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What Is a Claim Denial? Definition, Causes, and How to Resolve Them

A claim denial occurs when the insurance company refuses to pay for services or treatments you have already delivered to a patient.

Think of it this way: you perform a CT scan, then submit a claim with all the details and requirements the insurance company needs to a specific payer. Now, what happens? The insurer refuses to pay for the claim for a specific reason, such as the patient not being eligible or the service not being covered by insurance. However, you can recover these claim denials after fixing and resubmitting them on time and accurately.

In today’s blog, we will review what claim denials are, why health insurance companies deny them, their types, and how to prevent them to increase reimbursements.

What is a Claim Denial?

A claim denial is a health insurance company’s refusal, partial or full, of a submitted claim. Denials can happen for many reasons, including eligibility issues, incorrect coding, mismatches between CPT and ICD-10 codes, incorrect modifiers, expired credentials, or payer policy updates.

In short, a minor mistake in a submitted claim can lead to denials, which require an appeal process to recover the lost revenue.

Strong Appeals Help You Recover Lost Revenue Faster

If you don’t know how to write a strong appeal to recover lost payments, eClaim Solution can help. Our denial experts create strong appeals with the right documentation and submit them within the required timeframe, helping your practice recover as much revenue as possible.

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What Are the Different Types of Claim Denial?

There are two types of claim denial: one that can be resolved and paid, and another that can’t be resolved and remains unpaid.

Soft denials and hard denials: soft denials have errors that can be fixed and resubmitted for payment. Hard denials are those that can’t be fixed and remain unpaid — meaning the provider or practice needs to write them off.

For example, if a CPT code mismatches the ICD-10 and the payer denies the claim, you can fix the code, resubmit it, and get paid for the service—that’s a soft denial.

Now suppose you treat a patient with a high-cost service, such as an MRI or CT scan, but you forget to obtain prior authorization. You submit the claim, but the payer rejects it because you didn’t obtain prior authorization, and the service is now out of coverage. What’s the result then? The practice or provider lost that revenue forever and can’t collect.

Common Claim Denial Codes in Medical Billing

Here’s a quick overview of common claim denial codes in medical billing and their descriptions.

Claim Denial Codes	Decsriptions	Type of Denial
CO-16	NPI, modifiers, or patient demographics are missing in claims.	Soft
CO-18	Duplicate claims have been found.	Hard
CO-22	Coverage benefits issues mean the COB plan isn’t covered by the payer, or the patient has more than one payer.	Hard
CO-27	Insurance coverage has expired.	Hard
CO-29	Late claim submission.	Hard
CO-45	Charged fee is more than the allowable amount.	Hard
CO-50	Service/treatment is not medically necessary.	Hard (until supporting documents are attached)
CO-97	Bundled service issue.	Soft
CO-11	CPT codes do not match the ICD-10 diagnosis codes.	Soft
CO-15	Invalid or missing prior authorization.	Hard

Want to Know More About Denial Codes?

Why Do Insurance Companies Deny Claims?

Insurance companies deny claims for various reasons; some of them include;

Expired insurance benefits coverage.
Service is not covered by the payer.
Prior authorization is not obtained before service.
Missing or incomplete documentation.
Claims are submitted twice.
Incorrect patient demographics.
Services or treatment are not medically necessary.
Medical coding errors.
Out-of-network services.
Late claim submissions.

What Should You Do If Your Claim Is Denied?

In medical billing, if a health insurance company denies a claim, the practice or provider must correct it and resubmit it within the required timeframe to recover lost revenue. This entire process is called appeal management.

Understand this process in a few simple steps;

First, read the denial letter and compare it to your policy to understand why the claim was denied.
Then, identify the root cause of denial by understanding the denial codes.
Start fixing the errors that caused the denial.
Write a formal appeal letter explaining why you disagree with the insurer’s decision.
Attach medical documents and files that are necessary.
Submit it within the timeframe set by the payer.
Follow up on the denied claim until it is processed and you receive your rightful payments.

How Can You Prevent Claim Denials?

To prevent claim denials, always submit clean, accurate claims. Make sure you have reviewed the claims before submission to find errors (if any). Here’s what your practice should do to prevent claim denials;

Verify eligibility and insurance benefits coverage before the patient visit.
Obtain prior authorization.
Ensure a proper and accurate charge entry.
Use accurate, up-to-date ICD-10, CPT, and modifiers.
Scrub claims before submission to find any errors.
Train your billing and coding staff on a regular basis.
Track claim status and follow up continuously.
Stay up to date on payer policy changes.
Ensure provider/practice credentials are valid.
Always ensure you support claims with documentation.

Beyond these prevention techniques, you can also use AI and other technology to help prevent denials and submit clean claims. By using AI in billing tools, you can identify minor errors before submission, check patient’s insurance benefits in real time, and submit clean claims.

Final Thoughts

In short, claim denials are part of revenue cycle management and refer to health insurance companies refusing payment. It means payers deny payment, in full or in part, for any reason, which can hurt a practice’s revenue if recovery is delayed.

Always submit clean claims, and if denials occur, create a strong appeal with documentation to recover lost payments effectively and smoothly.

Recover lost revenue with expert claim denial management and timely appeals.

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Frequently Asked Questions

What is the difference between a claim rejection and a claim denial?

Claim rejection occurs when a claim is submitted but stops before the payer processes it, either in the clearinghouse system or during front-end validation.

A claim denial occurs when the payer receives the claim but denies payment for the service or treatment for various reasons, such as coding mismatches, eligibility or coverage issues, or incorrect modifiers.

What are the most common claim denial reasons?

Common claim denial reasons include eligibility and benefits coverage issues, meaning the patient’s current insurance plan does not cover the service. Other reasons may include incorrect CPT or ICD-10 codes, prior authorization issues, or policy updates.

How to handle claim denials in medical billing?

To handle claim denials in medical billing, identify the root cause, fix the issues, and write a strong appeal letter to request payment. Also, always attach medical necessity documents, as they support the appeal and help improve the recovery process.