Articles Posted in health insurance claim

The Employee Retirement and Income Security Act (“ERISA”) mandates that insurance companies and claims administrators provide claimants with the specific reasons for the denial or termination of employee benefits and the reasons for the denial must be in writing. See Militello v. Cent. States, Se. and Sw. Areas Pension Fund, 360 F.3d 681, 688 (7th Cir. 2004), cert. denied, 543 U.S. 869 (2004). The Department of Labor has promulgated regulations under ERISA which require certain information to be contained in a denial or termination of benefits letter. Specifically, 29 C.F.R. §2560.503(g) states:

Manner and content of notification of benefit determination.

(1)….The notification shall set forth, in a manner of calculated to be understood by the claimant –

(I) Reference to the specific plan provisions on which the determination is based;

(II) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

These requirements ensure that when a claimant appeals a denial to the plan administrator, he or she will be able to address the determinative issues and have a fair chance to present his case. Halpin v. W.W. Granger, 962 F.2d 685 (7th Cir. 1992). Describing the additional information needed, as required by this section, enables a claimant to gain a better understanding of the inadequacy of his claim and to gain a meaningful review by knowing with what to supplement the record. Wolfe v. J.C. Penney Co., 710 F.2d 388 (7th Cir. 1983).
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In Kenseth v. Dean Health Plan, Inc., 722 F.3d 869 (7th Cir. 2013), Ms. Kenseth had gastric band surgery in 1987. Eighteen years later, Kenseth’s physician recommended a second operation to address the severe acid reflux and other serious health problems that had arisen since the gastric band surgery. The medical policy specifically excluded treatment for morbid obesity; however, when Ms. Kenseth called to get approval for the second surgery, a customer service representative told Kenseth over the phone that the medical plan would cover the procedure subject to a $300 co-payment. Subsequently, all of the medical claims related to the second surgery, totaling approximately $78,0000, were denied by the health plan as being related to morbid obesity.

The Court was troubled by the health plan leading Kenseth to believe that the second procedure would be covered when Kenseth called for certification and then denying the claims after the surgery. The Court explained that fiduciaries have a duty to disclose material information to plan participants, which includes a duty not to mislead and an affirmative duty to communicate material facts affecting the interests of plan participants. Although negligence of the individual in supplying advice is not actionable as a breach of fiduciary duty, a fiduciary may be liable for failing to take reasonable steps in furtherance of an insured’s right to accurate and complete information.

The court in Kenseth reversed the district court opinion noting that where the defendant, by encouraging plan participants to call for coverage information before undergoing procedures, by telling plaintiff that defendant would pay for the procedure, and by not alerting plaintiff that she could not rely on the advice she received, lulled plaintiff into believing that defendant would cover the costs of the procedure…and where plaintiff did not obtain alternate coverage because she believe she was covered, plaintiff could seek make-whole money damages as an equitable remedy under § 502(a)(3) if the administrator’s breach of fiduciary duty caused her damages. The Court seemed most bothered by the fact that there was no warning in the medical plan to plan participants that they could not rely upon the advice given to them by the customer service representatives nor was there any clear explanation given as to how a plan participant could obtain a definitive answer on whether a particular procedure would be covered. The Seventh Circuit ended up remanding the case to the district court to determine whether there was a breach of fiduciary duty, whether the breach was the cause of any harm to plaintiff, and what form of equitable relief was appropriate in light of circumstances of case.
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When completing an application for life, health or disability insurance coverage, an insurance company will ask a broad array of questions designed to determine whether an individual is a good risk and the type of coverage that should be issued. It is important to carefully complete the application form to make sure that all of the answers are 100% accurate; otherwise, the insurance company may later deny your claim. Unfortunately, many people do not find out that they failed to disclose important information on the insurance application until a claim is submitted. The insurance company then denies the claim contending that the insured made a material misrepresentation in the application because the insured failed to disclose important information such as a previous health condition or by their failure to answer “yes” to questions which were answered “no.” If the misrepresentation is material to the insurer issuing coverage, the insurance company has the right to deny the claim, rescind the policy and refund the premiums that have been paid.

The falsity of any statement in the application for any policy may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer. (IC 27-8-5-5(c)). False representations on an insurance application made by an insured concerning a material fact, which mislead, will void an insurance contract, just as in any other contractual relationship, regardless of whether the misrepresentation was innocently made or made with fraudulent intent. Ruhlig v. American Community Mut. Ins. Co., 696 N.E.2d 877, 880 (Ind. Ct. App. 1998) citing Watson v. Golden Rule Ins. Co., 564 N.E.2d 302, 304 (Ind. Ct. App. 1990); American Family Mut. Ins. Co. v. Kivela, 408 N.E.2d 805, 810 (Ind. Ct. App. 1980); Bennett v. CrownLife Ins. Co., 776 N.E.2d 1264 (Ind. Ct. App. 2002); Jesse v. American Community Mut. Ins. Co., 725 N.E.2d 420 (Ind. Ct. App. 2000).
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Exclusionary clauses for experimental or investigational treatment may either be included under the “medically necessary” provision of a medical policy or as a separate exclusionary clause in the plan. Either way, exclusions for experimental treatments provide yet another obstacle in getting certain medical claims paid under ERISA plans. In cases where benefits are denied as experimental or investigational in nature, courts are often called upon to interpret whether the language governing the experimental exclusion is ambiguous or whether the insurance company’s denial under the provision was arbitrary and capricious.

The standard for what is “experimental” must be defined in the plan and cannot be “a floating standard which could rise or fall in any fact situation.” Bucci v. Blue Cross-Blue Shield of Connecticut, Inc., 764 F.Supp. 728, 733 (D.Conn. 1991). Courts may also look to the body of the medical community’s acceptance in determining whether a treatment is experimental. An insurer’s failure to consider whether a relevant segment of the medical community accepts a procedure as being within a range of appropriate medical treatment may suggest an arbitrary and capricious review of a claim. The Bucci court analogized this review to the malpractice setting, stating, “If the contemporary standards of the medical community would deem the treatment applied or used in the circumstances of the particular case, as consistent with the exercise of medical judgment, in the view of a reasonable number of practitioners qualified to treat the malady in question, then the treatment must be found to be accepted medical practice. If such were the case, then a finding that the treatment was not so accepted could only be arbitrary and capricious.” Because the standard for experimental treatment relied upon by the plan administrator was not clearly defined in the plan, the court determined that the denial was arbitrary and capricious.
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When disabled clients first call the O’Ryan Law Firm, one of the first questions they ask is whether they can obtain punitive damages for the wrongful denial of their disability claim. No doubt, many of our clients have suffered incredible financial and emotional damages as a result of the insurance company either denying their claim outright or terminating the claim before the client can actually return to work. We have had clients suffer terrible financial losses, such as the loss of a vehicle, loss of their credit rating or even the loss of their home through foreclosure, due to the insurance company wrongfully denying their disability claim. Unfortunately, if the client’s disability claim falls under the Employee Retirement Income Security Act, commonly known as ERISA, the courts have found that punitive damages are not awardable when the disability claim is subject to ERISA.

ERISA is a federal statute that was passed in 1974 by Congress in order to protect participants of employee benefit plans. Most individuals receive medical coverage, life insurance coverage and disability coverage through their employer. Most employer sponsored benefit plans are governed by ERISA. There are two exceptions: governmental entities and church plans. If your employer is a governmental entity, such as a public university or school corporation, or a church plan, then you would not be covered by ERISA; instead, your claim is subject to state law. Under state law, you may be able to recover damages in excess of what the disability policy provides in the way of monthly disability benefits.

However, most disability claims are governed by ERISA. Unfortunately, the courts have found that ERISA preempts any state laws that allow for compensatory or punitive damages in excess of the policy benefits. For example, in the case of Midwest Security Life Ins. Co. v. Stroup, 730 N.E.2d 163 (Ind. 2000) the Indiana Supreme Court denied the Stroups’ request for punitive damages finding that their health insurance claims were preempted by ERISA. In this case, Patrick and Theresa Stroup received a group health insurance policy from Midwest Security Life Insurance Company as a result of Patrick’s employment and the policy was governed by ERISA because it was an employer sponsored health insurance plan. In January, 1993, Theresa sought predetermination of benefits for surgery to correct congenital problems with her jaw and Midwest approved the surgery. About four months after Theresa’s surgeries, in August 1994, Midwest amended its plan to exclude coverage for orthognathic surgery. In October 1995, she awoke in considerable pain to discover that her jaw had broken. One week later, Theresa underwent bone graft surgery to repair her jaw. In January 1996, Theresa was forced to undergo another surgery because of continued pain and muscle spasms in her jaw.