Understanding the Difference Between Claim Denials and Claim Underpayments
In medical billing, it is crucial to differentiate between denied and underpaid insurance claims during the claim cycle. “Claim denial” is when an insurer or payer refuses to pay for a service or treatment, usually due to billing errors, missing documentation, or services not covered by the insurance policy. On the other hand, “underpayment” occurs when the payer reimburses the practitioner for less than the billed amount for a service or treatment, and many reasons can lead to it.
Common Reasons for Underpaid Insurance Claims
- Coding errors, unbundling bundled procedures, downcoding, fee schedules, and policy changes are some of the common challenges that practitioners face while billing insurance companies for their services.
- Medical coding is a complex and ever-changing field, requiring a focused expertise to stay on top of all the current codes and requirements. Even minor coding errors can lead to significant discrepancies in reimbursement rates, or worse, entire claims being rejected. For instance, omitting a required modifier, which provides additional information such as which side of the body was treated or examined, can result in a rejected claim.
- Some procedures are submitted with a bundled code, which means one code includes all the parts of the procedure. However, unbundling happens when practitioners are unaware of the bundle requirement and bill each step of a procedure separately. This practice may result in higher reimbursement rates on paper, but is likely to result in underpayment if the insurer denies the unbundled claims.
- Downcoding is another common issue where insurers reimburse the practitioner for a lower-level service than what was performed. This practice is common when the insurer thinks that the practitioner is using a code for a higher-level service than was necessary for the diagnosis.
- Insurance companies have different fee schedules that dictate the amount they will reimburse for a particular service. Practitioners may receive less than the billed amount if they bill according to the wrong fee schedule or the insurer has lowered the reimbursement rates.
Lastly, insurers may update their policies and reimbursement rates, resulting in lower compensation for practitioners. Read More...
