Health Insurance Claims

Health insurance claims provide a test of the commercial relationship between the insurer and the insured. Claims are where the ‘rubber meets the road’ for any type of insurance contract, not the least being health insurance.

For every claim that occurs, that relationship test occurs on a number of levels, especially:

  1. The ease of use of the claims process itself
  2. The helpfulness of customer service personnel
  3. The interpretation of claims information by processing staff
  4. The competence of the claims manager who decides the claim
  5. The disposition of the claims manager towards ‘grey area’ claims
  6. The directives of management on ‘hardness’ and ‘softness’ of acceptances
  7. The rate of accuracy with which the insurer processes and pays the claim
  8. The timeliness with which the insurer acts on, and ultimately decides on, the claim
  9. The communication on claims decisions which the insurer provides to the insured
  10. The manner in which the insurer responds to appeals against declined claims

While each of the above represents a true relationship test, many of the ‘test results’ are influenced by the information which is provided by both the insured and by the insured’s health care provider, and by the care with which each of those participants engages in the claims process.

Verification of Benefits

The most effective steps you can take to ensure a successful health insurance claim occur before you even seek treatment. The first of these is to know your policy, and to know what costs are covered and from what providers. All too often a plan member learns that a particular procedure or drug is not covered when the claim is denied by the insurer, leaving the expense to be fully met by the member. This can even happen when a network provider recommends, and you accept, a treatment which the insurer does not cover.

You can avoid this scenario by seeking a written Verification of Benefits from your insurance company before you obtain treatment. Insurance companies routinely provide Verification of Benefits letters, either at the request of an insured or the insured’s prospective health care provider. A Verification of Benefits letter contains a range of information, including confirmation of coverage, the deductible payable by the insured and any co-pay or co-insurance payable by the insured. It also typically specifies the information that must be included when the claim for treatment is ultimately submitted.

Medical practices are increasingly requesting patients to complete a Verification of Benefits form in advance of any appointment. This form collects all the information which the practice requires to confirm that the patient has coverage. If you are requested to complete such a form, then you can request a copy of the insurer’s subsequent Verification of Benefits letter so that you can have advance notice of (and can check against your policy) the amounts which you will be required to pay following treatment.

Performing a Verification of Benefits check has the additional advantage of alerting you and your health care provider to any procedures or treatment which require pre-authorization from your insurer in order to be eligible for claims acceptance.

Claims Filing

Health insurance claims are usually, but not always, filed by your health care provider following your treatment. In the event that you have to file a claim, be sure to obtain an itemized bill (sometimes called a ‘superbill’) from your provider which contains all the information which your insurer requires to process your claim. This information normally includes the following:

  • The physician’s name, address and contact phone number
  • The physician’s license and tax identification numbers
  • Your full name
  • The place where the treatment was received
  • The diagnosis, and the date of any injury
  • A description of the treatment received, with the correct medical codes
  • The date of each treatment
  • The amount charged for each treatment
  • Details of any ancillary medical service (such as an ambulance or nursing care)
  • Details of any medical equipment hire
  • The provider’s signature

Always check the accuracy of the bill. Then submit the original bill with your claim, and make a copy of it and the completed claim before you do so. As a general rule, document everything, including phone calls to your insurance company.

Explanation of Benefits

An Explanation of Benefits (EOB) is a document which your insurance company sends to you after they have processed your claim. An EOB specifies a range of information, including the following:

  • Your name
  • The claim number
  • The name of the plan to which you belong
  • The name of the health care provider
  • The medical treatments or procedures which you received
  • The medical codes for each treatment or procedure
  • The dates on which you received each service
  • The amount which your provider charged for each service
  • The claim amount paid by the insurer for each service
  • The amount not covered by the insurer
  • The amounts which you are liable to pay

As there are many parties involved in the claims process, and the potential for errors is significant, you should review any EOB you receive. Make sure that the treatments and procedures specified in the EOB accurately reflect those which you actually received. This is important as the EOB corresponds to the information which the insurer has on its files about you, and if that information is erroneous it could have serious consequences for you. For example, you don’t want the insurer to have an incorrect medical condition recorded against your name if you never had that condition. That could affect any subsequent health insurance applications which you make to another insurer.

Mishandled Claims

An annual survey of the health insurance industry has found that approximately 20% of claims are processed inaccurately by health insurance companies1. The survey findings are based on a sample of approximately two million claims submitted in electronic form to seven of the country’s largest health insurers. The results highlight the importance of plan members checking the Explanation of Benefits forms they receive from their insurers following a claim.

In the survey, the systems which health insurance companies use to process and pay claims were measured along four key dimensions, as follows:


This metric calculated the overall accuracy of claims processing, including the accuracy with which insurers reported the correct contractual fees to health care providers for each treatment or procedure rendered. Across the seven participating insurers, contract fees were reported correctly 78% to 94% of the time. However, there were substantial variations according to state, with the range of correct fee reporting widening to 59% to 97%.


The survey revealed an inconsistency between insurers in their rates of denied claims. The percentage of claim items denied ranged from a low of 0.7% to a high of 4.5%. The most frequent cause of claim denials is ineligibility for benefits.


This metric measured the number of days taken to respond to a submitted claim. The most responsive insurer had a median period of five days, while the least responsive insurer had a median period of 13 days. With the exception of one insurer, all insurers recorded slightly longer response times in comparison with last year’s survey.


The survey reported that insurers have made significant improvements since the 2008 survey in disclosing policies and information through their websites. A more consistent payments process, fewer payment disputes and reduced paperwork were attributed in the survey to greater transparency in insurer fee schedules.

Out-of-Network Providers

Some types of health insurance plans include coverage for services received from out-of-network providers, but the rates of coverage are almost always less than those which apply to network providers. Also, members are often required to make payment directly to out-of-network providers, and to then seek partial reimbursement of those costs from their insurers.

Cost-sharing by members for out-of-network services generally takes the form of higher co-pays or higher co-insurance percentages, but sometimes the greater cost lies in the difference between the usual and customary charges which the insurer is obliged to pay, and the actual amount billed by the out-of-network provider. In that event the member pays that difference, in addition to the normal cost sharing through co-pays and co-insurance.

In order to illustrate the value of provider networks, the national association of health insurance providers in the United States conducted a survey of charges billed by out-of-network physicians2. The survey found that some out-of-network providers charge exorbitant fees, resulting in much higher cost-sharing by members in addition to residual balances after taking account of usual and customary fees. Some examples of these fees, compared with the standard Medicare reimbursement rates, are shown in Table 1 below:

Table 1: Examples of Excessive Out-of-Network Physician Fees
CPT Code Description Amount Billed Medicare Fee % of Medicare Fee
43239 Upper GI endoscopic visual diagnostic exam with biopsy $29,998.00 $388.64 7,719%
22612 Lower back spinal fusion $72,000.00 $1,628.96 4,420%
47562 Laparoscopic gallbladder removal $26,100.00 $625.94 4,170%
29881 Minimally invasive knee meniscus surgery $20,120.00 $584.98 3,439%
45380 Colonoscopy with biopsy $9,995.00 $488.83 2,045%
19120 Benign breast lesion removal $7,800.00 $385.88 2,021%
58150 Total abdominal hysterectomy $14,553.00 $845.40 1,721%
27130 Total hip replacement $19,288.00 $1,440.30 1,339%
33535 Triple coronary bypass $30,228.00 $2,301.51 1,313%
66984 Cataract surgery with insertion of artificial lens $6,791.00 $580.87 1,169%

The survey notes that health plan members can achieve measurable savings when they visit network providers, for the reason that network providers are usually prohibited from charging patients the difference between their scheduled fees and the rate which those providers have negotiated to charge under their network contracts. In addition, the survey notes that members who obtain services from in-network providers normally have lower cost-sharing obligations.

  1. American Medical Association, National Health Insurance Report Card, 2010.
  2. America’s Health Insurance Plans, The Value of Provider Networks and the Role of Out-of-Network Charges in Rising Health Care Costs, 2009.
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