The Top 10 (Mostly Preventable) Reasons Your Claim Could be Denied

By Barbara Griswold, LMFT
(Updated May 27, 2019)

Managed care plans report these common situations that lead to claim denials (notice how many of them could be avoided by asking the right questions at the start of treatment):

1. Diagnosis issues. One of the biggest issues tripping up therapists with ICD-9 diagnoses is the failure to use the full number of digits required for a diagnosis. Most commonly, five digits (two to the right of the decimal) are required, though some diagnoses have only three or four digits.  To be sure your diagnosis code is correct, visit www.icd10data.com, enter the code (or name of the diagnosis) you plan to use in the search bar, and look for a green diamond next to the diagnosis when the results come up.  A red diamond means it is not an active diagnosis.   Most plan require more than a phase of life issue or a Z-code from the DSM-5 (formerly called V-code) diagnoses, except for EAPs. And be sure to use the diagnosis code – don’t simply write the name of the diagnosis.

2. No authorization on the date of the session.  This is not as important as it used to be, as most insurance plans don’t require preauthorization, but some still do.  If needed, keep track of expiration dates, and if you have limited sessions, take care not to exceed the number of allotted sessions.

3. Yearly session limit has been exceeded. Be sure you keep track of the number of sessions used. Remember that not all plans or EAPs run on the calendar year.

4. Wrong claims address. Always call the plan in advance to check the claims address. Never trust the address on the health plan card, or even the one given by the automated phone service at the health plan, as they are often not the address for mental health claims.

5. The claim was incomplete or illegible. If you submit paper claims you have filled out by hand, review them carefully to be sure you fill out all necessary boxes, and work on your clear block printing!

6. Wrong codes. You may have used a CPT code for a type of service other than the ones that were authorized, used a code they do not cover, or used an out of date code. Or you may have used the wrong Place-of-Service code. You may have written “O,” “OV,” “OFF” or “Office” to stand for office, instead of the required “11” for “office,” or “02” for “Telehealth” (for a complete list of POS codes, type “Place of Service Codes” in your search engine.)

7. The claim was late. Some plans require the claim be submitted within 60 or 90 days. If your claim is denied for this reason, the plan may not allow you to bill the client.  There are many reasons why you could win an appeal even if you submitted late (ex. extended therapist illness), so don’t give up hope.

8. Incorrect claim form. Most plans require the CMS-1500 forms, but some plans (including some EAPs) require their own claim forms.

9. The claim is being held, or “pended.” Frequently, a claim is pended awaiting information from the member about “Coordination of Benefits.”  The insurer wants to find out if the client is covered by another plan.  The fastest way to deal with this is usually to have your client call the insurance plan directly to verify there is no other coverage or complete a COB form from the insurance plan to attest this.  If you are out of network provider, they may also ask for a W-9 from you before paying.

10. The client was not eligible. New employees sometimes have a period of time before their coverage “kicks in.” Or a client’s coverage may have ended, which often happens when they leave a job or switch insurance plans.  Or the client may not have paid his/her premium.

Have insurance questions? Want more practical tips? Purchase Barbara’s insurance manual complete with sample forms and line-by-line claim form instructions (click here) or schedule a consultation with Barbara (click here).

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Barbara Griswold, LMFT, is the author of Navigating the Insurance Maze: The Therapist’s Complete Guide to Working with Insurance – And Whether You Should. To purchase the book or other resources for therapists, click here. Contact Barbara at barbgris@aol.com to get answers to your insurance questions.

Copyright 2019-, Barbara Griswold, LMFT. No part may be reproduced without written permission of the author.