I’ve previously blogged about cases in which insurers were limited from raising new reasons to deny coverage after the fact. Whether an insurer can do so is a complex question that depends on the facts of the specific case. It also depends on what law applies. A recent ruling from the Ninth Circuit Court of Appeals confirms that, if ERISA applies, the rule is clear: ERISA-governed benefit plans cannot raise new reasons for denying benefits after they get sued.
In Beverly Oaks v. Blue Cross & Blue Shield, doctors at the Beverly Oaks clinic sued Blue Cross & Blue Shield (BCBS) claiming that BCBS should have paid for the treatment of certain patients of the clinic who had health insurance coverage from BCBS under their ERISA plans. The doctors relied on agreements the patients signed promising that the doctors could sue the insurance plan directly to pay their treatment bills. These agreements are known as an “assignment of benefits.’
No one disputed that the ERISA plans at issue banned the patients from signing the “assignment of benefits” forms. The plan documents repeatedly stated that benefits could not be assigned to third parties like the doctors.
But BCBS failed to invoke the assignment ban in response to the doctors’ claims. Instead, BCBS processed the claims on the merits, mostly denying them for reasons unrelated to the assignment of benefits. At the end of the day, BCBS paid the doctors only $130,000 out of $1.4 million in medical bills.
BCBS raised the ban on assigning benefits only after the doctors filed a lawsuit under ERISA seeking to overturn BCBS’ denial of the claims on the merits. BCBS told the federal District Court that the doctors had no right to sue on behalf of their patients because the assignment of benefits agreements were not allowed under the terms of the ERISA plans. The District Court agreed and dismissed the case.
But the Ninth Circuit reversed and allowed the doctors’ suit to proceed. That court emphasized that ERISA requires employee benefit plans (including their agents like BCBS) to state all of the reasons for denying a claim in the first instance. Allowing plan administrators to keep arguments for denying claims in their proverbial “back pockets” until litigation invites abuses and cuts against claimants’ right to respond to the basis for any claim denials:
“ERISA and its implementing regulations are undermined where plan administrators have available sufficient information to assert a basis for denial of benefits, but choose to hold that basis in reserve rather than communicate it to the beneficiary.”
The Court of Appeals also relied on the fact that BCBS representatives repeatedly told the doctors that they could seek reimbursement for medical bills on their patients’ behalf–before the doctors provided treatment–without mentioning the ban on assignments of benefits.
The Ninth Circuit Court of Appeals (the federal appeals court with jurisdiction over Washington and other west coast states) is having a busy summer for insurance cases. On the heels of recent decisions regarding attorneys’ fees in ERISA-governed insurance disputes and insurers’ duty to reasonably investigate insurance claims comes the July 14, 2020 ruling in Schmitt v. Kaiser Foundation Health Plan of Washington, holding health insurers cannot design health plans that have a discriminatory impact under the Affordable Care Act (a/k/a “Obamacare”).
For decades before the ACA, it was legal for health insurers to design health plan benefits however they chose, even if those plan designs had a discriminatory impact. As long as the insurer provided the same benefits to everyone, the insurer could decide what benefits to offer and what not to offer. Insureds could not sue their insurer for designing a health plan that had a discriminatory effect.
The Schmitt ruling confirms that the ACA changed that. Part of the ACA’s purpose is to expand so-called “minimum essential coverage” under health insurance policies. There are certain minimum benefits that must be included in most health plans. This includes, for instance, emergency services, maternity care, mental health treatment, and rehabilitative treatment.
Additionally, the ACA specifically provides that insurers cannot design health plans in a discriminatory manner. It states that an insurer may not “design benefits in ways that discriminate against individuals because of their…disability.”
The Schmitt ruling emphasizes that the ACA is different from prior federal laws that had been interpreted not to prohibit discriminatory plan design. Prior to the ACA, no federal law guaranteed any person adequate health care. The ACA, on the other hand, explicitly guarantees the right to minimum health insurance benefits and prohibits designing health plans that deprive people of those minimum benefits on a discriminatory basis.
The court noted the ACA does not require insurers cover all treatment no matter how costly or ineffective. But the court emphasized insurers cannot design health coverage that has a discriminatory impact.
The Schmitt ruling is an important victory for advocates of fair insurance coverage.
The COVID-19 pandemic is causing many types of insurance questions. Below is an FAQ on some insurance issues people may be dealing with during the pandemic. As always, it’s important to keep in mind that the specific facts and insurance policy language will vary from case to case. An FAQ can’t take the place of legal advice from consulting with an attorney directly. But hopefully this will help point you in the right direction.
Typical health insurance covers COVID-19 treatment just the same as any other illness. Washington’s Affordable Care Act (a/k/a Obamacare) exchange platform is allowing a special open enrollment period for qualified uninsured individuals to buy insurance on the state Exchange through April 8, 2020. This is an exception to the normal rule that you can only buy Exchange coverage during special periods.
There are also special rules for COVID-19 testing. The federal government designated COVID-19 testing as an essential health benefit, meaning that Medicaid and Medicare plans should cover testing. Washington’s Office of the Insurance Commissioner has ordered health insurers to cover COVID-19 testing without deductibles or cost-sharing. Also, insurers have to allow patients to refill necessary prescriptions regardless of the normal waiting periods.
Employees unable to work due to COVID-19 might have recourse under disability insurance policies. Disability coverage should provide benefits for folks who can’t work because they are sick. But, as always, the fine print matters. Many policies have waiting periods or other detailed rules for paying benefits. The specific rules will also depend on how you obtained coverage. Most folks get disability insurance from their employer, and will have to navigate the special claims procedures under ERISA. For folks who bought their policies themselves, claims will be governed by Washington State law which is generally more policyholder-friendly.
Business Loss Insurance
Businesses who close or lose revenue because of the pandemic or the state-ordered lockdown might have claims for business interruption coverage. This coverage is often provided by standard commercial insurance policies. These claims depend heavily on the specific policy language and facts. For example, some policies require actual physical damage to property before paying business interruption benefits. Other policies might require the business be closed by the authorities. It is also important to be able to document the specific losses incurred under business interruption coverage.
Know Your Rights
Anyone who thinks they have insurance coverage related to COVID-19 should be on top of their rights. In disasters like this pandemic, insurers often cut corners or underpay claims. Washington State insurance policyholders have important rights, including the right to a full, fair, and prompt investigation of their claim at the insurer’s expense. Insurers also have a duty to fully disclose all the potential coverage that you might have.
Finally, here are some resources for non-insurance issues relating to the pandemic:
On October 3, 2019, the Washington Supreme Court decided Strauss v. Premera Blue Cross, holding the Strausses could sue Premera Blue Cross for denying coverage for Proton Beam Therapy to treat prostate cancer.
Mr. Strauss had a Premera health insurance policy. The policy promised Premera would pay for “medically necessary” treatment. Mr. Strauss was diagnosed with prostate cancer and his doctor recommended Proton Beam Therapy treatment. Mr. Strauss’ doctor believed Proton Beam Therapy had fewer side effects than traditional radiation therapy because it exposes less of the body to radiation.
Premara refused coverage, claiming Proton Beam Therapy was not “medically necessary.” Premara said there was no proof Proton Beam Therapy had fewer adverse side effects than traditional radiation therapy. The Strausses filed a lawsuit.
Because there were no clinical studies on point, the Strausses supported their case with testimony from two radiation oncologists that Proton Beam Therapy would lead to fewer side effects because it exposed less of the body to radiation. Premera argued the Strausses could never prove Proton Beam Therapy was medically necessary without clinical studies. The trial court agreed with Premera and dismissed the lawsuit.
The Washington Supreme Court reversed, holding the Strausses’ case could move forward. The Supreme Court emphasized the absence of clinical evidence did not bar the Strausses’ claim. The Supreme Court found the Strausses’ expert doctors were qualified and that the trial court was wrong to reject the doctors’ opinions purely because no clinical studies existed. Importantly, the Supreme Court also rejected certain prior cases Premera relied on, holding those cases were wrongly decided.
The Strauss case is an important victory for policyholders and patients. Health insurance disputes can be very difficult, particularly because health insurance policyholders often have fewer consumer protections and are at greater risk of abuse by their insurers. Health insurers often use the words “medically necessary” as magic words that mean you have no right to the healthcare your doctor prescribed. This is especially true with novel treatments for complex diseases like cancer. This ruling will hopefully empower more people to pursue the treatment they need without worrying about insurance coverage.
Preliminary reports suggest Washington State’s Affordable Care Act (a/k/a Obamacare) plans will see minimal rate increases in 2020. Washington State exchange plans are projected to see a 1% average rate increase, lower than almost half of other states in the U.S.
Washington’s Insurance Commissioner reportedly credited Washington-based health plans with the low increases. Washington-based insurers are tied to the local community. These insurers rely on keeping local business in order to thrive. Local plans also tend to have better relationships with doctors and hospitals. Large, national carriers, on the other hand, can lose Washington customers to cheaper plans.
This is good news for the approximately 250,000 Washington residents who buy insurance through Washington’s ACA/Obamacare exchange.