2% of ACA Marketplace In-Network Claims Denials Are for Medical Necessity

Given the 18 percent denial rate for in-network claims in 2020, payers on the Affordable Care Act marketplace should offer more robust transparency around data reporting for in-network claims denials, according to a report from Kaiser Family Foundation.

The report relied on CMS claims data on non-group qualified health plans’ denials and appeals data from 2020. In 2020, 213 payers were on the federal health insurance marketplace. Of those, 144 offered complete data on in-network claims, totaling 230.9 million claims.

Although the rate of denials varied considerably from payer to payer, marketplace plans denied, on average, nearly a fifth (18 percent) of in-network claims. Over eight in ten claims were accepted and covered in 2020.

For 72 percent of denials, the explanation that payers offered was “all other reasons.” As a result, for nearly three-quarters of all denied non-group qualified health plan claims, the reason is unclear. 

Sixteen percent of the claims that were denied were not covered due to an excluded service. One in ten claims was denied due to a lack of prior authorization or referral.

Only two percent of claims were denied due to a lack of medical necessity. In that small population of denied claims, one out of five denials were for behavioral healthcare services that did not meet the criteria for medical necessity.

However, the denial rate varied by the payer, including for medical necessity. While the overall denial rate for medical necessity was only two percent, some payers cited lack of medical necessity as the cause for more than half of their denials. 

For example, Cigna’s silver exclusive provider organization (EPO) plans in Missouri and Tennessee said that lack of medical necessity was the reason for 56 percent and 39 percent of their in-network claims denials, respectively.

Overall, most payers (52 out of 144 payers) reported a 10 to 19 percent denial rate. Thirty-six out of the 144 payers had a denial rate of 20 to 29 percent. The remaining 56 payers were evenly split between the lowest and highest denial rate shares: 28 payers had a denial rate of less than 10 percent, and 28 had a denial rate of 30 percent or more.

Celtic, Molina, Qualchoice, Ambetter, Oscar, and Meridian each reported that their denial rates exceeded a third of their in-network claims in one or more states.

In addition to breaking the data down by payer, the researchers analyzed denial rates by geography and plan level.

Of the states that provided enough data to assess denial rates, the denial rates were highest in Mississippi and Indiana. Payers in these states denied 29 percent of all in-network claims. South Dakota and Oregon had the lowest denial rates at six percent and seven percent, respectively. 

Among plan levels, platinum plans had the lowest denial rates (11.8 percent), while silver had the highest rate (18.9 percent) and was not far ahead of catastrophic plans’ denial rates (18.3 percent). 

The report also noted that consumers failed to appeal denied claims. Only slightly more than one percent of non-group qualified health plan enrollees appealed their denied claims.

Consumers who did appeal denials often did not receive a different result. Nearly two-thirds of the small population of enrollees who appealed their denied claims (63 percent) were still denied coverage at the end of the appeal process.

While these findings are important, the researchers found the data to be weak and noted a lack of transparency.

“Twelve years after enactment of the ACA, limited transparency in coverage data collected by the federal government is notable for what it doesn’t show, perhaps even more than for what it does reveal. These data reporting requirements were enacted to show regulators and consumers key features of health plans that are not otherwise transparently obvious,” the researchers wrote.

“However, agencies have not fully implemented this provision, limiting data that could be used to conduct oversight and enforcement of consumer protections, including Mental Health Parity and the No Surprises Act.”

The researchers suggested that implementing more comprehensive transparency data reporting could improve consumers’ and policymakers’ understanding of payer claims denials.

The results continue a trend from 2019. In that year, payers denied 17 percent of in-network claims on the Affordable Care Act marketplace.

A separate survey indicated that 83 percent of consumers would like to see payers publicize claims denial rates for specific diseases. Over three-quarters of the participants (77 percent) wanted payers to publish claims denial rates for provider-recommended care.