A recent case involving a health insurer’s attempt to deny payment for what it claimed was experimental and investigational treatment highlights an age old problem for insurers: how specific do you have to be in drafting your policy exclusions and limitations.
Health insurers and benefit plans routinely exclude from coverage medical treatment that is experimental or investigational. These claims are usually difficult. They regularly involve individuals who seek payment for treatment that hold out the hope of saving the insured’s life and yet cost a great deal of money. Unless the insurer or health benefit plan pays the cost, the patient will often not be able to obtain the treatment. Adding to the difficulty is the fact that most illnesses or injuries carry with them a window of opportunity, usually short, to achieve the best likelihood of positive response by applying the treatment in question. This is the context for Boldon v. Humana Ins. Co., 466 F.Supp.2d 1199 (D. Ariz. 2006). You can find the decision in the website library here
Michael Boldon was diagnosed with advanced unresectable hepatocellular carcinoma (“HCC”) in May, 2006. HCC is a rare form of liver cancer. His physician recommended treatment using TheraSphere. That involved the intra-arterial delivery of glass microspheres of yttrium-90, a radioactive element, to the site of the liver tumor. The treatment cost over $100,000. Alternative treatments were less effective and more likely to produce side effects.
TheraSphere had been tested in 13 clinical trials and had been found relatively safe, effective and well tolerated. It had been peer reviewed in nearly 30 medical journals with the same conclusions. However, in light of the small number of individuals who developed HCC, it was difficult to get a larger census from which to draw more definitive conclusions about the treatment.
Boldon had health coverage through a group insurance policy issued by Humana. The problem for him was that Humana’s policy excluded coverage for experimental and investigational treatment. Boldon requested approval to receive the TheraSphere treatment but Humana denied his request. Humana’s primary rationale for its denial was that there had been no National Cancer Institute Phase III clinical trials performed for the procedure to follow up on the positive Phase I and II clinical trials that had occurred. However, in light of the relative infrequency of HCC, the number of patients necessary to carry out this last phase of the investigation process did not exist.
Boldon filed suit and promptly asked the court to issue a mandatory injunction ordering Humana to authorize and pay for the treatment in light of his deteriorating physical condition. The court granted Boldon’s request.
As an initial matter, the court questioned whether an insurer could ever exercise its discretion in a manner necessary to trigger a deferential standard of review. Since the only thing Humana did was to apply a categorical, inflexible standard to deny coverage, the court had doubts that any “discretion” had been exercised at all. The court did not ultimately decide that question because it ruled that even under a deferential standard of review, Humana’s denial could not be sustained.
A number of things about Humana’s denial bothered the judge. Part of it was that Humana never had a physician examine Boldon. Nor, in the court’s opinion, did Humana pay proper attention to the unique circumstances of Boldon's medical condition. Part of it was the inherent conflict Humana shares with every other insurer between looking after its own bottom line versus the welfare of its insured. Part of it was Humana’s steadfast refusal to acknowledge that every study of ThereSphere concluded it was safe, effective and had fewer side effects than alternative treatments. Part of it was the judge’s feeling that denying Boldon’s claim was unfair to individuals who had the misfortune of being afflicted with diseases that would never generate enough victims to allow for Phase III trials to occur at all.
But the primary concern for the court was that Humana’s reading of the policy’s experimental and investigational exclusion categorically excluded any treatment that had not proceeded entirely through Phases I, II and III of NCI clinical trials without fairly disclosing the scope of that limitation in the policy language. The court held that Humana had utilized “a submerged requirement of Phase III trials when that exclusion cannot reasonably be anticipated from the text of the Plan.”
Morale of the story: if you want to enforce a limitation or exclusion, it has to be fully and fairly disclosed. The dilemma this creates for an insurer is that if it provides such an explicit and detailed disclosure of all its exclusions and limitations, especially when its competition may not be so scrupulous, it becomes harder to compete with the relatively unscrupulous insurer in selling your insurance policies.
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