States Battle Health Insurers’ Claim Denials: Progress and Setbacks

The growing reliance on artificial intelligence (AI) by health insurance companies has come under fire after allegations that claims for vital care are being denied without human oversight. Critics point to the recent tragedy involving UnitedHealthcare CEO Brian Thompson, which has intensified scrutiny on prior authorization, the necessary approval process for medical treatments and drugs. Insurers face a class-action lawsuit claiming AI is used to unjustly deny claims.

As patients and physicians express their frustrations, numerous states are drafting legislation to enhance the regulation of prior authorization and claims reviews. Proposed measures include limiting AI usage in claim assessments, exempting specific medications from prior authorization requirements, ensuring timely mental health care responses, and mandating that review panels consist of licensed medical professionals with real-world experience.

Traditionally, insurers require medical professionals to secure approval before covering certain treatments. While insurers argue this practice helps control costs, many physicians and patients contend that it leads to harmful delays in necessary care. A significant survey from the American Medical Association revealed that 93% of doctors experienced delays attributed to insurance approvals, with nearly a third reporting serious negative outcomes linked to these delays.

Recent data shows that insurances on the Affordable Care Act marketplaces denied an average of 20% of claims in 2023. Notably, of 73 million in-network claims denied, only a scant 1% were appealed, revealing a systemic issue in claim processing.

The Biden administration has taken steps to increase accountability among health insurers. The Federal Trade Commission and the Department of Justice have ramped up efforts against healthcare corporations that engage in practices limiting patient access to care. Moreover, upcoming regulations mandate that Medicare and Medicaid plans implement a streamlined electronic claims review process starting in 2026.

Experts recognize the challenge in holding insurers accountable. Timothy McBride, a health policy analyst at Washington University, notes that healthcare entities hold considerable power, complicating reform efforts. While the Biden administration has made strides, meaningful reform remains elusive.

Looking ahead, it remains uncertain how future administrations may pivot on health policy. Dr. Mehmet Oz, a recent appointee for leadership at the Centers for Medicare & Medicaid Services, endorsed the use of AI in prior authorizations, suggesting both its potential for efficiency and risks, depending on its application.

States, while empowered to regulate health plans within their jurisdiction, face limitations affecting their ability to influence broader insurance practices. Roughly 90 million are enrolled in state-regulated plans, but millions more fall under employer-sponsored insurance plans, which are federally regulated. Additionally, the financial strength of insurance companies often enables them to absorb local fines without significant impact.

Nonetheless, officials like Kaye Pestaina from the Kaiser Family Foundation advocate for active state involvement in insurance regulation. State-level reforms have historically paved the way for federal initiatives tackling prior authorization issues.

State legislatures are actively seeking solutions to streamline the authorization process. For instance, Arizona, Michigan, and Pennsylvania have granted their insurance regulators increased access to claims data, promoting transparency and accountability. Pennsylvania’s recent bipartisan legislation mandates an Independent External Review process, allowing appeals when insurers deny services. Early results from this initiative reveal a successful overturn rate for a notable portion of denied claims.

In North Carolina, legislative efforts are advancing to impose strict timelines on insurers for decision-making and to require the inclusion of licensed practitioners in claims reviews. Some lawmakers, like Rep. Timothy Reeder, advocate for maintaining oversight while moving towards a more balanced system of care approvals.

However, not all initiatives have yielded the desired outcomes. Texas implemented a “gold card” system in 2021, aiming to exempt frequently approved physicians from prior authorizations. Unfortunately, only a small fraction of doctors have qualified for this exemption, prompting calls for further legislation to enhance the scheme’s effectiveness.

As healthcare providers and patients push for changes to the prior authorization process, the ongoing discussions emphasize the tension between necessary regulations and the autonomy of medical professionals. The future of patient care hinges on the ability of states and federal bodies to navigate these complex challenges.