What is Medical Necessity

Per the National Association of Insurance Commissioners (NAIC) "Medical necessity" is a term that often includes a specific set of criteria that insurance companies use to determine whether or not they are going to pay for a service. If an insurer deems a service "medically necessary" it means they agree the service is needed and clinically agree to pay for it. However, clinical approval is not a complete guarantee of payment. This is caused by other administrative processes like coding, timeliness, network rules, etc. that could interfere with reimbursement.

 

“Medically Necessary” or “Medical Necessity” shall mean health care services that a medical practitioner, exercising prudent clinical judgment, would provide to a Covered Individual for the purpose of preventing, evaluating, diagnosing or treating an illness, injury, disease or its symptoms, and that are (a) in accordance with generally accepted standards of medical practice; (b) clinically appropriate, in terms of type, frequency, extent, site and duration, and considered effective for the Covered Individual’s illness, injury or disease; and (c) not primarily for the convenience of the Covered Individual, physician, or other health care provider; (d) and not more costly than an alternative service or sequence of services at least as likely to produce equivalent therapeutic or diagnostic results as to the diagnosis or treatment of that Covered Individual’s illness, injury or disease. For these purposes, “generally accepted standards of medical practice” ii means standards that are based on credible scientific evidence published in peer-reviewed medical literature generally recognized by the relevant medical community, national Physician Specialty Society recommendations and the views of medical practitioners practicing in relevant clinical areas and any other relevant factors.