TV ad overstates health insurance denials

Supporters of health care reform have portrayed insurance companies as insensitive and too quick to deny claims. In a recent television ad, Health Care for America Now, a group supporting the Democrats' health care reform bill, says insurance companies get wealthy by denying those claims.

The group's ad mockingly explains "how to get rich" by showing a "book" written "by America's health insurance companies." Chapter 3 reads, "Deny 1 out of 5 treatments prescribed by doctors." A news release issued by HCAN attributed this statistic to a study released Sept. 2, 2009, by the California Nurses Association titled, "California's Real Death Panels: Insurers Deny 21% of Claims." (We checked another claim from the ad, about insurance companies paying CEOs $24 million per year, and rated it Barely True.)

In a news release summarizing the findings, the nurses' group — an influential union — explained that researchers from its staff and its affiliate, the National Nurses Organizing Committee, examined data disclosed by insurers to the California Department of Managed Care, the state agency that regulates HMOs. The researchers reported that from 2002 through June 30, 2009, six of the largest insurers operating in California rejected 47.7 million claims for care, or 22 percent of all claims. According to the nurses' group, during the first six months of 2009, PacifiCare denied 39.6 percent of claims; Cigna denied 32.7 percent; HealthNet denied 30 percent; Kaiser Permanente denied 28.3 percent; Blue Cross denied 27.9 percent and Aetna denied 6.4 percent.

But the California Department of Managed Care told us the study was misleading.

Lynne Randolph, the department's deputy director of communications, said that what the nurses' group portrayed as denials are not necessarily what most consumers would think of as denials. Most patients probably think of a denial as when their claim is rejected because the plan doesn't cover a treatment or a particular doctor, or because the patient has hit a limit on coverage. But Randolph said that a sizable chunk of the denials counted by the nurses' group — though the exact amount is unclear — are for other reasons that are simply part of the health care bureaucracy that do not really affect a consumer's care.

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For instance, a claim might be denied because it was sent to the wrong insurer. (This is a common occurrence in California, Randolph and other experts said, because the state has many complicated business relationships between health plans and groups of doctors, and it's easy for claims to be unintentionally misdirected.) In fact, a patient may never even know that a given claim has been sent to the wrong place. Yet in the data used by the nurses' group, these claims are counted as denials.

For that matter, any claim denied during a given quarterly report is counted as a denial, even if that claim is eventually paid during a subsequent quarter. Claims could also be counted as denied because information on the form was missing or incorrect, even if that is later corrected and the claim is paid. And a claim sent simultaneously to two payers is counted twice, meaning that the same claim might be counted as both a completed payment and a denial.

Asked whether the nurses' group remains comfortable with its 1-in-5 estimate, spokesman Charles Idelson said it is. He noted that in the wake of the study's release, the state attorney general's office announced an "independent inquiry into how health maintenance organizations review and pay insurance claims submitted by doctors, hospitals and other medical providers." And he added that the group has received hundreds of reports from Californians about denied payments. "There's no doubt that these type of denials are occurring," Idelson said.

Idelson added that even if the caveats cited by Randolph are valid, the fact that one of every five claims is denied at some stage adds to an administrative burden that hikes the cost of health care without improving care for patients.

Randolph and Idelson actually agree on one point: Reliable statistics on why denials are made are not currently available. While the department undertakes periodic audits by sampling claims data, Randolph said, officials do not have good data on the causes of denials, forcing them to speculate. Idelson said he hopes the attorney general's investigation provides a better handle on the reasons for denials.

The nurses' union numbers are significantly higher than other studies of denial rates.

In 2007, America's Health Insurance Plans — a group representing insurers — conducted an internal survey of data from 19 health plans to determine the percentage of claims denied for "reasons that could affect consumers, including non-covered services, authorization issues, or network issues." The survey found that 2.36 percent of claims were denied. Specifically, 1.2 percent were denied due to non-covered services, 0.36 percent were denied due to benefit limits having been met, and 0.34 percent were denied due to pre-authorization, referral or utilization review issues. Smaller percentages were denied for the provider not being in the patient’s network, for issues with eligibility or pre-existing conditions and for issues related to experimental or unapproved treatments.

A second study was produced by the American Medical Association, the main group representing doctors. The 2008 National Health Insurer Report Card found that for the biggest health insurers, rejection rates ranged from 2.65 percent to 6.8 percent — higher than AHIP's figures, but well below the nurses' study.

It should be noted that all three groups have vested interests in the health care debate. In fact, it's also worth noting that the nurses' group has clashed with California's Republican governor, Arnold Schwarzenegger, who appointed the head of the California Department of Managed Care, although the department is mostly staffed by civil servants. Meanwhile, the state attorney general who is overseeing the investigation sparked by the nurses' report is Democrat Jerry Brown, a former governor who is running for an open gubernatorial seat next year.

Now that we have the politics out of the way, let's recap. The Health Care for America Now ad said that insurers "deny 1 out of 5 treatments prescribed by doctors." But that claim is based solely on one study in one state, and in our view it doesn't provide enough evidence to back up the claim. The independent state agency that collected the data used in the nurses' study has raised significant doubt on the group's interpretations of that data. Many "denials" that were counted were not really what most people would consider a denial. And studies by other groups show much lower denial rates. So we rate this claim False.