How to Avoid a Medical Insurance Claim Rejection With Ease?

Medical insurance is a protection and godsend during any medical emergency. Still, it is commonly witnessed that policyholders get vexed when there is a rejection for a health insurance claim, resulting in numerous disputes between them and insurers. According to the annual report 2021 by the Insurance Complaints Bureau, there were 583 complaints related to insurance claim refusal with compensation valued over HK$ 6.26M. Among the complaints, medical and travel insurance topped the number of disputes on claim denials.

Getting a claim denial is a nightmare for many policyholders, but do you know what are the reasons behind? Do you know how to avoid such a sticky situation? Let’s get to know more about the reasons and start with the principle of an insurance contract.

Principle of Insurance Contract: Utmost Good Faith

In the course of completing an insurance application, an individual will be required to provide specific information about the state of their health and their lifestyle habits in the utmost good faith. It is a legal requirement that all of these questions and disclosures are provided truthfully for an insurance company to evaluate the risks, calculate policy premiums, list particular exclusions etc.

Should the policy applicant breach the principle of ‘utmost good faith’ then the insurance company has the right not to compensate and the policy is typically rendered void. The number of complaints categorised as ‘non-disclosure of material facts’ ranked second among all cases in 2020, following those as ‘application of policy terms’, while cases related to ‘excluded items’ came third.

Reasons for Denying an Insurance Claim

Why do insurance companies reject your claim? Breaching the principle of utmost good faith, belonging to exclusion clauses and misunderstanding excluded items are the common rejection reasons for most cases.

Breaching the ‘Utmost Good Faith’ - Non-Disclosure of Material Facts

Based on the principle of ‘utmost good faith,’ you should proactively and honestly disclose all material facts when filling in an insurance application form. Pre-existing conditions, the most common controversy regarding this point, refer to any medical conditions and diseases that you were aware of but not disclosed prior to the cover under the policy. Your insurance company therefore has the right to decline your claim.

Example: Miss Chan purchased medical insurance in 2019 and was diagnosed with mastitis shortly after that. She then admitted to a private hospital to receive left breast lumpectomy and filed a claim for hospitalisation after discharge.

Upon claims investigation, the insurer learnt that Miss Chan suffered from gynecological diseases from 2012 to 2018 and had a medical history of convulsions and migraines from the medical reports of numerous public hospitals.

Without disclosing the above material facts during application, her insurance company declined her hospitalisation claim and voided her policy.

Insurance Rejection Reasons - Not Medically Necessary

Policy terms define clearly on “Medically Necessary”. In general, it refers to the charges and / or expenses of the Person insured on medically necessary and reasonable and customary basis. Before receiving non-emergency hospitalization services, you should first understand the coverage and exclusions of the insurance policy from the insurance company.

“Medically Necessary” means the necessity to have a medical service which is:

• Consistent with the diagnosis and customary medical treatment for the condition at a Reasonable and Customary charge;
• In accordance with standards of good and prudent medical practice;
• Necessary for such a diagnosis or treatment;
• Not furnished primarily for the convenience of the Person Insured, Physician, Chinese Medicine Practitioner, Physiotherapist, Anaesthetist or any other medical service providers;
• Furnished at the most appropriate level which can be safely and effectively provided to the Person Insured;
• With respect to hospital confinement, not furnished primarily for diagnostic scanning purpose, imaging examination or physical therapy.

Example: Surgeries or treatments can be performed in clinics that would be much more expensive in hospitals. The insurance company may question whether it is necessary to perform surgery in a hospital. Therefore, if the Insured Person considers receive surgery or treatment in a hospital, he should first understand whether he meets " Medically Necessary".

Insurance Rejection Reasons - Reasonable and Customary Charges

If the claim amount is high than ‘reasonable and customary charges,’ your insurance company has the rights to refuse the claim or reimburse only part of the fee according to the principles of ‘reasonable and customary charges’ which include (1) relevant information from private hospitals and healthcare facilities, (2) claims statistics, (3) government gazette and (4) other sources.

Example: Miss Lam was admitted to a private hospital to receive a colonoscopy due to rectal bleeding. The surgeon’s fee charged by the doctor was HK$48,000 with hospital charges, surgeon and anesthetic fees included. She then filed a claim for the surgeon’s fee with the insurer. With reference to the reference fees stated on the Hospital Authority’s List of Private Services, the price for a colonoscopy typically ranges from HK$12,750 to HK$19,350. Given that the insurer’s adjusted settlement for the surgeon’s fee was too high after comparing with the list, she was only entitled to a reasonable amount of compensation.

Insurance Rejection Reasons - Charges for Preventive Treatments and Care

Asymptomatic body check-ups, regular testing or screening procedures are generally not compensated by medical specifications.

Example: Miss Lee needed to receive a coronavirus test for travelling out of Hong Kong. Since she did not experience any symptoms, her insurance company denied her claim.

Insurance Rejection Reasons - Cogenital Conditions

Traditional medical insurance generally does not cover congenital conditions, such as Down syndrome, leukemia, heart disease etc.

Example: Mr Cheung took out a hospitalisation policy for his 11-month-old son. Five days after the policy issuance, his son was admitted to a private hospital for a right herniotomy under general anaesthesia. The final diagnosis was a right inguinal hernia. Mr Cheung subsequently lodged a claim with the insurer. The insurer considered that the medical issues of Mr Chueng’s son were related to a congenital condition and declined the hospitalisation claim according to the exclusion clause in the policy terms.

How to Avoid Insurance Refusal?

Understanding the principles above can help you avoid insurance claim rejections. With the following four practical tips, you could greatly lower your chance of getting a claim denial right from the start of your policy.

1. Disclose your health history accurately

   “Utmost good faith” is an important principle in insurance contracts. Under this principle, an applicant must actively and honestly disclose all critical information to the insurer. The insurer can then reasonably assess the risk based on the disclosed information. Breaching the principle by undisclosing any health conditions will result in a refusal of medical claims and the termination of your policy.

2. Understand the excluded items

   Most medical insurance policies contain a list of exclusions, such as preventive treatments, congenital diseases, and pre-existing conditions. Insurers will not compensate for any expenses arising from these. Therefore, you must understand the meaning of the exclusions determined by your policy. For example, most policies define “pre-existing conditions” as any injury, illness, condition or symptom presented prior to the commencement of the policy, whether or not it is congenital or acquired, and whether or not the condition has been diagnosed.

3. Prepare the required documents

   For reimbursement of relatively low medical costs, such as outpatient claims, you are normally required to submit a claim form together with the official receipts and original copies of referral letters. However, for hospitalisation, more documents are required for claiming more expenses, such as a claim form completed and signed by the attending doctor and stamped by the hospital, original hospital receipts, copies of diagnostic or laboratory reports etc. Therefore, please prepare the required documents clearly and accordingly. Otherwise, your insurer may not accept your claim application.

4. Be aware of the deadline for lodging a claim

   Medical insurance policies usually have a time limit for lodging a claim, normally within 30 to 90 days from the date of consultation or discharge from hospital. Insurers have the right to reject claims submitted after the deadline. You must initiate the claim with relevant supporting documents within the time limit.