What Happens After Your Insurance Denies a Claim?

Understanding Your Right to an External Review

By Michelle Spanier, RHIT, CCS, CCEP

Receiving a denial from a health insurance plan can feel overwhelming, especially when the service involves surgery, specialized treatment, or ongoing care your physician believes is necessary. Many people assume the insurance company has the final word. In reality, it often does not.

Most consumers have the right to request an independent external review when a claim is denied for reasons such as medical necessity or when a service is labeled experimental or investigational. This process exists to make sure coverage decisions are fair, unbiased, and grounded in sound medical judgment rather than internal plan policy alone.

External review is designed as a safeguard and an educational process. The goal is not to punish patients or providers, but to ensure that the right decision is made based on medical evidence and the terms of the patient’s contract.

Step 1: The Internal Appeal

After a denial, the first step is usually an internal appeal with the insurance company. The plan will have a clinician review the medical information and the reason for the denial. If the decision is overturned, the process ends there. If not, additional options remain.

Step 2: The External Review

Near the end of many denial letters is a notice stating that you may request an external review through your state insurance department or a federally designated process. This review is completed by an Independent Review Organization, known as an IRO. The organization is a neutral third party with no financial connection to the insurance plan and is free from any conflicts of interest.

In plain terms, this means:

• Independent physicians review the medical records and the terms of the policy.
• The decision is based on medical evidence and the definition of coverage in the member’s actual contract, not internal plan guidelines.
• If the external reviewer overturns the denial, the insurance company is required to honor that decision.

What Types of Denials Qualify

External review typically applies to decisions involving:

• Medical necessity
• Experimental or investigational treatments
• Clinical appropriateness of a service
• Certain coverage determinations under the policy

The process does not usually apply to self-funded employer plans or Medicare claims, but every situation is worth confirming with the insurance department or the plan administrator.

How to Get Started

The process can feel technical and confusing, and most patients have never heard of external review until they need it. A few practical steps can help:

1. Read the entire denial letter. Instructions for external review are often at the bottom.
2. Watch the timeline. Appeals have strict deadlines.
3. Gather supporting records. Include physician notes, test results, and letters explaining the need for treatment.
4. Contact the state insurance department for assistance in understanding the process.

Why This Process Matters

External review exists to protect patients and ensure coverage decisions are fair, balanced, and medically sound. It gives consumers access to an objective medical opinion and helps confirm that care decisions are grounded in evidence and the language of the contract.

If you or a family member receives a denial, do not assume it is the end of the road. Ask questions, follow the appeal steps, and remember that an external independent review may be available.

Health care can be complicated, but patients have rights and options to help them move forward with confidence.