Can Health Insurance Deny a Claim After Approval?

A health insurance claim is a formal request to an insurance company for payment of services covered under a health policy. While policyholders expect approved claims to be settled, specific situations can lead to a later denial. This occurrence, known as a retroactive denial, can create significant confusion and financial strain. Understanding these denials is important for navigating health insurance coverage.

Understanding Claim Approvals and Denials

Health insurance companies engage in various forms of approval throughout the healthcare process. Pre-authorization involves securing insurer approval before receiving specific medical services, treatments, or medications. This process confirms a service is medically necessary and covered by the plan, but it does not always guarantee payment. Verification of benefits confirms a patient’s active insurance coverage and plan details, such as deductibles, before services are rendered. These differ from claim payment, which is a post-service approval.

A retroactive denial occurs when an insurer reverses a previously paid claim, meaning they reverse an initial approval or demand repayment for a service already paid. This can result in the policyholder becoming responsible for the amount originally covered by the insurer. Health insurance policies function as contracts, outlining obligations for both the insurer and the policyholder. Insurers retain the right to review claims post-payment to ensure adherence to policy terms and conditions. This review process allows them to identify discrepancies or issues that may lead to a reversal of the initial payment.

Common Reasons for Retroactive Denials

Several circumstances can lead to a retroactive denial of a previously approved or paid health insurance claim.

Eligibility Issues: Changes in a policyholder’s status, such as policy termination due to non-payment or aging out of dependent coverage, may not be immediately discovered by the insurer. If claims were processed when the individual was not eligible, the insurer may later seek to recover funds.
Coordination of Benefits (COB) Problems: These frequently trigger retroactive denials, especially when an individual has multiple insurance plans (e.g., through two employers). If claims are processed without properly coordinating benefits, leading to overpayment, the insurer may adjust and deny the claim retroactively. Guidelines exist to determine which plan pays first and prevent duplicate payments.
Fraud or Misrepresentation: If an insurer discovers inaccurate, misleading, or incomplete information provided during the application process or claim submission, they can reevaluate and retroactively modify the claim payment. This applies regardless of whether the claim has already been paid.
Billing and Coding Errors: Clerical mistakes, incorrect medical coding, or duplicate billing by healthcare providers can lead to claims being paid erroneously. During later audits, if these errors are identified, the insurer may retroactively deny the claim and seek repayment.
Lack of Medical Necessity or Policy Exclusions: A retroactive denial can occur if a post-service review determines a service was not medically necessary according to policy terms. This can happen if initial approval was based on limited information. If a service is later found to be explicitly excluded by the policy terms, it can also lead to a retroactive denial.

Navigating a Retroactive Claim Denial

Receiving a retroactive claim denial can be confusing, but structured steps can help. Upon receiving a denial letter, carefully review it to understand the specific reason, appeal instructions, and deadlines. Understanding the insurer’s stated reason is the first step toward formulating an effective response.

Gathering comprehensive documentation is important for supporting your case. Collect:
The original approval letter or Explanation of Benefits (EOB) that indicated approval
All relevant medical records related to the service
The full health insurance policy document
Detailed records of all communications with the insurer (dates, times, names of representatives)
An EOB, which is not a bill, provides a breakdown of how a claim was processed, detailing costs, what the insurer paid, and what the policyholder owes.

Initiate contact with both your insurance company and healthcare provider. Contact the insurer to clarify the denial and ask for details about their appeals process. Simultaneously, contact your healthcare provider’s office to check for potential billing errors, incorrect coding, or to obtain additional supporting information, such as a letter explaining the medical necessity of the service.

If initial contacts do not resolve the issue, formally challenge the denial through the appeals process. Begin by filing an internal appeal with your insurance company. This involves submitting a written appeal, providing all gathered documentation, and clearly explaining why the denial should be overturned. The appeal letter should include the service denied, claim number, and supporting evidence from your policy documents and medical records.

After submitting an internal appeal, the insurer will review their decision. You will receive an internal appeal decision, which may uphold or reverse the initial denial. If the internal appeal is denied, you generally have the right to pursue an external review. This process involves an independent third party, often an independent review organization, which reviews the claim and the insurer’s decision. Information on how to initiate this process is typically provided in the internal appeal denial letter or can be obtained from your state’s Department of Insurance. State Departments of Insurance or consumer assistance programs serve as valuable resources for consumer complaints and guidance.

Strategies to Minimize Risk

Proactively reducing the likelihood of a retroactive denial involves several steps for policyholders. Thoroughly read and understand your health insurance policy document. Pay close attention to covered services, specific exclusions, and any limitations, as these details govern what the insurer covers.

Always verify coverage and eligibility with your insurer before receiving significant medical services or procedures, especially costly treatments. This step, often called benefits verification, helps clarify your financial responsibility upfront and can prevent unexpected denials. While pre-authorization does not guarantee payment, obtaining it for services when required by your plan is an important step.

When pre-authorization or pre-approvals are granted, ensure you receive them in writing. This documentation should include specific details of the service, the approved amount, and the effective dates of the authorization, providing a clear record of the insurer’s commitment. Maintain detailed records of all medical appointments, services received, and communications with your insurer. Keep a log of dates, times, names of representatives, summaries of discussions, and retain all related documents, such as EOBs, bills, and pre-authorization letters.

Promptly and carefully review every Explanation of Benefits (EOB) statement you receive. Cross-reference the EOB with the services you received and any bills from your provider to catch potential errors or discrepancies early. Identifying issues on an EOB quickly can allow for timely correction before they escalate into a retroactive denial.