Analysis of Claims Denials in Health Insurance: A KFF Study

KFF's research highlights significant issues in claims denials within the health insurance industry, emphasizing regulatory compliance requirements and industry practices. Their findings reveal challenges insured individuals face, with 66% of adults citing delays and denials as critical issues, while 33% experienced coverage denials for prescribed services or medications over the past two years.

The Affordable Care Act mandates transparency data reporting for non-grandfathered health plans, covering both marketplace and employer-sponsored plans. Initiated in 2015, this requirement focuses mainly on HealthCare.gov but leaves gaps in state-based marketplaces and group plans.

KFF's analysis of CMS-published federal transparency data shows insight into claims denials for qualified health plans on HealthCare.gov by 2024. Insurers provide data on claims submitted, denied, and appealed, aiding regulatory oversight and accountability. However, details on prior authorization denials, crucial for regulatory insights, remain missing.

In 2024, insurers processed 496 million claims, with an overall in-network denial rate of 19%. Denial rates varied, ranging from 3% to 36%, with notable geographic differences like Hawaii's 27% average denial rate versus South Dakota’s 7%.

Denial reasons for about 79 million claims were reported, revealing that some insurers attribute denials to medical necessity or lack of prior authorization, highlighting differences in insurer practices and complex utilization review techniques. Appeal activities were limited, with less than 1% of denied claims appealed internally, and external appeal processes remain underutilized.

Recognizing transparency gaps and the complexity of insurer practices, KFF suggests enhancing data utility by linking denial reasons to specific services and expanding data availability across all market segments. Comprehensive reporting offers stakeholders clearer insights into insurer behaviors concerning claims management.

Future regulatory changes may address these issues, as CMS plans to include behavioral health service claims and specify prior authorization metrics. The integration of AI in claims processing presents oversight challenges but also potential efficiencies, necessitating ongoing vigilance and regulatory adaptation.