products being sold for only a portion of the
3-month period.
[C] The data indicated that two insurers had denial rates of 100
percent and each of these insurers reported receiving one application
in the 3-month reporting period.
[End of table]
HHS officials noted that the data the department collected on
application denials, which represent a single calendar quarter of
applications, are only a starting point. They told us that as insurers
report additional quarters of data, the value and usefulness of the
data will increase. In addition, officials said that they have taken
steps to ensure the accuracy of the data and noted that the accuracy
of these data is critical to HHS, because no other source of
information on private health insurance has a complete catalog of
insurers operating in the individual market and what products those
insurers are selling.
Data reported by Maryland--the only state we identified as collecting
data on the incidence of application denials--indicated that variation
in application denial rates across insurers operating in the state's
individual market has occurred in that state for several years.
Maryland data showed that the range of application denial rates across
insurers was 26 percentage points or more in each of three reporting
periods, 2008, 2009, and the first half of 2010. (See table 2 for the
range in denial rates in the data reported by Maryland.)
Table 2: Range in Application Denial Rates across Insurers Licensed in
Maryland, 2008-2010:
Data year: 2008;
Range in application denial rates (percentage of applications denied):
6 to 34;
Number of insurers represented in the data: 11;
Number of applications received: 98,612;
Aggregate application denial rate (percentage): 14.
Data year: 2009;
Range in application denial rates (percentage of applications denied):
7 to 33;
Number of insurers represented in the data: 11;
Number of applications received: 107,617;
Aggregate application denial rate (percentage): 14.
Data year: 2010 (first half);
Range in application denial rates (percentage of applications denied):
6 to 45;
Number of insurers represented in the data: 11;
Number of applications received: 47,791;
Aggregate application denial rate (percentage): 16.
Source: GAO analysis of data from Maryland.
Note: Data are from 2008, 2009, and the first two quarters of calendar
year 2010 and reported by insurers to Maryland.
[End of table]
Data reported in studies by AHIP also showed variation in application
denial rates. The AHIP data illustrated that application denial rates
varied across age groups, with denial rates increasing as the age of
the primary applicant increased. In 2008, when AHIP data showed that
13 percent of all medically underwritten applications were denied,
[Footnote 29] in general the denial rate progressively increased as
the applicant's age increased, from a low of 5 percent for applicants
under 18 years of age to a high of 29 percent for applicants from 60
to 64 years of age.[Footnote 30] Similar variation in AHIP application
denial rates was seen in data from 2006.[Footnote 31] (See figure 1.)
Figure 1: Application Denial Rates by Age Group for 2008, as Reported
by AHIP:
[Refer to PDF for image: vertical bar graph]
Aggregate denial rate: 13%.
Age: 0 - 18;
Denial rate: 5%.
Age: 18 - 24;
Denial rate: 10%.
Age: 25 - 29;
Denial rate: 12%.
Age: 30 - 34;
Denial rate: 12%.
Age: 35 - 39;
Denial rate: 13%.
Age: 40 - 44;
Denial rate: 14%.
Age: 45 - 49;
Denial rate: 16%.
Age: 50 - 54;
Denial rate: 20%.
Age: 55 - 59;
Denial rate: 24%.
Age: 60 - 64;
Denial rate: 29%.
Source: GAO analysis of data reported by AHIP.
Note: Data are from AHIP, Individual Health Insurance 2009: A
Comprehensive Survey of Premiums, Availability, and Benefits
(Washington, D.C.: 2009).
[End of figure]
The available data on application denial rates provided little
information on the reasons that applications were denied. For
instance, the HHS and Maryland data did not include any information on
the reasons for application denials. The AHIP data, however, provided
limited information. Specifically, AHIP's data showed that a higher
percentage of applications were denied because of the applicant's
health status than for nonmedical reasons, such as the plan not being
offered in the applicant's geographic area. AHIP data showed that in
2008, of the 1.8 million applications for enrollment that insurers
either denied or made offers of coverage, 1 percent were denied for
nonmedical reasons and 12 percent were denied after underwriting when
the applicant's health status and other risk factors were assessed.
According to an AHIP official, applications that were denied after
underwriting were presumably denied because the applicant's medical
questionnaire responses were beyond the insurer's threshold for
issuing a policy.
There are several issues to consider when interpreting application
denial rates. First, application denial rates may not provide a clear
estimate of the number of individuals that were ultimately able to
secure health coverage, because individuals may submit applications
with more than one insurer and be denied by one insurer but offered
enrollment by another. Second, denial rates also do not reflect
applications that have been withdrawn. For example, AHIP data for 2008
indicated that 8 percent of applicants withdrew their applications
before underwriting occurred. Experts also noted that some individuals
may not submit applications for health coverage because they believe
or have been advised, for example by an insurance agent, that their
application would likely be denied. Third, an insurer's denial rates
may be affected by requirements of the states in which the insurer
operates. For example, officials from one insurance company explained
that for applicants in the state for which they are the insurer of
last resort, state law prohibits them from denying applications for
enrollment based on the health status of the applicant.[Footnote 32]
Officials told us that a denial can occur only for nonmedical
eligibility reasons, which the AHIP data indicate are far less
frequent.
Another consideration when interpreting application denial rates is
that the rates do not reflect applications that have been accepted by
an insurer but for coverage with a premium that is higher than the
standard rate or with exclusions for coverage of specified services.
Data from HHS, Maryland, and AHIP all indicated that some portion of
applicants received offers at a premium that was higher than the
standard rate. For example, the HHS data demonstrated that from
January through March of 2010, about 20 percent of individual market
applicants were offered coverage with premiums higher than the
standard rate. Maryland data also indicated that for the first half of
2010, 8 percent of applicants were offered either coverage with
premiums higher than the standard rate or coverage that excluded
specified health conditions. Finally, AHIP data from 2008 showed that
34 percent of offers for coverage were for coverage at a higher
premium rate. The AHIP data also showed that 6 percent of offers for
coverage were for coverage that excluded specified health conditions.
State and Other Data Indicated That Coverage Denial Rates and the
Reasons for Denials Vary and That Denials, If Appealed, Are Often
Reversed:
Data from selected states and others indicated that the rates of
coverage denials, including denials for preauthorizations and claims,
varied significantly, and a number of factors may have contributed to
that variation. The data also indicated that coverage denials occurred
for a variety of reasons, frequently for billing errors and
eligibility issues and less often for judgments about the
appropriateness of a service. Further, the data we reviewed indicated
that coverage denials, if appealed, were frequently reversed in the
consumer's favor and that appeals and complaints related to coverage
denials sometimes resulted in financial recoveries for consumers.
State and Other Data Indicated Wide-Ranging Coverage Denial Rates, and
a Number of Factors May Have Contributed to This Variation:
State data that we reviewed showed that rates of coverage denials by
insurers operating in the group and individual markets varied
significantly across states. Specifically, aggregate claim denial
rates for the three states that we identified as collecting such data
ranged from 11 percent in Ohio in 2009 to 24 percent in California in
the same year.[Footnote 33] Data reported by the remaining state,
Maryland, indicated a claim denial rate of 16 percent in 2007.
[Footnote 34] A fourth state, Connecticut, collected data on a
different measure, preauthorization denials, and these data indicated
a denial rate of 14 percent in 2009.[Footnote 35] In addition, claim
denial rates indicated by AMA data--3 percent during 2 months of 2010--
varied from coverage denial rates in the four states.[Footnote 36]
Several factors may have contributed to the variation in rates across
the four states and the AMA data. For example, Ohio and AMA data were
based on denials of electronic claims.[Footnote 37] AMA officials told
us that providers with electronic billing systems and insurers that
accept electronic claims are more sophisticated in terms of billing
management, and therefore the denial rates calculated by AMA may be
lower than rates of denials for all claims, including both electronic
and paper-based. In another example, Maryland's rate was calculated
using data for categories of denials that accounted for about 90
percent of all claims denied. In contrast, according to California
officials, California's data represented all claim denials. [Footnote
38] Differences in the time frames for the data may have also
contributed to the variation. AMA officials noted that their data were
from a 2-month period of the year (February through March) when there
was less contractual activity, such as open enrollment periods, and
when denials related to meeting deductible requirements--which
according to officials from one insurance company can be significant--
have already been resolved. In contrast, data from the four states,
except Ohio, covered a full year and therefore reflect all denials for
the year, including those related to enrollment and deductible issues.
See table 3 for the rates of coverage denials indicated by state data
and a description of the characteristics of the data, some of which
may have contributed to the variation in rates.
Table 3: Rates of Claim or Preauthorization Denials across States in
GAO's Review and Characteristics of the State Data:
State: Ohio;
Rate of claim or preauthorization denials: 11 percent across all
insurers licensed in the state;
Data year[A]: 2009;
Characteristics of the data: Data limited to denials of electronic
claims in the first and third quarters of the fiscal year[B].
State: Connecticut;
Rate of claim or preauthorization denials: 14 percent across 21
managed care organizations licensed in the state;
Data year[A]: 2009;
Characteristics of the data: Data were limited to denials of
preauthorization for services and did not include data on denials of
claims[C].
State: Maryland;
Rate of claim or preauthorization denials: 16 percent across 41
insurers licensed in the state;
Data year[A]: 2007;
Characteristics of the data: Data were limited to 16 categories of
denials of claims, representing 90 percent of total claim denials[D].
State: California;
Rate of claim or preauthorization denials: 24 percent across six of
the largest managed care organizations licensed in the state;
Data year[A]: 2009;
Characteristics of the data: Data were limited to denials of claims
and reflected each insurer's inventory of denials, which means that
some insurers may have reported denials for government-sponsored
health coverage, such as Medicaid[E].
Source: GAO analysis of data reported by insurers to states.
[A] The data years cited represent calendar years and the data reflect
the most recent complete year of data available.
[B] Data were reported to GAO by the Ohio Department of Insurance.
[C] Data were obtained from Connecticut's Consumer Report Card on
Health Insurance Carriers in Connecticut (Hartford, Conn.: 2010).
[D] Data were obtained from the Maryland Insurance Administration's
Report on Semi-Annual Claims Data Filing for Calendar Years 2005-2007
(Baltimore, Md.: 2009).
[E] Data were obtained from the Department of Managed Health Care's
Web site from June through September 2010 [hyperlink,
http://www.wpso.dmhc.ca.gov/fe/search].
[End of table]
In addition to variation across states in aggregated rates, state and
other data also indicated that coverage denial rates varied
significantly across insurers. For example, the California data
indicated that in 2009 claim denial rates ranged from 6 percent to 40
percent across six of the largest managed care organizations operating
in the state. Similarly, preauthorization denial rates in Connecticut
varied across 21 insurers, with rates among the seven largest insurers
ranging from 4 percent to 29 percent in 2009. Somewhat narrower
variation across insurers was also evident in the AMA data, with claim
denial rates in 2010 that ranged from less than 1 percent to over 4
percent across the seven insurers represented in those data.[Footnote
39]
State and other officials told us about several factors that may have
contributed to the variation across insurers and make it difficult to
compare data across insurers. First, California officials told us that
insurers may interpret a state's reporting requirements differently
and noted that some insurers may count certain claims transactions as
denials that the state would not consider a denial. This was evidenced
by discussions with one insurer who told us that if asked to report
the number of claims denied, some insurers might include claims where
the service was approved but the insurer paid nothing because the
member was liable for the charge, which California officials would not
characterize as a denial. Officials from the insurer said that their
current overall denial rate is 27 percent, but it would be 18 percent
if member liability denials were excluded. Officials from California
and AMA also indicated that circumstances unique to an insurer may
affect their denial rate. For example, California officials told us
one insurer's denials rose sharply in a month because providers were
submitting claims to the insurer's HMO when they should have gone to
the preferred provider organization (PPO). Rather than transferring
the claims, the HMO denied all of them, and then the PPO paid the
claims shortly after that.
State and Other Data Indicated That Coverage Denials Occurred for
Various Reasons and That Denials, If Appealed, Were Frequently
Reversed:
According to state and other data, coverage denials occurred for
various reasons. For example:
* Claim denials were often made for billing errors such as duplicate
claims and missing information on the claim. For example, data from
Maryland showed that the most prevalent reason for claim denials in
2007 was duplicate claim submissions, accounting for 32 percent of all
denials.[Footnote 40] Among six of the largest managed care
organizations in California, the four that reported on the most
prevalent reasons for claim denials in 2009 all reported duplicate
claims as one of those reasons. With regard to claims missing required
information, the 2010 AMA data indicated that five of the seven
insurers represented in the data made 15 percent or more of denials on
the basis that the claim was missing information, such as
documentation of preauthorization. Data from Maryland showed that 74
percent of denied claims did not meet the state's criteria for "clean"
claims, those claims that include all of the required information
needed for processing.[Footnote 41]
* Denials of claims also frequently resulted from eligibility issues.
For example, for six of the seven insurers in the 2010 AMA data, over
20 percent of claim denials occurred as a result of eligibility issues
such as services being provided before coverage was initiated or after
coverage was terminated.
* Insurers also denied preauthorizations and claims as a result of
judgments about the appropriateness of the service, such as that the
service was not medically necessary or was experimental or
investigational, although less frequently than for billing errors and
eligibility issues. Data from Maryland showed that in 2007 insurers
denied nearly 40,000 preauthorizations or claims because they
determined the services were not medically necessary.[Footnote 42]
This was a relatively small number compared to the 6.3 million claim
denials reported in the same year.[Footnote 43] The 2010 AMA data
showed that only one of the seven insurers denied claims on the basis
that services were not appropriate, specifically that the service was
experimental or investigational, with about 9 percent of denials made
for that reason.[Footnote 44] NAIC data on complaints filed with
states in 2009 also provided some information on coverage denials
related to the appropriateness of services. Specifically, the data
showed that of the approximately 14,000 complaints related to coverage
denials, at least 8 percent were related to the insurer's
determination that the service was not medically necessary and 2
percent were related to the determination that the service was
experimental.
State and other data indicated that coverage denials, if appealed,
were frequently reversed in the consumer's favor.[Footnote 45] The
data from the four states that we identified as collecting data on the
outcomes of internal appeals filed with insurers indicated that at
least 39 percent of internal appeals resulted in the insurer reversing
its original coverage denial. Officials from two insurance companies
explained that denials are frequently reversed because the consumer or
provider submits additional information, such as the consumer's
medical records. Officials from one of these insurance companies also
explained that because insurers receive additional information through
the appeals process, reversals of denials are expected even when the
company is using accepted medical criteria to make the initial
assessment of the appropriateness of the service; and regulators are
sometimes concerned when few appeals result in reversals of denials.
See table 4 for a summary of the outcomes of internal appeals reported
by insurers to Connecticut, Maryland, New York, and Ohio.
Table 4: Number and Outcomes of Internal Appeals Filed with Insurers
across States in GAO's Review:
State: Connecticut[C];
Type of insurer reporting[A]: HMOs;
Data year[B]: 2009;
Number of internal appeals: 1,932;
Percentage of internal appeals where initial determination was
reversed: 53.
Type of insurer reporting[A]: Indemnity managed care organizations;
Data year[B]: 2009;
Number of internal appeals: 1,797;
Percentage of internal appeals where initial determination was
reversed: 59.
State: Maryland[D];
Type of insurer reporting[A]: HMOs, nonprofit health service plans,
and commercial insurers;
Data year[B]: 2009;
Number of internal appeals: 4,844;
Percentage of internal appeals where initial determination was
reversed: 50.
State: New York[E];
Type of insurer reporting[A]: HMOs;
Data year[B]: 2009;
Number of internal appeals: 5,968;
Percentage of internal appeals where initial determination was
reversed: 39.
State: New York[E];
Type of insurer reporting[A]: Commercial insurers;
Data year[B]: 2009;
Number of internal appeals: 71,787;
Percentage of internal appeals where initial determination was
reversed: 47.
State: New York[E];
Type of insurer reporting[A]: Nonprofit indemnity insurers;
Data year[B]: 2009;
Number of internal appeals: 8,946;
Percentage of internal appeals where initial determination was
reversed: 48.
State: Ohio[F];
Type of insurer reporting[A]: All insurers;
Data year[B]: 2010 (1st quarter);
Number of internal appeals: 6,434;
Percentage of internal appeals where initial determination was
reversed: 48.
Source: GAO analysis of data reported by insurers to states.
[A] The types of insurers reported in this column are the categories
used by each state and may not be comparable across states.
[B] The data years cited represent calendar years and reflect the most
recent complete year of data available, unless indicated otherwise.
[C] Data were obtained from Connecticut's Consumer Report Card on
Health Insurance Carriers in Connecticut (Hartford, Conn.: 2010). The
reversal rates represent the aggregate reversal rates for 6 HMOs and
15 indemnity managed care organizations.
[D] Data were obtained from the Maryland Insurance Administration's
2009 Report on the Health Care Appeals & Grievances Law (Baltimore,
Md.: 2010).
[E] Data were obtained from the 2010 New York Consumer Guide to Health
Insurers (Albany, N.Y.: 2010). The reversal rates represent the
aggregate reversal rates for 12 HMOs, 28 commercial insurers, and 5
nonprofit indemnity insurers.
[F] Data were reported to GAO by Ohio and represent internal appeals
filed by all insurers licensed in Ohio.
[End of table]
Data on the results of appeals filed with states for external review
also indicated that denials were frequently reversed. A study
conducted by AHIP on 37 states' external appeal programs showed that
for 2003 and 2004, about 40 percent of external appeals resulted in
denials being reversed.[Footnote 46] More recent data from the six
states we contacted indicated similar rates of denials being reversed
upon external appeal. See table 5 for a summary of the outcomes of
external appeals indicated by state data.
Table 5: Number and Outcomes of Appeals Submitted for External Review
across States in GAO's Review:
State: California[C];
Types of insurers for which denials were appealed[A]: Managed care
organizations with enrollment over 400,000;
Data year[B]: 2009;
Number of external appeals resolved: 1,606;
Percentage of appeals where insurer determination was reversed or
revised: 54.
State: Connecticut[D];
Types of insurers for which denials were appealed[A]: Managed care
organizations;
Data year[B]: 2009;
Number of external appeals resolved: 184;
Percentage of appeals where insurer determination was reversed or
revised: 40.
State: Florida[E];
Types of insurers for which denials were appealed[A]: Managed care
organizations;
Data year[B]: State fiscal year 2010;
Number of external appeals resolved: 186;
Percentage of appeals where insurer determination was reversed or
revised: 49.
State: Maryland[F];
Types of insurers for which denials were appealed[A]: HMOs, nonprofit
health service plans, and commercial insurers;
Data year[B]: 2009;
Number of external appeals resolved: 915;
Percentage of appeals where insurer determination was reversed or
revised: 54.
State: New York[G];
Types of insurers for which denials were appealed[A]: HMOs;
Data year[B]: 2009;
Number of external appeals resolved: 570;
Percentage of appeals where insurer determination was reversed or
revised: 38.
State: New York[G];
Types of insurers for which denials were appealed[A]: Commercial
insurers;
Data year[B]: 2009;
Number of external appeals resolved: 812;
Percentage of appeals where insurer determination was reversed or
revised: 42.
State: New York[G];
Types of insurers for which denials were appealed[A]: Nonprofit
indemnity insurers;
Data year[B]: 2009;
Number of external appeals resolved: 395;
Percentage of appeals where insurer determination was reversed or
revised: 41.
State: Ohio[H];
Types of insurers for which denials were appealed[A]: Traditional
health insurers, PPOs, HMOs, and Public Employee Health Benefit Plans;
Data year[B]: 2008;
Number of external appeals resolved: 311;
Percentage of appeals where insurer determination was reversed or
revised: 23.
Source: GAO analysis of data reported by states.
[A] The types of insurers reported in this column are the categories
used by each state and may not be comparable across states.
[B] The data years cited represent calendar years unless indicated
otherwise, and the data reflect the most recent complete year of data
available.
[C] Data were obtained from the California Department of Managed
Health Care's 2009 Independent Medical Review and Complaint Results
report.
[D] Data were reported to GAO by the Connecticut Insurance Department.
[E] Data were reported to GAO by the Florida Agency for Health Care
Administration.
[F] Data were obtained from the Maryland Insurance Administration's
2009 Report on the Health Care Appeals & Grievances Law (Baltimore,
Md: 2010).
[G] Data were obtained from the 2010 New York Consumer Guide to Health
Insurers (Albany, N.Y.: 2010). The reversal rates represent the
aggregate reversal rates across 12 HMOs, 28 commercial insurers, and 5
nonprofit indemnity insurers.
[H] Data were obtained from the Ohio Department of Insurance's Patient
Protection Act Report for the Year 2008 (Columbus, Ohio: 2009). The
data represent external reviews for denials because the service was
not appropriate and denials for contractual reasons, which were less
frequently reversed than denials because the service was not
appropriate.
[End of table]
The data on the outcomes of external appeals also indicated that the
rate at which denials are reversed, if appealed, may vary depending on
the reason for the denial and the type of service denied. For example,
one study identified through our literature review looked at 740
external appeal decisions in California in 2001 and 2002. The study
showed that appeals resulted in denials being reversed in 42 percent
of cases where the denial resulted from the determination that
services were not medically necessary and 20 percent of cases where
services were determined to be experimental and investigational.
[Footnote 47] Further, the study showed that reversals of denials were
more likely for certain services, such as gastric bypass surgery, stem
cell transplants, and breast reduction surgery, than for other
services, such as residential behavioral health care. Data from
Florida also indicated variation in outcomes of external appeals based
on the reason for the denial and the type of service denied. For
example, for state fiscal year 2010, denials were reversed in 49
percent of cases where the denial resulted from the determination that
services were not medically necessary and in 60 percent of cases where
the service was deemed experimental or investigational, although there
were fewer appeals of coverage denials for this reason.[Footnote 48]
Further, the data showed that appeals were more likely to result in a
denial being reversed when the denial was for diagnostic testing and
pharmaceuticals than for other services, such as cosmetic surgery and
durable medical equipment.
Finally, federal and state data indicated that appeals and complaints
related to coverage denials sometimes resulted in financial recoveries
for consumers. According to data from DOL, more than 9,600 complaints
related to coverage denials by group health plans resulted in about
500 recoveries of payments totaling nearly $7 million in fiscal year
2010. Data reported by states to HHS in applications for the Consumer
Assistance Program grants also documented that complaints and appeals
resulted in recoveries.[Footnote 49] Specifically, 21 of the 35 states
submitting applications reported financial recoveries. For example,
Maryland reported recovering more than $1.4 million for consumers in
fiscal year 2009 as a result of internal appeals. NAIC data on
complaints filed with states also gave some indication of recoveries.
For example, NAIC's 2009 data indicated that of the approximately
14,000 complaints related to coverage denials, over 4 percent resulted
in an outcome where money or benefits were returned to the consumer
and about 7 percent resulted in the insurer paying more of a claim
than was initially paid.
Agency Comments and Our Evaluation:
HHS provided us with written comments on a draft version of this
report. These comments are reprinted in appendix III. HHS agreed with
our findings, noting in particular the need to improve the quality and
scope of existing data, and suggested clarifications, which we
incorporated. HHS and DOL also provided technical comments to the
draft report, which we incorporated as appropriate.
In its written comments, HHS emphasized the importance--for
policymakers, regulators, and consumers--of data on health insurance
application and coverage denials. HHS noted that data on application
and coverage denials can help increase transparency in the private
health insurance market and that these data can also provide an
important baseline measure for evaluating the impact of changes
resulting from PPACA. In its comments, HHS also noted that data
collection on application and coverage denials has been uneven across
insurers, plans, and states and that very little information is
available to help analysts understand the causes or sources of
variation in the data that are available. According to HHS, more
effort is needed to improve the quality and scope of existing data
collection to give policymakers and regulators better and richer data
to evaluate health insurance plan practices and market changes and to
produce measures that may be useful to consumers when they are
shopping for insurance.
In its written comments, HHS also identified a limitation to our data
that needed some clarification. Specifically, HHS pointed out--
correctly--that while our draft report provided information on the
percentage of claims that were denied, as well as data on the outcomes
of internal appeals and external reviews of denied claims, our draft
report did not provide data on the frequency with which claim denials
are appealed by consumers. These data were not included in the report
because the data we reviewed did not allow for a systematic
calculation of an "appeal rate"--the number of coverage denials for
which an appeal was initiated--for several reasons, including
different sources or years of denials and appeals data we reviewed. In
response to HHS' comments, we added language to the report clarifying
this limitation. For context, we also added information on the appeal
rate from one quarter for one state--the only information we
identified on internal claims appeal rates. HHS also noted that the
statement in our draft report that "denials are frequently reversed"
upon appeal may be confusing, because readers may assume a large
number of claim denials are ultimately overturned. We revised the
language in our draft report to prevent this misinterpretation of our
data, by stating that coverage denials, if appealed, were frequently
reversed in the consumer's favor.
We are sending copies of this report to the Secretaries of HHS and
DOL, the congressional committees of jurisdiction, and other
interested parties. In addition, the report is available at no charge
on the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix IV.
Signed by:
John E. Dicken:
Director, Health Care:
[End of section]
Appendix I: Methodology for Selecting States and State Data Reviewed by
GAO:
In order to describe the data on denials of applications for enrollment
and coverage of medical services, we contacted six states to interview
officials and to obtain data the states collect and track on denials
and appeals related to denials. The six states we selected included
states identified in the literature, through searches of state
insurance department Web sites, or in interviews with experts as a
state collecting data on the incidence of application or coverage
denials.[Footnote 50] These also included states that collect or track
data on appeals related to coverage denials reviewed by insurers
(internal appeals) or reviewed by external parties (external appeals).
The six states accounted for at least 20 percent of national enrollment
in private health insurance.
Once we selected the states, we asked officials from each state whether
they collected the following types of data: (1) incidence of
application denials; (2) incidence of coverage denials, including
incidence of denials of preauthorizations and claims; (3) incidence and
outcomes of appeals reviewed by insurers (that is, internal appeals);
and (4) incidence and outcomes of appeals reviewed by external parties
(that is, external appeals). If state officials reported collecting the
data, we reviewed at least the most recent year of data available. We
reviewed data from one state on the incidence of application denials,
from four states on the incidence of coverage denials, from four states
on the number and outcomes of internal appeals, and from all six states
on the number and outcomes of external appeals. (See table 6.)
Table 6: Information on Denial Data Collected by and Private Health
Insurance Enrollment for States in GAO's Review:
State: California;
Reported collecting data on the incidence of application denials:
[Empty];
Reported collecting data on the incidence of coverage denials: [Check];
Reported collecting data on internal appeals, including outcomes:
[Empty];
Reported collecting data on external appeals, including outcomes:
[Check];
Total number of people enrolled in private health insurance in 2008
(in thousands): 22,848;
Percentage of national enrollment: 11.4.
State: Connecticut;
Reported collecting data on the incidence of application denials:
[Empty];
Reported collecting data on the incidence of coverage denials: [Check];
Reported collecting data on internal appeals, including outcomes:
[Check];
Reported collecting data on external appeals, including outcomes:
[Check];
Total number of people enrolled in private health insurance in 2008
(in thousands): 2,575;
Percentage of national enrollment: 1.3.
State: Florida;
Reported collecting data on the incidence of application denials:
[Empty];
Reported collecting data on the incidence of coverage denials: [Empty];
Reported collecting data on internal appeals, including outcomes:
[Empty];
Reported collecting data on external appeals, including outcomes:
[Check];
Total number of people enrolled in private health insurance in 2008
(in thousands): 11,129;
Percentage of national enrollment: 5.5.
State: Maryland;
Reported collecting data on the incidence of application denials:
[Check];
Reported collecting data on the incidence of coverage denials: [Check];
Reported collecting data on internal appeals, including outcomes:
[Check];
Reported collecting data on external appeals, including outcomes:
[Check];
Total number of people enrolled in private health insurance in 2008
(in thousands): 4,171;
Percentage of national enrollment: 2.1.
State: New York;
Reported collecting data on the incidence of application denials:
[Empty];
Reported collecting data on the incidence of coverage denials: [Empty];
Reported collecting data on internal appeals, including outcomes:
[Check];
Reported collecting data on external appeals, including outcomes:
[Check];
Total number of people enrolled in private health insurance in 2008
(in thousands): 12,567;
Percentage of national enrollment: 6.3.
State: Ohio;
Reported collecting data on the incidence of application denials:
[Empty];
Reported collecting data on the incidence of coverage denials: [Check];
Reported collecting data on internal appeals, including outcomes:
[Check];
Reported collecting data on external appeals, including outcomes:
[Check];
Total number of people enrolled in private health insurance in 2008
(in thousands): 8,109;
Percentage of national enrollment: 4.0.
Source: GAO summary of state and U.S. Census Bureau data.
Note: Table includes data that officials from selected states reported
collecting. U.S. Census Bureau data are from the bureau's Current
Population Survey, 2009 Annual Social and Economic Supplement.
[End of table]
[End of section]
Appendix II: Methodology for and Studies Identified by Structured
Literature Review:
To identify research that examined private health insurance denials,
including the incidence of denials of applications for enrollment and
of coverage for medical services (i.e., "coverage denials") and the
incidence and outcomes of appeal related to coverage denials, we
conducted a structured literature review. This review resulted in 24
studies that we determined to be relevant to our objectives. To conduct
this review, we searched 23 reference databases for articles or studies
published from January 2000 through July 2010,[Footnote 51] using a
combination of search terms, such as "denial" and "insurer."[Footnote
52] We determined that a study was directly relevant to our objectives
if it: (1) included empirical analysis related to the incidence of
application denials, the incidence of coverage denials, or the
incidence and outcomes of appeals related to such denials; and (2)
analyzed, at minimum, denial or appeal data from an entire state or two
or more insurers. In addition to searching the reference databases, we
checked the bibliographies of the relevant studies to identify other
potentially relevant research and interviewed several private health
insurance experts about research done on denials.
We identified 24 studies in the literature that included empirical
analyses examining (1) the frequency of denials of applications for
enrollment or (2) the frequency of or reasons for denials of coverage
for medical services and outcomes of appeals related to such denials.
Table 7 identifies the number of studies that address these topics,
with some studies addressing more than one topic.
Table 2: Index of Studies Examining Private Health Insurance Denials,
by Topic:
Topic: Frequency of denials of applications for enrollment;
Study numbers: 2, 3, 11, 20;
Total number of studies: 4.
Topic: Frequency of denials of coverage for medical services;
Study numbers: 5, 6, 7, 10, 16, 17, 19, 22, 24;
Total number of studies: 9.
Topic: Reasons for denials of coverage;
Study numbers: 5, 6, 7, 17, 19;
Total number of studies: 5.
Topic: Outcomes of appeals related to denials of coverage;
Study numbers: 1, 4, 8, 9, 12, 13, 14, 15, 18, 21, 23, 24;
Total number of studies: 12.
Topic: By reason for denial being appealed;
Study numbers: 9, 12, 13, 23;
Total number of studies: 4.
Topic: By type of service being denied;
Study numbers: 9, 13, 23;
Total number of studies: 3.
Source: GAO.
[End of table]
The 24 studies that GAO identified in the literature are as follows:
1. American Association of Health Plans. Independent Medical Review of
Health Plan Coverage Decisions: Empowering Consumers with Solutions.
Washington, D.C., 2001.
2. America's Health Insurance Plans. Individual Health Insurance 2009:
A Comprehensive Survey of Premiums, Availability, and Benefits.
Washington, D.C., 2009.
3. -----. Individual Health Insurance 2006-2007: A Comprehensive Survey
of Premiums, Availability, and Benefits. Washington, D.C., 2007.
4. -----. Update on State External Review Programs. Washington, D.C.,
2006.
5. American Medical Association. 2010 National Health Insurer Report
Card. Chicago, Ill., 2010.
6. -----. 2009 National Health Insurer Report Card. Chicago, Ill.,
2009.
7. -----. 2008 National Health Insurer Report Card. Chicago, Ill.,
2008.
8. California Healthcare Foundation. Independent Medical Review
Experiences in California, Phase I: Cases of Investigational/
Experimental Treatments. Prepared by the Institute for Medical Quality
for the California Healthcare Foundation, Oakland, Calif., 2002.
9. Chuang, K. H., W. M. Aubry, and R. A. Dudley. "Independent Medical
Review of Health Plan Coverage Denials: Early Trends." Health Affairs,
vol. 23, no. 6 (November/December 2004), 163-169.
10. Collins, S. R., J. L. Kriss, M. M. Doty, and S. D. Rustgi. Losing
Ground: How the Loss of Adequate Health Insurance is Burdening Working
Families: Findings from the Commonwealth Fund Biennial Health Insurance
Surveys, 2001-2007. New York, N.Y., 2008.
11. Doty, M. M., S. R. Collins, J. L. Nicholson, and S. D. Rustgi.
Failure to Protect: Why the Individual Insurance Market is not a Viable
Option for Most U.S. Families. Findings from the Commonwealth Fund
Biennial Health Insurance Survey, 2007. New York, N.Y., 2009.
12. Foote, S. B., B. A. Virnig, L. Bockstedt, and Z. Lomax. "External
Review of Health Plan Denials of Mental Health Services: Lessons from
Minnesota." Administration and Policy in Mental Health and Mental
Health Services Research, vol. 34 (2007), 38-44.
13. Gresenz, C. R., and D. M. Studdert. External Review of Coverage
Denials by Managed Care Organizations in California. Working Paper No.
WR-264-ICJ, RAND Institute for Civil Justice, Santa Monica, Calif.,
2005.
14. Gresenz, C. R., D. M. Studdert, N. Campbell, and D. R. Hensler.
"Patients In Conflict With Managed Care: A Profile of Appeals in Two
HMOs." Health Affairs, vol. 21, no. 4 (July/August 2002), 189-196.
15. Gresenz, C. R., and D. M. Studdert. "Disputes over Coverage of
Emergency Department Services: A Study of Two Health Maintenance
Organizations." Annals of Emergency Medicine, vol. 43, no. 2 (February
2004), 155-162.
16. Kaiser Family Foundation/Harvard School of Public Health.
National Survey on Consumer Experiences With and Attitudes Toward
Health Plans: Key Findings. Washington, D.C., 2001.
17. Kapur, K., C. R. Gresenz, and D. M. Studdert. "Managed Care:
Utilization Review in Action at Two Capitated Medical Groups." Health
Affairs, Web exclusive (2003), W3-275-282.
18. Karp, N., and E. Wood. Understanding Health Plan Dispute Resolution
Practices, Washington. D.C., 2000.
19. Pearson, S. D. "Patient Reports of Coverage Denial: Association
with Ratings of Health Plan Quality and Trust in Physician." The
American Journal of Managed Care (March 2003), 238-244.
20. Pollitz, K., R. Sorian, and K. Thomas. How Accessible is Individual
Health Insurance for consumers in less-than-perfect health? Prepared
for the Henry J. Kaiser Family Foundation, Menlo Park, Calif., 2001.
21. Pollitz, K., J. Crowley, K. Lucia, and E. Bangit. Assessing State
External Review Programs and the Effects of Pending Federal Patients'
Rights Legislation. Prepared for the Henry J. Kaiser Family Foundation,
Menlo Park, Calif., 2002.
22. Schauffler, H. H., S. McMenamin, J. Cubanski, and H. S. Hanley.
"Differences in the Kinds of Problems Consumers Report in Staff/Group
Health Maintenance Organizations, Independent Practice Association/
Network Health Maintenance Organizations, and Preferred Provider
Organizations in California." Medical Care, vol. 39, no. 1 (2001), 15-
25.
23. Studdert, D. M., and C. R. Gresenz. "Enrollee Appeals of Preservice
Coverage Denials at 2 Health Maintenance Organizations." The Journal of
the American Medical Association, vol. 289, no. 7 (Feb. 19, 2003), 864-
870.
24. Young, G. P., J. Ellis, J. Becher, C. Yeh, J. Kovar, and M. A.
Levitt. "Managed Care Gatekeeping, Emergency Medicine Coding, and
Insurance Reimbursement Outcomes for 980 Emergency Department Visits
from Four States Nationwide." Annals of Emergency Medicine, vol. 39,
no. 1 (January 2002), 24-30.
[End of section]
Appendix III: Comments from the Department of Health and Human
Services:
Department Of Health and Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
February 16, 2011:
John E. Dicken:
Director, Health Care:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Mr. Dicken:
Attached are comments on the U.S. Government Accountability Office's
(GAO) draft report entitled, "Private Health Insurance: Data on
Application and Coverage Denials" (GAO 11-268).
The Department appreciates the opportunity to review this report prior
to publication.
Sincerely,
Signed by:
Jim R. Esquea:
Assistant Secretary for Legislation:
Attachment:
[End of letter]
General Comments Of The Department Of Health And Human Services (HHS)
ON THE GOVERNMENT ACCOUNTABILITY OFFICE'S (GAO) Draft Report Entitled,
"Private Health Insurance: Data On Application And Coverage Denials"
(GAO-I1-268):
The Department appreciates the opportunity to review and comment on
this draft report.
The Affordable Care Act (ACA) of 2010 required GAO to study the rates
of such application and coverage denials. GAO reviewed the data
available on denials of the applications of enrollment and coverage
for medical services.
We would like to emphasize the importance-”for policy makers,
regulators and consumers”-of the data presented in your report, and
make note of Center for Consumer Information and Insurance Oversight's
(CCIIO) role in improving and expanding data collection on application
and coverage denials to help bring about increased transparency in
private health insurance.
We would like to also bring your attention to an important piece of
data not included in your analysis. Although GAO's draft report
provides information on the percentage of claims that are denied by
private health insurance plans, as well as data on the outcomes of
internal appeals and external review of denied claims, it does not
provide data on the frequency with which claims denials are appealed
by consumers. This letter offers views on why the gap matters and what
might be done to close that data gap. It also highlights HHS' role,
together with our Federal partners in the Departments of Labor (DoL)
and Treasury, in crafting federal regulations to both create more
uniform federal protections for internal appeals and external review
and enforce notice requirements so that consumers are aware of their
appeal rights, as required by the ACA.
Why the Data on Application and Coverage Denials Matter:
Data on application and coverage denials help increase transparency in
private health insurance. However, more effort is needed to improve
the quality and scope of existing data collections to give
policymakers and regulators better and richer data to evaluate health
insurance plan practices and market changes, and to produce measures
that may be useful to consumers when they are shopping for insurance.
The GAO's draft report makes it abundantly clear that data collection
on application and coverage denials have been uneven across insurers
and plans and across states. The report also reveals that very little
information is available to help analysts understand the causes or
sources of variation in the data that are available. For example, the
GAO analyzed data”collected by CCIIO and displayed in the individual
market plan finder on HealthCare.gov”on applications denials by plans
in the individual health insurance market. The data perform an
important function”alerting consumers to the uncertainty that goes
along with applying for private coverage in the current market. The
data also provide an important baseline measure for evaluating the
impact of the ACA. We should, for example, expect to see a sharp
reduction in these application denials over time, since denials for
pre-existing conditions will be a thing of the past after 2014.
Similarly, the GAO's analysis of claims denials primarily serves to
illustrate that there is variation across issuers. Unfortunately, not
much more can be said about these data. Although the data illustrate
wide variation in the reported rate of claims denial, the GAO was
unable to describe the sources or significance of that variation.
Further, it is possible that the states that do provide data are also
the states with stronger appeals protections such that the reported
rates are not representative of the national picture.
The GAO report also reveals that the scope of existing data collection
needs to be expanded to assure transparency across the health
insurance market.
How Often Do Consumers Appeal Claims Denials and What Obstacles Do
They Face?
Together with our Federal partners in DOL and Treasury, HHS has
crafted Federal regulations to create more uniform Federal protections
for internal appeals and external review and to implement improved
notice requirements for consumers. In order for the Departments to
provide oversight for those new protections, data on the rate at which
claims denials are appealed (and the outcomes of those internal
appeals and external reviews) are needed.
ACA directed the GAO to study data on denials including denials where
a "health plan later approves such coverage." Unfortunately, due to
the limitations of existing data collections, the GAO, with one small
exception, was not able to report data on the frequency with which
claims denials are appealed in any segment of the market.
Consequently, the GAO risks confusion when it states that "denials are
frequently reversed." Readers may reasonably assume that a large
percentage of claim denials are ultimately overturned (with a consumer
receiving a previously denied benefit payment). It is unclear that
this is the case, especially in the pre-ACA patchwork of appeals
protections. For example, in its own discussion, the GAO seems to
suggest that reversals and recoveries for consumers may be rare,
citing a favorable outcome for a plan enrollee in 5.2 percent of
reported cases (i.e., the GAO reports that recoveries were made in 500
cases out of 9,600 complaints about benefit denials received by the
DOL from enrollees in self-funded plans).
Systematic, standardized and richer data collection on claims denials
and appeals is needed across market segments-–in both the commercially
insured market and in self-funded group plans-”to provide transparency
for consumers and meaningful information for policymakers.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
John E. Dicken, (202) 512-7114 or dickenj@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Kristi Peterson, Assistant
Director; Susan Barnidge; Krister Friday; Jawaria Gilani; Teresa Tam;
and Hemi Tewarson made key contributions to this report.
[End of section]
Footnotes:
[1] Private health insurance includes all forms of health insurance
that are not funded by the government and may be purchased on an
individual or group basis.
[2] Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), as amended by
the Health Care and Education Reconciliation Act of 2010, Pub. L. No.
111-152, 124 Stat.1029 (Mar. 30, 2010).
[3] Throughout this report, the term ’insurer“ refers to commercial,
state-licensed issuers of health insurance coverage and entities such
as health maintenance organizations (HMO). Insurers can offer coverage
in the group market, individual market, or both. In this report, the
term ’insurer“ does not include self-funded group health plans where
instead of purchasing health insurance from an insurance company an
employer sets aside its own funds to pay for at least some of its
employees‘ health care.
[4] Throughout this report, we refer to denials of authorization for
services not yet provided as ’preauthorization denials“ and denials of
payment for services rendered as ’claim denials.“
[5] PPACA also directed that we submit our report to the Secretaries
of HHS and DOL. Pub. L. No. 111-148, § 10107, 124 Stat. 911-2.
[6] The data were reported by state-licensed health insurers offering
coverage in the individual market.
[7] This is the only quarter of data that HHS had collected as of
December 2010.
[8] The six states we selected to contact were California,
Connecticut, Florida, Maryland, New York, and Ohio.
[9] For example, through the course of our work, we found that Texas
requires certain insurers to report on the number of requests for
preauthorization of coverage for proposed services that insurers
declined.
[10] To conduct this review, we searched a number of reference
databases, such as EconLit and Social SciSearch, for peer-reviewed,
industry, or government studies published from January 2000 through
July 2010. In addition, we checked the bibliographies of the studies
and interviewed a number of experts regarding the research done on
private health insurance denials to identify other relevant studies.
[11] The insurance companies we contacted offered coverage in both the
individual and group markets and, according to AHIP, were among the 10
largest by enrollment, together accounting for nearly 26 million
enrollees.
[12] The data obtained from states on the incidence of coverage
denials were not broken out by the types of medical services being
denied.
[13] State regulators established NAIC to help promote effective
insurance regulation, to encourage uniformity in approaches to
regulation, and to help coordinate states‘ activities. Among other
activities, NAIC collects data from state regulators on insurers,
including complaints about insurer practices filed by consumers with
states. We requested NAIC to provide us with data on the number of
complaints reported by states that were related to coverage denials.
The complaint data did not include information on the type of service
for which coverage was denied.
[14] Under PPACA, $30 million was appropriated to the Secretary of HHS
for the award of federal grants to states to establish, expand, or
provide support for offices of health insurance consumer assistance or
health insurance ombudsmen programs. Pub. L. No. 111-148, § 1002, 124
Stat. 138. To receive these grants, called Consumer Assistance Program
grants, states must ensure that their programs assist consumers with
such tasks as enrolling in health coverage and filing complaints and
appeals. In the applications for the grants, HHS directed states to
report on complaints and appeals. States varied in the data they
included in their application and the time frames for those data.
[15] Throughout this report, the term ’group health plan“ refers to
employer-sponsored health plans, including both fully insured and self-
funded plans.
[16] As of 2009, 85 percent of small employers, those with 3 to 199
employees, that offered health benefits were fully insured while 88
percent of large employers, those with 5,000 or more employees,
offered self-funded plans. See The Kaiser Family Foundation and Health
Research & Educational Trust, Employer Health Benefits: 2009 Annual
Survey (2009).
[17] Group health plans and health insurance issuers offering group
coverage are prohibited from implementing eligibility rules based on
health-status-related factors defined as health status, medical
condition, claims experience, receipt of health care, medical history,
genetic information, evidence of insurability, or disability. See, for
example, 42 U.S.C. § 300gg-1 (2006). PPACA extends this prohibition to
health insurance issuers offering coverage in the individual market
for plan years beginning on or after January 1, 2014. Pub. L. No. 111-
148, § 1201(4), 124 Stat. 156.
Health insurance issuers that offer coverage in the small group market
in a state generally are required to accept every small employer that
applies for health coverage in that state. In addition, issuers cannot
deny an application for enrollment by individuals employed by such
employers due to health-status-related factors if the individuals
apply when they are first eligible. See 42 U.S.C. § 300gg-11 (2006).
For plan years beginning on or after January 1, 2014, PPACA requires
health insurance issuers offering group or individual coverage in a
state to accept every employer and individual that applies for
coverage in that state, subject to certain requirements. Pub. L. No.
111-148, § 1201(4), 124 Stat. 156.
[18] Health insurance issuers offering individual coverage are
prohibited from denying coverage for individuals who (1) have had at
least 18 months of prior creditable coverage with no break of more
than 63 days; (2) have exhausted any available continuation of
coverage; (3) are uninsured and are not eligible for other group
coverage, Medicare, or Medicaid; and (4) did not lose group coverage
because of the nonpayment of premiums or fraud. See 42 U.S.C. § 300gg-
41 (2006). As referenced above, PPACA requires health insurance
issuers to guarantee coverage to all individuals seeking coverage in
that state for plan years beginning on or after January 1, 2014,
subject to certain requirements.
[19] According to data from the Kaiser Family Foundation, as of
January 2010, six states have guaranteed issue requirements that
prohibit any insurer from denying coverage to an individual based on
their current medical conditions or risk of poor health. Another seven
states have guaranteed issue requirements that only apply to certain
insurance plans or during limited times during the year.
As referenced above, in certain circumstances, federal law also
protects consumers seeking individual coverage from application
denials. For example, health insurance issuers cannot deny
applications for eligible consumers who had prior group or other
coverage.
[20] See GAO, Health Insurance: Enrollment, Benefits, Funding, and
Other Characteristics of State High-Risk Health Insurance Pools,
[hyperlink, http://www.gao.gov/products/GAO-09-730R] (Washington,
D.C.: July 22, 2009).
[21] The temporary national HRP program will terminate in 2014. Pub.
L. No. 111-148, § 1101, 124 Stat. 141. As referenced above, for plan
years beginning on or after January 1, 2014, PPACA prohibits health
insurance issuers offering individual coverage from implementing
eligibility rules based on health status-related factors and requires
health insurance issuers offering individual coverage to accept every
individual in the state who applies for coverage, subject to certain
requirements. In addition, PPACA prohibits group health plans and
insurers offering group and individual coverage from excluding
coverage for pre-existing health conditions. This prohibition is
generally effective for plan years beginning on or after January 1,
2014 for adults and plan years beginning on or after September 23,
2010 for individuals under age 19. Pub. L. No. 111-148, § 1201(2),
10103(e), (f), 124 Stat. 154, 895.
[22] According to research completed by AHIP, as of January 2006, 44
states and the District of Columbia operated external review programs.
Such programs are generally available to consumers purchasing coverage
from insurers regulated by states.
[23] Under PPACA and implementing regulations, group health plans and
health insurance issuers offering group or individual coverage,
subject to certain exceptions, must comply with a state external
review process that, at a minimum, includes consumer protections
identified in the NAIC Uniform External Review Model Act. If a state
external review process does not incorporate these consumer
protections or a self-insured group health plan is not required to
comply with the state external review process, then the health plan
must follow a federal external review process. Pub. L. No. 111-148, §§
1001(5), 10101(g), 124 Stat. 137, 887; Interim Final Rules for Group
Health Plans and Health Insurance Issuers Relating to Internal Claims
and Appeals and External Review Processes under PPACA, 75 Fed. Reg.
43,330 (July 23, 2010).
[24] For example, with respect to those leaving group coverage and
applying for coverage in the individual market, HIPAA prohibited
health insurance issuers from denying coverage for individuals who (1)
have had at least 18 months of prior creditable coverage with no break
of more than 63 days; (2) have exhausted any available continuation of
coverage; (3) are uninsured and are not eligible for other group
coverage, Medicare, or Medicaid; and (4) did not lose group coverage
because of the nonpayment of premiums or fraud. See 42 U.S.C. § 300gg-
41 (2006).
[25] ERISA established certain federal requirements that apply when
employers offer their employees, retirees, and dependents employee
benefit plans that include health coverage, retirement plans such as
pensions, and other benefits such as life insurance. See Pub. L. No.
93-406, 88 Stat. 829 (1974). ERISA requirements generally apply
regardless of the size of the business, although some requirements are
streamlined for smaller employers. ERISA imposes certain reporting and
disclosure requirements, fiduciary obligations, and requirements for
claims-filing procedures. ERISA is enforced through DOL‘s Employee
Benefits Security Administration. PPACA expands upon ERISA‘s
requirements for claims-filing procedures by applying new standards
for internal claims appeals and for external claims review processes,
as referenced above. Pub. L. No. 111-148, §§ 1001(5), 10101(g), 137,
887.
[26] Pub. L. No. 111-148, §§ 1103, 10102(b), 124 Stat. 146, 892. The
Web site is [hyperlink, http://www.healthcare.gov].
[27] Health Care Reform Insurance Web Portal Requirements, 75 Fed.
Reg. 24,470 (May, 5, 2010).
[28] The data indicated that two insurers had denial rates of 100
percent and each of these insurers reported receiving one application
in the 3-month reporting period.
[29] In 2008, according to AHIP data, 84 percent of applications were
medically underwritten and 16 percent were not medically underwritten.
Just over 1 percent of applications were denied before going through
medical underwriting, and those denials were unrelated to the applicant‘
s health status.
[30] America‘s Health Insurance Plans, Individual Health Insurance
2009: A Comprehensive Survey of Premiums, Availability, and Benefits
(Washington, D.C.: 2009). (See appendix II for references to the AHIP
study and other studies with information on application denial rates
identified through our literature review.)
[31] America‘s Health Insurance Plans, Individual Health Insurance
2006–2007: A Comprehensive Survey of Premiums, Availability, and
Benefits (Washington, D.C.: 2007).
[32] According to data from the Kaiser Family Foundation, as of
January 2010, four states”-Michigan, Pennsylvania, Rhode Island, and
Virginia”-and the District of Columbia have insurers of last resort,
which are insurers that typically accept consumers with health
conditions that prevent those consumers from obtaining coverage in the
individual market.
[33] The Ohio data included the number of electronically submitted
claims paid and denied in the first and third quarters of calendar
year 2009 and represented all insurers licensed in Ohio. The
California data included the number of claims received and denied by
six of the largest managed care insurers licensed in the state, each
with enrollment in 2009 of over 400,000. We obtained these data from
the Department of Managed Health Care‘s Web site from June through
September 2010 [hyperlink, http://www.wpso.dmhc.ca.gov/fe/search].
[34] The Maryland data were obtained from the Maryland Insurance
Administration‘s Report on Semi-Annual Claims Data Filing for Calendar
Years 2005-2007 and represented data for calendar year 2007 from 41
insurers licensed in the state.
[35] The Connecticut data were obtained from the Connecticut Insurance
Department‘s Consumer Report Card on Health Insurance Carriers in
Connecticut and represented data for calendar year 2009 from 21
managed care insurers licensed in the state.
[36] The data were reported to GAO by AMA and represented claims from
February 1, 2010, through March 31, 2010. The data indicated the total
number of claim lines-”charges for specific services included in the
claim”-that were denied. AMA defines a denial as a claim line where
the amount allowed and the amount billed were equal, but the amount
paid was $0. Though not included in the claim denial rate, AMA also
reported data indicating that 5 percent of claim lines were edited,
that is, the claim lines were automatically reduced to a payment of $0
by the insurer‘s payment system. According to AMA officials, both
claim-line denials and claim-line edits result in no payment for the
service, and therefore are denials from the perspective of the
provider. The data on claim lines denied and edited were used as the
basis for rates reported in AMA‘s 2010 National Health Insurer Report
Card. See citations to the 2010 report card and previous AMA report
cards as well as other studies related to coverage denials in appendix
II.
[37] Providers can submit paper or electronic claims. According to
Ohio and AMA officials, electronic claims represented roughly 70 to 80
percent of their total claims activity.
[38] California officials told us they currently require plans to
report on their full ’inventory“ of denials but the state is revising
its claim denial reporting instructions to clarify the denials that
should be included and excluded from the numbers reported.
[39] According to officials, the AMA claim data included data for
insured products offered by the companies represented and self-insured
products administered by the companies.
[40] The calendar year 2007 data were obtained from the Maryland
Insurance Administration‘s Report on Semi-Annual Claims Data Filing
for Calendar Years 2005-2007.
[41] Maryland reports the total claim denial rate, as well as a denial
rate for ’clean claims“”those health care claims submitted by a health
care provider on one of two widely used industry standard billing
forms and that also include all of the essential information needed by
a plan for processing”in their Semi-Annual Claims Data Filing Reports.
[42] The data were obtained from The Maryland Insurance
Administration‘s 2007 Report on the Health Care Appeals & Grievances
Law.
[43] The data were obtained from the Maryland Insurance
Administration‘s Report on Semi-Annual Claims Data Filing for Calendar
Years 2005-2007.
[44] The data on the reasons for claim denials reflect the reasons
assigned by the insurer that denied the claim. According to AMA
officials, there is no requirement that insurers assign the most
specific reason for the claim denial, and they sometimes assign more
general reasons. For example, although a denial may have occurred
because the insurer determined a service was not medically necessary,
the insurer may document that the claim was denied because the service
was not covered, which could be for reasons other than that the
service was not medically necessary.
[45] Reversals of coverage denials were limited to denials for which
an appeal was initiated. The data we reviewed did not allow for a
systematic calculation of an ’appeal rate“-”the number of coverage
denials for which an appeal was initiated”-for several reasons,
including different data sources or data years for denials and appeals
data. Data from Ohio did provide limited information; specifically,
for the first quarter of calendar year 2010, Ohio data indicated that
0.5 percent of claim denials were internally appealed.
[46] America‘s Health Insurance Plans, Update on State External Review
(Washington, D.C.: 2006).
[47] C. R. Gresenz and D. M. Studdert, ’External Review of Coverage
Denials by Managed Care Organizations in California“ (RAND Institute
for Civil Justice, Santa Monica, Calif.: 2005). See appendix II for
the list of studies that included external appeal data by the reason
for the denial being appealed and the type of service being denied.
[48] Data were reported to GAO by the Florida Agency for Health Care
Administration. Maryland‘s data, obtained from the Maryland Insurance
Administration‘s 2009 Report on the Health Care Appeals & Grievances
Law, also included some information on external appeals by the type of
service being denied.
[49] In October 2010, HHS awarded nearly $30 million in Consumer
Assistance Program grants to 35 states and the District of Columbia.
States receiving the grants are required to begin reporting data 6
months after the award notice on the number of inquiries filed with
the state about health coverage, the reasons for the inquiries, and
the outcomes of the inquiries.
[50] Because we did not survey all states to determine whether they
collect data on the incidence of application or coverage denials, there
may be other states that collect such data that were not known to
experts or discussed in the literature. For example, through the course
of our work, we found that Texas requires certain insurers to report on
the number of requests for verification of coverage for proposed
services that insurers declined.
[51] The 23 databases were BIOSIS Previews, NTIS: National Technical
Information Service, Social SciSearch, ABI/INFORM, Gale Group PROMT,
SciSearch: a Cited Reference Science Database, Pharmaceutical News
Index, EMCare, Elsevier BIOBASE, EMBASE, Gale Group Business A.R.T.S.,
General Science Abstracts, Wilson Applied Science & Technology
Abstracts, EconLit, Readers' Guide Abstracts, Wilson Social Sciences
Abstracts, Gale Group Trade & Industry Database, Gale Group Legal
Resource Index, MEDLINE, CANCERLIT, EMBASE Alert, Periodical Abstracts
PlusText, and Wilson Business Abstracts.
[52] We searched the reference databases for the terms "denial" or
"refusal" and "health plan," "insurer," "carrier," or "issuer" with all
of the following combinations of terms: (1) "application" or
"enrollment;" (2) "coverage," "claim," or "preauthorization;" and (3)
"complaint," "appeal," or "dispute" and "coverage," "claim," "service,"
or "preauthorization."
[End of section]
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