Jan 20, 2019
Recently the largest health insurer in California, Blue Cross of California, was sued in a series of ten separate lawsuits. The allegations are that Blue Cross systematically reviews large claims submitted shortly after a policy goes into effect and then rescinds those policies for no good reason other than to get out of paying the submitted claims. I’ve commented before on some of the unique aspects of rescission cases.
I’m litigating two separate rescission cases right now that make me pretty sure the cases I’ve linked to in the L.A. Times story have some merit. In both of my cases the health insurers retrospectively reviewed my clients’ applications based on claims that were submitted within three or four months after the policies went into effect. In each case the insurers found relatively minor discrepancies between the answers on the insurance application and my clients’ health histories. In neither case did the alleged misstatement or omission have anything to do with the claims that were submitted by my clients after their policies went into effect. And once we got hold of the insurers’ underwriting guidelines it became clear that the "misstatements" my clients supposedly made were insignificant and wouldn’t have called for the insurers to decline coverage even if they had been disclosed.
Every time I have a person call about a rescission claim I take a hard look at it. In my experience, insurers often rescind policies for very flimsy reasons. When big claims come in shortly after a policy goes into effect, insurers often look hard at whether they can rescind the policy to get out of paying those claims. In fairness to insurers, when large claims come in soon after coverage goes into effect it is sometimes true that a person has lied during the application process in order to get coverage for a serious medical condition that presents the need for immediate treatment. If a person is willing to knowingly misrepresent their health history about a serious medical condition to get coverage and that medical condition thereafter results in significant expense, the insurer should be able to rescind. But insurers use rescission as a strategy to avoid paying valid claims far more often than in that limited situation. The availability of rescission can act on an insurer like crack to a drug addict.
Last month I wrote about the Health Insurance Marketplace Modernization Act (HIMMA), a new bill introduced by Senator Enzi to increase accessibility to health insurance for small businesses. The American Association of Retired Persons weighed in almost immediately here. Other reviews are coming in from insurers and state insurance departments and they seem to be unfavorable for the most part. As an example I’ve posted in the library a copy of a letter the Attorney General for the State of Illinois, Lisa Madigan, wrote to Senators Durbin and Obama outlining her concerns.
Here's the latest on Congress's attempts to amend ERISA to eliminate the made whole rule and give insurers carte blanche to be reimbursed their medical expenses regardless of how complete the compensation is from the negligent third party for the victim. The legislation's sponsors wanted to get all the changes in place before the Spring break that began a couple of weeks ago but ran into problems. The time frame for hammering out the differences between the House and Senate versions of the Pension Protection Act is now set for May or later.
In the meantime, voices opposing the efforts to get rid of equitable subrogation, the idea that a personal injury plaintiff should be completely compensated for his injuries from a negligent third party before health insurers or medical benefit plans can be reimbursed, are starting to rise. I've posted in the Library an Op-Ed piece I sent to my local paper, the Salt Lake Tribune. I'll let you know if it gets published. It tells the story of Karl Sweat, a good illustration of why this legislation is such a bad idea. It also borrows extensively from information provided by the Association of Trial Lawyers of America to its members about the need to apply pressure to have the language emasculating the made whole rule removed from the Pension Protection Act.
Also, over 150 attorneys and law professors have signed a letter to the members of the conference committee detailing their concerns about the bill, specifically the fact that the bill as drafted creates a one way street that favors insurer interests and provides no protection to ERISA participants and beneficiaries. You can find the letter here in the Library. Other comments I've made about this legislation can be found here, here, here, here, here and here.
In the News section of this website I’ve posted an article about discretionary clauses in insurance policies and how they create an unfair advantage for insurers by encouraging them to deny claims that should be paid. Briefly, under ERISA, clauses in insurance policies that give insurers discretion to interpret the terms of the policy and determine eligibility for benefits are enforceable and prevent judges from reversing an insurer’s denial of benefits unless the consumer can show that the insurer was arbitrary and capricious. That’s a tough standard for consumers to satisfy.
Insurers argue that these clauses aren’t bad because they result in a lower cost insurance product for consumers. This assumes that the money insurers save from denying claims based on the existence of discretionary clauses that would otherwise be paid to a claimant flows through to consumers in the form of lower premiums. It’s difficult to know the degree to which that is true but let’s assume, for the purposes of argument, that these savings do flow through to consumers to a significant degree. So, by how much are insurance premiums lower due to use of discretionary clauses than they would be if these clauses were prohibited?
Milliman, Inc., a national business consulting and actuarial firm, released a report about six months ago that analyzes that question in the context of disability policies. I’ve put a copy of it in the library section of the website and you can read it here. Milliman’s conclusion is that eliminating discretionary clauses would have the effect of increasing disability insurance premiums from 3 to 4%. The analysis and conclusions about discretionary clauses (as opposed to other modifications to disability insurance policies) are found in the first eleven pages of the 26 page PDF document.
A couple of weeks ago I commented on a series of lawsuits filed by William Shernoff, a well known plaintiff’s lawyer in Southern California, against Blue Cross of California. He alleges that Blue Cross of California makes it a regular practice to rescind coverage on individual insurance policies where large medical expenses are incurred shortly after the policies go into effect. When that occurs, Blue Cross makes it a practice to go through an insured’s medical records looking for any discrepancy between the representations made by the insured in the application and their medical history. If there are any misstatements, omissions, or inconsistencies at all, Blue Cross rescinds. The L.A. Times has an article in today’s paper discussing the cases Shernoff has filed. Those cases have prompted the California state departments of insurance and managed healthcare to open investigations of Blue Cross of California.
Blue Cross’ actions violate California state insurance law. According to the article, insurers in that state may rescind only if they can show a misstatement on an application was made with some intent to deceive the insurer. Not all states are like California. In some, an insurer is allowed to rescind if there is any material misstatement made in the application, regardless of whether the applicant intended to deceive the insurer or even knew that the statement in the application was inaccurate.
I've commented on the Health Insurance Marketplace Modernization and Affordability Act here, here and here. This week come two more comments against HIMMA. First, a letter to Senator Obama from the Illinois Division of Insurance that you can find in the library of this website. The letter raises a number of well founded concerns including preemption of state statutes and protection of consumer rights.
Second, the National Association of Attorneys General sent a letter to all Senators last week basically arguing that HIMMA will substitute weak federal regulations for strong state consumer protections that are currently in place.
Bill Shernoff has filed 13 more lawsuits alleging improper rescission practices by not only Blue Cross of California but also Blue Shield of California. You can read about the latest filings here in the L.A. Times. You can read my last posting about Shernoff’s recent lawsuits here.
One of the most infuriating and abusive practices of health insurers and self funded medical plans is their regular practice of delaying payment of valid claims submitted by health care providers. Many states have passed "prompt pay" statutes that require insurers to pay covered claims within short time frames, usually 30 days, after receiving all the information needed to process those claims. These statutes put in place penalties or interest obligations against insurers if payment is not made within the required time frames. However, these statutes are often toothless because they do not provide any private cause of action to individual consumers or health care providers; the penalties may be assessed and imposed only by a state’s insurance commissioner or other enforcement authority.
Sen. Robert Menendez of New Jersey proposes to amend ERISA to give claimants the right to collect interest from payors who improperly deny valid claims. You can read the bill here. Where the payor shows a pattern of wrongfully denying claims, the bill also allows the Secretary of Labor to impose fines and penalties.
The need to provide a meaningful negative consequences to payors who jerk around insureds and their health care providers is long overdue. I am amazed by payors’ brazen disregard of contractual and statutory time limits for paying valid claims. Whether Sen. Menendez’s bill has any chance of passage in today’s political climate is another thing. But it is a step in right direction.
editorializes today in favor of the Health Insurance Marketplace Modernization Act that is coming up for a Senate vote soon. I’ve talked about HIMMA a lot in recent postings. Its supporters argue that HIMMA will make health insurance more accessible and affordable to small businesses and, thus, lower the number of people without health insurance in this country. Opponents argue that it is a slick gimmick to allow insurers to circumvent state insurance protections and will do little to either lower insurance costs or provide more folks with health insurance. I lean toward the latter view. However, regardless of how HIMMA fares, it seems clear to me that something will have to change about the way people get coverage for medical expenses in this country. If you project into the next 10, 20 and 30 years the rates of uninsured and the costs of medical care and health insurance, I can’t see how we can sustain the present course. And even if its supporters are right in that HIMMA will lower the costs of health insurance for small employers, I can’t see how it will make a significant dent in our uninsured and rising health insurance costs problems.
BTW, what is up with the WSJ referring to ERISA as "Erisa?" The WSJ doesn’t do this with other statutory acronyms does it? Does it refer to the Americans with Disabilities Act as "Ada?" How about the Health Insurance Portability and Accountability Act? Is that "Hipaa?" Just askin’.
Yesterday the Supreme Court decided Sereboff v. Mid-Atlantic Medical Services, Inc. You can read the opinion here. It's a unanimous opinion written by Chief Justice Roberts. Sereboff has been eagerly anticipated by ERISA afficionados for several months. I'll have more to say about the decision later today or tomorrow. But for now, color me unimpressed. It's an analytical mess and raises more questions than it answers.
Sereboff v. MAMSI, decided the day before yesterday by the Supreme Court, deals with the right of an ERISA fiduciary to pursue a participant in the ERISA plan for reimbursement of money the plan has paid and that the participant later recovers from some other source. For example, say a person is injured in an auto accident and his health insurance, provided through a group policy from his work at the bar and grill, pays $10,000. The policy says that if the person later recovers that $10,000 from the drunk driver who ran into him, the health insurer has the right to be reimbursed the $10,000 before the participant gets anything. Can the insurer enforce that language and get the money back?
The Supremes first dealt with this question in Great-West Life & Ann. Ins. Co., 534 U.S. 204 (2002). In that case the Court ruled that Great-West could not seek reimbursement from a plan participant where the funds recovered in a personal injury case were deposited in a special needs trust, a separate account not in the possession of the participant. The Court in Great-West also stated that "[a] claim for money due and owing under a contract," such as the reimbursement claim at issue in Sereboff, was not a claim available to ERISA fiduciaries.
In Sereboff, the Court backtracks on this Great-West language and rules that a reimbursement interest created by the language of ERISA plans is an "equitable lien ‘by agreement.’" The Court rules that an insurer may be reimbursed all the funds it paid from a participant who later recovers a portion of those funds from a third party so long as those funds are in the possession of the participant. The Court also makes it easier for ERISA fiduciaries to recover funds in reimbursement actions by overruling the language in Great-West that required the fiduciary trace the funds held by the participant. All an insurer now has to do is show that the participant possesses the funds the insurer seeks and that the ERISA plan gives the insurer the right to get those funds back. The decision defers to another day the role the doctrine of equitable subrogation, the "made whole rule," has in ERISA.
Unfortunately, as with so many ERISA decisions, the analysis is muddled, almost incoherent in spots. Sereboff raises many questions. Its purpose was to clarify the law relating to ERISA’s equitable remedies provision but it offers little assistance on that point. It is clear that insurers will be happy with this result. But I pity the circuit and district courts across the country that will try to obtain specific guidance from its language.
The decision does not address whether its strengthening of equitable remedies in favor of ERISA fiduciaries/insurers will be reciprocal. However, many court decisions across the country say that meaningful equitable remedies under ERISA are available only to benefit businesses sponsoring ERISA plans and their insurance companies. For the most part, the case law relating to ERISA’s equitable remedies is developing as an alarmingly one way street that benefits only corporate America.
The Supreme Court shows no indication that it will provide a level playing field when dealing with employee benefits under ERISA. I continue to be amazed at how the federal judiciary converts a statute intended to protect consumers into a sword that cuts them off at the knees.
An article in one of my hometown newspapers yesterday
illustrates the tension that can exist between the interests of law enforcement and patient privacy. Here’s the story. Following a domestic dispute, husband checks himself into the University of Utah Neuropsychiatric Institute. The police show up to serve an arrest warrant and the hospital refuses to disclose whether the man is a patient there citing Health Insurance Portability and Accountability Act (HIPAA) as the barrier. The police ask the hospital to inform them if the patient is discharged. Husband is later discharged and goes to live with his mother but the hospital doesn’t tell the cops. When they find out from some other source where husband is, the cops contact mom and tell her they need to serve an arrest warrant on husband. He checks back into the hospital before they can serve the arrest warrant. Back go the police to the hospital but again the facility refuses to disclose any patient information to them. The cops then get a search warrant and this finally triggers the hospital’s disclosure of information about the patient.
The police find it frustrating to have to jump through so many hoops but the hospital stands by its position that to comply with HIPAA that’s just the way it has to be. When dealing with substance abuse treatment the hospital requires not just an arrest warrant but a search warrant before it is on safe ground disclosing patient information.
I can’t say whether either side’s position was unjustified or improper without taking a harder look at the details of HIPAA as applied to this particular situation. But it’s an interesting little brouhaha.
Kevin Drum at Washington Monthly has a comment
on a recent medical malpractice study
that I think pretty well characterizes the relationship between medical malpractice suits and the need for tort reform. I'm with Drum. The real reform that needs to occur in this area is insurance rather than tort reform.
This is a real life example of the dynamic that regularly plays out between health insurers and health care providers. It involves Oxford Health Plans, a subsidiary of UnitedHealth Group and MediSys Health Network . You can read about it in the New York Times. Here’s the short version.
In 2004 Oxford and Medisys, which operates two hospitals in Queens, New York, negotiated increased rates in their managed care contract. However, time passed and Oxford never paid at the new, increased, reimbursement amounts. After awhile MediSys says, "what’s going on? Why aren’t you paying at the increased rates?" Oxford says, "oh, yeah. Well, tell you what, we’ll pay the new rates we agreed to pay a few months ago if you get that group of anesthesiologists at one of your hospitals to agree to accept contracted rates instead of insisting on payment at their billed charges." MediSys says, "hey, they go their own way; we don’t have control over them. Besides, that has nothing to do with you and us. Pay us the money you owe us and negotiate with the anesthesiologists yourselves." In response, Oxford not only continues to ignore the new payment rates but terminates the contract with MediSys’ Jamaica hospital. Of course, this was quite upsetting to the Jamaica hospital, its doctors and the Oxford insureds receiving treatment there. Things are now in court.
From my experience insurers have been remarkably effective at kneecapping providers in this way. Kenneth E. Raske, President of the Greater New York Hospital Association, said that if Oxford’s strategy works, "every financially troubled hospital is at the mercy of any major insurer that does not want to honor its contract." That pretty much hits the nail on the head.
Hopefully, the court will hold Oxford’s feet to the fire and require it to live up to the terms of the contract. An insurer who gets away with the type of bad faith Oxford is demonstrating here will simply be encouraged to do it again and again. And so will the competitors of that insurer.
The conference committee process for amending ERISA goes on. I’ve commented before about my thoughts on attempts to add language to section 502(a)(3) of ERISA to give a leg up for businesses and insurers trying to collect subrogation and reimbursement claims regardless of whether the plan participant has been made whole.
The latest is that the leaders of the conference committee say they will be finished with their work by the Fourth of July. One of the interesting twists on the amendment to eliminate equitable subrogation is the Supreme Court’s decision in Sereboff last month. The increased leverage that decision gave to insurers to pursue repayment of monies paid by ERISA plans from participants does not seem to have slaked insurer’s thirst for a more absolute right to get their money from dollar one regardless of how badly injured and incompletely compensated plan participants are.
We all know
that if an ERISA plan document grants discretion to a person or entity to interpret the terms of an ERISA plan or to determine eligibility for benefits, an ERISA fiduciary’s decision on those points will not be reversed by a court unless it is arbitrary and capricious. Unless the decision is completely
unreasonable, it will be upheld by a court. That is a tough mountain for plaintiffs to climb and is a significant reason so few lawyers handle ERISA cases for plan beneficiaries. In the alternative, if no discretionary language is in the ERISA plan document, a court reviews the decision for whether it is correct or not, without deferring to any degree to the ERISA fiduciary’s decision.
But what language is sufficient to "grant discretion?" For years insurers have argued that boilerplate clauses in policies such as "you must present proof satisfactory to Insurer" or "Insurer will determine if you are entitled to benefits" is sufficient to confer discretionary authority on an insurer and trigger a very deferential standard of review by a court. It wouldn’t matter that no reasonable person reading these innocuous phrases would realize the effect of this language is to largely prevent any court from reversing all but the most outrageous or baseless denials.
Fortunately, more and more courts are rejecting this overreaching argument. Today’s case is Schwartz v. Prudential
, another great result from Mark DeBofsky
out of Chicago. In Schwartz
the Seventh Circuit makes clear that the requirement for an insured to submit "proof satisfactory to Prudential" of a disability is language that will not provide the insurer with an arbitrary and capricious standard of review in court. Schwartz
also holds that if the master plan document and the separate summary plan document that ERISA requires be distributed to plan participants are inconsistent in any significant way, the provision that is more generous to the insured will be enforced.
but here’s word on the fate of the Health Insurance Marketplace Modernization and Affordability Act. Last month the bill’s sponsors couldn’t get the 60 votes they needed to end debate on the legislation. I’ve commented before on the widespread opposition the bill generated. It’s not likely it will come up for a vote again anytime soon.
from the U.S. Fifth Circuit Court of Appeals
out of New Orleans, Robinson v. Aetna Life Insurance Co.
Alton Robinson was a sales rep. When his eyesight began to fail he realized he could no longer drive the distances required by his job, 800 – 1000 miles a week. It is quite evident that the ability to safely drive long distrances for Mr. Robinson was a pretty important component of that work. But fortunately, Alton had a disability policy that paid him disability benefits when he was not able to perform the material duties of his own occupation.
Unfortunately, he had to deal with an unsympathetic insurer. Although Aetna initially paid the claim for about 18 months, the insurer cut Alton off because his physician stated that Alton had no restrictions on his activities of daily living. Alton’s response? “Sure, I can care for myself at home. But everyone agrees I can’t drive any meaningful distance. The criteria for disability is whether I can perform my job, not whether I can care for myself.”
Alas, this cogent analysis failed to reverse the denial because Aetna simply switched over to another reason to deny the claim. Rather than asserting that he could drive, Aetna claimed that driving was not a material duty of Alton’s own occupation!
Fortunately for Alton, the court of appeals was not as obtuse as Aetna. It reversed the denial and granted Alton his benefits.
Judge William Acker is a federal district court judge in the Northern District of Alabama. He understands the absurdity that passes for analysis of conflict of interest in most ERISA cases.
But first, a little background. ERISA requires that any person or entity with any discretionary control over the management or disposition of the assets of an ERISA plan is a fiduciary. A good example of an ERISA fiduciary is when an employer purchases a policy of group insurance for its employees. Because it is deciding what benefits will be paid or denied to the employees, there is no question that the insurer in that situation is a fiduciary under ERISA. As such, ERISA requires that it act in the sole interest of the insureds and for the exclusive purpose of providing them benefits. 29 U.S.C. Sec. 1104
. A fiduciary duty is the highest known to the law. Its duty of loyalty is rigid and uncompromising. ERISA fiduciaries may not balance their loyalties to participants in the plan against other loyalties. To do so is a violation of ERISA and can make the fiduciary personally liable for payment of benefits.
Of course, insurers don’t work that way in the real world. They are profit making entities that cease to exist unless they make money for the individuals who own a share of the business.
So how does the federal judiciary reconcile the self-evident conflict that exists between the insurance company’s need to look after its own financial interest and ERISA’s duty of loyalty? Sometimes, as the Seventh Circuit has repeatedly done, the court simply denies that a conflict exists.
This has the effect of keeping the judges’ dockets clear in that area of the country because such a rule is a powerful disincentive to challenging insurance company denials. And as the Seventh Circuit has informed us, it does not have the time, energy or resources to ensure that justice is meted out in that section of the country. At least not for ERISA cases.
So insurers can do pretty much what they want in Wisconsin, Illinois and Indiana unless they act in a completely unreasonable way.
The Supreme Court has taken a different approach. It has stated
that an ERISA fiduciary can put a boilerplate clause in the plan documents (including an insurance policy) that calls for the trial court to defer to any decision the ERISA fiduciary makes. However, if there is a conflict of interest the court should somehow factor that in to the judge’s review process. In practice the lower courts have struggled to figure out how to make that type of not-quite-so-deferential review workable.
So back to Judge Acker. He has written other thoughtful opinions and at least one law review article about ERISA and its flaws. Last week he issued a ruling in Burroughs v. BellSouth Telecommunications
that I’ve placed in the library of this website. Click here
to read it. It’s an excellent critique of the idea that insurers are anything but completely and inherently conflicted when it comes to deciding claims in a way that satisfies ERISA fiduciary duty requirements. Don’t miss it.
Last week I commented
on the tension between an insurer’s role as a profit making entity and their obligation to act as fiduciaries when they provide group health, life or disability insurance under an ERISA plan. One of the frustrating things about how the federal judiciary has resolved this tension is that it has often ignored well established principles of insurance law that have been developed by courts over many decades.
ERISA itself makes clear, at 29 U.S.C. Sec. 1144(b)(2)(A),
that Congress intended to leave in place state laws regulating insurance companies. Nevertheless, many federal courts have gutted important principles of insurance law and left consumers with less protection against insurer misconduct than individuals had before ERISA was enacted.
Here’s an example. Every state in the country has held that when the terms of an insurance policy are ambiguous as to whether a loss is covered, the insurance company loses and the consumer gets the coverage. Why? Because the insurer wrote the policy and is almost always much more sophisticated of the two parties. This legal principle, known as contra proferentem
, has done much to make sure that insurers don’t get away with putting unclear language that can be interpreted as either covering or excluding a loss in their policies and then weasel out of paying when there is a claim.
However, many federal courts have ruled that contra proferentem
does not apply in ERISA cases. Consequently, you have overreaching and abuse by insurers. This is just one of many ways in which basic principles of insurance law protecting insureds have been swept under the rug since ERISA was passed in 1974.
Accidental death and dismemberment insurance polices have been around for a long time. They pay out when you are killed or have serious injury (usually loss of a limb, sight or hearing) as a result of an accident. One of the fascinating and complicated issues that arises in these policies is how the term “accident” is defined.
Eckelberry v. Reliastar Life Ins. Co., 402 F.Supp.2d 704 (S.D.W.V. 2005) is a recent case that discusses this. You can read it here
. Judge Joseph R. Goodwin spends some significant time and energy thoroughly reviewing the history of how courts have dealt with determining whether an accident has occurred that triggers coverage.
Earl Eckelberry was driving home after having a few drinks too many, drove into the back of a tractor trailer parked on the side of the road and was killed. His blood alcohol level was .15, half again as much as allowed under West Virginia law. The insurance policy paid out only if the loss of life was “due to an accident.” It defined “accident” as “an unexpected and sudden event which the insured does not foresee.” The insurer denied the claim because it argued that Earl’s death was “not unexpected” and that he “put himself in a position in which he should have known serious injury or death could occur.” The only issue in the case was whether this interpretation of the phrase “due to an accident” and the language defining that phrase was reasonable. The court ruled it was not. Its comprehensive and colorful analysis is persuasive.
The court first recounts how the judiciary has struggled with this issue. One court characterized the issue as “one of the more philosophically complex simple questions” in the law. Another court refers to defining an accident as a “metaphysical conundrum.” Judge Goodwin dives into it by taking apart the definition of “accident” in the policy.
First, he asks whether Earl’s accident was “unexpected.” The judge’s answer is unequivocal: even though he was drunk, Earl expected to get home safely. To say otherwise would be to say that Earl intended to kill himself when he plowed into the back of the tractor trailer. There was no evidence he was suicidal at the time of his death.
Next, the court finds that the event was “sudden” as required by the language in the policy. This was the easiest aspect of the definition of accident to satisfy.
Third, did Earl foresee the accident? If you define “foresee” as “knowing beforehand,” Earl didn’t foresee when he put the keys in the ignition that he would die from driving under the influence of alcohol. Did his actions contribute to the accident? Certainly. But the court notes that if insurers are allowed to deny accident insurance coverage for any incident caused to any degree by the insured’s own negligent actions, most insurance would be pretty worthless: “having accident insurance would become as useful as socks for fish.” After all, most of us buy insurance precisely because we do foresee the possibility of a loss of something we value, a loss we often help cause, directly or indirectly, by our own negligence.
Judge Goodwin goes on to review how other courts have dealt with this issue. Many have adopted the distinction between accidental means and accidental results. These courts rule that if the means by which the injury occurred was in any way intended, the injury is not accidental. This is true even if the results were entirely unplanned and even unforeseen. Judge Goodwin rejects this approach saying that while it seems straightforward enough:
“it has proven to be entirely artificial in practice. Saying Justice Cardozo was psychic when he predicted that adhering to this artificial distinction would ‘plunge this branch of law into a Serbonian Bog’ is a vast understatement.”
Note 5 of the opinion give more detail about the allusion. Circumventing the Serbonian Bog, the court adopts the analysis of the First Circuit in Wickman v. Northwest National Ins. Co.,
908 F.2d 1077 (1st Cir. 1990) and that has been widely accepted. First, the court looks to the reasonable expectations of the insured person. If facts as to that person’s subjective expectations are not available, the court looks to whether a reasonable person similarly situated to the insured “would have viewed the injury as highly likely
to occur as a result of the insured’s intentional conduct.”
The insurer has a tough argument under this language. Driving drunk is certainly negligent. Maybe even extraordinarily stupid. But would a reasonable person think it is “highly likely” to kill you? The court presents data to show that while driving drunk dramatically increases the risk of death while driving, death results only once out of every 9,128 trips with an impaired person behind the wheel. This does not begin to approach the “highly likely” standard that Reliastar had the burden of proving.
There is more to the court’s reasoning that I won’t go into here. But don’t miss the opportunity to digest the whole thing. The opinion is a pleasure to read not just because Judge Goodwin carries out a cogent and careful analysis of the facts and the law but due to his effort and skill at writing well, with humor and taking into consideration how people operate in the real world.
Lucas Fritcher was born with serious physical problems. They included severe hypoxic encephalopathy, severe cerebral palsy, frequent daily seizures, cleft palate, cortical blindness, microcephaly, severe mental motor retardation, spastic quadriplegia, an inability to swallow and asthma. He required constant medical care or monitoring to live.
His health insurer paid for home health care at the clip of about 18 hours a day for three years. But, as you can imagine, that got to be pretty expensive. So the insurer decided it had spent enough and announced that it would pay for no more than two hours of care a day for Lucas’ care stating that any more care than that was “custodial” and not medically necessary under the terms of the ERISA plan providing the coverage.
The insurer’s in house physician, a part time practicing endocrinologist, provided the support for the insurer’s decision. However, he admitted that he made his decision without referring to Lucas’ need for medical care throughout the day or the frequency of his seizures (about 20 a day).
His father filed suit against the insurer, Fritcher v. Health Care Service Corp.,
301 F.3d 811 (7th Cir. 2002), and won. The court was not amused with the insurer’s denial, holding that the insurer’s decision to limit payment to two hours of care a day was “patently unreasonable.” Fritcher
criticizes insurers for selective review of medical records, focusing only on information that supports denying the claim, without fairly reviewing the record as a whole.
This “cherry-picking” of facts by insurers to support their claim denials is very common. Of course, often times, taking a look at the big picture demonstrates that the insurer is correct in denying the claim. But often, the insurer is simply saving itself money by focusing on a few facts that show a lack of medical necessity or give rise to some other exclusion or limitation when the patient’s records, viewed in their entirety, demonstrate the claim is valid. In that situation, there is no substitute for a painstaking review of all the records to demonstrate that, when viewed as a whole, the facts underlying a claim show it should be paid.
contains other holdings that are helpful to plaintiffs. The Seventh Circuit rejected the payer’s argument that discretionary language found in the administrative services agreement between the insurer and the employer of a self funded plan is sufficient to confer discretion on the insurer and requires the court to review the insurer’s decision under an arbitrary and capricious standard of review. The ASA is not a document that is distributed to the employees. Consequently, they have no notice of any discretionary language in that document. Without proper notice to the plan participants of discretionary authority, the court should not defer to the payer’s decision. Finally, the court awarded prejudgment interest and noted that compounding of that interest over time was a permissible component of that calculation.
Health and Human Services Secretary Michael Leavitt
spoke to the American Health Lawyers Association
on June 26th. One of his topics was the need for transparency in the pricing of healthcare. He stated that for the duration of this administration, one of his top priorities would be promoting the need for healthcare providers to fully disclose their pricing to the public. The text of his comments is not yet up on the HHS website but I expect it will be sometime soon.
We hear a lot along these lines nowadays. It is odd to me that there is so much talk about the need for providers to fully disclose their pricing arrangements when, at the same time, health insurers so often do a terrible job at providing information to consumers about how the cost of medical treatment will be split between the insurer and the insured under a health insurance policy.
For example, many health insurance policies state that if an insured goes to a non-preferred provider, the insurer will pay only the amount a preferred provider would accept and the patient is responsible to pay the difference between that amount and the billed charge. So you would assume that an insured can call up the insurer and find out what the preferred provider payment for any given procedure is? Dream on. Getting information about the specific amount of that payment before the procedure occurs so the insured can shop around is next to impossible. Insurers view it as proprietary information. Unlike what is happening to providers, I don’t see anyone pushing insurers to open up their records, even for their own insureds.
Insurer stonewalling is especially offensive when there is a direct contractual relationship between the insured and the insurer. That creates more of a duty to be openhanded with information than any relationship between a healthcare provider and the public at large.
B. Janell Grenier
, an ERISA lawyer in Pennsylvania, has an interesting post and link
to an article in Law.com
discussing why more lawyers aren't blogging. I'm with Janell in feeling that it may have something to do with the fact that as I look out my office window at the trees waving in the sun with the mountains in the background on this perfect summer afternoon, other activities take a higher priority for most lawyers.
I like the reference in the article to the blog as pet: "In a lot of ways, blogging is like owning a dog," says Stephen Nipper, author of The Invent Blog.
"You have to feed it, you have to take it for walks, you have to take it to the vet. It's a living and breathing animal that needs to be regularly dealt with." True. But I already have a dog, Emma the Airedale, and a cat too for that matter.
For me, blogging is both a creative and educational outlet providing the chance to talk to a somewhat larger audience than my paralegal and associates about ERISA, a troubled statute IMHO.
Managed care has made great inroads in the past 10 – 20 years in cutting back the payments made for medical care. Nowhere has this been more significant than in cases involving mental health. You can say that is a good or a bad thing; I’m not here to take a position on that. But the question remains: for purposes of determining the extent of a patient’s insurance coverage, should the opinions of reviewing physicians, doctors who are only reviewing a patient’s medical records for a payer, be given equal weight as the opinions of the treating physician? If they are, the payer really has the upper hand in limiting the reimbursement it sends to a provider of care.
Out of the federal district court in Buffalo, New York, comes an important case last month regarding how judges should evaluate medical necessity disputes in psychiatric cases. Westphal v. Eastman Kodak Co
, 2006 U.S. Dist. LEXIS 41494, a copy of which you can access in the library here
, contains a thorough analysis of the advantages the treating physician has over the reviewing physician in evaluating a patient’s condition. For psychiatric cases, an important aspect of the assessment of the patient’s condition comes from observation of the patient’s demeanor, watching affect, evaluating nuances of speech, etc. These types of things, and there are many of them, simply cannot be recorded in written medical records. In addition, the ethics code of the American Psychiatric Association prohibits an M.D. from offering a professional opinion unless he or she has examined the patient.
the court determined that the payer acted in an arbitrary and capricious manner by relying on the opinions of non-treating, non-examining doctors to override the prescription of care offered by the treating physician. This rationale of this opinion could go a long way toward tipping relatively balanced scales in close cases in the provider’s and patient’s favor.