How To Handle a Claim Your Health Insurance Won’t Pay

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Medical expenses are among the most expensive for families to pay, which is why most people rely upon their health insurance to cover these huge costs. The moment you get word that your insurance provider will not pay for a medical treatment or service can be terrifying — talk about sticker shock! Before you panic, there are steps you can take to deal with the issue.

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Know the Difference Between Denial and Rejection

It’s very important to know the difference between a denial — when your insurance company simply will not cover the claim, and a rejection — where the claim has missing or inaccurate information. In the latter instance, typically a correction can be made and the claim can be refiled, according to The Balance. Common errors include an incorrectly spelled name, outdated address or an incorrect medical billing code. Reasons for outright denials can include not obtaining prior authorization, your insurance company does not believe your procedure or treatment was medically necessary, your provider was out-of-network or you exceeded your plan’s coverage limits in some way.

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Read: These States Have the Cheapest Healthcare Costs

Make Sure the Denial Is Legitimate

If you are pretty sure that there’s no error on your end, then it’s time to look at the fine print and determine if the denial is legitimate — according to VeryWell Health, an insurance company may interpret a clause in the coverage differently than you do. It never hurts to contact your insurance provider to go over it with them, just in case they missed something or read it wrong.

See: Should You Redo Your Healthcare Plan? Here Are the Pros and Cons

Appeal Your Claim

If there is any gray area at all, the Affordable Care Act ensures that you have the legal right to appeal any denial. You can choose one of two approaches. One option is an “internal appeal,” where your insurance company must make a “full and fair review of its decision,” according to the Federal Department of Health and Human Services (HHS). If that appeal results in a continued denial but you are sure it’s unfair, you are entitled to hire an independent, third party to be the final decision on the denial, in what is known as an “external appeal.”

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Your appeal letter should include key information, according to The Balance: an opening statement that lays out the service you received and the reason for denial, an explanation of your medical condition or health problem and why you believe the treatment is medically necessary and supporting information from your healthcare provider


According to Forbes, many insurance companies rely upon auditing software to weed through millions of claims. This software is essentially looking for ways to reject claims, therefore lowering the amount of money paid out. Since these programs rely upon data-mining technology and algorithms, rather than individual people making assessments of each claim, chances of denial are higher. Thus, it helps to reapply for the claim, Forbes said, even multiple times, to increase the likelihood of acceptance.

Learn: Healthcare Expense Mistakes To Avoid

Denial or Out-of-Pocket Expenses?

Unfortunately, sometimes what looks like a denial or refusal to pay your full treatment is not that, but rather a misunderstanding on the patient’s part about what his or her out-of-pocket expenses really are, such as co-pays and deductibles. This is where it’s very important to read your insurer’s “explanation of benefits” that should come when you first sign up (you can request them again if needed), detailing your share of expenses. VeryWell Health gives an example of an insurance plan with a $5,000 deductible. If you haven’t yet paid for any healthcare for the year, but you have an MRI that costs $2,000 and receive the bill for it, it’s because you haven’t yet met your deductible. In this case, your claim wasn’t denied, you just have to pay out-of-pocket until that $5,000 deductible is met.

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According to NPR, data analyzed from California showed that appeals of denials worked in favor of patients about half of the time.

Keep Records

It’s very important to keep paper records, but file things digitally as much as possible to limit the chances that things are getting lost in the mail. The more prepared you are to back up the information on your claim, the better chance of winning an appeal.

Seek Support

If all of this is initially overwhelming, reach out either to the human resources administrator in charge of benefits at your workplace, the insurance agent who sold you your plan or a state insurance commissioner to help you sort through the steps and process.

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Last updated: May 27, 2021

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About the Author

Jordan Rosenfeld is a freelance writer and author of nine books. She holds a B.A. from Sonoma State University and an MFA from Bennington College. Her articles and essays about finances and other topics has appeared in a wide range of publications and clients, including The Atlantic, The Billfold, Good Magazine, GoBanking Rates, Daily Worth, Quartz, Medical Economics, The New York Times, Ozy, Paypal, The Washington Post and for numerous business clients. As someone who had to learn many of her lessons about money the hard way, she enjoys writing about personal finance to empower and educate people on how to make the most of what they have and live a better quality of life.

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