Commercial Health Insurance Claim Denials: Why They Happen To Your Hospital And What Are Your Final Options

Hospitals receive claim denials daily. These denials are from commercial health insurance companies that have been billed for patient services. Did you know that the average amount of claim denials is between 5 and 10%? And that around 25% of claims are denied the first time that they’re submitted? Sure, those numbers sound small, but they aren’t really, especially when you consider how many bills are sent out by hospitals every day. Those claim denials can add up quickly over time.

What Are Commercial Insurance Claim Denials?

Commercial insurance claim denials are exactly what they sound like – a charge that a health insurance company refuses to pay for any particular reason. Don’t take this the wrong way. This sounds like the companies arbitrarily choose not to pay claims. This isn’t the case at all. There are a number of specific reasons behind their refusals, which we’ll get into below.

Claim denials can be defined as one of two things – either the charge doesn’t get paid at all, despite going through the state-level appeals process, or it ends up being underpaid. When claim denials occur for any reason, there are consequences. The hospital loses money that was already spent on utilities, staff salaries, and supplies, among other things. Even those denied amounts seem small at first, especially in comparison to everything else, they can add up before you know it. When hospitals appear in the news explaining why they’re shutting their doors, the number one claim is due to lost revenue.

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Why Do These Claim Denials Occur?

Commercial insurance claim denials occur for many different reasons. Here are some of the most common:

1) The service isn’t covered by the insurer – In some cases, the patient may have gone out of network or didn’t follow the preapproval process correctly. The insurance company will deny coverage, even for the hospital’s portion of the charge.

2) The filing limit has already passed – Every commercial insurance company has a different filing deadline. It could be anything from one week to 30 days (or something else entirely) after the service has occurred. If the hospital submits the charge after this deadline, then claim denials will follow.

3) Information has been left out or is incorrect – This actually happens more often that you’d think. All that it takes is one missing line or misspelling for claim denials to occur. It could be something like the patient’s last name is misspelled, or their insurance identification number contains a typo. The coding for the procedure and charges could be wrong or missing altogether. When this happens, those charges aren’t paid.

4) Duplicate charges have been submitted – Mistakes happen, and sometimes the charges were already sent to the insurance company. It’s also possible that the procedure took place more than once. In either case, the commercial insurance company thinks that they were already billed, so they’ll deny the claim.

5) The service was already billed and paid for – This is another mistake that sometimes happens. When you handle as many charges and claims a day as a medical billing employee, sometimes issues occur. If the insurer has already paid the charge, then they’ll deny the second, duplicate one.

Although hospitals don’t have much recourse for the last two reasons, they do for the first three. This means that if the claim denials are due to misspellings in the billing process, missing information, filing time limits, issues with pre-approvals, or even out of network charges, then the hospital can appeal. This is an entirely different process that doesn’t always guarantee a positive outcome.

The Issues With Claim Denials

Claim denials cause quite a few problems, especially where time is concerned. Let’s discuss the process in a little bit of detail. The commercial insurance company refuses to pay the charges. They explain their reason. The hospital then has their billing employees sent an appeal. This can happen up to three times at the state level. Fittingly, these are referred to as state-level appeals. By law, every hospital has three of these appeals to go through. In some cases, the claim is paid, and everyone is happy. In others, the insurance company may pay just a portion of the claim. They also could keep refusing the claim outright. Those underpaid and unpaid amounts are both subject to that state-level appeals process. The charges can be sent out again in the hope that the health insurance company finally gives in. It’s entirely possible that those claims will be paid by the end of the appeals process. However, it’s just as likely that they won’t be. That static from earlier states that between 5 and 10% of them remain unpaid. At that point, many hospitals just give up.

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What Happens Next?

After the three state-level appeals have been rejected and the claim denials are still in place, your hospital has a choice. Usually, that money goes uncollected. This means that the information on it ends up in your accountant’s office where it’s placed on a list of permanent debts. Over time, those debts grow, and eventually, your hospital becomes insolvent. Hospitals go bankrupt and close their doors regularly, thanks to this practice. They simply cannot pay their bills any longer.

There is a solution to getting those claim denials paid. This involves the Federal ERISA process. However, many hospital administrators either aren’t aware of it, or they aren’t sure how to begin to collect on those debts using this method. They need to call in some additional help.

This Is Where Federal ERISA Appeals Come In

ERISA is short for the Employee Retirement Income Security Act. This federal law is set up to ensure that hospitals – and clinics – can collect on those state-level claim denials. The commercial insurance company needs to pay them. They are legally obligated to under the Federal ERISA Act. The trick lies in getting those appeals done correctly. And yes, even though the Affordable Care Act is in place, ERISA is still valid. The ACA accepted every section of the Federal ERISA Act when it was signed into law.

However, the process isn’t taught in a typical medical billing and coding course. In fact, many lawyers aren’t even taught the specifics of the law. Companies like ERISA Recovery know the ins and out of the entire process. This is why we can take those claim denials and turn them into revenue.

In fact, even if your hospital’s billing department had the time (many don’t since they need to keep up with current charges, as well as those tricky state-level appeals), they wouldn’t know how to submit those claim denials under ERISA to get them paid. You need outside help.


It’s time to deal with your claim denials instead of ignoring them. You need to call ERISA Recovery today. We’re experts at navigating the Federal ERISA Process and can turn those claim denials into money in your hospital’s bank account. Are you ready? Call us today. We can be reached at (972) 331-4140. We also have a contact form on our website. Just fill it out, and one of our experts will give you a call.