A denied insurance claim can be challenged through an internal appeal, an independent external review, a state insurance department complaint, negotiation with the insurer, or a lawsuit for breach of contract or bad faith. Each option has its own deadline, and missing one can end your right to the next, so speed matters as much as strategy.
Why Do Insurance Claims Get Denied?
Insurers reject claims for reasons ranging from paperwork errors to disputes over medical necessity or policy exclusions. In some cases a simple error is behind the denial, such as an incorrect billing code or a claim sent to the wrong insurance company, and this type of mistake can usually be cleared up with a single phone call. Other denials involve genuine disagreements over coverage, pre-existing conditions, or whether treatment was medically necessary. The same pattern shows up in personal injury and workers’ compensation files, where insurers often reduce or deny injury claims based on disputed liability or the extent of harm.
What Are Your 5 Legal Options After a Denied Insurance Claim?
1. File an Internal Appeal With the Insurer
Your first move is almost always an internal appeal directly with the company that denied you. There are typically two levels of appeal: a first-level internal appeal administered by the insurance company and then a second-level external review administered by an independent third-party. For most health plans, you have up to six months (180 days) after finding out your claim was denied to file an internal appeal. Read the denial letter closely. The issuer must provide a description of available internal appeals and external review processes, including information regarding how to initiate an appeal, so that information should already be in your file, according to federal rules published by the Cornell Legal Information Institute.
2. Request an Independent External Review
If the internal appeal fails, you can typically escalate to an outside reviewer who has no relationship with the insurer. If a patient’s internal appeal is denied, patients in new plans have the right to appeal all denied claims to an independent reviewer not employed by their health plan, and one study found that in states with external appeals, consumers won their external appeal against the insurance company 45% of the time. Timelines are tight but predictable: according to HealthCare.gov, standard external reviews are decided as soon as possible, no later than 45 days after the request was received, while expedited external reviews are decided no later than 72 hours, or less, depending on medical urgency. If the reviewer sides with you, the insurer has to pay, since if the external review results in a reversal of your health plan’s decision to deny, the company must approve benefits for the covered services.
3. File a Complaint With Your State Insurance Regulator
Every state has an insurance department that can investigate how a claim was handled, even if it cannot force payment on a disputed benefit determination. If you have questions or think your health plan is doing something wrong, you can contact your state insurance regulatory agency, and a directory of all state insurance regulatory agencies is available through the NAIC. A regulator complaint creates a paper trail and can pressure an insurer that is dragging its feet or ignoring its own procedures. For workplace injuries specifically, the process often runs through a state labor or workers’ compensation board rather than the insurance department, which is one reason employees should understand their state’s specific workplace injury claim rules before assuming the general insurance appeal path applies.
4. Negotiate or Resubmit With Additional Evidence
Many denials turn on missing documentation rather than an outright coverage exclusion. You can strengthen a resubmission by asking for the exact denial code, the standard the insurer applied, and copies of everything in your file. The issuer must ensure that the reason for the adverse benefit determination includes the denial code and its corresponding meaning, along with a description of the standard used in denying the claim, and in the case of a final internal denial, this must include a discussion of the decision. Attach medical records, expert letters, or repair estimates that were not part of the original submission before moving on to a formal appeal.
5. File a Lawsuit for Breach of Contract or Bad Faith
Once internal and external appeals are exhausted, a lawsuit becomes an option, though the path differs depending on the type of policy. For employer-sponsored health plans governed by federal law, the Employee Retirement Income Security Act of 1974 governs nearly every employer-sponsored health benefit plan in the private sector, and an ERISA attorney is worth consulting when the disputed coverage exceeds roughly $25,000, involves a transplant, complex oncology, or an experimental designation, or you have already lost external review. ERISA also shifts some of the financial risk of litigation, since many ERISA plaintiff attorneys take cases on contingency or under the fee-shifting provision at 29 USC Section 1132(g). Outside the ERISA context, lawsuits against auto, property, and disability insurers typically proceed under state contract and bad faith law, and the same principle of documenting every denial and delay applies whether you are dealing with a health insurer or, as described in this piece on when legal action becomes necessary after a crash, an auto carrier that refuses to pay a legitimate claim.
How Long Do You Have to Appeal a Denied Insurance Claim?
Deadlines vary by policy type, so treat the table below as a general guide rather than a substitute for your denial letter.
| Step | Typical Deadline | Governing Standard |
|---|---|---|
| Internal appeal (health plan) | Up to 180 days from denial notice | NAIC / ACA internal appeal rules |
| Internal appeal decision, urgent care | 72 hours | CMS internal appeal rule |
| Internal appeal decision, care not yet received | 30 days | CMS internal appeal rule |
| Internal appeal decision, care already received | 60 days | CMS internal appeal rule |
| Standard external review decision | No later than 45 days | HealthCare.gov external review rule |
| Expedited external review decision | No later than 72 hours | HealthCare.gov external review rule |
| Lawsuit after final ERISA denial | Often one year from final denial, plan-specific | Plan document, ERISA |
Sources: plans must give a decision within 72 hours for urgent care appeals, 30 days for denials of non-urgent care not yet received, and 60 days for denials of services already received; standard external reviews are decided no later than 45 days, expedited reviews no later than 72 hours; and the lawsuit must be filed within the plan’s deadline, often one year from the final denial, though this varies by plan.
When Should You Hire a Lawyer for a Denied Claim?
Not every denial needs a lawyer. A billing code error or a missing form is usually fixable with a phone call and a resubmission. Bring in an attorney when the dollar amount is significant, the denial involves a disputed medical or legal standard, the insurer has already rejected both an internal and external appeal, or you are dealing with a workplace injury where compensation rules are more technical than a standard health claim. If your case involves a job-related injury, it helps to understand when a workers’ compensation lawyer is worth hiring and how fees typically work before signing any agreement. Similarly, a personal injury denial after a car crash or slip and fall often benefits from early legal input, since insurers are less likely to lowball a claimant who already has representation.
FAQ
What should I do first after an insurance claim is denied?
Read the denial letter carefully, note the stated reason and any deadlines, and request your full claim file and policy language in writing before deciding on next steps.
How long do I have to appeal a denied insurance claim?
For most health plans you generally have up to 180 days to file an internal appeal, and separate, often shorter, windows apply for external review or a lawsuit, so check your denial letter and policy for exact dates.
Can I sue my insurance company for denying my claim?
Yes, once you have exhausted the required internal and external appeals, you may be able to sue for breach of contract or bad faith, though employer health plans governed by ERISA follow a different federal process with their own deadlines.
Do I need a lawyer to appeal a denied insurance claim?
Not for a straightforward first appeal, but a lawyer is worth consulting when the denial involves a large dollar amount, a complex medical or legal standard, a workplace injury claim, or a plan that has already rejected your internal and external appeals.
This article provides general information only and is not legal advice. Consult a licensed attorney in your state about your specific claim.
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