Rise in Insurance Denials: How AI and Automation Are Reshaping Healthcare Decisions
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In recent years, insurance coverage denials in the US have surged, driven largely by the growing reliance on automated algorithms powered by artificial intelligence (AI). While new AI tools have been introduced to generate automatic appeals, healthcare experts emphasize that lasting change requires systemic reform to address skyrocketing medical costs and improve insurance coverage.
Algorithms and Denials: The Role of AI in Healthcare
Major insurers like UnitedHealth, Humana, and Cigna are facing class-action lawsuits alleging that AI algorithms have been used to deny lifesaving care.
A lawsuit against Cigna claims the company denied over 300,000 claims in just two months, equating to a review time of 1.2 seconds per claim—a feat made possible by automation.
UnitedHealth Group’s algorithm, nH Predict, is under particular scrutiny. Acquired in 2020, the tool predicts patient care needs but allegedly has a 90% error rate. Although only 0.2% of patients appeal denied claims, nearly all those appeals are successful, highlighting a significant flaw in the system.
A survey by the nonprofit KFF found that less than 0.2% of HealthCare.gov users appeal in-network claim denials. Similarly, only 10% of Medicare Advantage denials were appealed in 2022, leaving patients to bear the burden of administrative hurdles, out-of-pocket costs, or even forgone care.
The Impact on Patients and Providers
Insurance denials aren’t just a logistical issue—they directly affect patient health.
A survey by the Commonwealth Fund revealed that nearly half of US adults had received unexpected medical bills or co-payments. Four out of five reported feeling stressed due to these delays, and nearly half experienced worsened conditions because of delayed care.
Deirdre O’Reilly, an intensive care physician, exemplifies the challenge. After her son, who has severe food allergies, received emergency care, their insurer denied the $5,000 claim multiple times, each time citing a different reason.
"I’ve been a physician for 20 years, and it’s never been this bad," O’Reilly shared, noting how inaccessible the appeal process is for most patients without her medical expertise.
Regulatory Scrutiny and Legislative Efforts
The growing reliance on automated denials has drawn attention from lawmakers.
A US Senate report revealed that UnitedHealthcare, CVS, and Humana—responsible for nearly 60% of Medicare Advantage coverage—reject prior authorization claims at high rates through automation. This results in $7.2 billion in annual administrative costs for providers.
States like California and Vermont are leading reform efforts:
- California recently passed legislation requiring human oversight in AI-based coverage decisions.
- Vermont enacted laws to ease the burden of prior authorizations.
Federal agencies like the Centers for Medicare and Medicaid Services (CMS) have also introduced new regulations to improve transparency and accountability.
Fighting Back: AI as a Solution to AI
To counter these automated denials, some companies are deploying generative AI tools to help patients and hospitals draft appeal letters. Open-source models and platforms like ProPublica’s records submission service are also empowering patients to contest denials effectively.
However, health policy experts like Michelle Mello of Stanford University note that AI could also improve the insurance process by standardizing forms and preventing errors that lead to denials.
Andrew Witty, CEO of UnitedHealth Group, recently stated that 85% of denied claims result from form-filling errors, which could be minimized through standardized processes and improved technology.
Beyond AI: The Need for Systemic Reform
While AI-driven automation plays a significant role, experts stress that the core issue lies in the healthcare system’s underlying structure.
"One in every five dollars of the US GDP is spent on healthcare," said Mika Hamer of the University of Maryland.
"This is a massive system that needs a massive overhaul."
Efforts to curb excessive costs and improve transparency must accompany regulatory measures addressing AI’s role. Without these changes, automated denials will remain a symptom of a deeper systemic issue.
For now, the battle of the bots—AI-driven denial systems versus generative AI appeal tools—represents the latest chapter in the ongoing struggle for equitable and accessible healthcare.
Written by Dev Anand from Funnel Fix It Team
