Smart Expert Tips if You Need an Insurance Payout

If you’ve ever had an insurance claim denied, especially a medical claim, you’re not alone.

Insurers Deny Claims Without Reviewing Medical Records and Worse

In 2015, an Aetna medical director testified under oath that he never looked at patients’ medical records before accepting or denying claims, making those decisions based on nurse recommendations. The case led to the insurer ultimately agreeing to an undisclosed settlement with the plaintiff.

According to KFF, in 2021, about one in seven in-network health insurance claims were denied, though some insurers denied as many as 49 percent of claims! Only about one in 500 people whose claim was denied appealed the denial and most denials appealed were upheld by insurers.

A ProPublica report decries how difficult it is to get definitive numbers on the prevalence of claim denials but that the rate is likely between one in five to one in 10. They quote Wendell Potter, a former Cigna communications executive, as saying, “Refusing payment for medical care and drugs has become a staple of [insurers] business model, in part because they know customers appeal less than 1 percent of denials… That’s money left on the table that the insurers keep.”

ProPublica also described how Cigna does “batch denials,” saying “The company has built a system that allows its doctors to instantly reject a claim on medical grounds without opening the patient file, leaving people with unexpected bills… Over a period of two months… Cigna doctors denied over 300,000 requests for payments using this method, spending an average of 1.2 seconds on each case.”

According to another ProPublica report, another huge insurer, United, tried to deny life-saving coverage for a university student who needed unusual treatments that cost the insurer around $1.7 million a year. 

The insurer based their denial on a third-party reviewer, but ProPublica listed multiple behaviors on the part of the insurer’s staff and the third-party reviewer that led the student and his family to feel United acted in bad faith. 

This included proposing a big cut in dosage (that would have saved the insurer hundreds of thousands of dollars a year) that the student’s doctor, a leading expert, said would have rendered his treatment ineffective and would have likely led to it no longer working even at the higher doses. 

The family sued and the insurer ended up reversing their denial. Needless to say, the ordeal suffered by the student was horrific and even led to his experiencing suicidal thoughts.

Picking the Right Insurer May Help

Not all insurers behave the same – the KFF report states that while some deny nearly half of in-network claims, others deny as few as one in six.

If you have several options for carriers, try researching carriers’ track records and pick the one that seems less likely to force you to jump through hoops to get what they contractually owe you.

How to Get Insurers to Cough Up Coverage When They Deny Claims

If your claim is denied, your first step shouldn’t be a lawsuit. Those are expensive and the outcome is uncertain.

It’s worth following the insurer’s appeal process first. 

While statistics show most appeals are denied, you have an almost even chance of getting the initial denial reversed, because it seems many insurers try to deny even cases where there’s no justification, as mentioned above, simply because they know that out of 500 denials, perhaps one will appeal.

If you’re that one in 500, you may well succeed simply by trying. However, even if this first attempt fails, all is not lost.

You can hire a patient advocate to fight for you.

John Gugle, CEO, Gugle Wealth Advisory recounts a situation when he had to fight to get a claim covered, “I became very sick once while on a cruise, incurring over $6K in medical bills from Royal Caribbean, was discharged to a hospital on St. Kitts, where I paid another $2K out of pocket, and then had to arrange for a $68k air ambulance to fly me back to the USA for emergency surgery. I then had to submit claims to my insurance company asking them to cover those expenses. 

“When dealing with health insurance claims, I highly recommend folks work with a Patient Advocate. My Patient Advocate had to fight through multiple claim denials to get those expenses reimbursed. Ultimately my Patient Advocate managed to get ALL of my costs reimbursed. She understood the insurance company’s tactics, knew how to fight their denials, and used her industry experience to get my case heard and my claim accepted. She fought tirelessly on my behalf. Hiring her was the best money I ever spent!”

If your patient advocate is unsuccessful but you think you have a strong case, that may be time to go the lawsuit route, as the above-mentioned student had to do.

Picking a Good Insurer Is Good Practice for Life Insurance Too

The last thing you want to happen with your life insurance is for your beneficiaries to have to fight to get the death benefit they need once you’re gone.

Here too, as with medical coverage, it helps to pick a good insurer. Having expert guidance can help here as well.

Omar Morillo, CFP, ChFC, AIF, Founder, Imperio Wealth Advisors says, “Over time, I’ve seen the significant impact of using reputable, A-rated life insurance carriers for a smooth and efficient claims process. Key strategies include ensuring all necessary documents are in order, maintaining open communication with the insurer, and seeking professional assistance. These steps help expedite the process and reduce stress during challenging times. 

“To improve the odds of a claim being honored, it’s essential to maintain open communication with beneficiaries and the carrier’s claims department about policy details, promptly file claims, and maintain full disclosure with the insurer. For example, I recently helped a family with a substantial life insurance payout from an A-rated carrier. Due to meticulous record-keeping and a solid financial plan, the claims process was completed swiftly. Proper preparation and professional guidance significantly eased the claims process.

What to Do and What to Avoid Doing Once You Receive the Payout

Usually, you get a large payout because you need it, whether to cover high medical bills or to replace the income you’d have received from your spouse once he or she passes.

It’s important to use the money judiciously, investing as much as possible once you’ve covered your immediate needs to provide for your long-term ones too.

Morillo again, “We advise clients receiving sizable payouts to set aside funds for immediate needs, avoid impulsive decisions, and diversify investments for long-term financial stability.”

Michael Rosenberg, RFC, CPFA, Managing Director and Founder of Diversified Investment Strategies agrees and expands, “If you have a trusted financial advisor, that should be one of your first phone calls when it’s time to file a death claim, whether it is an annuity death benefit or a life insurance claim. The advisor can reassure the beneficiaries that he or she will be there to assist and advise them on handling the claim. 

“Most of my clients have IRAs, annuities, and life insurance, among other assets, all of which pass through beneficiary designations but have different rules and options. Typically, when beneficiaries come to my office, I describe their options for each, whether it’s to stretch a non-qualified IRA or the different options available with a non-qualified annuity, which can be ‘stretched’ over a lifetime. 

“I’ve had many clients who passed away, leaving children or other family members as beneficiaries. One recent case involved a seven-figure payout to nieces and nephews. I gathered the family members, described their options, and made the process as easy for them as I could.”

The Bottom Line

Insurance is a critical tool that lets you pay a known amount, the premium, to avoid having to pay catastrophic amounts if bad things happen, be it a severe medical issue or accident or passing away and leaving dependents without your income.

However, while insurers are meticulous and prompt in taking in premiums, many carriers, especially health insurers, are less eager to pay out large claims.

The above provides some expert tips on how to navigate these treacherous waters to have a better chance of receiving what you’re due.

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This article was originally published on Wealthtender and is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions. Wealthtender earns money from financial professionals, which creates a conflict of interest when these professionals are featured in articles over others. Read the Wealthtender editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.