Claims Denials and Appeals in ACA Marketplace Plans
In this report, we analyze transparency data released or updated in 2020 by the Centers for Medicare and Medicaid Services (CMS) to examine claims denials and appeals among issuers offering individual market coverage on HealthCare.gov; data are from plan years 2018 and 2019. The Affordable Care Act (ACA) requires transparency data reporting by non-grandfathered group health plans and by individual market plans offered on and off of the Marketplace. We find that, across HealthCare.gov issuers with complete data, about 17% of in-network claims were denied in 2019, and about 14% of in-network claims were denied by issuers in 2018, with rates for specific issuers varying significantly around these averages.
In 2019, issuer denial rates ranged from less than 1% to more than 50%. Average denial rates also varied based on plan metal levels – 15% for bronze, 14% for gold, 18% for silver, and 20% for catastrophic plans in 2019.
The federal government now requires HealthCare.gov issuers to report reasons for claims denials at the plan level. Of all denials with reasons reported for 2019, about 18% were denied because the claim was for an excluded service; about 9% were denied due to prior authorization or lack of referral, and less than 1% were denied based on medical necessity. The remaining plan-reported denials (72%) were denied for other reasons.
We also find that consumers rarely appeal claims denials to their issuers, and when they do, issuers usually uphold their original decision. In 2019, HealthCare.gov consumers appealed just over one-tenth of one percent of denied in-network claims, and issuers upheld 60% of those appeals.
ACA transparency data has the potential to reveal information about health plan coverage and operations that might not otherwise be readily apparent from plan documents. For example, data could reveal the incidence of “surprise medical bills” and patient cost liability for such claims from one plan to another. Data could also be used to develop tools to help consumers evaluate marketplace plan options, comparing claims payment practices in addition to price. Transparency data could also inform oversight activities by regulators. To date, however, ACA transparency data requirements have not been fully implemented. Data that are collected are not audited and appear to contain some reporting inconsistencies. And, federal regulators have not used transparency data for oversight or for the development of any consumer information tools.
ACA Transparency Data
The Affordable Care Act (ACA) requires periodic data reporting by non-grandfathered group health plans and health insurance issuers in the individual and group markets.1 Data on the following is required in the statute:
- Claims payment policies and practices
- Periodic financial disclosures
- Data on enrollment
- Data on disenrollment
- Data on the number of claims that are denied
- Data on rating practices
- Information on cost-sharing and payments with respect to any out-of-network coverage
- Information on enrollee and participant rights under this title
- Other information as determined appropriate by the Secretary
The law requires these data to be available to state insurance regulators and to the public.
Partial implementation of ACA transparency data reporting began several years ago. To date, reporting is required only by issuers for qualified health plans they offer on HealthCare.gov. Issuers report only on the number of in-network claims denied, the number of denied claims that are appealed, and the outcome of appeals.2 Data are reported in aggregate at the issuer level. In addition, starting in 2018, data are reported at the health plan level, and certain reasons for claims denials are also now reported at the plan level. CMS does not collect data on all of the fields enumerated in the ACA, including out-of-network claims submitted or enrollee cost sharing and payments for out-of-network claims. Nor has it required any further detailed reporting (e.g., on claims or appeals by type of service or diagnosis.) To date, ACA transparency data are not reported by other non-group plans or employer-sponsored plans.
Recently, the Trump Administration issued a final regulation requiring all non-grandfathered plans – including those sponsored by employers or offered by issuers outside of HealthCare.gov – to report billed charges and negotiated allowed amounts for covered items and services beginning in 2023. The regulation invokes ACA transparency data reporting authority, but does not require plans to report prices to CMS; instead, price data must be posted online by each plan sponsor and issuer, making it unlikely that the price data across plans and issuers will be compiled into a single public use file provided by the federal government.
Analysis of Transparency Data
This brief focuses primarily on transparency data for the 2019 calendar year submitted by major medical plans offered to individuals on HealthCare.gov. Our analysis excludes stand-alone dental plans and issuers with incomplete data or very low enrollment, as well issuers for SHOP marketplace plans. The methods section details our rules for inclusion. Public use files with reported transparency data for calendar years 2019 and 2018 were posted online by CMS.3 From the public use files, we have developed working files that are posted with this report. A previous KFF report summarized transparency data reported for the 2015-2017 plan years.
Claims submitted and denied
Of the 181 major medical issuers in healthcare.gov states included in the transparency data, 122 show complete data on in-network claims received and denied for the 2019 plan year. Together these issuers reported 232.8 million in-network claims received, of which 40.4 million were denied, for an average in-network claims denial rate of 17.4% (Figure 1).
.Denial rates by issuers varied widely, ranging from 1% to 57% of in-network claims. Overall for 2019, 34 of the 122 reporting Healthcare.gov major medical issuers had a denial rate for in-network claims of less than 10%. Another 45 reporting issuers denied 10%-20% of in-network claims that year, 32 issuers denied 20%-30%, and 11 issuers denied more than 30% of in-network claims (Figure 2). Issuers that report denying one-third or more of all in-network claims were Blue Cross Blue Shield (BCBS) of Tennessee (57%), Anthem BCBS of Georgia (40.5%), Anthem BCBS of Maine (40.4%), Anthem BCBS of Ohio, (39.5%), Anthem BCBS of Virginia, (36.2%), Anthem BCBS of New Hampshire, (35.2%), and Anthem BCBS of Kentucky (33.3%).
On average, claims denial rates are similar to those reported in earlier years, although for some issuers, reported denial rates have varied over time. For example, Blue Cross Blue Shield of Florida reported an in-network claims denial rate of less than 5% in 2017, 2018, and 2019, while Blue Cross Blue Shield of Tennessee reported a claims denial rate of 15% in 2017, 17% in 2018, and 57% in 2019.
Denial rates also vary from state to state (Figure 3). In states where multiple issuers participate in the marketplace, the average denial rate sometimes obscures variation among issuers. For example, in Florida, where the average denial rate for in-network claims was 11%, rates for the seven issuers ranged from less than 5% to nearly 24%.
A variety of factors could explain the variation in denial rates across issuers and markets, including but not limited to differences in:
- Issuer reporting methods, for example, in how to count partial approvals
- Provider knowledge about which claims will be covered and how to properly submit claims
- Limits (e.g. day or visit limits) on covered services
- Degree to which issuers’ automated claims processing systems routinely deny certain claims
- Determination of medical necessity
Depending on the nature of the denial, consumers may or may not be held harmless. If the consumer is not held harmless, she could face significant financial liability.
Plan Level Data on Claims Denials
Issuers were required to begin reporting data on claims payment practices at the plan level for the 2018 plan year. By 2019, there are signs that issuers are not reporting plan level data consistently.
Of the 131 issuers reporting aggregate data on in-network claims received and denied for 2019, 121 also reported data at the plan level for the 2019 plan year. Of those, for 82 issuers, the aggregated number of claims received at the issuer level is the same as or similar to the sum of claims received reported at the plan level. Ten issuers report data on claims received at the issuer level, but report no plan level data. Finally, issuers are now required to report plan level data on the reasons for denied claims.
We reviewed plan level claims data for 1,714 plans offered on HealthCare.gov in 2019. Plan denial rates averaged 17%, and ranged from 0% to more than 60%. Average denial rates were somewhat different based on the plan metal level. On average, silver plans show a denial rate of about 18%, compared to 20% for catastrophic plans, 14% for gold plans, and nearly 15% for bronze plans.4
HealthCare.gov plans are also required to report on certain categories of reasons for in-network claims denials:
- denied due to prior authorization or referral
- denied due to an out-of-network provider
- denied due to an exclusion of a service
- denied based on medical necessity (claims for other-than behavioral health services)
- denied based on medical necessity (claims for behavioral health service)
- denied for other reasons
Transparency data reporting instructions require that the total number of plan-level claims denied in a year “should also be accounted for in the six denial reason categories… however, the totals [from the six denial reason categories] will not add up to the total number of plan level claims denied.” That is because “denied out-of-network claims” is included in one of the reason categories. Keeping out-of-network claims denials separate, we added the number of in-network claims denials reported by plans for the other five reason categories. Then we calculated the share of total in-network denials attributable to each of the five reason categories for in-network claims denials. (Table 1)
|Table 1: Plan-Reported In-network Claims Denied, Total and by Reason Category, 2019|
|Total Denied In-Network Claims||Sum of In-network Denials for 5 Reasons||Denied for Referral, Pre-Authorization||Denied as Excluded Service||Denied for Medical Necessity (non-behavioral health)||Denied for Medical Necessity (behavioral health)||All Other Reasons|
|36 million||35.6 million||3.3 million
We observe the following from transparency data on reasons for claims denials:
- 18% of plan-reported denied claims were denied because the service was not a covered service
- 9% of plan-reported denials were because the claim lacked a required referral or preauthorization
- Fewer than 1% of plan-reported denied claims were denied on the basis of medical necessity
- 72% of denied in-network claims were denied for some other reason
Plans denied in-network claims for these five reasons at different rates, suggesting that more detailed reporting or investigations could yield meaningful information to regulators as well as consumers. For example, while medical necessity denials appear to be rare, in some plans that is not the case. Seventeen plans reported that medical necessity denials of non-behavioral health service account for 10 percent or more of all reported denials (compared to an average rate of seven-tenths of one percent across all reporting plans). And 4 plans (offered by a single insurer) report that denials of behavioral health claims for medical necessity reasons accounted for more than 5% of all reported in-network claims denials, compared to an average rate of one-tenth of one percent across all reporting plans.
That nearly three-quarters of in-network claims (more than 25 million in 2019) were denied for “some other” reason indicates there is more to learn about why plans deny in-network claims. The state of Connecticut, for example, has long required transparency data reporting of state-licensed insurers and includes results in an annual report card on health insurers. Denial reasons reported by Connecticut insurers account for nearly half of all denied claims reported in the 2019 report card. (Table 2)
|Table 2: Claims Denials and Reasons, Connecticut Report Card, 2019|
|Total Denied Claims Reported by 14 Issuers||Denied Because Service Not Covered||Denied Based on Medical Necessity||Denied Because Claimant Not Enrolled||Denied Based on Incomplete Information||Denied for Duplicate Claim||All Other Reasons|
|2.2 million||0.18 million
|SOURCE: Consumer Report Card on Health Insurance Carriers in Connecticut, October 2020.
Available at https://portal.ct.gov/-/media/CID/1_Reports/2020-ConsumerReportCard.pdf
Federal transparency reporting on denial of out-of-network claims does not provide meaningful information at this point. Plans are not required to report on the total number of out-of-network claims submitted, so a denial rate for out-of-network claims cannot be calculated from the data.
Finally, there appear to be inconsistencies in the reporting of reasons for claims denials by HealthCare.gov plans. Though CMS instructions require that the total denied in-network claims be reflected in the denials reported by reason, totals don’t always match denials reported in the reason categories: — 123 plans report substantially fewer total denied in-network claims than they report in the five in-network reason categories; 457 plans report substantially more total in-network denials than they report in the reason categories. Auditing of transparency data by CMS could possibly improve the quality and consistency of reporting.
The ACA transparency data show the number of denied claims that were appealed to the plan (internal appeals), the number of internally appealed denials that were overturned by the issuer, the number of external appeals made by consumers, and the number of externally appealed denials that were overturned. The CMS public use files suppress values lower than 10.
Consumers rarely appeal denied claims. In 2019, 119 major medical issuers show data values on submitted, denied, and appealed in-network claims. Together they denied more than 40 million claims, of which consumers appealed fewer than 64,000 – an appeal rate of less than two-tenths of one percent (Figure 4). Transparency data from earlier years show similarly low appeal rates.
Issuers uphold most denials that are appealed. In 2019, about 40% of denials that enrollees appealed internally to their health plans were overturned. The overturn rate of appealed claims denials varied by issuer. Among 119 issuers whose appeals outcomes data were not suppressed, the overturn rate ranged from less than 15 percent to over 90 percent.
The ACA guarantees external appeal rights to enrollees in all non-grandfathered private health plans. When issuers uphold denials at the internal appeal level, consumers have the option of requesting an independent review by an outside entity, whose decision is binding.
However, consumers seldom avail themselves of external review. Of 55 issuers that reported data on external appeals requested in 2019, just 31 reported more than 10 external appeals; 24 issuers reported zero external appeals, 67 additional issuers had data suppressed because the number of external appeals filed was less than 10. Even if a value of 9 were assumed for each of the suppressed data fields, fewer than 1 in 20,000 denied claims made it to external review. Under federal regulations, consumers are only eligible for external review if their claim was denied based on medical necessity or related, clinical reasons. As noted above, insurers rarely deny claims based on medical necessity. Under some state laws, all denied claims are eligible for external appeal.
Transparency data offers insights into how health plans work in practice. However, five years into implementation, ACA transparency data reporting remains limited in its content and its uses. CMS does not require reporting by HealthCare.gov issuers on all of the transparency data required under the ACA. The agency does not audit transparency data reported by issuers, even though reporting inconsistencies seem apparent. Transparency data are posted online, but not made available by the federal government in a format useable for consumers or used to develop tools consumers could use to recognize and evaluate material differences in plan choices. In addition, the federal government does not collect ACA transparency data from employer plans or other issuers subject to the ACA requirements.
An Inspector General report found Medicare Advantage plans deny 8% of claims, on average. By contrast, HealthCare.gov plans, on average, report denying about 17% of in-network claims; with some issuers fewer than 10% of in-network claims while others deny one-third or more. While these differences in denial rates might reflect inconsistencies in data reporting, at least in part, they also could signal differences in the reliability of coverage that health plans offer. Such differences could materially affect consumers, and regulators could investigate and address them more than they do currently.
Data also show that consumers rarely appeal claims denied by their health plans. The Affordable Care Act established statewide ombudsman, or consumer assistance programs, to help consumers file appeals for denied claims. These programs were established in most states and territories in 2010 and 36 remain in effect, but they have not received federal funding since 2012.
Recently federal policymakers have taken other steps to promote price transparency within private health plans, to protect patients and require annual reporting on surprise medical bills, and to promote the transparency and accuracy of health plan provider networks and directories. For each of these policy priorities, ACA transparency data reporting could be implemented more completely to yield information helpful to regulators and to consumers.