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How to challenge and collect on insurance claims denials


The federal Employee Retirement Income and Security Act (ERISA) offers physicians opportunities to challenge and collect on claims denied by commercial insurers.

There are many approaches that can be implemented by doctors and hospitals to maximize their revenue stream by challenging a health insurer’s denials of claims in the commercial insurance area. This article focuses on the tools available in the federal law called ERISA that can be used by these medical providers to increase collections.

Using these methods will not only help with collections on current and future claims, but can provide the basis for dusting off piles of older, denied claims that medical providers have forgotten about or written off.

The first task is to get an understanding of how to use Employee Retirement Income Security Act’s (ERISA) many rules. Rather than adhering to an insurer or claims administrator’s “bulletins,” “payment guidelines,” or “manual,” the focus should be placed on the use of ERISA rules. This accomplishes two things. First, ERISA can actually make the medical provider’s in-network provider agreement legally non-binding as to some of the billing or coding rules that are used to deny claims. And second, when ERISA’s claims regulations are violated, the provider can argue that the claim decisions are not legally valid and that the claims are immediately payable. When playing on this turf, medical providers will discover new and more effective avenues for getting paid.

In the world of commercial health insurance, nearly all of the insurance polices purchased today are obtained by employers for their employees and families. These group insurance benefits are “employee welfare benefit plans” governed by ERISA. Therefore, no matter what state you practice in, these rules apply to your patients’ employer-sponsored health insurance plans. And under the new federal healthcare law, the ERISA claims regulations even apply to claims under plans sponsored by federal, state, and local employees that are typically not governed by ERISA.

Pre-emption of portions of the provider agreement

ERISA provides that once it governs an area, it “preempts”; i.e., it takes over and wipes out all other law that could apply. Thus, on questions of whether a particular claim or service is “covered,” it is not the provider agreement, provider manual, or other health insurer created internal rules that apply.

Instead, as the U.S. Supreme Court makes clear, the claims are governed by the employee’s health plan document. The health plan documents, adopted by employers and distributed to employees, typically do not address billing or coding issues. Therefore, claims cannot be denied on such grounds because the language of the health plan does not authorize it. And since the health plan is the only document that can define coverage, any internal insurance company rule, guideline, or manual provision that the insurer attempts to use to deny claims is both irrelevant and preempted by ERISA. This concept alone is a “game-changer” that medical providers should employ to challenge improper claim denials.

Using ERISA’s claims regulations

There are three basic sets of ERISA rules that medical providers need to become familiar with: (1) the timing rules regarding an insurer’s response to a claim, (2) the specificity rules as to an insurer’s denial in an explanation of benefits (EOB), and (3) the rules that excuse a medical provider’s obligation to appeal a claim denial.

Timing:  ERISA’s regulations provide that a health insurer must respond to a claim within 30 days of receiving it. If the insurance company wants more time to consider the claim, it must notify the medical provider that it needs additional time. If the notification for more time is sent before the 30 days expires, then the insurer gets an additional 15 days. If the health insurer blows either the initial 30-day deadline or an extended deadline, the late-arriving explanation of benefits (EOB) is legally invalid. If a late EOB alleges that a service was not medically necessary, for example, the health insurer can be precluded from asserting that defense to the claim because it was asserted too late. Thus, instead of arguing about medical necessity, how the claim was coded, or whether too many services were allegedly performed in a given visit, the medical provider can simply demonstrate the lateness and demand payment in full.

While there are court decisions that confirm this point, health insurers will likely be reluctant to admit their obligations in this regard, for fear of opening the floodgates. A well-armed medical provider, however, who either learns and implements the rules or hires qualified legal counsel, is likely to get the insurer to come to a settlement based on these rule violations.

Specifics required: The ERISA regulations require health insurers to explain the reasons for a claim denial, with specificity.  Most EOBs fail this test, and thus they are not legally valid. In addition, if the denial is for an alleged lack of medical necessity, the regulations further require the insurer to provide either “... an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.”  Have you ever seen an EOB that complies with this regulation?  Probably not. And again, there are consequences for a violation.  If the EOB is insufficient, it can be argued that it is the equivalent of no response at all.  And no response equals a late response; i.e., a violation of the above 30-day rule. Thus, claims that fail to meet this test are also candidates for a demand for immediate payment, regardless of the true merits of the claim, the patient’s condition, or how the billing was coded.

Getting around the appeal requirement: There are many ways in which a medical provider can be excused from the appeal requirement.  If the appeal requirement can be excused, then older claim denials that were never appealed are still “alive” and can be pursued for collection. In addition, the provider can also save precious time and resources by avoiding the frustrating process of faxing dozens of pages that get ignored or rejected.

The ERISA claims regulations state that if the claims administrator violates the regulations, then an appeal is not necessary.  And that makes sense.  For example, if an EOB is vague-and thus violates the regulations-how can a medical provider tender a proper appeal if the true reason for a denial is unknown? Thus, appealing under these circumstances is excused. This rule applies to any type of regulatory violation and can be relied upon to press forward with collection on many of the medical provider’s older claims denials that were never appealed. 

Medical providers should pursue the use of these rules against the health insurers. Armed with the right tools and represented by qualified ERISA health insurance counsel, medical providers can put together large groups of denied claims and pursue payment in a cost effective manner.

The author is a founding partner of Quadrino Schwartz in Garden City and New York, New York.

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Jennifer N. Lee, MD, FAAFP
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