ACA plan payment denials increase as hospital financial reliance increases

Payment denial rates by Affordable Care Act (ACA) marketplace plans reached their highest point in nine years, at the same time health systems became most reliant on revenue from them.

The average total denial rate was 20% for ACA plans sold in the federal marketplace used by most states, according to tracking by the Kaiser Family Foundation. The rate applies to claims for services already provided. Differences among those included:

• 19% denial rate among in-network claims (92% of all claims)
• 37% denial rate in out-of-network claims

Among in-network claims, denials reached their highest point since the marketplace coverage launched in 2015. KFF did not previously track out-of-network denials since payers were not required to provide such information.

Other findings on in-network claim denials included:

• 1% to 54% average denial rate by plan
• Highest rate among states was a 34% average in Alabama plans
• Lowest rate among states was a 6% average in  South Dakota plans
• Highest rate among large payers was 35% by Blue Cross and Blue Shield of Alabama
• Lowest rate among large payers was 13% by GuideWell Mutual Holding
• 27% in catastrophic plans (highest by category)
• 15% in platinum plans (lowest by category)

The reasons for the denials included 34% for unspecified “other” causes, 18% for administrative reasons, 16% for excluded service, 9% for a lack of prior authorization or referral and 6% based on lack of medical necessity.

Hospital impact

The increase in denials comes amid an enrollment surge to 24 million people in 2025 among all federal and state ACA marketplaces. That surge has increased hospital and health system revenue — and dependence on that revenue — from patients with ACA coverage.

For instance, HCA Healthcare reported in January that 7.5% of admissions were patients with ACA plan coverage and they provided 9% of total revenue. Health systems in states that have not expanded Medicaid eligibility have seen the largest ACA marketplace enrollment increases in recent years and report the largest financial dependence on such revenue.

Meanwhile HCA and other for-profit systems that have garnered large amounts of revenue from marketplace plans say they are lobbying Congress to extend an estimated $35 billion in additional subsidies for such plans. Those funds were provided as an emergency response to the COVID-19 pandemic and are scheduled to expire at the end of 2025.

Other denials

Denial rates for various types of payment varied widely among different payer categories.

One of the highest rates of denials of prior authorization requests was the 29% denial rate for selected services in fee-for-service Medicare in 2023, according to a previous KFF report.

While data is unavailable for all denied claims by commercial health insurance companies, a March report by Premier, a group purchasing and consulting company, surveyed hospitals, health systems and post-acute care providers and reported a 15% initial denial rate of medical claims. An average of 3.2%of all claims denied included those that were pre-approved through the prior authorization process.

Among Medicaid managed care plans, 12.5% of prior authorization requests were denied in 2019, according to a report by the Office of Inspector General (OIG) of HHS.

No national denial rates are available for fee-for-service Medicaid but providers reported a 16.7% denial rate in the Premier report.

Appeal burdens and results

Claim denials shift costs onto providers by requiring additional resources to manage such denials and can drive up their bad debt. The Premier report found hospitals and health systems spend an estimated $19.7 billion annually managing denied claims.

HCA has increased its investments in adjudicating claims denials, so the health system has not seen “a material impact” from payers’ increased denials, said Mike Marks CFO for HCA.

Providers were much more likely to appeal MA prior authorization, which they did at a 12% rate in 2023. In comparison, providers appealed only 6.4% of prior authorization denials in fee-for-service Medicare in 2022 (the last year available).

“You know, at this point, we’re really focused on collecting on that revenue and working through the denial and appeal processes associated with the Medicare Advantage program,” Marks said on the January investor call.

Across all providers, most MA denials that were appealed were partially or fully overturned (81.7%) in 2023. That compared to less than one-third (29%) of denials appealed were overturned in traditional Medicare in 2022. 

Less than 1% of claims denied in ACA marketplace plans were appealed and only 44% of denials were overturned on appeal.

Among Medicaid plans, 11% of prior authorization denials were appealed and 46% of appealed denials submitted to an external medical reviewer were fully or partially overturned, the OIG found.

The Premier survey did not report the share of commercial plan denials that were appealed but appeals succeeded in overturning more than half (54.3%) of denials.

Worsening trend

Denials across payers is taking an increasing toll on healthcare providers.

Seventy-three percent of healthcare finance leaders said claims denials are increasing across payers, according to a 2024 Experian Health poll. In 2022, only 42% said denials were increasing.

Other findings included:

• 38% said claims are denied 10% of the time, or more
• 11% said claims are denied more than 15% of the time
• 66% said denials occur at a higher rate than before the pandemic

Among the top reasons for denials were missing or inaccurate data, authorization, and inaccurate or incomplete patient information. Eighty-four percent of respondents said reducing denials is a top priority for their organization. One way to do that may include increasing invests in claims management technology, which 45% said their organization planned to do within the next six months.