HMO Claims-Rejection Rates Trigger State Investigation

Published on

California Atty. Gen. Jerry Brown is joining state regulators in
scrutinizing the payment practices of seven major health plans in
response to complaints from physicians and hospitals.

His announcement came Thursday as regulators said they had stepped up
scrutiny of the payment practices of the state’s seven largest health
plans in response to complaints from physicians and hospitals.

The increased attention also comes on the heels of a first-of-its-kind
report issued this week that said the California health insurers reject
1 in 5 medical claims.

Six of the state’s largest insurers rejected 45.7 million claims for
medical care, or 22% of all claims, from 2002 to June 30, 2009,
according to the California Nurses Assn.’s analysis of data submitted
to regulators by the companies.

The rejection rates ranged from a high of 39.6% for PacifiCare to 6.5%
for Aetna for the first half of 2009. Cigna denied 33%, and Health Net

Anthem Blue Cross, the state’s largest for-profit health plan, and
Kaiser, the state’s largest nonprofit plan, each rejected 28% of claims.

Blue Shield, a nonprofit with 3.4 million California members, is the
only large health plan that does not report claims-denial figures in
its annual report to the state Department of Managed Health Care.

State health plans say claims often are denied because they are
duplicates, because patients are no longer members, and because a
particular treatment is not a covered benefit.

An industry representative also cautioned that claim rejections do not
always equate to actual denials of treatment to patients, and claims
may be denied for a number of legitimate reasons.

As for Brown’s investigation, "We believe that the attorney general’s
office will learn that the California Nurses Assn.’s
mischaracterization of health plan claims data does not accurately
reflect denials of care for consumers or widespread denials of
insurance coverage," said Nicole Kasabian Evans, spokeswoman for the
California Assn. of Health Plans. "It appears that a good deal of the
so-called denials are merely paperwork issues," she said.

Brown’s office said that his deputies would soon review records and complaints.

"These high denial rates suggest a system that is dysfunctional, and
the public is entitled to know whether wrongful business practices are
involved," Brown said.

Doctors complain that too often insurers delay, shortchange or deny legitimate claims.

"Getting health insurers to pay their fair share of medical claims can
be as much of a headache for physicians as it is for patients," said
Rebecca Patchin, an anesthesiologist at Loma Linda University and board
chairwoman of the American Medical Assn. She said each insurer has a
different set of "obscure, bureaucratic rules for processing and paying
medical claims" that result in as much as $210 billion of "unnecessary
cost" annually, studies have shown.

Don DeMoro of the nurses association said he was told a couple of years
ago that denial data weren’t collected. Recently, however, researchers
stumbled across them in a section of the annual reports that insurers
file with the Department of Managed Health Care.

Harvey Rosenfield, founder of Consumer Watchdog, a Santa Monica-based
advocacy group, criticized the department for failing to publicize the

"There is no more important information to the consumer than whether
they can rely on their health insurance company or HMO to give them the
treatment they need," Rosenfield said.

The department pointed out that the annual reports are posted on the
Web. It also said that most denied claims don’t involve patients.

"It’s important to point out that a denied claim means that the patient
received the medically necessary services, but the doctor or hospital
was not paid for that care," said Lynne Randolph, spokeswoman for the
Department of Managed Health Care. "The department has been very active
in ensuring that providers of care should be paid fairly and on time."

Randolph said the department’s provider complaint unit has obtained
almost $20 million in disputed claims payments for physicians since

PacifiCare, the Cypress-based subsidiary of UnitedHealthcare Group,
ranked highest in the state for claims denied in the first half of
2009. It has been the subject of considerable scrutiny for its
claims-handling practices.

The HMO paid $3.5 million in fines last year for claims payment
problems, and the department is conducting a follow-up examination.

"We still do get frequent complaints about PacifiCare, and obviously
the numbers in the California Nurses Assn. report backed that up,"
Randolph said. "We do expect we will be taking some further action."

PacifiCare also faces a hearing this year over state Department of
Insurance allegations of 133,000 violations of claims-handling laws
that could result in as much as $1.33 billion in fines.

PacifiCare said it has been cooperating with both inquiries and had
already corrected most of the identified problems, which it described
as technical. The insurer said its claims-denial rate was higher than
average because of its unique business model.

"It doesn’t truly reflect an impact on the consumer," said PacifiCare spokesman Tyler Mason.

PacifiCare said it delegates the financial responsibility for many of
its members’ care to physician groups. As a result, many of the denials
involve confusion over whether the HMO or the physician groups are
responsible for paying certain types of claims. But, the HMO said,
consumer bills usually get paid.

Similarly, Woodland Hills-based Health Net said many of its denials
were ultimately covered by physician groups that care for patients in
exchange for set monthly fees from the insurer.

Cigna spokesman Chris Curran said that, nationwide, the
Philadelphia-based insurer approves "more than 99% of eligible claims
for care that the doctor recommends."

A spokesman for Oakland-based Kaiser Permanente said the reported
denials were not a reflection of the vast majority of care provided
within the HMO’s network.

Blue Shield defended its failure to break out claims denials in its annual report.

"We’ve reported the data this way for years, and the [Department of
Managed Health Care] has never asked for any additional information,"
said spokesman Aron Ezra. "We’re more than happy to break out the
information differently if the [department] requests it from us."

A spokeswoman said the department has requested the information, which it expects the Chicago insurer to provide.


Rejecting medical claims

California’s top health plans reject an average of 1 in 5 claims for treatment — 45.7 million claims over the last seven years. Here’s how their rejection rates compared during the first six months of 2009:

PacifiCare: 39.6%

Cigna: 33%

Health Net: 30%

Anthem Blue Cross: 28%

Kaiser Permanente: 28%

Aetna: 6.5%

Blue Shield: Data not available

Source: California Nurses Assn.

Contact the author at: [email protected]

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases