Claim denials grew as prior authorization rejections fell in 2024

Modern Healthcare – Friday, May 23, 2025
By Nona Tepper

Health insurance companies initially declined to pay more than one dollar for every $10 providers submitted in claims last year, an increase from 2023.

Payers in 2024 initially denied 11.8% of dollars associated with hospital-based claims, according a report from consultant Kodiak Solutions. That compares with 11.53% of dollars denied in 2023.

The company examined data from its revenue cycle analytics platform used by more than 2,100 hospitals and 300,000 physicians. It categorized any initial bill that commercial, Medicaid and Medicare insurers initially rejected, or requested more information for, as a denial.
Insurers often overturned their initial denials and ended up paying nearly 97% of dollars requested, according to the report.

Kodiak Solutions’ report failed to spell out how many bills were initially denied because of provider error, Tina Stow, executive vice president of public affairs at the insurer lobbying group AHIP, wrote in an email.

“As is this case with this report and many others, there needs to be a clear and full picture on the number of claims that are submitted inaccurately, with incomplete information, duplicative or those that are ineligible in the first place,” Stow wrote.

Health insurers contend that utilization management and claim review practices are necessary to control rising healthcare expenses and ensure quality care.

In 2024, insurers most commonly denied initial claims for payment over a lack of medical necessity, or they requested additional medical record information to justify the bill, according to Kodiak.

Insurers initially denied 1.5% of dollars tied to claims because a prior authorization request was denied. That compared with a denial rate of 1.6% in 2023.

The decline in rejections over prior authorization requirements highlights the impact of Medicare Advantage’s two-midnight rule and insurers scheduling more procedures in outpatient settings, said Matt Szaflarski, vice president of revenue cycle intelligence at Kodiak. Nevertheles, Szaflarski said he was hesitant to call the drop good news.

“What we’re seeing is that claims that used to get denied for authorization on the inpatient and outpatient side are now denied for different reasons,” he said.

Insurers attribute the decline to health plan investments to streamline the prior authorization process.

In recent months, companies such as UnitedHealth Group, Cigna, Elevance Health and others pledged to cut back on prior authorization requirements after the murder of former UnitedHealthcare CEO Brian Thompson ignited widespread fury over industry practices.

But there are limits to operational changes companies can make without jeopardizing their financial position. Earlier this month, for instance, a group of UnitedHealth Group shareholders sued the company over how its slight pullback on utilization management tools after Thompson’s death affected its earnings.

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