Patient Refunds for Bad Denials Act of 2026
- Sponsor
- Rep. Craig, Angie [D-MN-2]
- Committees
- Energy and Commerce Committee (primary)
- Last action
- Apr 22, 2026
Bottom line
The bill aims to enhance consumer protection by financially penalizing health insurance companies with high claims denial rates and increasing transparency in their denial processes.
What it actually does
This bill establishes civil monetary penalties for health insurance issuers whose group or individual health insurance coverage has a claims denial percentage of 25% or greater. Collected penalties would be distributed on a pro rata basis to individuals enrolled in the penalized coverage. Additionally, it mandates that issuers provide detailed explanations for claims denied due to lack of medical necessity and requires annual reporting of their overall claims denial rates to the Secretary.
Proponents argue
Proponents argue that this legislation will hold health insurance companies accountable for unfair claims denials, ensuring that patients receive the medical care they are entitled to. They contend it will provide direct financial relief to consumers affected by high denial rates and empower individuals with greater transparency regarding medical necessity standards, ultimately improving access to care and reducing patient financial burdens.
Opponents contend
Opponents might argue that the fixed 25% claims denial threshold is arbitrary and could lead to unintended consequences, such as insurers approving questionable or medically unnecessary claims to avoid penalties. They may also raise concerns about increased administrative burdens on insurers, which could potentially result in higher premiums for all consumers, and the complexity of auditing medical necessity and fraud claims.
The bill is concise and clearly structured, allowing for a quick and accessible review of its core provisions.
Section 2(a), new Part F, Sec. 2799C-1(a)
Imposition of Civil Monetary Penalties for High Claims Denial Rates
This provision authorizes the Secretary to impose civil monetary penalties on health insurance issuers if their group or individual health insurance coverage has a claims denial percentage of 25% or greater (or a lower percentage as the Secretary may specify) for plan years beginning on or after January 1, 2027. The penalty amount is set at $10,000,000, with an additional $2,000,000 for every percentage point by which the denial rate exceeds 25%.
Supporters argue
Supporters argue this provision creates a strong financial incentive for insurance companies to process claims fairly and reduce unwarranted denials, directly protecting patients and ensuring access to necessary medical services.
Critics contend
Critics may contend that a fixed percentage threshold could lead to unintended consequences, such as insurers approving questionable claims to avoid penalties, potentially driving up overall healthcare costs and premiums for all consumers.
Tradeoffs
This provision balances the goal of holding insurers accountable and protecting consumers against the risk of creating incentives that could lead to higher healthcare costs or administrative burdens for the insurance industry.
Section 2(a), new Part F, Sec. 2799C-1(b)
Defining 'Claims Denial Percentage' and Exclusions
This section defines 'claims denial percentage' as the percentage of claims for items and services furnished during a plan year that were denied, as determined by audits conducted by the Secretary. Importantly, it excludes claims that were correctly denied on the basis of fraud or lack of medical necessity. For fraud-based denials, the issuer must provide sufficient information to the Secretary to demonstrate the claim was indeed fraudulent.
Section 2(a), new Part F, Sec. 2799C-1(d)
Distribution of Collected Penalties to Enrolled Individuals
This provision mandates that the Secretary distribute the civil monetary penalties collected from non-compliant health insurance issuers on a pro rata basis to individuals who were enrolled in the specific group or individual health insurance coverage offered by that issuer during the plan year for which the penalty was imposed.
Section 2(b)(1), new Sec. 2730(a)
Requirement for Transparency in Medical Necessity Denials
This provision requires health insurance issuers to provide a detailed notice to individuals when a claim for an item or service is denied based on a lack of medical necessity. The notice must include the issuer's specific medical necessity standards for that item or service and a clear explanation of why the furnished item or service failed to meet those standards.
Section 2(b)(1), new Sec. 2730(b)
Annual Reporting of Base Claims Denial Rate
This provision mandates that health insurance issuers annually submit to the Secretary the overall percentage of claims that were denied under their coverage for any reason, for each plan year. This is a separate reporting requirement intended to provide broad data on denial practices.
The Secretary is granted discretion to specify a claims denial percentage lower than 25% as the threshold for imposing civil monetary penalties on health insurance issuers.
Section 2(a), new Part F, Sec. 2799C-1(a)
Why it matters:This is a common legislative technique to provide administrative agencies with flexibility to adapt regulations to changing circumstances or new data, rather than locking in a static numerical threshold. While standard, it grants substantial future regulatory power.
Case for: Proponents argue this flexibility allows the Secretary to adjust the threshold based on evolving industry practices, market conditions, or new data, ensuring the penalty remains effective and relevant over time without requiring new legislation.
Case against: Critics might argue that granting such broad discretion to the Secretary could lead to unpredictable regulatory changes, making it difficult for insurers to plan and comply, or that it could be subject to political influence rather than purely data-driven adjustments.
Estimated impact: This provision could significantly alter the financial liability for health insurance issuers and the number of individuals receiving refunds, depending on how and when the Secretary chooses to exercise this power. A lower threshold would increase the number of penalized issuers and the total penalties collected.