The most common claim denial in healthcare is for missing or incomplete information (such as invalid member IDs, missing date of birth, or incorrect coding). Other top reasons include duplicate claims, lack of prior authorization, and services not covered by the patient's insurance plan.
One of the primary reasons claims are denied is that insurers determine that the treatment or service was not medically necessary. Health insurance providers typically require documentation from healthcare providers to justify the reason for a particular procedure, test, or treatment.
A rejected claim is typically the result of: A coding error(s), • A mismatched procedure and ICD-10 code(s), or • A terminated patient medical insurance policy.
Top 10 Denials in Medical Billing
Here, we discuss the first five most common medical coding and billing mistakes that cause claim denials so you can avoid them in your business:
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The most common medical billing denial codes involve missing or incorrect information (CO-16), duplicate claims (CO-18), mismatched diagnosis/procedure codes (CO-11, CO-4), lack of authorization (CO-15, CO-197), non-covered services (CO-97, PR-96), and timely filing issues (CO-29, CO-27). These codes, often starting with 'CO' (Contractual Obligation) or 'PR' (Patient Responsibility), highlight errors in data, authorization, coding, or submission, requiring providers to correct and resubmit claims.
However, denials are more generally categorized into “soft denials” and “hard denials.” A soft denial or initial denial is a denial that is potentially reversible by taking appropriate corrective actions before resubmitting. A hard denial is, on the other hand, not reversible.
A hard denial is when the insurance refuses to pay the claim because the service is not covered. Even appeals may fail to reverse or correct a hard denial, leading to lost revenue. Soft denial is when an insurance company reviews a claim and rejects payment due to an issue like missing data or lack of documentation.
The most frequent home insurance claims are caused by wind and hail damage, followed by water damage and fires. Fires are the most expensive cause of loss for homeowners, resulting in the highest average claim amount.
When talking to an insurance adjuster, avoid admitting fault, speculating on the cause or extent of injuries/damages, giving recorded statements without legal advice, and volunteering extra information like past injuries or unrelated details, as anything said can be used to minimize your claim; instead, stick to basic facts, remain polite but brief, and consider getting legal counsel. Don't sign anything without review, and avoid saying you're "fine" or "okay" immediately after an incident.
Incomplete or Inaccurate Information
Incomplete or incorrect details on the insurance application are one of the most frequent causes of claim rejections. All forms must be completed with honesty and complete transparency.
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“Delay is the deadliest form of denial,” said historian C. Northcote Parkinson.
Denial code 4 is used when the procedure code is inconsistent with the modifier that was used. This means that the modifier attached to the procedure code does not match the requirements or guidelines set by the payer.
Denials usually fall into two categories: Technicalities: missing codes or authorizations, claim filing mistakes. Medical: treatment not considered a medical necessity or is considered experimental/investigational.
The 80/20 rule in insurance refers to two main concepts: the Medical Loss Ratio (MLR) under the Affordable Care Act (ACA), requiring insurers to spend 80% (85% for large groups) of premiums on care or refund the rest, and a common home insurance clause where you must insure your home for at least 80% of its replacement cost to receive full coverage for partial losses, preventing underinsurance. In health insurance, it limits administrative costs and profits, while in homeowners insurance, it ensures adequate dwelling coverage to avoid penalties on claims.
In 2023, roughly one third of all in-network claims made to AvMed were denied by the medical insurance company. In this year, AvMed and United HealthCare were the medical insurance companies with the highest denial rate for in-network claims in the United States, at 33 percent each.
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