McKean Evans

Know Your Rights – Long Term Care Insurance

Many people have long term care insurance, especially when they get older, because the cost of prolonged individual care due to an injury or illness can be significant. For that reason, Long Term Care insurance is often part of people’s estate plan.

Long Term Care insurance can be subject to problems because the premiums get paid for years and years before coverage is needed, and, once it is needed, the policyholder is potentially to infirm to proactively protect their rights and make sure the insurer follows the policy.

Fortunately, Washington State’s insurance regulations give policyholders specific rights under Long Term Care insurance.

Long Term Care insurance policies must clearly explain the eligibility criteria and triggers for benefits, and advise the policyholder what circumstances give rise to a claim for benefits under the policy. This includes specifying what medical findings a doctor must make to trigger coverage. Further, eligibility requirements cannot be overly restrictive and cannot require an insured be precluded from performing more than three “Activities of Daily Living” (e.g., bathing and dressing). Importantly, the Long Term Care policy must provide that the insured cannot perform an Activity of Daily living if the insured requires another person’s significant assistance.

Similarly, Long Term Care policies cannot limit benefits to unreasonable time periods or dollar amounts. And, if the Long Term Care insurance policy replaces prior coverage, the insurer cannot apply an exclusion for pre-existing conditions.

Washington State law also limits what insurers can exclude from Long Term Care policies. Long Term Care policies can only exclude coverage for things like acts of war, criminal acts, chemical dependency, etc.

Additionally, insurers cannot cancel Long Term Care policies unless they obtain for the policyholder equivalent coverage with another insurer.

Lastly, Long Term Care insurance must provide a grace period for the insured to make up missed premium payments. This right is particularly significant because the beneficiaries of Long Term Care insurance are often elderly and rely on their children or others to handle their financial affairs and pay premiums.

UnitedHealth Unlawfully Denied Mental Health Treatment, Judge Finds

One of the ways in which ERISA protects insureds is by imposing a fiduciary duty on certain decision makers, requiring that decisions about coverage and benefits be made in the best interests of the plan participants and not in the best interests of an insurer’s profits. A recent federal court ruling highlights the importance of insurers’ fiduciary duties under ERISA.

This week, a U.S. federal judge in Northern California found insurer UnitedHealth violated ERISA by systematically denying coverage for mental health treatment for thousands of plan participants. The judge determined UnitedHealth’s internal guidelines for mental health coverage provided narrower coverage based on UnitedHealth’s financial interests. According to the judge, that resulted in UnitedHealth putting its own interests over those of plan participants, breaching UnitedHealth’s fiduciary duties under ERISA.

A federal law called the Mental Health Parity Act forbids most insurance from discriminating against mental health conditions. Under the law, insurers generally must cover mental health conditions to the same degree they cover physical ailments. The judge found UnitedHealth’s internal guidelines developed in response to the Mental Health Parity Act deviated from generally accepted standards of care and made it harder for patients to obtain coverage for mental health treatment. As a result, UnitedHealth’s guidelines made it harder for patients to obtain coverage. Among other things, UnitedHealth emphasized treating crisis symptoms over preventative care. The judge found UnitedHealth’s defense of its guidelines was evasive and deceptive.

Instead of complying with the law, UnitedHealth’s guidelines were found to promote UnitedHealth’s profits. The judge noted UnitedHealth ignored generally accepted criteria for making coverage determinations out of concerns compliance would cost the company money. To ensure that costly treatment would be routinely denied, UnitedHealth gave its fiance department veto power over its coverage guidelines.

This ruling represents an important enforcement of ERISA’s protections for insureds.

Can the Insurance Company Retroactively Deny Your Claim On A New Basis After You File A Lawsuit?

Let’s say you make an insurance claim, and the insurance company denies the claim for reason A. You think they’re wrong, so you take them to court and argue reason A is invalid and the company should have paid your claim. In response, the insurance company admits reason A didn’t apply but now argues your claim should have been denied for reason B. Can they do that?

Like most insurance law questions, the answer is “it depends.”

An insurer can waive or give up a basis for denying a claim if it does so knowingly and voluntarily. For instance, if the adjuster tells the policyholder “I know the policy says you have to give us all the repair estimates by Tuesday, but don’t worry about it,” the insurer probably can’t deny your claim if you give them the estimates after Tuesday.

On the other hand, if the insurer doesn’t know about a basis for denying your claim despite a diligent investigation, the insurer probably hasn’t waived its right to assert that basis as a reason for denying your claim. For instance, if a boat insurance policy provides the boat will stay within Puget Sound and the insurer only learns the boat was damaged in the open ocean after the fact, despite diligently investigating, the insurer may not have waived its right to deny the claim because the boat left Puget Sound.

Similarly, the insurer’s failure to deny coverage on a specific basis may bar the insurer from asserting that basis retroactively if the insured relies on the insurer’s failure to deny the claim on that basis. In the boat insurance example above, if the insurer knew that the boat was being sailed outside Puget Sound in violation of the insurance policy, but continued to accept the insured’s premiums anyway, the insurer may not be able to deny coverage later if the boat is damaged. Or, if the insurer denies coverage for an erroneous reason, and the insured pays an insurance expert to investigate the claim and fight the insurance company in court, the insurer may not be able to switch its reason for denying coverage and assert a new reason for denying coverage in court.

Similarly, for insurance polices issued through an employer that are subject to ERISA, courts will often find that the insurer or plan administrator must list all its reasons for denying a claim up front. This is because federal regulations require full and fair review of ERISA claims, and specifically require the claim denial notice provide a detailed explanation of the reasons the claim was denied. If the insurer or administrator hides a reason for denying benefits, they often lose the right to rely on that reason in a lawsuit.

Aetna Settles Wrongful Depression Treatment Denial Allegations

On February 15, 2019, Aetna Inc. announced a settlement of allegations Aetna wrongfully denied mental health treatment. The plaintiff and a group of Aetna insureds had filed a class action lawsuit under ERISA alleging Aetna wrongfully denied health insurance for a specific treatment for major depression called Transcranial Magnetic Stimulation (“TMS”).

The lawsuit alleges Aetna had a uniform policy of denying coverage for TMS on the basis TMS was purportedly “experimental and investigational.” Experimental/investigational exclusions are common in health plans, particularly plans issued through employers under ERISA. In theory, such exclusions limit the insurer’s obligation to pay for treatment where there’s insufficient evidence the treatment will effectively treat the insured. Unfortunately, in practice, experimental/investigational exclusions are frequently used as a justification for health plans’ refusal to cover any treatment that is new or novel enough to be expensive.

If approved by the judge, the settlement would require Aetna to pay $6.2 million to reimburse insureds who were wrongfully denied coverage for TMS treatment. Aetna had already changed its policies to allow coverage for TMS earlier in the lawsuit. The settlement class includes participants in employee-sponsored health plans administered by Aetna who were denied health insurance coverage for TMS on the basis of Experimental, Investigational, or “Unproven Services.”

Court Hands Long-Term Disability Claimant A Win Based on Insurer’s Failure to Give Proper Notice of Claim Denial

ERISA’s rules for making claims for benefits and for appealing benefit denials can prejudice claimants. The rules are complicated, not obvious, and rarely fully disclosed. And if you don’t follow the rules, you can lose your right to file suit after a claim is denied.

To protect claimants’ rights during this process, the U.S. Department of Labor, the agency responsible for enforcing ERISA, has promulgated a regulation establishing minimum claims-handling standards requiring that persons claiming benefits under ERISA receive full and fair review of their claims. Among these rules is a requirement that ERISA plan administrators give claimants fair notice when their claims for benefits are denied. Denial notices must be given within 90 days of the claim and must contain enough information for the claimant to decipher what is needed to obtain benefits.

A recent decision by the Ninth Circuit Court of Appeals in Gordon v. MetLife confirms that ERISA plan administrators such as MetLife must follow the rules for giving claimants full and fair review. Gordon sued MetLife under ERISA after MetLife failed for years to decide his claim for Long-Term Disability benefits. After the fact, MetLife sought to justify its de facto denial of benefits by relying on language in the ERISA plan giving MetLife discretion to determine benefits.

The court ruled that MetLife’s failure to respond to Gordon’s claim until years after the fact violated the Department of Labor’s “full and fair review” regulation. Accordingly, the court determined MetLife could not rely on its discretionary authority to deny Gordon’s claim for Long-Term Disability benefits. Although the Gordon ruling is unpublished, meaning it is not binding precedent, the case is nevertheless an important reminder that ERISA plan administrators must follow the rules mandating full and fair review of benefit claims.