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What can I do if my health insurance claim is denied?

If you receive medical treatment for an illness or injury you had assumed was covered under your existing health insurance plan, it can come as a major shock if you receive a notice your insurance provider has denied the claim.

In these circumstances, the bill won't be covered by your insurance carrier or even applied to your deductible. Because health insurance companies negotiate discounted rates for specific procedures, this means that you must pay the higher rate charged to uninsured patients. This rate is often many times higher than the amount you might otherwise pay out of your insurance deductible.

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Health claim denials are more common than many people realize: According to the AARP, about one out of every seven health insurance claims is denied.

But if it happens to you, don't panic: Denied health claims are often the result of human error, and can usually be successfully appealed. According to the National Consumers League, 40 percent of all denied claims will be covered after an appeal. And, for denials that can't be appealed, you can often reduce costs substantially through negotiation.

5 things you can do if your health insurance claim is denied

1. Read your policy carefully to find out if the procedure should be covered.

Dig your explanation of benefits out and look closely at the details. This document provides information on which services will and won't be covered. If you can’t find it, see if it is available online or contact your insurance provider to request a new copy.

This is when you'll discover how much coverage your existing health plan actually offers. "The first step in fighting a claim is knowing beforehand what is actually covered," says Eric Stauffer, an insurance consumer advocate in Seattle.

2. Look for medical billing errors.

A consumer advocacy group, Medical Billing Advocates of America, found that 8 out of every 10 medical bills to insurance companies contain inaccuracies. Adria Gross, owner of consumer advocacy group MedWise Insurance Advocacy, says the following are common errors:

  • Double-billing for the same procedure.
  • "Upcoding," a method of billing for a more expensive procedure.
  • Using the wrong diagnosis code. (You can use www.findacode.com to search for codes.)
  • Using a provider that isn’t listed as “in-network.”
  • Filing the claim beyond the allowable date (typically a three-month period from when the treatment was received).

Whether your claim is denied or approved, it's always important to look it over in detail. If you're being overbilled for a medical service, you may end up paying more of your deductible than you should.

If this happens to you, call the hospital or medical service provider to ask for an itemized bill, so you can clearly see each charge. If some of the charges on your bill aren’t valid, contact the provider’s billing center to dispute them either via phone call or letter, keeping detailed records of whom you spoke with and when, says Beth Morgan, owner of Medical Bill Detectives in Wilton, Conn.

It’s also important to call your insurance provider to find out why all or some of your charges were denied coverage. If the denial stems from a coding error, ask your provider to submit a request for a corrected claim, which should then be approved.

3. Seek outside help from a medical-billing advocate or insurance attorney

In some cases -- particularly if you are dealing with very large medical bills -- it can be very difficult to sort out matters with doctors’ billing offices and your insurance provider on your own. Instead, consider reaching out to a medical-billing negotiator or attorney who will be able to advocate on your behalf. Such advocates may bill on an hourly basis, or they may take a commission of the savings they help you realize.

These experts are able to impartially negotiate on your behalf to overturn denials that you may not have luck with independently.

For example, Morgan says she often successfully overturns denied claims for services that the insurance provider disputes because they are considered to be out-of-network. This can most commonly be done in cases where the patient had no alternative for care.

4. Seek help from your state Medicaid office or a medical charity organization.

If you're not able to get your insurer to cover your medical bills, your first step should be to negotiate with the hospital or medical service provider. Often, they have sliding-scale payments based on patients' incomes, and you may be eligible to pay a much lower rate than your original bill.

If you fall within your state's eligibility guidelines for Medicaid, you may be entitled to free or discounted health care for services not covered by your insurance. Such coverage is retroactive for up to three months, as long as you met the eligibility guidelines during the entire period. Eligibility varies by state: In California, families of four with household income up to $32,500 qualify for the service.

If your household income is too high to benefit from either the medical provider's price reduction plan or Medicaid, you can also consult local charity organizations for assistance. NeedHelpPayingBills.com has a list of reputable charitable organizations that may be able to provide assistance, depending on what medical issues you are facing.

5. Consider filing for medical bankruptcy.

If you’ve already exhausted your other options, but you know that you’ll be unable to pay your medical bills, filing for bankruptcy may be the right choice. According to a data analysis by NerdWallet Health, 1.7 million Americans filed for bankruptcy because of high medical bills in the last year.

By filing for Chapter 7 or Chapter 13 bankruptcy, you can prevent your creditors from foreclosing on your home, repossessing your car, or seizing other valuable assets. However, the bankruptcy will show up on your credit score for 10 years, and could affect your interest rates and your ability to qualify for loans.

Before filing for bankruptcy, you are required to first seek counseling from an approved credit counseling organization. These sessions will help you evaluate how you can budget your money more effectively, and whether bankruptcy is truly your best option.

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