Gov. Tony Evers’ plan to make Wisconsin the first state in the nation to audit insurance companies over denying health care claims probably won’t happen until the Democratic Party controls all of state government. But in articulating the party’s desire to assist health care consumers, he’s teeing up a populist idea.
Under the governor’s plan, outlined in his February budget address, if an insurance company is denying Wisconsinites’ claims too often, the state will audit them with the assistance of a new Public Intervenor Office devoted to helping the insured get the coverage they pay for. If an insurance company denies a health care claim, Evers said they should have “a darn good reason” for it.
“It’s frustrating when your claim gets denied and it doesn’t seem like anyone can give you a good reason why,” Evers said.
His approach to addressing the issue has a number of critics, but to others, the frequency of claims denial is both a health and financial emergency for consumers. According to an analysis released in January by KFF (formerly the Kaiser Family Foundation), insurers on the HealthCare.gov exchange denied 19% of claims submitted for in-network services in 2023, and they denied 37% of claims for out-of-network services.
Evers’ plan
In his budget address, Evers said he frequently hears from people who feel like they’re getting “ripped off” by the health care industry and insurers. Among their complaints is they can’t get a straight answer on what’s covered by insurance and what’s not, and their health problems get worse because it takes too long to get an appointment or be approved for care — if it’s ever approved at all.
“People try to get their care paid for but insurance companies refuse to cover it,” Evers said. “Families get a medical bill and see all sorts of charges they didn’t know about, or even worse, suddenly collections agencies are calling about unpaid medical bills they didn’t even know they hadn’t paid.”
Evers also blasted the practice of prior authorization, in which insurance companies require health care professionals to get permission before they prescribe medication or care that people need. He said the result is that people have to wait to get care until doctors get permission, or may end up forgoing treatment altogether because of “all the hassles with insurance.”
This wait for medical care can cause health conditions to get even worse or even dangerous and life-threatening, Evers said.
“Basically, that means health insurers — not your doctor — are deciding whether your prescribed treatment is medically necessary,” Evers said. “Health insurance companies try to use these so-called prior authorizations to help their bottom line and cut costs. They’re banking on being able to avoid covering the services and treatment you need.”
In response to this practice, Evers’ proposal also creates new standards to expand health care services and procedures that insurance companies are required to cover. One example of care the ban on prior authorization would apply to is in-patient mental health services.
“That means more health care services and procedures will be covered by your insurance automatically — no delays, no hassle, no questions asked,” Evers said. “Wisconsinites should know what you’re getting when you buy your health insurance plan. You should know which services and treatments will need prior authorization.
“So, we want to require health insurance companies to be transparent from the get-go,” he said. “They’d have to tell you right up front which services and treatments will require prior approval so you can find a health plan that’s right for you.”
Evers’ plan would also create standards for maximum wait times for scheduling appointments so services “are available within a minimum time and distance of where you live.”
His proposal would also require health providers to give Wisconsinites notice of unpaid medical bills and give state residents a six-month grace period, effectively banning health care providers from reporting unpaid medical debt to consumer reporting agencies during that period of time.
Mixed response
Sarah Davis, director of the University of Wisconsin–Madison’s Center for Patient Partnerships, finds a great deal of merit in Evers’ proposal. She operates an interdisciplinary center that is a medical-legal partnership offering patient advocacy education to UW-Madison students in the law school, and schools of Medicine and Public Health, Nursing and Pharmacy. Students learn about the complexities of health care so they can help patients navigate a system that Davis said is not designed for patients but for profit that — in the case of publicly traded insurers — drives shareholder value.
Anyone in Wisconsin can call the center’s Health Justice Clinic if they have an issue with insurance paying for medically necessary care, and the center helps them with the multistage appeal process that all insurers in Wisconsin are required to offer.
“Insurance is a business that is designed to make money for shareholders,” Davis said. “That’s just the nature of insurance in a market economy, and unfortunately it’s not designed to pay for all the care that patients might need and be contractually obligated to receive.
“You must have watchdogs like our center or like the new office that the governor’s proposing, the Public Intervenor, because left to their own devices, insurance companies don’t have patients’ best interests at heart,” Davis said. “They don’t. It’s not their priority.”
If a health insurance claim is denied in Wisconsin, consumers also can request an independent review, file a complaint with the Office of the Commissioner of Insurance, or explore other options like small claims court or legal counsel.
Davis said watchdogs like the Center for Patient Partnerships and OCI are needed to help consumers who often are not only in the process of appealing an insurance denial, they are doing so while dealing with a life-threatening illness or serious chronic illness.
“Only about 1% of people actually do follow up on denials and appeal them, and about half of all appeals are overturned if you go through a pretty lengthy process,” Davis said. “So, that means 50% of the denials are wrong, should be covered, and so the current system isn’t working to make sure that things that should be covered by the (insurance) contract are actually covered.”
Insurance industry representatives have a different view of the governor’s proposals. Abbey Rude, legislative and policy director for the Alliance of Health Insurers, whose members include WPS Health Solutions and Delta Dental, said health insurance is one of the most highly regulated industries in the American economy and one of the only ones with administrative costs and profits capped by federal law for large segments of the industry.
In reference to the prior authorization of services, which is largely dictated by medical professionals that insurers either employ or consult with, Rude said removing the few remaining tools health plans and employers have to ensure patients are receiving “safe, appropriate, and high-quality care” is not a step in the right direction. “We hope to see these misguided provisions removed from the (proposed) budget,” she said.
Rachel Ver Velde, associate vice president of government relations and senior political advisor for Wisconsin Manufacturers & Commerce, the statewide chamber of commerce, also criticized Evers’ proposal. She said Wisconsin faces the fourth highest hospital costs in the country, making it an outlier in the Midwest, and employers and consumers are increasingly concerned about affordability.
Ver Velde said employers support changes that promote pricing transparency and empower patients to make informed choices without government mandates that increase costs.
“Unfortunately, Gov. Evers’ proposed budget removes key tools that help employers contain costs,” Ver Velde said. “His plan inserts costly, top-down government mandates for coverage, limits the ability of payers to prevent unnecessary or harmful care, and weakens health care consumerism. These changes will drive costs even higher, making Wisconsin’s already expensive health care system even more unaffordable.”
What’s behind denying a claim?
There are four legitimate reasons a claim might be denied, according to Marty Anderson, chief strategy and business development officer for Group Health Cooperative-South Central Wisconsin, a not-for-profit organization that provides both health care insurance and services. The policies vary from insurer to insurer, but in general 80% to 90% of claim denials are because:
1. The care provided is not a covered benefit under the essential health benefits identified in the Affordable Care Act (“Obamacare”) for small group, individual, or family plans. One example is allergy testing. “Insurers can choose to cover them or not, and some don’t,” Anderson said. “If somebody were to seek allergy testing in an Affordable Care Act product, oftentimes that would not be covered because it’s not a covered benefit under the policy.”
2. A patient went to an out-of-network provider without prior authorization. “Most insurance plans have a network of providers that you have to seek services at,” Anderson said. “If you go outside of that network without seeking prior authorization, that’s going to be a denied claim.”
3. The care, service, or drug therapy provided is not considered a medical necessity. This means that either the care being sought isn’t medically necessary or an evidenced-based, proven treatment. “It might also mean that we have a preferred mode of treatment and … we’re steering them toward the preferred mode of treatment,” Anderson said.
4. The lack of prior authorization, which is related to medical necessity. “We have certain procedures that we, as an insurance company, require either the provider or the member to reach out to us for approval before they seek those services,” Anderson said. “An example of that is some type of elective surgery where we want to make sure that we’re working with that person and know that they’ve gone through a lot of conservative treatment protocols before ultimately they land at having that joint procedure or whatever the elective procedure is.”
Anderson said preferred treatments and medical necessity are determined by medical professionals, not insurance executives, including an external vendor and an internal care management department.
“There are two things that we have that help inform whether something is medically necessary,” he said. “One is that we have our own medical policies that we’ve drafted for certain conditions, and then we also use an external organization to compare our policies against because we want to make sure that we’re following the medical evidence.
“We also want to make sure that our policies don’t get out of date in terms of the medical evidence pertaining to how things should or shouldn’t be covered,” Anderson said.
John Nygren, CEO of the Wisconsin Association of Health Plans, whose members include Quartz Health Solutions, Dean Health Plan and GHC-SCW, worries about the effects of the governor’s plan on the regional health plans his organization represents.
Nygren, a former Republican lawmaker who served on the Assembly Insurance Committee, said there are 10 regional health plans in Wisconsin and most of them are not-for-profit organizations, not publicly traded insurers with shareholders to please.
In the health care universe, Nygren said these plans are the only ones working to keep costs down. When there is a state mandate that plans must cover something at a certain cost, or that plans must cover something that isn’t medically necessary, these (regional) insurers don’t have the ability to pass it on to consumers in 49 other states like the large insurers do.
“These mandates are a bigger deal to us than they are to them just for that reason,” he said. “We think consumerism and competition is a better way to drive the market than mandating coverages.”
According to Nygren, the rate of prior authorization rejections is 14% in Wisconsin whereas the national average is 19%. He credits the prevalence of community-based plans here for that performance.
“It’s obvious that we’re reducing that average significantly, and a lot of times there’s an initial rejection and the initial rejection is based on maybe there wasn’t documentation that was provided appropriately from the doctor’s office to get it approved,” he said. “Oftentimes, those things are handled and corrected very quickly.
“A lot of our member plans are owned by hospital systems, so even from a financial standpoint, it is in our members’ best interest to make sure there is no false barrier for people being able to get the care at the hospital systems that own us,” he said. “So, it is kind of a silly argument here in Wisconsin because we should be the blueprint for the rest of the country.”
Confusing coverage
In his budget address, Evers noted the frustration and confusion that consumers have regarding their medical insurance coverage.
While much of the onus is on consumers to understand their own coverage — and employers who sponsor medical insurance plans play a role — the ACA requires insurers to provide enrollees with “clear, consistent, and comparable” information on health plan benefits and coverage.
According to the Centers for Medicare and Medicaid Services, those requirements include an easy-to-understand summary of benefits and coverage and a glossary of health insurance terms.
Rude of the Alliance of Health Insurers said the federal government’s final rule on transparency in coverage requires that most group health plans and health insurers disclose price and cost-sharing information to participants, beneficiaries and enrollees. As of January 2024, health insurers also must provide an online tool showing real-time, cost-share estimates for all covered services, and paper versions must be made available upon request.
Davis doesn’t believe it’s helpful to blame individual consumers for not fully understanding their coverage because in her experience, many people who are having problems with their insurance are in the middle of a crisis. She said claims denials occur for bottom-line reasons.
“I would love everyone to know 100% what their insurance covers, but the denials aren’t happening because the patient didn’t read their insurance contract,” she said. “The denials are happening because the system is designed to automatically deny.
“The insurance company knows that most people won’t appeal, or that they will appeal and it will take months and months before they have to pay the claim,” Davis said. “During that time, they’re investing the money they would have paid out. That’s how insurance companies make money, if they’re investing the premiums and the money that they’re holding before they pay out claims. It’s a numbers game.”
