Adding Fuel to the Fire.

In July 2023, Cigna, a prominent healthcare insurance firm, was sued for allegedly rejecting health insurance claims. (1) Cigna uses a proprietary software called PxDx to screen insurance claims and patients argue that this screening is not thorough but that it happens in a matter of seconds. The state of California requires insurance providers to conduct a “thorough, fair, and objective” inspection of each claim, yet it appears the PxDx software does not consider cases in which the medical treatment does not “match” the illness. (2) In fact, the California lawsuit claims that within a span of 2 months, PxDx denied over 300,000 insurance claims with the average time processing each claim being 1.2 seconds. (3)

Health insurance is a complicated topic; in this article, I hope to explore what health insurance claims are, how they are processed, when claims are denied, and what the future of health insurance looks like.

Let’s dive into the insurance claim process. Healthcare providers or patients first submit a claim to an insurance firm. (4) The insurance company then reviews the claim to check that the information is valid. (5) The firm then verifies the patient’s coverage plan to ensure the treatment they received was covered before determining the amount of reimbursement the patient receives. The insurance company will then send an Explanation of Benefits (EOB) to the patient or healthcare team to explain what services were provided and what were covered. (6) If the insurance claim was denied, the healthcare provider or patient may then appeal for coverage with additional documentation. Finally, the information is provided to the healthcare provider so that it may be uploaded into the record.

This is a complicated process! To simplify the story as it pertains to Cigna, I provide the flowchart below. Notice that after the patient receives medical care, Cigna uses the AI algorithm PxDx to determine if they received the “appropriate type of care”. This affects whether the patient receives coverage. Importantly, after the insurance process, the information is sent back to the healthcare team and the provider is not even required to verify the claim before it is finalized.

But what are some reasons why insurance claims may be denied? Many reasons are associated with the healthcare provider: the provider may not be eligible to provide coverage, the medical service provided may not be coded properly on the online system, the claim may have been submitted after the deadline for coverage, or the patient’s information may have been inputted incorrectly. (7, 8) On the other hand, many reasons are associated with the specific medical service provided: some medical services may not be included in the insurance plan, the patient may not have received a referral for a procedure, the service provided may not be eligible for insurance coverage, or and perhaps most importantly in this scenario, the insurer may find the service unnecessary given the circumstance. (9)

Cigna is one of the largest US health insurance firms but what does the industry look like? The health insurance market is controlled by a few large companies, most of which you’ve probably heard of before. Here are a few:

The largest five firms account for roughly 57% of all insurance policies in the market as most large firms provide personal and corporate health insurance plans, Medicaid and Medicare plans, long-term healthcare insurance plans, and dental care plans. (10)

But what about Cigna? Cigna has roughly 1.5 million members in all 50 states plus Washington D.C. (11) While I have yet to discuss what health insurance plans look like, the Cigna Global Medical plan is one of the most popular international health insurance plans right now. (12)

Firms like Cigna provide 6 main types of health insurance plans. These include HMOs, PPOs, EPOs, POSs, Short-term plans, and Government program plans. (13) These are fairly complex as well, so I’ll boil each plan down to a few key elements. The HMO or Health Maintenance Organization offers low monthly premiums with the insured individual being able to select their primary care provider; however, this plan requires a referral for a patient to visit a specialist and restricts coverage for individuals who wish to change their care team. (14) The PPO or Preferred Provider Organization charges individuals higher monthly premiums but does not require referrals for specialist visits; additionally, the PPO plan provides greater coverage for patients attempting to change their care team but does include higher out-of-pocket expenses. (15) The EPO or Exclusive Provider Organization is similar to a PPO plan but provides little to no coverage for patients interested in changing their care team. (16) The POS or Point of Service plan combines the HMO and PPO plans requiring a referral to visit a specialist; the plan also provides some coverage to individuals trying to change their care team by including higher out-of-pocket expenses. (17) Short term insurance plans provide temporary (and sometimes comprehensive) coverage ranging from 30-364 days for individuals in between jobs or waiting for a long-term coverage plan. (18) Finally, health insurance firms facilitate Medicaid and Medicare by providing low-income and elderly individuals with government-granted health insurance.

As I conclude this article by discussing the future of healthcare insurance after the Cigna lawsuit, I want to briefly include a bit about the role of technology in the insurance industry.

Technology can be used to sort through insurance claims by checking the accuracy of patient and provider information while also protecting against fraud and unnecessary coverage. (19, 20) Technology can also be used to develop personalized treatment and care plans for patients by sorting through large pools of data. Finally, technology can be used to analyze health information to identify patient risk which plays a role in determining insurance premiums and allocating resources. Clearly, technology makes healthcare and health insurance more efficient, decreasing firm costs; this decreased cost may result in decreased premiums for insured individuals as reduced provider expenses make their way to the consumer.

Then, what went so wrong with PxDx? While more of the insurance claims process is facilitated using technology, it is important to maintain a patient-focused approach. When considering using technology in health systems, firms must consider whether the move is in the patient’s best interest, for if not (such is the case with PxDx), the long-term consequences may result in increased burdens on healthcare firms.

If the Cigna lawsuit is successful, not only will Cigna face a financial penalty, but it may be forced to abandon PxDx as a means to process insurance claims. Furthermore, this lawsuit may set a precedent against firms using algorithms in the health insurance and broader healthcare industry. Not only will other health insurance firms be forced to evaluate the effectiveness of the algorithms they use in determining coverage but legislative bodies may take action, increasing regulations for technology in healthcare firms. (21) Healthcare has always been patient-centered, and as we move into the age of technology, it is important that we keep the industry grounded. Not only should physicians, nurses, and care teams adhere to patients’ concerns but we must make sure, through legislation or otherwise, that medicine-adjacent industries remain focused on the welfare of the patient above all else. Ultimately, while technology brings new possibilities to the health insurance industry, we as patients and healthcare stakeholders must weigh the pros and cons of technology, making our voice heard to ensure all patients are treated fairly and receive the best possible care.