When Colleen Henderson’s 3-year-old daughter complained of pain while using the bathroom, doctors brushed it off as a urinary tract infection or constipation, common maladies in the potty-training years.

Henderson, however, suspected it could be something worse, and asked for an ultrasound. The doctor and ultrasound technician told her that her insurance provider, UnitedHealthcare, would not cover it, but Henderson decided to do it anyway, charging the $6,000 procedure to her credit card. Then came the news: There was a grapefruit-sized tumor in her toddler’s bladder.

That was in 2008. The next five years, Henderson said, became a protracted battle with UnitedHealthcare over paying for the specialists who finally diagnosed and treated her daughter’s rare condition, inflammatory pseudotumor. She appealed denial of coverage for hospital stays, surgeries and medication to the insurer and state regulators, to no avail. The Sacramento-area family racked up more than $1 million in medical debt, she said, because UnitedHealthcare had decided that treatments recommended by doctors were unnecessary. The family declared bankruptcy.

“If I had not fought tooth and nail every step of the way, my daughter would be dead,” said Henderson, whose daughter eventually recovered and is now a thriving 20-year-old junior at Oregon State University. “You pay a lot of money to have health insurance, and you hope that your health insurance has your well-being at the forefront, but that’s not happening at all.”

While insurance denials are on the rise, surveys show few Americans appeal them. Various analyses have found that many of those who escalate complaints to government regulators successfully get denials overturned (unlike the Hendersons). Consumer advocates and policymakers say that’s a clear sign insurance companies routinely deny care they shouldn’t. Now a proposal in the California legislature seeks to penalize insurers who repeatedly make the wrong call.

While the measure, Senate Bill 363, would cover only about a third of insured Californians whose health plans are regulated by the state, experts say it could be one of the boldest attempts in the nation to rein in health insurer denials — before and after care is given. And California could become one of only a handful of states that require insurers to disclose denial rates and reasoning, data the industry often considers proprietary information.

The measure also seeks to force insurers to be more judicious with denials, by fining them up to $1 million per case if more than half of appeals filed with regulators are overturned in a year.

In 2023, state data show, about 72% of appeals made to the Department of Managed Health Care, which regulates the vast majority of health plans, resulted in an insurer’s initial denial being reversed.

“When you have health insurance, you should have confidence that it’s going to cover your healthcare needs,” said Sen. Scott Wiener, the San Francisco Democrat who introduced the bill. “They can just delay, deny, obstruct, and, in many cases, avoid having to cover medically necessary care, and it’s unacceptable.”

A spokesperson for the California Assn. of Health Plans declined to comment, saying the group was still reviewing the bill‘s language. Gov. Gavin Newsom’s spokesperson Elana Ross said his office generally does not comment on pending legislation.

Concerned about spiraling consumer health costs, lawmakers in states across the nation have increasingly looked for ways to verify that insurers are paying claims fairly.

In 2024, 17 states enacted legislation dealing with prior authorization of care by private insurers, according to the National Conference of State Legislatures. For example, Connecticut, which has one of the most robust denial rate disclosure laws, publishes an annual report card detailing the number and percentage of claims each insurer has denied, as well as the share that ends up getting reversed. Oregon published similar information until recently, when state disclosure requirements lapsed.

In California, there’s no way to know how often insurers deny care, which health experts say is especially troubling as mental health needs are reaching crisis levels among children and young adults. According to Keith Humphreys, a health policy professor at Stanford University, it’s easier to deny mental health care because a diagnosis of, say, depression can be more subjective than that of a broken limb or cancer.

“We think it’s unacceptable that the state has absolutely no idea how big of a problem this is,” said Lishaun Francis, senior director of behavioral health for the advocacy group Children Now, a sponsor of the bill.

Under Wiener’s proposal, private insurers regulated by the state’s Department of Managed Health Care or Department of Insurance, or both, would be required to submit detailed data about denials and appeals. They would also need to explain those denials and report the outcomes of the appeals.

For appeals that make it to the state’s independent medical review process, or IMR, insurers whose denials are overturned more than half of the time would face staggering penalties. The first case that brings a company above the 50% threshold would trigger a fine of $50,000, with a penalty ranging from $100,000 to $400,000 for a second. Each one after that would cost the company $1 million.

If passed, the measure would apply to roughly 12.8 million Californians on private insurance. It would not apply to patients on Medi-Cal, the state’s Medicaid program, or Medicare, and it would exclude self-insured plans offered by large employers, which are regulated by the U.S. Department of Labor and cover roughly 5.6 million Californians.

The phrase “deny and delay” continues to reverberate across the healthcare industry after the killing of UnitedHealthcare Chief Executive Brian Thompson in December. In a survey by the research organization NORC at the University of Chicago, conducted shortly after the attack, 7 in 10 respondents said they believed denials for health coverage and profits by health insurance companies bore a great deal or a moderate amount of responsibility for Thompson’s death.

Following Thompson’s death, UnitedHealthcare said in statements that “highly inaccurate and grossly misleading information” had been circulated about the way the company treats claims, and that insurers, which are highly regulated, “typically have low- to mid-single digit margins.”

Wiener called Thompson’s killing a “cold-blooded assassination,” and said his measure had grown out of a narrower proposal that failed last year aimed at improving mental health coverage for children and adults under age 26. But he acknowledged that the public’s reaction to the killing underscored the long-simmering anger many Americans feel about health insurers’ practices and the urgent need for reform.

Humphreys, the Stanford professor, said the U.S. health system creates strong financial incentives for insurers to deny care. And, he added, state and federal penalties are paltry enough to be written off as a cost of doing business.

“The more care they deny, the more money they make,” he said.

Increasingly, large employers are starting to include language in contracts with claim administrators that would penalize insurance providers for approving too many or too few claims, said Shawn Gremminger, president of the National Alliance of Healthcare Purchaser Coalitions.

Gremminger represents mostly large employers that fund their own insurance, are federally regulated, and would be excluded from Wiener’s bill. But even for the so-called self-funded plans, it can be nearly impossible to determine denial rates for the insurance companies hired simply to administer claims, he said.

While the bill may be too late for many families, Sandra Maturino of Rialto said she hopes lawmakers tackle insurance denials so other Californians can avoid the saga she endured to get her niece treatment.

She adopted the girl, now 13, after her sister died. Her niece had long struggled with self-harm and violent behavior, but when therapists recommended inpatient psychiatric care, her insurer, Anthem Blue Cross, would cover it for only 30 days.

For more than a year, Maturino said, her niece cycled in and out of facilities and counseling because her insurance wouldn’t cover a long-term stay. Doctors tested a laundry list of prescription drugs and doses. None of them worked.

Anthem declined to comment for this story.

Unlike so many others in similar situations, Maturino was eventually able to get outside assistance to remedy the situation. She asked her adoption agency for help, and it ended up covering the cost of her niece’s stay in a residential program in Utah, where she was diagnosed with bipolar disorder and has been undergoing treatment for a year.

Maturino said she didn’t have the energy to appeal to Anthem.

“I wasn’t going to wait around for the insurance to kill her, or for her to hurt somebody,” Maturino said.

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — the independent source for health policy research, polling, and journalism.