What to Do If Your Insurance Denies a Claim (Step-by-Step)

Step 1: Read the Denial Letter Carefully

When a claim is denied, your insurer is required to send you an Explanation of Benefits (EOB) — or a separate denial notice — explaining why. This document contains a denial reason code, which is the most important thing on the page. Everything you do next flows from that code.

Common reason codes to look for:

• 1 CO-4 / CO-57 — Prior authorization was required but not obtained
• 2 CO-97 — Bundled service — the charge is covered under another code
• 3 PR-1 / OA-109 — Deductible not met; this is your responsibility
• 4 CO-50 / B15 — Not medically necessary under the plan's criteria
• 5 CO-11 — Diagnosis does not justify the procedure billed

Write down the denial reason code, the claim number, and the date of service. You'll need all three when you call or write to your insurer.

Step 2: Understand the Three Most Common Denial Reasons

Prior Authorization (Pre-Auth) Denials

Many procedures — MRIs, specialist referrals, surgeries, certain medications — require your insurer to sign off before the service happens. If your provider forgot to get that approval, the claim gets denied. Your best move: have your doctor submit a retroactive authorization request with clinical notes explaining why the service was urgent or medically necessary. Some plans allow this; many don't, but it's worth trying before you appeal.

Out-of-Network Denials

If you saw a provider not in your plan's network, coverage may be limited or denied outright. However, there are exceptions: emergency care, situations where in-network providers were unavailable in your area, and cases where an out-of-network provider was used during an in-network facility visit (known as "surprise billing"). The No Surprises Act (effective 2022) protects patients from balance billing in many of these scenarios — reference it explicitly in your appeal.

Medical Necessity Denials

This is the most common — and the most winnable — denial type. Your insurer decided the treatment wasn't medically necessary under their criteria. The appeal path: get a Letter of Medical Necessity from your treating physician that explains your diagnosis, why alternative treatments were inadequate or contraindicated, and how this specific service was required for your care. Pair it with published clinical guidelines (from organizations like the American Medical Association or USPSTF) that support the treatment.

Step 3: File an Internal Appeal

Under the Affordable Care Act, all non-grandfathered health plans must offer an internal appeals process. You have the right to have your denial reviewed by someone at your insurance company who was not involved in the original decision.

Submit everything in writing and send via certified mail or through your insurer's online portal — never by phone alone. Document every communication: dates, names, reference numbers. Your insurer must decide on an urgent care appeal within 72 hours and a standard appeal within 30–60 days.

Keep copies of everything you submit. If the insurer requests additional records, respond promptly — delays can reset the clock or result in a default denial.

Step 4: Request an External Review If the Internal Appeal Fails

If your internal appeal is denied — or if your insurer doesn't respond within the required timeframe — you can escalate to an external review by an independent organization (called an Independent Review Organization, or IRO). The ACA gives you this right for most health plans.

Key facts about external review:

• → You generally have 4 months from the date of the internal appeal denial to request external review
• → The IRO's decision is binding on the insurer — they must pay if you win
• → The cost to you is capped at $25 (often free for urgent cases)
• → Expedited external review (for urgent cases) must be decided within 72 hours

Contact your state insurance commissioner or your insurer directly to request external review. Some states have their own external review processes; federal rules apply where state processes are inadequate.

Step 5: Escalation Paths If Appeals Fail

If both internal and external appeals are exhausted, you still have options:

• 1
  File a complaint with your state insurance commissioner.

  Every state has a department that oversees insurer conduct. A formal complaint is free, gets on record, and insurers take them seriously — especially if the pattern affects multiple patients.

• 2
  Contact your employer's HR or benefits team.

  If your insurance is employer-sponsored, HR has leverage with the insurer. They pay the premiums and can escalate internally.

• 3
  Consult a patient advocate or healthcare attorney.

  For high-value claims (typically $10,000+), a healthcare attorney who works on contingency may be worth consulting. Many patient advocacy nonprofits offer free guidance.

• 4
  Negotiate directly with the provider.

  If the insurer won't budge, the provider may agree to write off the balance, accept a reduced payment, or set up a payment plan. Providers often prefer this to collections.

Document Everything — From Day One

The single biggest mistake patients make is not keeping records until they need them. By then, it's often too late to reconstruct the paper trail. Start a dedicated folder — physical or digital — the moment you receive a denial.

What to keep:

• • Every EOB and denial letter, in order
• • Itemized bills from the provider (not just the summary bill)
• • Your physician's notes and the Letter of Medical Necessity
• • Screenshots or printouts of online portal submissions with timestamps
• • Phone call logs: date, time, representative name, reference number, summary of conversation
• • Certified mail receipts and delivery confirmations

If your case ever goes to external review or litigation, this paper trail is your case. Without it, you're arguing from memory against an institution with a full administrative record.

Frequently Asked Questions