By Michal Horný & Alex Hoagland

What Are Health Insurance Claim Denials?

Health insurance claim denials have become increasingly prevalent in U.S. health care systems, manifesting as lower insurer payouts and, analogously, lower provider revenue and higher costs for enrollees (Lo et al. 2025; Kliff 2025). Denials are common across all major types of insurers: in 2022 and 2023, an average of 14% of commercial claims, 16% of Medicare Advantage claims, and 20% of ACA Marketplace claims were initially denied (Alkire et al. 2024; Lo et al. 2025). These represent increases as large as 25% over the last 8 years (Kliff 2025).

Services most frequently subject to claim denials include laboratory tests, mental health services, and procedures with complex prior-authorization requirements, such as surgeries or oncologic treatments (Schwartz et al. 2022; Pollitz et al. 2023). Notably, denials also affect preventive services, such as cancer screenings or contraceptive care, which should be cost-free to patients under the Affordable Care Act when provided at recommended frequencies (Hoagland and Shafer 2021; Hoagland et al. 2025).

In theory, a claim denial is a signal that a health care provider’s billed claim does not meet an insurer’s standards for coverage applied to a specific enrollee contract. In practice, denials have become a powerful tool for insurers to contain costs. Unfortunately for researchers, measuring the fairness of denials is complex, even with data on a claim’s final outcome. Despite that challenge, the root causes, as well as the direct and indirect effects of these denials, remain important understudied economic questions.

Insurers deny claims for a variety of justifiable reasons. Some claims are denied because the respective medical service was explicitly excluded from a beneficiary’s plan (e.g., infertility services) or deemed medically unnecessary. Some claims are denied because the patient consumed care inappropriately, for example, by receiving certain services or prescription drugs too frequently or after their coverage had lapsed. Other claims are denied due to insufficient documentation or incorrect coding by the submitting health care provider. Whether driven by the type of care, patient behavior, or provider billing, claim denials act as a guardrail for insurers to enforce their contracts. Without these denials, insurers would bear greater risk and face higher costs, which would likely be passed on to enrollees in the form of higher premiums and limited access to coverage.

The increasing reliance on claim denials may indicate that either some denials are less benign or that the relative value of denials is changing over time. Insurers are well-incentivized to control their medical loss ratios, which may lead them to err on the side of denying marginal or ambiguous claims that otherwise would be payable. Moreover, as new technologies automate the processes for both reviewing initial claims and processing appealed denials, the marginal cost of denying eventually overturned claims has decreased dramatically, potentially leading to a surge in marginal denials.

At the same time, similar technologies adopted by health care providers to automate billing practices may themselves lead to more ambiguities or errors, resulting in initial denials. Hence, a nontrivial share of denials may reflect administrative noise rather than meaningful misuse of health care services.

How Do Health Insurance Claim Denials Impact Key Stakeholders?

Impact on Health Care Providers

When an insurer denies a claim, providers do not receive payment for services already rendered, thereby placing revenue at risk. Recovering payment requires substantial administrative effort, which can be especially burdensome for under-resourced providers. Because collecting payments from insurers is generally more reliable and less costly than collecting payments from patients, providers have strong incentives to resubmit denied claims to insurers. However, many lack the capacity to do so; over two-thirds of denied claims are never resubmitted (Reiner 2018). In such cases, the administrative and financial burden shifts to patients, who either must resolve insurer-provider disputes themselves or pay the full cost of care. The collection rates from patients are usually low, which reduces providers’ realized revenue, increases administrative costs, and, ultimately, compresses provider profit margins. To the best of our knowledge, no evidence currently exists on the downstream impacts of health insurance claim denials on health care delivery and quality.

Impact on Patients

When a denied insurance claim becomes a patient’s financial responsibility, the patient faces a limited set of options. The patient may pay the provider’s bill, thereby incurring a higher-than-expected out-of-pocket cost, or contest the denial through an internal appeal with the insurer. Such appeals are rare: in 2023, individual-market enrollees appealed fewer than 1% of denied claims, and insurers upheld 56% of these appeals (Lo et al. 2025). For certain claims, patients whose denials are upheld may pursue an external, independent appeal.

Contesting a denial requires substantial institutional knowledge of insurance rules and billing practices, as well as the time and resources needed to engage in reconciliation (Yaver 2024; Gupta et al. 2024). Patients whose denials are upheld and who cannot pay the resulting balance incur medical debt. Overall, these administrative burdens may erode trust in the health care system and reduce future care utilization (Anderson et al. 2024; Darden and Macis 2024; Hoagland 2025). In our own work, we have found that these burdens are disproportionately borne by patients with lower household incomes, limited education, and by racial and ethnic minorities (Hoagland et al. 2024). It remains unclear whether the administrative and financial burdens created by health insurance claim denials produce adverse health effects comparable to those associated with other forms of cost-sharing (Chandra et al. 2024).

What Data Can Health Economists Use to Study Health Insurance Claim Denials?

Health economists interested in studying insurance claim denials can use several data sources, each with their respective tradeoffs. Information on the incidence of and reasons for claim denials can be obtained from legislatively mandated, self-reported databases, such as the Health Insurance Exchange Public Use Files from the Centers of Medicare and Medicaid Services (used in Lo et al. 2025) or the New York State External Appeals database (used in Wei et al. 2022). These data are publicly available and low-cost, but are often limited in scope, detail, and generalizability, as they typically cover specific insurer types or geographic areas.

Medical claims and remittance data provide another important source (Gottlieb et al. 2018; Hoagland et al. 2024; Kang et al. 2025). Remittance data, by construction, capture the full life cycle of claims, including denials and reprocessing, while most claims databases include only adjudicated (approved) claims and are therefore ill-suited for studying denials. Exceptions include databases such as the Massachusetts All-Payer Claims Database, which requires reporting of denied claims (used in Kranz et al. 2025). These data offer objective, granular information on denial reasons and broad population coverage, but often cannot identify whether a denied claim reprocessing was initiated by providers or patients or whether resulting patient liabilities were ultimately paid. The analytical value of remittance and claims data increases substantially when these data are linked to information on providers’ adoption of electronic health records (EHR) or artificial intelligence (AI) in billing practices (available, for example, from the American Hospital Association’s Healthcare IT Database), and insurers’ use of automation and AI in claim review processes.

Provider billing data–the provider-side analogue to insurance claims–could offer valuable insights into denial incidence and financial consequences from the provider perspective. However, such data are proprietary, highly sensitive, and typically limited to individual health systems, constraining access and external validity.

Finally, patient surveys on health insurance claim denials can capture dimensions unavailable in administrative sources, such as detailed socioeconomic characteristics and downstream impacts of denials, including consequences in terms of forgone care or experiencing other burdens that are difficult or impossible to observe (used in Duffy et al. 2024; Yaver 2024; Gupta et al. 2024). Their key limitation is potential measurement error due to recall or social desirability bias.

Conclusion

The implications of health insurers’ increased reliance on claim denials affect all parties in the health care system. Patients often face increased financial liability, delays in care, and the burden of navigating appeals processes–costs that fall especially heavily on those with chronic conditions (Tran et al. 2026) or limited administrative capacity (Lo et al. 2025; Horný et al. 2025). In fact, patients rarely contest or appeal denied claims, leaving them liable for the bill balances their insurer did not pay to their physicians. Providers, meanwhile, bear the revenue hit from unpaid claims and invest substantial staff time into resubmissions, documentation, and appeals. Even insurers incur additional administrative costs associated with reviewing and assessing denied claims and their appeals.

As claim denials have become increasingly prevalent, they represent a salient policy challenge. Rigorous empirical evidence on the causes and consequences of insurance denials, including effects on future health care utilization, quality of care, and health outcomes, is essential for informing policies that address their distributional, efficiency, and welfare implications, making this an ideal area of study for health economists.

References

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