Published: May 04, 2023
Revenue Cycle Management

Cigna Denials and Underpayments: Causes and Mitigation Strategies for Providers

Rex H.
Rex H.
8 minute read
Blog Hero Background GraphicBlog Hero Background Graphic

The consequences of Cigna denials are far-reaching, affecting healthcare providers, patients, and the healthcare system as a whole. This article delves into the impact of Cigna's underpayment and denials on healthcare providers, the legal actions taken against the company, denial rates by health plan, the causes of underpayments and denials, and strategies healthcare providers can use to mitigate the effects of denied claims.

The Scope of Cigna Underpayment and Denials

A ProPublica investigation has unveiled a concerning review system within Cigna, which enables its doctors to reject patients' claims without opening their files. This system, known as PxDx, automatically denies payments for treatments that don't match a list of approved tests and procedures, sidestepping the conventional claim review process. As a result, denials are sent to medical directors who reject the claims without reviewing the patient's file.

According to corporate documents and interviews with former Cigna officials, this method led to over 300,000 requests for payments being denied within a two-month period last year, with doctors spending an average of 1.2 seconds on each case. This system saves Cigna money by allowing it to deny claims it previously paid and by avoiding the cost of manual review.

Cigna's review system undermines the principles of fairness and meaningful claim evaluation, which patients expect from their insurers. Although Cigna maintains that its system doesn't prevent patients from receiving care, it does determine when the insurer won't pay.

Given the rapid rate that Cigna denied claims, this alarming revelation has raised questions about the legality and ethicality of Cigna's PxDx system and its impact on both healthcare providers and patients. 

Unlike Cigna's controversial system, which denies claims based on a predetermined list of approved tests and procedures, Medicare does not reject claims on medical grounds in the same manner as Cigna's PXDX system.

Medicare has a system in place that automatically prevents improper payment of claims that are wrongly coded. This system is designed to ensure that the submitted claims adhere to the coverage guidelines and billing codes established by the Centers for Medicare & Medicaid Services (CMS). While Medicare may deny claims for reasons such as incorrect coding or lack of medical necessity, it doesn’t employ an automated process that denies claims without a more thorough review.

The Impact of Cigna Underpayment and Denials on Healthcare Providers

When claims are denied or underpaid by Cigna, healthcare providers face financial losses from revenue leakage that can adversely affect their operations and ability to provide quality care to patients. In fact, according to Change Healthcare, a typical health system could lose as much as 3.3 percent of net patient revenue, averaging $4.9 million per hospital, due to denials.

The administrative burden of appealing these denials is also substantial. Providers spend around $118 per denied claim on appeals, amounting to as much as $8.6 billion in administrative costs across the country. This expenditure of time and resources on appeals not only detracts from patient care but compromises the financial health of healthcare providers.

Moreover, patients may suffer when their claims are denied or underpaid. Denied or underpaid claims can lead to delayed or inadequate care for patients, negatively impacting their health outcomes and satisfaction with their healthcare experience.

Actions Taken Against Cigna on Underpayments

In light of Cigna denials, patients and physicians have filed a proposed class-action lawsuit against Cigna, one of the nation's largest health insurance plans, alleging that the company intentionally underpaid patients' medical claims. The Litigation Center of the American Medical Association (AMA), the Medical Society of New Jersey (MSNJ), and the Washington State Medical Association (WSMA) have joined as plaintiffs in the lawsuit.

The lawsuit claims that Cigna failed to pay medical claims based on physicians' contracts with MultiPlan Corp., the nation's largest "third-party network" company. Instead, Cigna used a lower payment methodology for nonparticipating physicians and other health professionals, leaving patients on the hook for balance billing for physicians and other health service fees.

The AMA, MSNJ, and WSMA allege that Cigna has routinely shortchanged payments to MultiPlan Network physicians and interfered with the patient-physician relationship. The lawsuit further claims that Cigna's conduct serves its own economic self-interest at the expense of the best interests of plan member patients, violating the Employee Retirement and Income Security Act of 1974 (ERISA), as well as laws in New Jersey and Washington.

Furthermore, the lawsuit accuses Cigna of using misrepresentations to pressure providers into accepting discounted rates and maximizing its own profits through exorbitant and unreasonable "savings fees" (for self-funded plans) and reduced benefit payments (for fully insured plans). The AMA hopes that by joining the case as a plaintiff, it can shed light on Cigna's misconduct and create remedies so that patients and physicians can be reimbursed fairly. 

Cigna Denial Rates by Health Plan

According to research by KFF, an independent health policy research organization, the average denial rate across Cigna’s plans is 15.28% in 2021. Among individual Cigna plans, the denial rate ranges from 12% to 19.6%. Patients only appeal 0.2% of denied claims, making this a profitable strategy for Cigna.

State Cigna Health Plan Denial Rate
KS Cigna Health and Life Insurance Company 12.00%
AZ Cigna HealthCare of Arizona, Inc 13.10%
NC Cigna HealthCare of North Carolina, Inc. 13.10%
VA Cigna Health and Life Insurance Company 13.20%
MO Cigna Health and Life Insurance Company 14.10%
TN Cigna Health and Life Insurance Company 16.80%
UT Cigna Health and Life Insurance Company 17.40%
FL Cigna Health and Life Insurance Company 18.20%
IL Cigna HealthCare of Illinois, Inc. 19.60%

Causes of Cigna Underpayment and Denials

The causes of Cigna underpayments and denials can be attributed to several factors, all of which seem to be aimed at controlling costs but ultimately end up negatively affecting patients and healthcare providers.

One of the key factors is Cigna's review system, which was originally designed to prevent claims for care that the insurer considered unnecessary or potentially harmful to the patient. However, instead of achieving its intended purpose, the system has been used to quickly reject claims without proper review, causing frustration and financial losses for patients and providers alike.

Another issue contributing to Cigna's underpayments and denials is the way the system was set up to accelerate the payment of claims for certain routine screenings. While this might sound like a positive feature, it has inadvertently led to claims being denied quickly, without proper review, and without considering the individual circumstances of each case. This hasty approach often results in legitimate claims being rejected, leaving patients and providers to deal with the financial repercussions.

Although insurance companies like Cigna have wide authority to reject claims for care, the process of handling those denials can be quite expensive, costing several hundred dollars per claim. As a result, it becomes more cost-effective for Cigna to simply deny claims in bulk without thoroughly examining the merits of each case. 

Denied Claim Mitigation Strategies for Healthcare Providers

Implementing a thorough denial management strategy can mitigate the impact of Cigna underpayment and denials on your practice, ultimately reducing the financial burden on your practices and improving patient outcomes. 

Submit claims with correct diagnosis codes and supporting documentation

One of the primary reasons for claim denials is errors in the submission, such as incorrect or missing diagnosis codes. You can reduce the likelihood of denials by ensuring that claims are submitted with the correct codes and complete supporting documentation. This may require investing in staff training, implementing a robust coding system, and regularly reviewing submitted claims for accuracy.

Appeal denials and underpayments through internal and external processes

When a claim is denied or underpaid, you have the option to appeal the decision through Cigna's internal appeals process. You should be prepared to present a strong case by gathering all necessary documentation and medical records to support your claims. If the internal appeals process is unsuccessful, you can also consider external appeals processes, such as seeking assistance from state insurance regulators or independent review organizations. 

Collaborate with patient advocacy groups and state regulators

Work with patient advocacy groups and state regulators to push for greater transparency and accountability from insurers like Cigna. By collaborating with these organizations, you can contribute to collective efforts aimed at improving the insurance claims process and reducing the incidence of underpayments and denials.

Focus on denial management

Establish a dedicated team or designate a staff member to focus on denial management. This includes tracking denied claims, identifying trends and patterns, and developing strategies to address common reasons for denials. By proactively addressing the root causes of denials, providers can improve their claims approval rates and minimize the financial impact of underpayments and denials.

Automatically Detect and Appeal Cigna Underpayments With MD Clarity

MD Clarity RevFind can help you spot patterns of underpayment by insurance companies like Cigna instead of waiting for investigations or lawsuits. With an automated workflow and advanced analytics, RevFind brings transparency to the revenue cycle. Book a demo today to find out how MD Clarity can help your organization get paid fairly by payers.

Accelerate your revenue cycle

Boost patient experience and your bottom line by automating patient cost estimates, payer underpayment detection, and contract optimization in one place.

Get a Demo

Get paid in full by bringing clarity to your revenue cycle

Full Page Background