Why Health Insurance Claims Get Denied and Your Rights to Appeal

Nora Martinez thought she had done everything right. After months of debilitating back pain, her doctor finally ordered an MRI that revealed severe spinal stenosis requiring surgery. With her insurance card in hand and pre-authorization seemingly approved, she scheduled the procedure. Three weeks after her successful surgery, the nightmare began: a denial letter arrived stating her $45,000 surgery was "not medically necessary." If you're reading this, you or someone you love has likely received a similar devastating letter. You're not alone – health insurance companies deny approximately 17% of in-network claims, affecting millions of Americans each year and leaving them with unexpected medical bills that can lead to bankruptcy.

The good news? You have powerful rights under federal and state law to appeal these denials, and studies show that consumers who appeal have a surprisingly high success rate. According to the Kaiser Family Foundation's 2024 analysis, less than 1% of denied claims are appealed, yet of those that are, over 50% are eventually overturned. This means insurance companies are counting on you not fighting back. This chapter will arm you with the knowledge to understand why claims get denied and, more importantly, your legal rights to challenge these denials and win.

Understanding the Business of Insurance Denials

Insurance companies are for-profit businesses, and denying claims is unfortunately part of their business model. In 2024, the top five health insurers reported combined profits exceeding $41 billion, with denial rates ranging from 7% to 32% depending on the insurer and type of claim. These denials aren't random – they follow predictable patterns that you can learn to recognize and counter.

The most shocking revelation from recent investigations is that many initial denials are automated. Insurers use algorithmic systems and artificial intelligence to review claims in bulk, sometimes spending mere seconds on each case. A 2024 ProPublica investigation revealed that some insurers' review systems were programmed to deny entire categories of claims without any human review. This means your carefully submitted claim might have been rejected by a computer program that never considered your unique medical situation.

Understanding this automated denial system is crucial because it means your first denial letter might not reflect any real evaluation of your case. When you appeal, you're often getting the first genuine human review of your claim. This is why persistence pays off – you're not just fighting a considered medical decision, you're often fighting an automated rejection that violated your rights to fair claim review.

Your Timeline: Important Deadlines You Can't Miss

WARNING: Missing appeal deadlines can permanently forfeit your rights. Mark these dates immediately:

The moment you receive a denial letter, the clock starts ticking. Different types of insurance plans have different deadlines, and missing these can mean losing your right to appeal forever. Here's what you need to know:

For Employer-Sponsored Plans (ERISA Plans):

- First-level appeal: 180 days from denial letter date - Expedited appeal for urgent care: 72 hours - External review request: 4 months after final internal denial

For ACA Marketplace Plans:

- Internal appeal: At least 180 days - External review: 4 months after final denial - Expedited external review: Immediately after expedited internal appeal

For Medicare Advantage:

- Reconsideration request: 60 days - Appeals Council review: 60 days - Federal court review: 60 days

For Medicaid:

- Varies by state: Usually 30-90 days - Fair hearing request: Often 60-120 days - Check your state's specific deadlines

Document the date you received your denial letter – take a photo of the envelope's postmark if possible. Insurance companies sometimes claim letters were sent earlier than they actually were, trying to run out your appeal clock. If you're approaching a deadline, send your appeal via certified mail with return receipt requested, fax with confirmation, or use the insurer's online portal if available (always screenshot your submission confirmation).

Common Reasons Why Claims Get Denied (And How to Fight Each)

Insurance companies use a variety of tactics to deny claims, but they typically fall into several categories. Understanding these helps you craft a winning appeal strategy:

1. "Not Medically Necessary"

This is the most common denial reason, used in approximately 40% of all denials. Insurance companies employ nurses and doctors who have never examined you to second-guess your treating physician's recommendations. They might claim alternative treatments should be tried first, or that your condition isn't severe enough to warrant the proposed treatment.

How to fight it: Get a detailed letter from your doctor explaining why the treatment is medically necessary, including consequences of not receiving treatment. Request your doctor cite peer-reviewed medical studies and clinical guidelines supporting the treatment. Include your medical records showing failed conservative treatments.

2. "Experimental or Investigational"

Insurers love labeling treatments as experimental to avoid coverage, even for FDA-approved medications used slightly differently than their original approval (called "off-label use"). They might deny coverage for newer treatments or procedures that are actually standard care in medical practice. How to fight it: Obtain letters from specialists stating the treatment is standard care. Include medical journal articles showing the treatment's effectiveness. Get your doctor to provide evidence of the treatment being used successfully at major medical centers. Reference Medicare coverage decisions if Medicare covers the treatment.

3. "Out of Network"

Even if you carefully chose in-network providers, you might receive denials claiming services were out-of-network. This often happens with emergency care, anesthesiologists, or when your in-network surgeon uses an out-of-network assistant. How to fight it: For emergencies, cite state and federal laws requiring coverage regardless of network status. For surprise bills, invoke the No Surprises Act (effective 2022). Document that you had no choice in provider selection. Show that no in-network provider was available for your specific needs.

4. "Coding Error" or "Billing Error"

Sometimes legitimate claims are denied due to simple administrative errors – wrong procedure codes, missing information, or clerical mistakes. While frustrating, these are often the easiest to resolve. How to fight it: Work with your provider's billing office to identify and correct the error. Request itemized bills and compare codes to your medical records. Ask for claim resubmission with correct information. Document all communications with both provider and insurer.

5. "Pre-existing Condition" or "Waiting Period"

While the ACA prohibits denying coverage for pre-existing conditions, insurers still find ways to invoke waiting periods or claim conditions existed before coverage began. How to fight it: Cite ACA protections if applicable. Provide documentation of continuous coverage. Show that the condition is new or that you've met any legitimate waiting periods. Request detailed explanation of how they determined pre-existing status.

Step-by-Step Instructions for Your First Appeal

When your claim is denied, take these immediate actions within the first 48 hours:

Day 1-2: Immediate Actions

1. Don't panic, but do act quickly. Take photos of all denial documents 2. Call your insurer immediately to verify the denial and ask for clarification 3. Request your complete claim file including all notes and medical reviews 4. Contact your doctor's office to inform them of the denial 5. Start a denial diary documenting all communications

Week 1: Gather Your Arsenal

1. Obtain your Summary Plan Description (SPD) or Evidence of Coverage (EOC) 2. Get all medical records related to your condition and treatment 3. Request a letter of medical necessity from your doctor 4. Research your condition and standard treatment protocols 5. Check if your state has additional appeal rights beyond federal requirements

Week 2-3: Build Your Case

1. Write your appeal letter (see templates in Chapter 4) 2. Organize supporting documents chronologically 3. Get additional expert opinions if needed 4. Research similar cases that were successfully appealed 5. Consider getting help from patient advocates if available

Week 4: Submit Your Appeal

1. Make copies of everything before sending 2. Send via certified mail with return receipt 3. Also fax or use online portal for backup 4. Calendar all deadline dates 5. Follow up to confirm receipt

Understanding Your Federal Rights Under ERISA and ACA

The Employee Retirement Income Security Act (ERISA) and Affordable Care Act (ACA) provide powerful protections that insurance companies hope you don't know about:

ERISA Rights (for employer-sponsored plans):

- Right to receive claim denial in writing with specific reasons - Right to full and fair review by someone new - Right to receive all documents relevant to your claim - Right to know the medical experts consulted - Right to respond to any new information before final decision - Right to sue in federal court after exhausting appeals

ACA Rights (additional protections):

- Right to external review by independent medical experts - Right to continue receiving care during urgent care appeals - Right to appeal in your preferred language - Right to have someone represent you - Right to receive notices in culturally and linguistically appropriate manner - No annual or lifetime benefit caps for essential health benefits

Your insurer must provide:

- Specific reason for denial with plan provisions cited - Description of additional information needed - Internal appeal procedures and deadlines - Your right to receive relevant documents - External review information - Contact information for consumer assistance

Violations that strengthen your appeal:

- Denial letter missing required information - Insurer failed to decide within required timeframes - New reasons given for denial during appeal - Failure to provide requested documents - Not following plan procedures exactly

Sample Letters and Templates You Can Use

Here's a powerful appeal letter template that addresses the most common denial reasons:

[Your Name]

[Your Address]

[City, State ZIP]

[Phone Number]

[Email Address]

[Date]

[Insurance Company Name]

Appeals Department

[Address]

RE: Appeal of Claim Denial

Member Name: [Your Name]

Member ID: [Your ID Number]

Claim Number: [Claim Number]

Date of Service: [Date]

Provider: [Doctor/Hospital Name]

Amount in Dispute: $[Amount]

URGENT: First Level Appeal - Response Required Within [30/60] Days

Dear Appeals Review Team:

I am formally appealing your denial of coverage for [specific treatment/service] dated [denial date]. Your denial violates my plan benefits and federal law for the following reasons:

1. Medical Necessity: My treating physician, Dr. [Name], has determined this treatment is medically necessary based on: - [Specific diagnosis and symptoms] - Failed conservative treatments including [list treatments tried] - Clinical guidelines from [medical society] recommending this treatment - Peer-reviewed studies showing effectiveness (see attached) 2. Coverage Terms: My plan specifically covers [relevant plan language]. Your denial misinterprets this coverage because [explain why]. 3. Procedural Violations: Your denial failed to include [list missing required information], violating ERISA/ACA requirements.

I am experiencing [describe impact of denial - pain, inability to work, etc.]. Further delay will result in [specific harms].

Requested Action: Immediately approve coverage for [treatment] and authorize my provider to proceed.

Attachments:

- Letter of medical necessity from Dr. [Name] - Medical records (