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Kristina Zucchi is an investment analyst and financial writer with 15+ years of experience managing portfolios and conducting equity research.
Updated February 07, 2023 Reviewed by Reviewed by Thomas J. CatalanoThomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
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Navigating health insurance coverage is a monumental task. Consumers generally have no say in which services are rendered, which services are covered, and how much they will ultimately be responsible for paying. It is not uncommon that a doctor requests a service, the patient follows the doctor's orders, insurance pays only a portion or none at all, and the patient is left holding the bag—and the bill.
The No Surprises Act, part of the Consolidated Appropriations Act of 2021, forbids patients from receiving surprise medical bills when seeking emergency services or certain services from out-of-network providers at in-network facilities.
Other common scenarios: A patient calls the doctor to ask for the price of a particular test or treatment, only to be told the price is unknown. Or a plan participant calls their health insurer to ask for the customary fee for a service—to determine how much of it will be covered—only to be told, "It depends." No one would go into the local electronics store and buy a TV without being told the price, but in medical care, this is basically what patients are expected to do.
To be fair, health insurance companies, traditionally known as the gatekeepers to healthcare, have recognized this and in recent years have tried to improve price transparency. Despite these efforts, there are many pitfalls associated with health insurance coverage. Learning how to navigate these should make for a more educated healthcare consumer. Here are the services that most insurers decline and a look at how you can get things covered that may initially be denied.
Medicare provides the most insight into covered benefits for consumers. The Medicare system is a federally run health insurance system granted primarily to U.S. citizens ages 65 and older. In general, the basis for all health insurance benefit design is the Medicare system. Many commercial health insurance plans model basic benefits after those benefits granted to Medicare recipients.
The focus is on health and wellness rather than sickness; annual physical exams are not fully covered by Medicare, and treatment for severe ailments also usually requires a copay or coinsurance payment. However, preventative assessments, such as wellness visits and various screenings, are included in Medicare Part B. After the basic plan design is set for commercial health insurance, other benefits are added depending on the requirements of the plan's sponsor—for example, an employer.
To understand the basics of what is covered under the Medicare plan, you can visit its website. Medicare is not an "early adopter" system; therefore, most new technologies are typically not covered at all—or not covered as robustly as other, more time-tested technologies. One example of this is drug-eluting stents versus bare-metal stents in cardiac procedures or ceramic hip replacements versus traditional metal ones. It is much easier to obtain coverage for proven procedures rather than those that could potentially be deemed as "test procedures." Similarly, covered lab tests are often lagging behind the newest technology; one example of this is the ThinPrep pap test.
Although each benefit plan is different, depending on the sponsor's needs, and depending on state regulations (each state has its own insurance commissioner), there are services that are typically not covered by most health insurance plans.
Many services that improve someone's exterior appearance, such as plastic surgery and some dermatological procedures, are usually not covered by typical plans. Interestingly, because consumers elect to have these procedures, there is great price transparency for them. A consumer who wants laser hair removal can call any number of providers, and each one will be able to immediately quote a price.
The costs of many procedures often aren't covered by health insurance, although health insurers are required to pay for all the testing required to make an infertility diagnosis. However, this is one of the treatment areas that differs among states.
Currently, 20 states mandate coverage for fertility treatments, but even in those states, there are loopholes that allow employers of certain sizes to decline coverage. If covered by a fully insured plan, the company must follow the state insurance laws. Self-insured plans are exempt from the state stipulations and can decline coverage.
Prescription drugs are tested and approved for specific disorders, such as autoimmune diseases. At times, these drugs can be prescribed for disorders not listed on the "label." In some cases, the insurance company may reject paying for these off-label uses.
Occasionally, physicians can argue for the coverage of off-label prescriptions for specific uses by offering peer-reviewed research supporting the prescription, but insurance companies are not obligated to cover them.
Covering these costs often happens slowly, particularly if the technology does not demonstrate an added benefit for the increased costs. Medical companies are tasked with proving that a new drug, product, or test provides a measurable benefit to the consumer such that the cost will improve mortality or morbidity rates (basically, save lives or reduce ill health). Because Medicare is not an early adopter of new technology, other insurance plans generally follow suit and wait for more data before including it in the covered benefits.
Although there are services not typically covered, there are "special cases" in which insurance companies do make exceptions and cover these services. However, for many instances in which services are not covered, there are several other courses of action that consumers can take.
For cases in which a new technology provides additional benefits as opposed to the older technology, consumers can try several methods for getting the insurance company to pay. Many insurance companies require doctors to "prove" why the costlier procedure or product is more beneficial. Additionally, an insurance company may pay a specific amount for a procedure, and the patient can pay the difference to get the new technology—in other words, partial coverage is available. The first step in this process is to discuss the coverage with the insurance company, determine what will be covered, and have an agreement with the physician for the total cost and what you will be required to pay.
Medical device companies can also lobby for inclusion. Within the Medicare system, they may apply for a new technology add-on payment. If accepted, Medicare will cover a portion of the device cost or the incremental costs associated with it.
Many new drugs or services introduced in the market undergo trials to test additional benefits or uses. Consumers can try to get into one of the trials and get the service or product as part of the trial. However, although each trial is designed differently, many have a group of participants who receive a placebo (a fake treatment), so you are not guaranteed the drug or service. Your physician should be able to inform you of any trials available as the Food and Drug Administration (FDA) requires the listing of drug trials.
Health insurance companies provide insured persons with the option to purchase a rider, an added policy feature, for a specific covered benefit. However, these riders can be costly and may not be available for purchase for all treatments.
Covered persons can contest a denial by an insurance company. Each insurance company is required to provide an insured person with the procedure required to appeal. In addition, if the appeals process results in another denial, the insured consumer can appeal to the state insurance commissioner for a review of the case. The process can be somewhat lengthy but is often without cost to the insured person.
Managed care plans have rules regarding the use of in-network versus out-of-network care that must be followed in order to ensure that services are covered.
Some doctors' offices will help consumers navigate the insurance maze to determine coverage. However, as the consumer, it's always wise to speak directly with the insurance company to validate that a procedure is covered. Frustratingly, insurance companies will sometimes decline to speak with an insured member and speak only with a physician's office. But persistence generally pays off.
There are many other pitfalls of insurance coverage that consumers should beware. Some of the most common are:
Most health insurance companies use Medicare as a roadmap for what will and will not be covered. Medicare tends to be conservative in its adoption of new drugs, therapies, and devices, so cutting-edge technology will often be deemed too expensive or experimental for coverage.
Though coverage can vary case by case, some procedures are seldom covered. Cosmetic procedures such as plastic surgery or vein removal are nearly always considered elective and so are not covered. Fertility treatments are only covered in certain states, and even then, there are loopholes that allow insurers to deny coverage.
New medical devices are often not covered until there have been years of evidence of their value versus costs. Some prescription medications that are prescribed for off-label use may also be denied.
Yes, you may appeal an insurers' denial of your claim. Typically, your insurer will expect you to work with your physician's office to provide justification for the need for the treatment, drug, or device, and it still may not be approved. You may appeal beyond your health insurance company with the state insurance commissioner.
Although the Transparency in Coverage Proposed Rule intended to make prices available to all, hospital systems and providers have been slow to adopt it. The only true way to know what price you'll pay is by speaking to a representative of your insurance company. Some companies require pre-authorization or approval for services to be covered as well. Check the language of your plan and get your approval in writing.
Understanding and working within the guidelines of health insurance is complex. Many companies provide members with access to a vast amount of information on secure websites. This information can help members select a doctor or facility, review the drug formulary, and learn other key information. But to understand what is a covered benefit, having a live discussion with an insurance representative is the best course of action. As higher percentages of healthcare costs are pushed to insurance plan members, more of the "shopping" decisions should also be made by members.
