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The Washington Independent

California to Investigate High Rates of Claims Rejections

Just in time for Congress’ return to Washington to continue its health reform debate, California Attorney General Jerry Brown announced Thursday that he’s

Habiba Ashton
Last updated: Jul 31, 2020 | Sep 04, 2009

Just in time for Congress’ return to Washington to continue its health reform debate, California Attorney General Jerry Brown announced Thursday that he’s launching an investigation into the claims-processing practices of the largest private insurers in the state, the Los Angeles Times reported today. The move came just a few days after the California Nurses Association released a report finding that, over the last seven years, those same companies have rejected more than 20 percent of all claims submitted by health care providers like doctors and hospitals.

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 30%.

The insurance industry is claiming that the report is misleading because (1) some denials are legitimate and (2) others are denied for technical reasons but paid later after the submission is tweaked. But while it’s certainly true that you wouldn’t want every medical claim rubber-stamped for approval (there are bad providers out there just as there are bad plumbers and bad presidents), the 22 percent figure, Brown says, is unacceptable.

“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.

The saga is a reminder that, for all the rhetoric and fear about the government being a lumbering bureaucracy incapable of tying its own shoes, insurance companies also have plenty of red tape that doctors and patients have to fight through. The difference being, of course, that insurers, while they have a fiduciary duty to shareholders, have no obligation to patients. At least in theory, this is one advantage of creating a not-for-profit insurance plan like the public option being debated so furiously in Congress.

Here’s one doctor’s comment to the Times:

“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.

Habiba Ashton | BCS Growth Fund (Israel) L.P., a private investment fund specializing in investments in technologically focused businesses with high growth potential, employs Habiba as an analyst. Mrs. Ashton served as an analyst and information manager at the Israel International Fund, the first Israeli venture capital fund designed specifically for Japanese corporate investors, prior to joining BCS. Habiba graduated with honors from Israel's College of Management with a B.A. in Business Administration.


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