What Is a Denied Medical Claim and Why Does It Happen?
Getting a letter from your insurance company saying your claim has been denied is one of the most frustrating experiences in healthcare. You went to the doctor, you have insurance, you expected coverage—and now you're being told you have to pay the full bill yourself.
You're not alone in this experience. According to data from the nonprofit organization KFF and federal figures, approximately 850 million medical claims are denied each year in the United States. That's out of more than five billion total claims processed.
The worst part? Less than 1% of patients appeal these denials, even though many denied claims can be successfully overturned.
What Exactly Is a Denied Claim?
A denied claim is when your insurance company reviews a request for payment from your healthcare provider and decides they won't pay for it. This means you become responsible for the full cost of that service, test, procedure, or medication.
A denial is different from a rejected claim. A rejection happens before the insurance company even looks at your claim—usually because of a technical error like wrong information or a missing form. Rejections can often be fixed and resubmitted quickly.
Denials are more serious. The insurance company has reviewed your claim and made a decision not to cover it. But here's something important to know: many denials can be appealed and overturned.
Common Reasons for Denied Claims
Insurance companies deny claims for many different reasons. Understanding why your claim was denied is the first step toward fighting it.
Medical Necessity Denials
This is one of the most common—and most controversial—reasons for denials. Your insurance company decides that the treatment, test, or procedure wasn't "medically necessary."
What's frustrating is that your doctor thought it was necessary. They ordered the test or treatment because they believed you needed it. But insurance companies use their own criteria to determine medical necessity, which doesn't always align with your doctor's judgment.
Prior Authorization Not Obtained
Many insurance plans require your doctor to get approval (prior authorization) before providing certain services. If your doctor's office didn't request this approval, or if it was denied and the service was provided anyway, insurance won't pay.
This is complicated because patients often don't know which services require prior authorization. You might assume that if your doctor orders something, it's automatically approved.
Out-of-Network Provider
If you received care from a doctor or facility outside your insurance network, your claim might be denied or paid at a much lower rate. This can happen even if you didn't know the provider was out of network.
Emergency situations create particular problems. You can't always choose which emergency room or which surgeon is on call when you need urgent care.
Service Not Covered by Your Plan
Some services simply aren't covered under your insurance plan, even if they're medically necessary. This might include certain types of therapy, experimental treatments, or specific medications.
Administrative Errors
Sometimes claims are denied because of simple mistakes:
- Wrong patient information
- Incorrect billing codes
- Missing documentation
- Expired coverage dates
- Clerical errors
These are often the easiest denials to overturn because they're based on fixable errors rather than coverage decisions.
What Happens When Your Claim Is Denied?
When your insurance company denies a claim, here's what typically follows:
You receive a denial letter explaining why they won't pay. This is technically called an Explanation of Benefits (EOB), though when a claim is denied, it feels more like a rejection letter.
The provider sends you a bill for the full amount that insurance didn't cover.
You have the right to appeal the decision. Your denial letter should include information about how to file an appeal and the deadline for doing so.
Why Denials Are Increasing
Healthcare professionals report that insurance denials have increased significantly in recent years. Several factors contribute to this trend:
Automated systems now review many claims. AI and computer algorithms can flag claims based on specific criteria, sometimes without human review.
Prior authorization requirements have expanded. More services now require pre-approval than in the past.
Cost control measures by insurance companies mean more scrutiny of expensive treatments and medications.
The Real Impact of Denied Claims
Beyond the financial stress, denied claims create enormous emotional burden. You're already dealing with health issues. Now you're facing unexpected bills and the prospect of fighting with your insurance company.
For caregivers managing medical care for a loved one, denied claims add another layer of complexity to an already overwhelming situation. Research shows that family caregivers spend an average of 22.5 hours per week on caregiving tasks—and fighting denied claims takes time many don't have.
What You Can Do
If your claim has been denied, don't assume the decision is final. Here are your immediate options:
Read the denial letter carefully. It should explain exactly why the claim was denied and what your appeal rights are.
Contact your insurance company. Sometimes denials are based on simple misunderstandings or missing information that can be quickly resolved.
Talk to your doctor's office. They may be able to provide additional documentation or correct coding errors.
File an appeal. Studies show that up to three-quarters of denied claims that are appealed are eventually approved.
Consider getting help. Some services specialize in fighting denied claims and can handle the appeals process for you.
You're Not Alone
The sense of helplessness that comes with a denied claim is something that Dr. Ezekiel Emanuel, an oncologist at the University of Pennsylvania, has observed firsthand. "Because a lot of people won't appeal, won't call, don't have the knowledge to sit on the phone—a lot of those go away," he explained in a recent interview.
That's exactly why many people simply give up and pay bills they shouldn't have to pay. The system relies on the fact that most people won't fight back.
But you have rights. Your denial letter isn't the final word. Services like HealthLock can help monitor your claims and guide you through the appeals process, taking some of the burden off your shoulders during an already difficult time.
Don't Let This Happen to You
The situations described above happen to millions of Americans every year. HealthLock's experts monitor your claims 24/7 and alert you to problems automatically, so you can focus on getting well instead of fighting with insurance companies. HealthLock's members have saved over $243 million by catching billing errors, denied claims, and fraud before they became major problems.
Disclaimer: We're not medical billing experts or attorneys—we're patients and caregivers sharing resources to help you navigate a broken system. This information is for educational purposes only and should not be considered medical or legal advice.
Affiliate Disclosure: This site may contain links to services like HealthLock that help monitor medical claims and billing. We may earn a commission if you sign up through our links, at no extra cost to you. We only recommend services we believe can genuinely help.