Claims

(Via Gotcha Covered)

2008 is shaping up to be a particularly challenging year for Allstate. First, we have the antics taking place in Florida. And now, it seems, there’s a little light reading coming onto the market that Allstate won’t be too happy about: David Berardinelli’s From Good Hands to Boxing Gloves.

Quoting the Amazon product description:

It’s the story the insurance industry doesn’t want you to know. Now, for the first time, the story covered in the “lawyer only” book From Good Hands to Boxing Gloves is available to the pubic. Find out for yourself why insurance claims are being improperly denied, delayed, and defended at trial. The book takes you from the ideas arising from the masterminds behind the Enron business model, through their impact on the insurance industry, and the resulting claim denials in everything from minor auto accidents to Hurricane Katrina claims. Author David Berardinelli is the trial lawyer who diligently worked to become the first to obtain the “McKinsey Documents” unprotected, and discusses how they teach insurers how to profit by denying or delaying claim payments. Learn how Allstate changed from dealing with policyholders with “good hands” to “boxing gloves,” and how this has led to the highest profits in insurance company history during years with our country’s largest natural disasters.

Before I get into this week’s plank, I need to remind folks of my blogging disclaimer — that even though I blog as “Mike the Actuary”, the views expressed here should not be considered professional statements of opinion; nor should they be considered to reflect the opinions of my employers past or present.

I make that reminder because I’m about to violate one of the rules I have for myself when posting my thoughts to this website — I generally avoid writing about topics “too close” to my day job or to matters at home….except for today.

I also make that reminder because I’m going to cross the line that some of the stodgier members of my profession would draw when defining “unprofessional conduct”.  So, I need to be up-front that I’m writing today as an aggrieved consumer and blogger, not as an actuary.

Longtime readers are likely aware that I lead an “interesting” life.   My wife suffered a brain injury in a car accident almost six years ago, and we’ve had a lot of “fun” with doctors and lawyers since.

In the past few weeks, I’ve added “fun” with health plan TPA’s to the mix.   In a couple of surgeries last year, my wife had an occipital nerve stimulator implanted (a picture of her with the temporary stim can be found in the gallery).

Naturally, before proceeding with the treatment, we had “The Talk” with the surgeon’s business office about the related financial matters.   We were told that our health plan administrator (Aetna) was approving payment for the treatment…and we did indeed get approvals from Aetna before moving forward.

So, my wife had the surgeries, became a Borg…and has been doing generally better than she was this time last year.  It’s not been as miraculous a treatment for her as it has been for some other chronic pain sufferers…but we’ve seen a definite improvement.

Unfortunately, with our lives it seems that every ray of sunshine must be accompanied by some dark cloud.

Aetna became difficult post-surgery, and began postponing or outright denying the claims for parts of the surgery.  The reasons given at various times didn’t make sense — for example, declining the claim because of “lack of documentation”  even though hundreds of pages of documentation had been sent, multiple times.    The hospital bill collectors started calling us after Aetna declined because the procedure was “out of network” (even though the surgical facility selected was chosen because it was in-network to us, and we have out-of-network coverage to boot).

I had been kept mostly in the dark through the initial round of bureaucratic squabbling, but I very quickly submitted an appeal letter after my first collections call.  My appeal tackled each of the declination reasons I had been given, and pointed out the inconsistency of some claims having been paid, and others being open.

Of course, that appeal was denied….and Aetna started reclaiming the funds for the parts of the surgery it had already paid and closed the claims on.

Naturally, the question we asked while I started crafting my second appeal (and general nastygram) was, “can they do this?”  After all, it seems unfair for them to un-pay settled claims.

Well, the answer is not only apparently “yes”, but “there is no reason for them to not do this”.

Employer-provided health insurance is, like most employer-provided benefits, governed by a federal law known as ERISA, short for “Employee Retirement Income Security Act”; so-named since it was intended to address some shenanigans that arose during a pension crisis in the early 1970’s.

In some respects, it is a good piece of legislation.  I won’t go into full detail, but on the health insurance side, it requires health insurance plan administrators to communicate to employees what their rights are, and to specify a requirement for a formal appeals process, as well as deadlines in which decisions must be made in those appeals, under certain circumstances.

From the insurer/administrator’s point of view, it’s a great concept since, in return for setting up the ability for a formal appeals process, they are generally exempted from the maze of assorted state laws and regulations — especially if the health plan is an employer self-funded program (as is the case at most mid- and large-sized employers).

Unfortunately, for the employee, this preemption has some unfortunate side-effects.

For example, if the employee disagrees with the administrator’s decision, and receives unfavorable results from the internal appeals process, he or she can sue, in federal court.   However (based on what I’ve been reading, but IANAL), the trial is somewhat limited from what many of us would otherwise expect, in the following ways:

• There is no right to a jury.
   
• The federal judge is generally limited to looking at the medical records and the terms of the plan, to affirm or overturn the administrator’s decision.
   
• The court is generally limited to awarding only the costs of the treatment.   There is no prejudgment interest, no provision for punitive damages, and only rarely may attorneys fees be awarded.
   
• There appears to be no provision in the relevant federal laws and regulations to penalize administrators for acting in bad faith.

In other words, an unscrupulous TPA has almost no reason to authorize payment for a claim.  There is essentially no downside for them to simply denying a claim, as they are unlikely to be penalized for behaving badly.   As attorney fees are rarely awarded, it’s frequently difficult for an aggrieved party — particularly one facing a mountain of medical bills — to retain a lawyer to even attempt to pursue the matter to federal court.  And even if the decision is overturned, the administrator can look good to the employer by showing a lower level of cost, by virtue of having been able to collect interest on the much-delayed payment.

Now normally,  I am a fan of streamlining regulation, avoiding litigation, and reducing drag on insurance and financial systems from questionable lawsuits and ridiculous punitive damage awards.

However, I also believe that entities operating in the insurance arena ought to act with the highest standards of good faith.    Sadly, that is not always true, as my ongoing experience with Aetna indicates.

So, for this week’s stint on the soapbox, I publicly wish for a little ERISA reform. 

I’m OK with attempting to streamline the dispute-resolution process, and I definitely don’t want to add additional litigation expense to the already too-quickly-inflating cost of health care in the U.S.   However, if some TPA’s are going to be inclined to abuse their decision-making authority (*cough* Aetna *cough*), perhaps some mechanism can be provided to consumers to disincent such abuse.

Heck, right now, I’d be happy with a provision that attorneys fees could be awarded to an aggrieved consumers…something that would create a bit more of an incentive for the TPA to avoid court.

I offer one additional tangential thought — I wonder how much of the underlying, structural expense aggravating medical cost inflation in this country is generated by slow-paying or underpaying TPA’s in this sort of a scheme.

In my wife’s case, if Aetna could have issued its denial pre-surgery, back when we were securing the necessary preclearances, we could have argued the matter then, avoiding the hospital losing interest on outstanding receivables, before the expenses were generated.  Also, had the denial stuck, my wife and I could have arranged other financing, rather than looking at scrounging something together now for some very large bills we’re fighting over.

Perhaps rather than spending so much energy on the rhetoric of universal health care, some of that effort could be diverted to fixing up the shortcomings of the system we already have in place.

I had several good posts that were calling to me to write about, on this, what promised to be a beautiful snowy January day.

Unfortunately my slack time was eaten up this afternoon, with a health insurance related fire drill. It seems:

• When a certain health plan administrator gets petulant, they go back and disapprove already paid-claims, demanding reimbursement, upsetting the medical professionals and terrorizing us with the prospect of an unexpected pile of rather large medical bills.
   
• It seems that “supporting documentation not supplied” is an apparently valid reason to deny claims (after having been approved, paid, and closed), even though the doctors and hospital involved have already sent complete files…thrice.
   
• Similarly, it seems to be perfectly acceptable for the health insurance customer service folks to insist that all documentation be sent by us as part of our appeal of the retroactive denial…even though the rep admits “the documentation seems to be there, but I can’t pull it up.
   
  I’d argue this point with them further, but I’m inclined to think that it would be best to deny them the “insufficient documentation” rationale when appealing. However,…
   
• Neither the doctors nor the hospital involved mail patient records to patients. A patient must present him or herself in person to request the files, and take physical possession of the files. Never mind that the hospital is 90 minutes away, and the patient is effectively a shut-in at home due to disability.
   
• Now, were this standard property/casualty insurance, this is the sort of fuss that would cause me to go have a chat with the person handling consumer complaints down at the Department of Insurance, whereupon the insurer would get a nastygram from the state, and either the situation would be remedied, or someone with pointy hair would clear the b.s. and explain what really is the problem.
   
  However, because this is employer provided health insurance, it is mostly out of the jurisdiction of state regulation, and is instead governed by ERISA and related Department of Labor regs. A kind person at the DOL EBSA was very sorry to advise me that there is no consumer complaint functionality within their administration; if we have an issue, our recourse is the internal appeals process, followed by a federal suit.

I’d say that this is enough to make me wish for single-payer health insurance…but under a single-payer system, this procedure probably wouldn’t have been available to my wife.

I wonder if Bob Hunter or Birny Birnbaum need any help.