Medical Necessity Denials: What Insurers Get Wrong and How to Fight Back
Health insurance is meant to protect you when medical care is needed most. Yet one of the most common reasons insurers deny coverage is by asserting that the requested service, treatment, medication, or procedure was “not medically necessary.” On its face, this phrase sounds objective, but in practice, medical necessity denials are often applied in ways that are inconsistent with accepted medical standards, patient needs, and even the terms of the insurance policy.
For many Californians, a medical necessity denial can mean delayed or foregone treatment, financial hardship, and emotional stress. At Gianelli & Morris, we help policyholders challenge wrongful denials and hold insurers accountable when they misapply medical necessity standards in violation of California law. Contact our office to speak with an experienced California insurance bad faith lawyer to fight back against a wrongful denial of your healthcare claim.
What Does “Medically Necessary” Really Mean?
Most health insurance policies include a definition of “medical necessity” or “medically necessary treatment.” While exact wording varies by plan, a typical policy definition states that a service is medically necessary if it:
- Is needed to prevent, diagnose, or treat an illness, injury, or health condition;
- Is consistent with the symptoms or diagnosis;
- Meets the standards of good medical practice in the relevant clinical setting; and
- Is not primarily for the convenience of the patient or provider.
In California, both health insurance policies and law require that insurers adhere to reasonable medical standards when applying this definition. Neither insurers nor third-party reviewers may arbitrarily decide what is “necessary” if that decision is inconsistent with the views of the relevant medical community and individualized patient factors.
Despite this, medical necessity remains the leading cited reason for claim denials, particularly for advanced imaging, surgical procedures, specialty drugs, genetic testing, and ongoing therapies.
How Insurers Determine Medical Necessity
When a provider submits a claim, insurers typically review the request against internal medical policies, clinical guidelines, and often proprietary medical “review criteria.” These may be built from:
- Industry treatment guidelines (e.g., National Comprehensive Cancer Network, American College of Cardiology)
- Peer-reviewed medical literature
- Internal insurer medical policy manuals
- Recommendations from medical directors or third-party reviewers
This review should, in principle, evaluate the individual patient’s condition and whether the requested care is consistent with the views of the relevant medical community and supported by current medical research. Unfortunately, insurers often rely on outdated or overly restrictive criteria that fail to reflect modern standards of care.
Common Ways Insurers Misapply Medical Necessity
Here are some of the most frequent errors and abuses seen in medical necessity denials:
1. Relying on Outdated or Irrelevant Medical Literature
Medical science evolves rapidly. Treatments once considered experimental may become the standard of care. Yet insurers often cling to internal policy manuals that have not been updated to incorporate newer research or clinical consensus.
For example, specialty drugs for autoimmune disorders, certain cancer therapies, or advanced diagnostic tools may be denied as “experimental” despite multiple peer-reviewed studies demonstrating effectiveness.
Insurers sometimes cite isolated or outdated studies while ignoring stronger, current evidence — a practice known as “cherry-picking.”
2. Ignoring Treating Physician Opinions
Treating physicians understand the patient’s condition, history, and prognosis in ways no reviewer can from abstract records alone. Yet many insurers minimize or disregard the treating doctor’s clinical rationale, preferring automated algorithms or brief reviews by non-specialist medical directors who may misinterpret key evidence.
When a treating specialist provides a detailed letter explaining why a treatment is necessary, dismissing that opinion without explanation is often unreasonable and may constitute bad faith.
3. Applying Blanket Rules Without Individualized Review
Many insurer medical policies include rigid criteria — for example, requiring that all other treatments be tried first, or that a certain test score threshold be met before approval. While clinical criteria can be useful, they cannot replace individualized medical judgment.
A policyholder being treated by a qualified physician shouldn’t be denied care because they don’t fit a narrow algorithm, especially when their unique medical factors justify the requested service.
4. Misinterpretation of Coding or Submission Errors
Insurers sometimes claim that a denial occurred due to coding mistakes or insufficient documentation, even when the underlying medical justification is sound. In such cases, the insurer should provide clear instructions for correction; instead, some insurers use this as a basis to avoid reviewing the true medical merits of the case.
5. Delaying Decisions or Repeatedly Requesting the Same Records
Unreasonable delay is a hallmark of bad faith. Insurers may request the same medical records multiple times or claim that additional documentation is needed, only to issue a denial anyway. These delay tactics can jeopardize timely treatment and impose financial strain.
How Medical Necessity Denials Can Be Bad Faith
Under California law, insurers have a duty of good faith and fair dealing, meaning they must fairly evaluate evidence and meaningfully consider the insured’s interests. It is not enough for an insurer to assert that a treatment is not medically necessary; the denial must be supported by reasonable medical judgment and clinical evidence.
A denial may rise to insurance bad faith when:
- The insurer ignores or misrepresents critical medical evidence;
- The denial contradicts widely accepted clinical standards;
- The insurer uses internal criteria that have not been updated to reflect current care;
- The insurer fails to conduct a meaningful individualized review; or
- The insurer delays or repeats documentation requests without substantive justification.
California courts have repeatedly held that unfair or unreasonable claim handling can constitute bad faith. An insurer cannot hide behind generalized policy language when dealing with complex claims that require detailed clinical analysis.
How to Fight Back Against a Medical Necessity Denial
If your medical claim is denied on the grounds of medical necessity, there are steps you can take to challenge the decision:
Review the Denial Letter Carefully
The denial letter should identify the specific policy provision relied on, the evidence considered, and the process for filing an appeal. Read it closely so you know exactly what basis the insurer used.
Obtain and Organize Medical Records
Ensure that complete records, test results, and physician notes are submitted. Sometimes denials occur simply because the insurer didn’t have all the relevant documentation.
Request Peer-to-Peer Review
Ask your doctor to schedule a peer-to-peer discussion with the insurer’s medical reviewer. This allows your physician to explain the clinical rationale directly.
Provide Supporting Medical Evidence
Submit relevant clinical guidelines, journal articles, or specialist statements that support the necessity of the service. High-quality evidence can counter narrow insurer criteria.
File an Internal Appeal
Follow the insurer’s formal appeal process, adhering to deadlines. Internal appeals give the insurer another chance to reconsider and correct a mistaken denial.
Seek Independent External Review
Under California law, you may have the right to an independent medical review (IMR) by an outside expert if the insurer’s denial persists. This is especially powerful because independent reviewers are not beholden to the insurer’s internal policies.
Consult an Attorney Experienced in Bad Faith Claims
If internal appeals and external review fail, an experienced insurance bad faith attorney can evaluate whether the insurer’s conduct rises to bad faith and pursue legal remedies.
Frequently Asked Questions (Medical Necessity Denials)
Q1: What does “medically necessary” mean in my health policy?
Medically necessary services are those that a physician determines are appropriate for diagnosis or treatment, consistent with clinical evidence and accepted standards of care, and not mainly for convenience. Your specific policy may provide its own definition, but it cannot conflict with California law.
Q2: Can my insurer change what is “medically necessary” after I file a claim?
No. Insurers must apply a consistent, evidence-based clinical standard when evaluating necessity. Changing criteria retroactively or using outdated criteria to avoid payment may be unreasonable or unfair.
Q3: What is an independent medical review (IMR)?
In California, if an insurer denies a claim after an internal appeal, you may request an IMR. An external expert reviews the medical evidence separately from the insurer’s internal staff, and their decision can overturn the denial.
Q4: Why do insurers use rigid checklists even when my doctor says that treatment is necessary?
Insurers often rely on internal guidelines that may not reflect current medical science or individual needs. When these checklists conflict with physician judgment, the insurer must still provide a rational, evidence-based explanation for denial.
Q5: When is a medical necessity denial in bad faith?
If the insurer unreasonably interprets medical evidence, ignores accepted standards of care, or fails to conduct a fair review, the denial may constitute bad faith under California law.
Fight Wrongful Medical Necessity Denials with Gianelli & Morris
Medical necessity denials don’t have to be the end of the story. If your health insurance claim has been unfairly denied, delayed, or undervalued based on an unreasonable interpretation of medical necessity, the California insurance bad faith attorneys at Gianelli & Morris can help.
Our team understands how insurers misapply medical necessity standards, and we know how to challenge those denials effectively. Don’t accept an unfair decision. Contact Gianelli & Morris today for a free consultation and protect your rights under California law.
