What Is the Difference Between a Denied and Rejected Claim?

A claim is a formal request submitted to an entity, such as an insurance company, seeking a benefit or payment based on the terms of an agreement. This request serves as the mechanism for policyholders to receive compensation for a covered event or loss. The entity then evaluates the claim to determine its validity and the extent of its liability under the policy’s conditions.

Understanding Rejected Claims

A rejected claim is one that was not processed by the payer due to an administrative or technical error in its initial submission. The claim never entered the system for a thorough review of its merits, often flagged by a clearinghouse or the payer’s system before full adjudication. Consequently, no formal decision on coverage or payment is made at this stage.

Common reasons for a claim rejection include missing or incorrect policy identification numbers, incomplete forms, or illegible handwriting. Errors in patient demographics, such as misspelled names or incorrect dates of birth, can also lead to rejections. Duplicate submissions or issues with provider information, like an invalid National Provider Identifier (NPI) number, frequently prevent claims from being processed.

When a claim is rejected, it is typically sent back to the submitter with a clear indication of the specific error. The immediate action is to identify and correct the administrative or technical mistake. Once corrections are made, the claim can be resubmitted for processing.

Understanding Denied Claims

A denied claim, in contrast, is one that has been processed and reviewed by the payer for its merits, but has been determined not to meet the criteria for payment or benefit according to policy terms. The claim has entered the system, undergone evaluation, and a formal decision has been rendered. This outcome often indicates a discrepancy between the requested service and the coverage provisions.

Common reasons for denial include the service or item not being covered by the policy, due to specific exclusions. Lack of medical necessity is another frequent cause, meaning the payer did not believe the service was justified. Pre-existing condition exclusions, exceeding benefit limits, or a policy lapse due to unpaid premiums can also lead to denials.

Services obtained from an out-of-network provider are also common grounds for denial. Claims may be denied if there is insufficient evidence to support the claim, such as lacking documentation or if filed beyond the deadline. Upon denial, an Explanation of Benefits (EOB) document is typically sent to the policyholder.

The immediate action following a denial involves reviewing the denial reason in the EOB to understand the grounds for non-payment. The policyholder or provider can initiate an appeal process. This involves gathering supporting documentation, such as medical records or a letter of medical necessity, and submitting a formal appeal to the payer within a specified timeframe.

Key Distinctions and Subsequent Actions

The core distinction between a rejected and a denied claim lies in the stage of the claim lifecycle. Rejections happen before the claim is processed, indicating an administrative or technical flaw. Denials, however, occur after the claim has been processed and evaluated against the policy’s terms.

The nature of the problem differs; rejections stem from procedural errors, while denials arise from issues related to policy coverage, eligibility, or medical necessity. A rejected claim is a submission error, whereas a denied claim is a coverage decision. This difference dictates the subsequent actions required.

For rejected claims, the path forward is to correct the administrative error and resubmit the claim. This process is a straightforward correction of data or formatting. For denied claims, the action is to understand the denial reason in the Explanation of Benefits and pursue an appeal, which involves a more substantive review of the claim’s merits against policy terms.