Insurers’ Black Box

From the Center for American Progress:

Consumers have a strong interest in picking a company that will reliably pay their legitimate claims when they need medical treatment. But health insurance companies don’t disclose the percentage of claims they reject and decline to pay. And inquiries by the Center for American Progress show that the nation’s insurance regulators have not asked them to do so.

CAP in recent weeks launched an investigation to determine whether data on commercial health insurers’ claim denial rates is available nationwide or in any states. The research included interviews with multiple senior officials of the National Association of Insurance Commissioners, other current and former insurance regulators and government officials in states around the country, officials at health insurance companies, academic experts, and others. All said that no such data is available. No state insurance regulators or federal agencies require insurers to disclose their claim denial rates, except in California. California’s Department of Managed Health Care requires insurers to include it in reports they file.

CAP also asked each of the nation’s seven largest for-profit health insurers—Aetna, Anthem Blue Cross Blue Shield, Cigna, Coventry, Health Net, Humana, and UnitedHealth care—if for the purposes of this report they would disclose their overall rates of claims denials and breakdowns by reason for the denials. All of the companies declined or did not give any direct response to the request. Spokesmen for the companies in general said that the insurers pay the vast majority of claims, and that denials are fair, with most occurring for routine reasons such as a patient erroneously submitting the same claim twice or a physician sending a claim to the wrong company.

But the reports from California indicate why health insurance companies may be reluctant to disclose their claim denial rates. That data shows that three of the six largest health insurance companies in the state each denied 30 percent or more of all claims filed in the first six months of 2009. It also showed wide variations in denial rates among the companies.

The most sensitive and potentially controversial claims are those based on medical criteria—such as whether a treatment is medically necessary or should not be covered because it is deemed experimental. CAP learned in interviews with former senior medical personnel at several of the largest insurers that big insurers—including Aetna, Cigna, and UnitedHealth care—made internal changes in recent years that gave business executives more direct authority over the companies’ doctors who evaluate claims based on these medical criteria.

Insurance companies had previously maintained a separation between the medical evaluation staff and the executives responsible for financial performance. The doctors and nurses reported to the companies’ chief doctor—known as the chief medical officer—who had final say on whether coverage for a particular individual’s treatment should be granted or denied based on medical criteria. But beginning about a decade ago, in a shakeup that evidently received no public attention, companies changed their policies so that the medical staff reported to regional business executives. These executives were given the authority to determine the doctors’ pay, bonuses, and promotion, and consequently they gained the power to influence the doctors’ decisions. The new systems generally kept “dotted line” reporting to the chief medical office, who would still weigh in on the most difficult claims decisions

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