Legal Ease
The Ins and Outs of Insurance Law
December 2004
I n the first two articles of this series, I discussed ERISA and how ERISA insulates insurance companies from liability from litigation by patients. This is so because the Supreme Court interpreting ERISA has used as its guiding principle of judicial interpretation that paying for care and providing care are wholly distinct. Sometimes, of course, the Supreme Court has required insurance companies to adhere to the terms of their contracts, for example by requiring them to account for patients to receive second opinions.
I have explained that even if states attempt regulation of HMOs with state legislation, such state legislation will be overturned because ERISA “pre-empts” (i.e. supercedes) state legislation.
Why All the Lawsuits in Health Care?
Here, I will examine several topics in insurance coverage to help you better deconstruct its complexities.
While it is the caps on the “pain and suffering” in malpractice awards that get a lot of press, in reality, medical liability costs are only 1% to 3% of the costs of medical care in the United States. More than 90% of medical expenses are paid for by some type of insurance (HMOs, Medicare, Medicaid etc.).
A reason for the unending novel litigation that occurs in health care is its unique nature — it fails to fit into a category except for its own. Wendy Mariner, a professor at Boston University Law School has noted that insurance law does not fit easily and neatly into the typical context of contract law.1 She suggests that this is the case because the general body of contract law never evolved to handle insurance disputes, and insurance treatises devote little attention to health insurance.
Health insurance really only developed in the period following World War II (Kaiser’s Plan being the first, most important plan), and then only rapidly expanded in the 1960s as medical science expanded the range of treatments and Medicare and Medicaid were enacted. Health insurance was only regulated specifically and intensely with ERISA, enacted in the early 1970s. The body of health insurance law mostly consists of litigation over specific patient policies and ERISA.
A peculiar thing about health insurance (as compared to other insurance) are the following:
1. Patients do not negotiate their
policies.
2. Patients have not usually read their insurance policies.
3. Patients typically do not even specifically know the details of their policy’s coverage.
These policies are negotiated between their employers and insurers and are complicated government legislation (i.e. Medicare, Medicaid).
Just as many patients are not sure of their exact coverage details, doctors sometimes do not know the precise contents of the contacts that they have entered into with insurers (these contacts’ contents change constantly so this itself might be a full-time job). These gaps in knowledge and the desire of insurance companies to maximize their profits are at the heart of litigation.
Defining the Nature and Extent of Payments for Medical Services
Health insurers and their contacts define the nature and extent of payments for medical services. A fascinating and troubling instance of this involves a Minnesota health insurer that says it won't pay the bill when doctors make serious mistakes. This is seemingly the first time an insurer has taken such a rigid position against medical errors.
HealthPartners, Minnesota's third-largest health insurer, said it is not attempting to save money, but wants to send a message to get doctors to pay more attention to medical mistakes.2
The Associated Press quoted the insurer as saying, “This is about reinforcing accountability. We want to make sure that no person that experiences one of these events, as terrible and tragic as they are, has to suffer additionally by being billed for them,” said Dr. George Isham, HealthPartners medical director.2 “This is not going to have a major impact, or even a noticeable impact, on costs at all.”2
If this denial of coverage were widely enacted, it is possible that a Mohs surgeon who needed to redo a case because he missed all the basal cells could find a denial of payment for his services.
However, it remains to be seen what the implications of this policy will be and whether it will be widely adopted.
Denial of coverage and the potential for denial of coverage apparently cause physicians to sometimes use deceptive tactics with third-party payers according to a recent article in the Archives of Internal Medicine.3
Many physicians appear to be willing to deceive insurers to obtain coverage of medical services that they perceive as necessary. This is true, in particular, when illnesses are severe and the appeals procedures for care denials are burdensome.
Physicians whose practices include larger numbers of Medicaid or managed care patients appear more ready to deceive third-party payers than are other physicians. The use of deception has important implications for physician professionalism, patient trust, and rational health policy development.
If deception is as widespread as this article implies, there may be serious problems in the medical profession and the health care financing systems at the interface between physicians and
third-party payers. Deception may be seen as a symptom of a flawed system, in which physicians are asked to implement financing policies that conflict with their primary obligations to patients.3
It should be noted that the lack of truth-telling goes both ways. One study has noted that some physicians do mention treatment options to patients whom the physicians know have insurance that will not pay for a treatment. The effects of insurance on the full disclosure of information of all sorts require further explication.
Why You Should Know About Your Patients’ Insurance Coverage
There are sound reasons for the doctors to ponder insurance coverage on patients’ care. Courts will enforce the strictures and limitations contained in medical insurance contracts.
In 2000, the U.S. Supreme Court let stand a ruling that allows insurance companies to cap AIDS-related benefits in their insurance contracts. The justices declined to hear an appeal in the case brought against Mutual of Omaha Insurance Company by two policyholders who sued under the Americans with Disabilities Act (ADA) that they received inferior coverage as a direct result of their HIV infection.
The insurance company attorney said the Supreme Court did not hear the case because there is no real split in the circuit courts. At appeal on the issue, 8 of 13 have held that coverage limits do not violate the ADA. It should be noted that almost all health insurance usually has a lifetime benefit cap on coverage (usually $500,000 to $1,000,000). In addition, some health insurers have annual limits on what they will pay for prescription medication.
Most insurance companies do not cap benefits for specific illnesses because there is no business justification, and the caps open them up to lawsuits. However, this case shows that sometimes disease-specific caps on coverage exist.4 Available evidence in 1994 suggested that the use of “caps” on prescription drugs limits access to pain medications.5 The effect of these caps on care requires further definition.
In all the disputes over coverage, the principle that insurance companies are not healthcare providers must be recalled.
An example of this is that the U.S. Supreme Court refused to review a ruling that held that insurers are not obligated to notify applicants who test positive for HIV during routine medical screening. This left intact a Federal judge’s ruling that Jackson National Life Insurance Company was not legally bound to inform its applicant that he tested positive for HIV when he applied for an increase in his life insurance policy. The judge stated that an insurer may have a moral obligation to inform the applicant, but no legal duty to do so.
Approximately 20 States have no laws requiring insurance companies to inform applicants of their HIV-antibody test results.6
Cornerstones of Health Insurance
The field of health insurance law continues to evolve. Its cornerstones are the health insurance contract and ERISA. With increasing costs, improving medical technology, and an aging population, more litigation is inevitable.
I hope that by knowing more about these issues that dermatologists will be able to shape the debate on these issues. Its appears that for the moment, however, insurers are in the driver’s seat in terms of defining coverage.
I n the first two articles of this series, I discussed ERISA and how ERISA insulates insurance companies from liability from litigation by patients. This is so because the Supreme Court interpreting ERISA has used as its guiding principle of judicial interpretation that paying for care and providing care are wholly distinct. Sometimes, of course, the Supreme Court has required insurance companies to adhere to the terms of their contracts, for example by requiring them to account for patients to receive second opinions.
I have explained that even if states attempt regulation of HMOs with state legislation, such state legislation will be overturned because ERISA “pre-empts” (i.e. supercedes) state legislation.
Why All the Lawsuits in Health Care?
Here, I will examine several topics in insurance coverage to help you better deconstruct its complexities.
While it is the caps on the “pain and suffering” in malpractice awards that get a lot of press, in reality, medical liability costs are only 1% to 3% of the costs of medical care in the United States. More than 90% of medical expenses are paid for by some type of insurance (HMOs, Medicare, Medicaid etc.).
A reason for the unending novel litigation that occurs in health care is its unique nature — it fails to fit into a category except for its own. Wendy Mariner, a professor at Boston University Law School has noted that insurance law does not fit easily and neatly into the typical context of contract law.1 She suggests that this is the case because the general body of contract law never evolved to handle insurance disputes, and insurance treatises devote little attention to health insurance.
Health insurance really only developed in the period following World War II (Kaiser’s Plan being the first, most important plan), and then only rapidly expanded in the 1960s as medical science expanded the range of treatments and Medicare and Medicaid were enacted. Health insurance was only regulated specifically and intensely with ERISA, enacted in the early 1970s. The body of health insurance law mostly consists of litigation over specific patient policies and ERISA.
A peculiar thing about health insurance (as compared to other insurance) are the following:
1. Patients do not negotiate their
policies.
2. Patients have not usually read their insurance policies.
3. Patients typically do not even specifically know the details of their policy’s coverage.
These policies are negotiated between their employers and insurers and are complicated government legislation (i.e. Medicare, Medicaid).
Just as many patients are not sure of their exact coverage details, doctors sometimes do not know the precise contents of the contacts that they have entered into with insurers (these contacts’ contents change constantly so this itself might be a full-time job). These gaps in knowledge and the desire of insurance companies to maximize their profits are at the heart of litigation.
Defining the Nature and Extent of Payments for Medical Services
Health insurers and their contacts define the nature and extent of payments for medical services. A fascinating and troubling instance of this involves a Minnesota health insurer that says it won't pay the bill when doctors make serious mistakes. This is seemingly the first time an insurer has taken such a rigid position against medical errors.
HealthPartners, Minnesota's third-largest health insurer, said it is not attempting to save money, but wants to send a message to get doctors to pay more attention to medical mistakes.2
The Associated Press quoted the insurer as saying, “This is about reinforcing accountability. We want to make sure that no person that experiences one of these events, as terrible and tragic as they are, has to suffer additionally by being billed for them,” said Dr. George Isham, HealthPartners medical director.2 “This is not going to have a major impact, or even a noticeable impact, on costs at all.”2
If this denial of coverage were widely enacted, it is possible that a Mohs surgeon who needed to redo a case because he missed all the basal cells could find a denial of payment for his services.
However, it remains to be seen what the implications of this policy will be and whether it will be widely adopted.
Denial of coverage and the potential for denial of coverage apparently cause physicians to sometimes use deceptive tactics with third-party payers according to a recent article in the Archives of Internal Medicine.3
Many physicians appear to be willing to deceive insurers to obtain coverage of medical services that they perceive as necessary. This is true, in particular, when illnesses are severe and the appeals procedures for care denials are burdensome.
Physicians whose practices include larger numbers of Medicaid or managed care patients appear more ready to deceive third-party payers than are other physicians. The use of deception has important implications for physician professionalism, patient trust, and rational health policy development.
If deception is as widespread as this article implies, there may be serious problems in the medical profession and the health care financing systems at the interface between physicians and
third-party payers. Deception may be seen as a symptom of a flawed system, in which physicians are asked to implement financing policies that conflict with their primary obligations to patients.3
It should be noted that the lack of truth-telling goes both ways. One study has noted that some physicians do mention treatment options to patients whom the physicians know have insurance that will not pay for a treatment. The effects of insurance on the full disclosure of information of all sorts require further explication.
Why You Should Know About Your Patients’ Insurance Coverage
There are sound reasons for the doctors to ponder insurance coverage on patients’ care. Courts will enforce the strictures and limitations contained in medical insurance contracts.
In 2000, the U.S. Supreme Court let stand a ruling that allows insurance companies to cap AIDS-related benefits in their insurance contracts. The justices declined to hear an appeal in the case brought against Mutual of Omaha Insurance Company by two policyholders who sued under the Americans with Disabilities Act (ADA) that they received inferior coverage as a direct result of their HIV infection.
The insurance company attorney said the Supreme Court did not hear the case because there is no real split in the circuit courts. At appeal on the issue, 8 of 13 have held that coverage limits do not violate the ADA. It should be noted that almost all health insurance usually has a lifetime benefit cap on coverage (usually $500,000 to $1,000,000). In addition, some health insurers have annual limits on what they will pay for prescription medication.
Most insurance companies do not cap benefits for specific illnesses because there is no business justification, and the caps open them up to lawsuits. However, this case shows that sometimes disease-specific caps on coverage exist.4 Available evidence in 1994 suggested that the use of “caps” on prescription drugs limits access to pain medications.5 The effect of these caps on care requires further definition.
In all the disputes over coverage, the principle that insurance companies are not healthcare providers must be recalled.
An example of this is that the U.S. Supreme Court refused to review a ruling that held that insurers are not obligated to notify applicants who test positive for HIV during routine medical screening. This left intact a Federal judge’s ruling that Jackson National Life Insurance Company was not legally bound to inform its applicant that he tested positive for HIV when he applied for an increase in his life insurance policy. The judge stated that an insurer may have a moral obligation to inform the applicant, but no legal duty to do so.
Approximately 20 States have no laws requiring insurance companies to inform applicants of their HIV-antibody test results.6
Cornerstones of Health Insurance
The field of health insurance law continues to evolve. Its cornerstones are the health insurance contract and ERISA. With increasing costs, improving medical technology, and an aging population, more litigation is inevitable.
I hope that by knowing more about these issues that dermatologists will be able to shape the debate on these issues. Its appears that for the moment, however, insurers are in the driver’s seat in terms of defining coverage.
I n the first two articles of this series, I discussed ERISA and how ERISA insulates insurance companies from liability from litigation by patients. This is so because the Supreme Court interpreting ERISA has used as its guiding principle of judicial interpretation that paying for care and providing care are wholly distinct. Sometimes, of course, the Supreme Court has required insurance companies to adhere to the terms of their contracts, for example by requiring them to account for patients to receive second opinions.
I have explained that even if states attempt regulation of HMOs with state legislation, such state legislation will be overturned because ERISA “pre-empts” (i.e. supercedes) state legislation.
Why All the Lawsuits in Health Care?
Here, I will examine several topics in insurance coverage to help you better deconstruct its complexities.
While it is the caps on the “pain and suffering” in malpractice awards that get a lot of press, in reality, medical liability costs are only 1% to 3% of the costs of medical care in the United States. More than 90% of medical expenses are paid for by some type of insurance (HMOs, Medicare, Medicaid etc.).
A reason for the unending novel litigation that occurs in health care is its unique nature — it fails to fit into a category except for its own. Wendy Mariner, a professor at Boston University Law School has noted that insurance law does not fit easily and neatly into the typical context of contract law.1 She suggests that this is the case because the general body of contract law never evolved to handle insurance disputes, and insurance treatises devote little attention to health insurance.
Health insurance really only developed in the period following World War II (Kaiser’s Plan being the first, most important plan), and then only rapidly expanded in the 1960s as medical science expanded the range of treatments and Medicare and Medicaid were enacted. Health insurance was only regulated specifically and intensely with ERISA, enacted in the early 1970s. The body of health insurance law mostly consists of litigation over specific patient policies and ERISA.
A peculiar thing about health insurance (as compared to other insurance) are the following:
1. Patients do not negotiate their
policies.
2. Patients have not usually read their insurance policies.
3. Patients typically do not even specifically know the details of their policy’s coverage.
These policies are negotiated between their employers and insurers and are complicated government legislation (i.e. Medicare, Medicaid).
Just as many patients are not sure of their exact coverage details, doctors sometimes do not know the precise contents of the contacts that they have entered into with insurers (these contacts’ contents change constantly so this itself might be a full-time job). These gaps in knowledge and the desire of insurance companies to maximize their profits are at the heart of litigation.
Defining the Nature and Extent of Payments for Medical Services
Health insurers and their contacts define the nature and extent of payments for medical services. A fascinating and troubling instance of this involves a Minnesota health insurer that says it won't pay the bill when doctors make serious mistakes. This is seemingly the first time an insurer has taken such a rigid position against medical errors.
HealthPartners, Minnesota's third-largest health insurer, said it is not attempting to save money, but wants to send a message to get doctors to pay more attention to medical mistakes.2
The Associated Press quoted the insurer as saying, “This is about reinforcing accountability. We want to make sure that no person that experiences one of these events, as terrible and tragic as they are, has to suffer additionally by being billed for them,” said Dr. George Isham, HealthPartners medical director.2 “This is not going to have a major impact, or even a noticeable impact, on costs at all.”2
If this denial of coverage were widely enacted, it is possible that a Mohs surgeon who needed to redo a case because he missed all the basal cells could find a denial of payment for his services.
However, it remains to be seen what the implications of this policy will be and whether it will be widely adopted.
Denial of coverage and the potential for denial of coverage apparently cause physicians to sometimes use deceptive tactics with third-party payers according to a recent article in the Archives of Internal Medicine.3
Many physicians appear to be willing to deceive insurers to obtain coverage of medical services that they perceive as necessary. This is true, in particular, when illnesses are severe and the appeals procedures for care denials are burdensome.
Physicians whose practices include larger numbers of Medicaid or managed care patients appear more ready to deceive third-party payers than are other physicians. The use of deception has important implications for physician professionalism, patient trust, and rational health policy development.
If deception is as widespread as this article implies, there may be serious problems in the medical profession and the health care financing systems at the interface between physicians and
third-party payers. Deception may be seen as a symptom of a flawed system, in which physicians are asked to implement financing policies that conflict with their primary obligations to patients.3
It should be noted that the lack of truth-telling goes both ways. One study has noted that some physicians do mention treatment options to patients whom the physicians know have insurance that will not pay for a treatment. The effects of insurance on the full disclosure of information of all sorts require further explication.
Why You Should Know About Your Patients’ Insurance Coverage
There are sound reasons for the doctors to ponder insurance coverage on patients’ care. Courts will enforce the strictures and limitations contained in medical insurance contracts.
In 2000, the U.S. Supreme Court let stand a ruling that allows insurance companies to cap AIDS-related benefits in their insurance contracts. The justices declined to hear an appeal in the case brought against Mutual of Omaha Insurance Company by two policyholders who sued under the Americans with Disabilities Act (ADA) that they received inferior coverage as a direct result of their HIV infection.
The insurance company attorney said the Supreme Court did not hear the case because there is no real split in the circuit courts. At appeal on the issue, 8 of 13 have held that coverage limits do not violate the ADA. It should be noted that almost all health insurance usually has a lifetime benefit cap on coverage (usually $500,000 to $1,000,000). In addition, some health insurers have annual limits on what they will pay for prescription medication.
Most insurance companies do not cap benefits for specific illnesses because there is no business justification, and the caps open them up to lawsuits. However, this case shows that sometimes disease-specific caps on coverage exist.4 Available evidence in 1994 suggested that the use of “caps” on prescription drugs limits access to pain medications.5 The effect of these caps on care requires further definition.
In all the disputes over coverage, the principle that insurance companies are not healthcare providers must be recalled.
An example of this is that the U.S. Supreme Court refused to review a ruling that held that insurers are not obligated to notify applicants who test positive for HIV during routine medical screening. This left intact a Federal judge’s ruling that Jackson National Life Insurance Company was not legally bound to inform its applicant that he tested positive for HIV when he applied for an increase in his life insurance policy. The judge stated that an insurer may have a moral obligation to inform the applicant, but no legal duty to do so.
Approximately 20 States have no laws requiring insurance companies to inform applicants of their HIV-antibody test results.6
Cornerstones of Health Insurance
The field of health insurance law continues to evolve. Its cornerstones are the health insurance contract and ERISA. With increasing costs, improving medical technology, and an aging population, more litigation is inevitable.
I hope that by knowing more about these issues that dermatologists will be able to shape the debate on these issues. Its appears that for the moment, however, insurers are in the driver’s seat in terms of defining coverage.
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