In February 2018, the State of California opened an investigation against Aetna, one of the largest health insurance companies in the country, because Aetna’s medical director admitted under oath that he never reviewed patients’ medical records when deciding whether to approve or deny coverage. The medical director’s shocking deposition testimony came after a college student filed a lawsuit against Aetna after Aetna refused to provide insurance coverage for the college student’s rare disease. Here’s why you should care.

Deciphering Your Insurance Coverage

A while back we wrote a blog about your rights when insurance companies deny coverage for medical bills. (I’ll wait here while you refresh your memory.) Clearly, this is becoming a common occurrence when one of the nation’s largest providers is denying coverage. It also happens on a local level.

For the sake of clarity, let’s introduce Betty and XYZ Insurance. Betty pays a monthly premium to XYZ for insurance coverage. XYZ provides Betty with a policy and the promise to cover certain medical expenses. Betty thinks she has insurance coverage for many things. The insurance policy offers her peace of mind.

A different way to look at XYZ’s policy is not for what it covers, but what it doesn’t cover. An insurance policy usually contains a long list of exclusions or limitations. Exclusions are descriptions of services, charges, or categories of care that XYZ will not cover, regardless of how Betty ended up in the hospital. For instance, XYZ may cover radiation treatment for cancer in children, but it may not cover the same radiation treatment for same cancer in adults. Limitations are applicable only under certain circumstances or for specified periods of time. A good example of a limitation used to be the “pre-existing condition” limitation where health insurance would limit coverage for pre-existing conditions until the policy had been in effect for a certain period of months or years.

So what exactly does XYZ cover? First Betty needs to look at the explanation of benefits (EOBs). EOBs should list the charges from the hospital or clinic and show how much of the charge XYZ will cover. Sometimes XYZ will not provide coverage because Betty has not met her annual deductible or out-of-pocket maximum. Sometimes XYZ will not provide coverage because Betty has a copay charge. But for large sums, XYZ might categorize the charges as “experimental” or “investigational” or “exceeding the usual and customary amount.” After gathering information, codes, and terms from the EOBs, Betty needs to look at the policy to see the definition of these terms.

Betty disagrees with her EOBs. She thinks it’s ridiculous that XYZ isn’t covering these charges. Now what?

The Administrative Appeal

Betty has a right to appeal this denial of coverage. Typically, Betty’s first step in the appeal is direct to XYZ — the very company that just denied coverage. If this fails, Betty may have the option of having her medical provider file an appeal on her behalf. If this fails, Betty may have the option to appeal to an external review board, which is an independent trained medical professional who will analyze XYZ’s denial against the standards of medical professional care. But why must Betty do this? Why can’t she just sue the insurance company and skip all this red tape? There’s a really good chance XYZ included the Employee Retirement Income Security Act of 1974 (ERISA) language in the policy, which states that Betty must exhaust her administrative remedies before she can file a lawsuit. The appeals listed by XYZ in the policy are Betty’s administrative remedies. She must jump through those hoops before she can bring her case before a judge or jury. Without doing so, the court could dismiss Betty’s lawsuit against XYZ as a matter of law without ever considering whether XYZ’s conduct in denying benefits was a breach of the policy.

Enforce Your Rights

Betty has a right under the policy to enforce her rights against XYZ. But she can only do that by exhausting the administrative appeals process. It’s possible a higher level review within XYZ will catch this error and determine that coverage should be provided. Or it’s possible the external reviewer will say XYZ needs to provide coverage for medical coverage that conforms to the standards of professional care. If that happens, Betty won her case at the administrative level.

But what if the denials keep coming? Betty has to make the decision of filing a lawsuit, suing the insurance company, suing the hospital, and maybe more. Betty knows she needs a lawyer to file a lawsuit. But if the lawyer reviews her case and sees that she didn’t exhaust her administrative remedies, Betty’s lawsuit is over before it ever got started.

What do you do if you’re Betty? Insurance policies are complicated and difficult to read. Each insurance policy is different, with different exclusions, limitations, administrative appeals, and definitions. The insurance company’s administrative appeal process may look convoluted and confusing. How many days do you have to file the appeal? Where do you send the appeal? It’s critical to complete these steps.

The attorneys at SW&L have knowledge and experience in navigating the administrative procedures of insurance policies and litigation beyond. If you need to appeal a denial of insurance coverage, call SW&L at 701-297-2890 or send us an email below.

The information contained in this article and on this website is for informational purposes only and not for the purposes of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem.

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