Because the health insurance industry has legal immunity in many situations from bad faith lawsuits, it operates differently in many ways than the remainder of the insurance industry. Health insurance companies do not tend to investigate and evaluate claims in the same manner as auto insurance or homeowners insurance companies.  My experience prosecuting bad faith lawsuits against health insurance companies has taught me the duty of good faith and fair dealing is far from their minds when deciding whether to approve payment for medical treatment of their policyholders.  Some health insurance denials are truly outrageous.

Our health care system in this country has many problems, but few are as troubling as when an insurance company tries to play doctor.

Why does the health insurance industry think they can get away with this?  Because too often, they can.  The health insurance industry enjoys special protections from liability for insurance bad faith claims that other kinds of health insurance companies do not.  In 1974, Congress passed the Employee Retirement Income Security Act or “ERISA.”  One of the effects of ERISA is to preclude insurance bad faith claims against ERISA-governed insurance policies.  If you bought your health insurance through a group sponsored by your employer, ERISA applies to preclude you from bringing a bad faith claim, with some exceptions.  These exceptions can be extremely important.

Generally, if you purchased your health insurance through a group health plan established or maintained by a governmental entity or a church, ERISA does not apply to your health insurance plan. Put another way, if you are a Government employee (local, county, state or federal) or a church employee, it is likely your health insurance plan is not governed by ERISA and therefore you can bring a bad faith claim against your health insurance company.

Likewise, if you did not buy your health insurance through a group but instead bought it individually (for instance because you are self-employed or because you purchased your policy through the Affordable Care Act or “Obamacare” exchanges) ERISA does not apply to your policy.  Therefore, if you bought your insurance policy individually it is likely your policy is not governed by ERISA and therefore you can bring a bad faith claim against your health insurance company.

Very few people know these rules exist, and almost everyone who finds out wonders why.  Let’s just say the health insurance industry has a stronger political lobby in Washington, D.C. than anyone who would seek to oppose ERISA immunity from bad faith claims.

But, for those policyholders whose medical treatment is denied but who work for the government or bought their health coverage individually, there is recourse.  The duty of good faith and fair dealing applies, and the health insurance industry is not set up to defend itself effectively against these claims.  In the hands of the right lawyers, these can be very powerful cases.

 

CNN just ran an incredible story by Wayne Drash (see it here) on a health insurance claim denial by one of the country’s largest insurers, Aetna.  The story involved the case of Gillen Washington, a 23-year-old Californian, who is represented by attorney Scott Glovsky.  Apparently, Aetna denied medical treatment to Gillen based on the opinion of an Aetna-employed doctor who had not even read the medical records on Gillen.  In fact, the Aetna doctor testified in his deposition that as a matter of practice in his job reviewing policyholders’ claims at Aetna, he never reviewed the medical records of the policyholders.  Mr. Glovsky brought a lawsuit on Gillen’s behalf, and it is set to go to trial this week.

Now, the Insurance Commissioner in the State of California has opened an investigation into Aetna’s claim-handling practices.  The commissioner expressed concern over the Aetna doctor’s testimony and apparently intends to look into the matter.  Aetna denies any wrongdoing.

The CNN story quoted Dr. Arthur Caplan, founding director of the division of medical ethics at New York University Langone Medical Center, as describing Aetna doctor’s testimony as “a huge admission of fundamental immorality.  People desperate for care expect at least a fair review by the payer. This reeks of indifference to patients.”  CNN also quoted Dr. Caplan saying the  the testimony shows there “needs to be more transparency and accountability” from private, for-profit insurers in making these decisions.

 

This story appeared recently in the New York Times relating the story of Benjamin Poehling, a former finance director at United Health Group, one of the largest health insurers in the country.  Mr. Poehling is now a whistleblower who says the major insurance companies have been engaged in a scheme to bilk Medicare out of billions of dollars.

The New York Times story says:  “When Medicare was facing an impossible $13 trillion funding gap, Congress opted for a bold fix: it handed over part of the program to insurance companies, expecting them to provide better care at a lower cost. The new program was named Medicare Advantage… But now a whistleblower…asserts that the big insurance companies have been systematically bilking Medicare Advantage for years, reaping billions of taxpayer dollars from the program by gaming the payment system.”  The Times story goes on to say that Mr. Poehling “described in detail how his company and others like it – in his view – gamed the system: Finance directors like him monitored projects that United Health had designed to make patients looks sicker than they were, by scouring the patients’ health records electronically and finding ways to goose the diagnosis codes. The sicker the patient the more United Health was paid by Medicare Advantage – and the bigger the bonuses people earned…”

When insurance company executives allow their own financial interests to be placed ahead of those of everyone else, including the American taxpayer, something has gone wrong at the heart of the industry. Placing profits and personal bonuses ahead of all other considerations, including honesty, fairness, the health and welfare of policyholders and the tax dollars of all Americans is the act of a company run amok.