Insurance Consumers

 Medical/HMO Line

Medical Coverage Purchasing Issues

Background

Insurance policies are seldom known for their clarity. But medical policies may qualify as the most confusing of all lines. We'll start with a little background before digging into the information you'll need to decipher in purchasing medical coverage.

Contracts of Adhesion

All health care agreements, including both Health Insurance and Managed Care agreements, are “contracts of adhesion.” This basically means that you either take the agreement as written, or you leave it; with the exception of minor options, you really can’t negotiate the terms. For this reason it is especially important for you to understand the differences between one plan or policy and another. It is amazing how many people are totally surprised when, after it's too late, they find out for the first time the crucial things that aren’t covered.

A health care policy has to provide more protection for you and your family than to cover broken bones, colds and flu shots. These days, even a relatively short hospital stay can run into tens of thousands of dollars and more. A long-term illness can bankrupt most people, destroying their lifestyles and exhausting their retirement savings. Given that you cannot negotiate the terms of these contracts, it is crucial that you be able to compare different plans and determine which ones to consider and which to avoid..

HMO's and PPO's

Two of the most common medical care delivery systems are the HMO (Health Maintenance Organization) and the PPO (Preferred Provider Organization). The designations and details of each differ.

The HMO is a plan managed by one primary doctor. When you need medical services, you go to him or her for treatment and/or referral.

The PPO is a plan in which you may seek the care of a physician of your own choosing so long as the doctor is one approved by the PPO and included in their Providers Directory. With most PPOs you can also select a physician from outside the Directory, if you are willing to pay a higher portion of the doctor’s charges out of your own pocket.

HMO’s generally charge higher premiums in exchange for broader coverage, and they require fewer user fees and paperwork. PPOs, on the other hand, provide a greater choice of doctors and treatment options.

There are other names for plans in addition to HMO’s and PPO’s. These include Point of Service Plans, Healthcare Service Plans, Participating Physicians Programs and so on. Nevertheless, the basic distinction remains the same: Whether you have one primary doctor who serves as a gatekeeper versus a choice of doctors, one of which you may select and go to directly.

Other distinctions between plans may become blurred under the terms of a particular contract. For example, some HMO plans do allow you direct access to specialists without having to request approval from your primary doctor, if specific conditions are met.

If this sounds somewhat confusing to you, take heart, you are not alone. Plans and options are constantly changing. In recent years, inflation in medical care costs has increased by over 40% more than that of other sectors of the economy.

Many health care providers have responded by cutting services, increasing deductibles and limits and establishing co-payment procedures and other charging arrangements. Some have also instituted “capitation agreements," where a doctor or group of doctors receives a monthly flat fee based on the number of patients assigned to the doctor, regardless of whether the patient does or does not visit the doctor that month. In addition, other containment features have become common, such as utilization reviews. Utilization review is a process by which a health care plan makes treatment decisions. Sometimes, a plan employee makes these decisions instead of a treating medical doctor.

Individual Health Coverage

Individual health policies require individual underwriting or risk assessment. In other words, individuals to be covered by the policy must be assessed individually, in terms of age, sex, risk factors (such as smoking), medical history, current medical condition, residence location, coverage desired and other variables. The person submitting the application for insurance provides detailed information on each person to be insured. The carrier or plan then determines whether or not an applicant is accepted as a member; and, if so, the premium to be charged and the conditions of coverage.

Group Coverage (other than employer-employee groups)

Group policies generally include several to hundreds of members and their families. Group policies can be written for organizations of any type – professional or business groups, social organizations and so on. Often, depending on the size, demographics and healthcare terms and conditions being offered, the underwriting characteristics of individual members of the group are less important than that of the group as a whole.

It’s one thing to provide medical coverage for the NCAA Cross-Country Runners Association. It’s quite another to be writing coverage for the Smokers Rights League. While some groups provide members with a choice between different plans or insurance companies, most groups give one insurance company exclusive access to the entire group in exchange for reduced rates, or other financial incentives.

Employment Based Coverage

The most common group medical coverage programs sold today are plans offered through employment. Many employers offer a choice from a number of HMO or PPO options.

Some employers also offer a form of self insurance, which means their employer directly pays up to X dollars per year in health benefits for each employee. This type of arrangement usually includes a catastrophic policy benefit covering certain medical expenses incurred above a threshold amount. For example, such an arrangement might provide that the employer pay up to $6000 per year in medical care costs for each employee. Amounts above $6000 would then be covered by a separate catastrophic healthcare policy.

Employers can administer health care in many different ways. This is a very important subject because it impacts access to information and claims handling. Some employers administer their own plans through their company’s Human Resources Department; others “outsource” programs through a separate claims servicing, or HR company. The amount of help that a particular employer may give to its employees in assisting them in understanding and exercising their rights under an employment based plan depends on the motivation of the particular employer. Some are determined to provide maximum coverage and help to their employees in order to keep them healthy, happy and dedicated to the company. Others are principally concerned with the more short term goal of controlling the company’s bottom line.

In evaluating any company program, you should use the factors and considerations described below.

ERISA

The one crucial distinguishing factor separating employment based plans from others, is that with an employment plan an employee and his/her covered dependants lose virtually all of the rights and leverage you would otherwise have under the consumer protection and insurance laws and regulations of their state. (See ERISA, Glossafry Section).

How did this come about? First, some background. Over the past several decades each state, through its own laws and court decisions developed protections for insurance policyholders. This happened at the state rather than the federal level because years ago, as described elsewhere on this site, Congress enacted legislation preventing federal regulation of the insurance industry. This Congressional legislation was known as the McCarran Ferguson Act. It provided that any regulation of the insurance industry had to be enacted at the state rather than the federal level. Various “model” state statutes eventually developed and were enacted. These uniform statutes included unfair claims handling regulations and other laws adopted on a state by state basis.

These state statutes, along with state court decisions, gave policyholders the right to take legal action against carriers engaging in unfair claims handling practices such as underpayment, misrepresentation, delay or fraud. Consumer groups argued that the right to hold insurers accountable in this way gave policyholders leverage to compel the fair settlement of valid claims. However many insurance companies complained that lawsuits were costing the industry too much money and that the solution was to bar people from suing it. Most states were simply unwilling to do this. 

In 1987 the US Supreme Court, at the urging of the insurers, did precisely what state legislatures had been unwilling to do. In the case of Pilot Life v. Dedaux, the Court ruled that if a person obtained his or her health insurance through their employer, they could no longer rely on state laws, or state courts, to protect them if their rights were violated. Instead, their rights were to be limited by an existing federal law known as the Employee Retirement Income Security Act (ERISA). Interestingly, this law was not originally enacted with insurance in mind at all. It contained none of the standards or consumer protections afforded by most states in non-ERISA situations.

The elimination of state insurance protections for employees who obtain their health benefits at work is called “ERISA Preemption”.

There are limited employee exemptions to ERISA preemption (notably for state employers and employees of religious organizations). In addition, a number of efforts have been launched in an attempt to rectify this situation through the enactment of remedial legislation. But the bottom line is that so far, the Supreme court's 1987 Ruling remains the law. And unless you are exempted as a government or other excluded employee you lose all of your rights under your state's laws and protections if you are ERISA Preempted.

If you have any choice between purchasing an ERISA governed plan, versus one that is not an ERISA plan, InsuranceConsumers recommends that you select the latter.

Your Preparation Before Meeting With An Agent

As with all other types of insurance think about what your specific needs are before talking to an agent or broker or otherwise choosing a policy.

Jot down the key points important to your situation. Who needs to be covered? What are their ages and medical conditions? What are some of the important things you want coverage for? Check them off and assign each a number of from one to ten in importance.

Medical Office
  - Routine doctor visits
  - Annual check-ups
 - Medical care for pre-existing conditions
 
Hospital - Lab - Treatment Services
  -  Diagnostic testing
  -  X-Rays, EKGs, biopsies , MRIs.
  -  Hospitalization coverage (type of room, specific benefits, duration of stay).
  -  Outpatient surgery.
   - Ambulance/Air ambulance services
  -  Pain treatment.
  -  Rehabilitation services
  -  Cardiac care
  -  Radiation, bone marrow treatment and other cancer care
  -  Kidney dialysis and other treatment 
  -  Organ and bone marrow transplants
  -  Inpatient services
  -  Rehabilitation, mental health, substance abuse facilities
 
Specialists
  - Dermatology orthopedics, neurology,  ENT, urology
  - Speech Therapy
  - Learning disability issues
  - Psychiatric care and treatment/Psychological counseling
  -  Chiropractics
  -  Acupuncture
 
Dental services
  - Orthodontics, periodontics oral surgery, orthogenatics
 
OB/GYN
  - Pap smears and mammography
  - Newborn complications/care
  - Family planning/fertility services
 
Pharmaceutical
  -  Prescription drugs
  -  Vitamins and nutritional supplements
  -  Allergy treatment care and products
  -  Injectifbles
 
Equipment/Devices
  -  Hearing aids and treatments
  -  Prosthetics and orthotics
  -  Durable medical equipment 
    

   

Internal Appeals

What does the policy say about appealing adverse claims determinations within the company hierarchy? (before resorting to other options).

Does the plan you are considering have a procedure permitting you to appeal an adverse claims decision? If so, to evaluate such a provision ask the following questions:

a. To whom is the claims decision to be appealed?
b. Is the appeals person or panel a truly independent/neutral party?
c. What are the appeal procedures and are they fair?
d. Is the appeal process prompt or can it drag on for weeks or more?

Binding arbitration provisions

Many medical coverage contracts now require the binding arbitration of any disputes arising under the policy. As mentioned elsewhere, ADR provisions required under any insurance policy can be a real cause for concern. But with medical and HMO contracts this is especially so.

Bear in mind that there is a big difference between a situation in which both sides choose a neutral mediator who only has the power of persuasion to attempt to bring the sides together, versus one in which a third party - - who may or may not be neutral - - is actually empowered to make enforceable, binding, decisions.

Most ADR provisions contained in medical and HMP contracts mandate that a hand-picked decision maker be empowered to actually decide controversies. This decision maker is substituted for the courts.  At first blush this might seem to provide an efficient and expeditious means for resolving disputes. However, some ADR clauses are so one-sided that they are the equivalent of allowing the insurer or HMO to serve as its own judge and jury. These types of ADR clauses should be avoided at all costs.

The ADR requirements under various policies can differ dramatically. If a policy you are considering has an ADR clause here are the questions you must to ask in evaluating it:

a. Is the ADR clause optional or mandatory (unless waived or given up by the parties)?
b. Who can demand ADR? The insurer, the insured or either?
c. How long may either party wait before demanding ADR?
d. Does the ADR process empower someone to make a final and binding decision or is the decision appealable?
e. How is the ADR decision-maker to be selected? Is it a fair procedure aimed at choosing a truly neutral party?
f. What ability do the parties have to obtain records or documents from the other side prior to the ADR hearing?
g. Are formal rules of evidence used? What about briefing, expert testimony, attorney participation? In other words, how elaborate, time consuming and expensive, is the process that is set forth?
h. Who pays for the cost of the ADR proceeding? The insurer? The claimant? Both?
    

Your Financial Situation

Ask yourself what your financial situation is and how would it be impacted by various types of medical problems? This will help you in evaluating different types of plans.

What kind of tradeoffs do you want to make to save premium dollars? Choice of doctors? Higher deductibles? Limits on covered conditions and services? Agreeing to one-sided contractual requirements? Think about these things before you meet with an agent, so you are sure you will not forget to ask about them.

If you and your family members are simply not going to get sick, you might not want to have to pay for medical coverage at all. But if you want to be prepared, put yourself in the position of being ill. What kind of plan will you want to have in place from that perspective? 
   
 

Choosing an Agent or Broker

Choose your health coverage agent or broker very carefully. Interview agents or brokers by telephone before meeting with them. Find out exactly what their training and experience is. How long have they worked in the healthcare field? Are they captive (associated with one company) or independent (representing many companies)? With which companies? How familiar are they with the advantages and disadvantages of one plan or policy over another?

As with other lines of insurance, health care agents and brokers may be considered an extension of the company. If so, then the company may be responsible for honoring whatever representations the agent or broker made to you about the coverage at the time of sale. Whether or not it is may depend on a number of factors, including the laws of your state, whether you read the plan or policy when it was first given or sent to you, whether you have any evidence of the misrepresentation and other factors.

Once again, it is absolutely critical that you always take good notes of conversations with insurance representatives and that you store these notes in your insurance Notebook. When it comes to meetings with agents, you should also keep all pamphlets, brochures or other promotional materials given or shown to you. Do not throw these notes or materials away. They could be worth thousands of dollars and more.

In discussing anything important about the coverage being offered, you should also ask to see the actual written plan or policy. Do this whether you understand everything in it, or not. If you note any discrepancies between the policy and what you have been told, inquire about them immediately.

Employer Representatives

If you obtain the information concerning your health coverage from your employer or your company’s human resources department, the same considerations apply as with the agents and brokers section above.

Some HR representatives are more knowledgeable and experienced on coverage issues than others.

Understand that some employer representatives are well trained and experienced in coverage matters, others are not.

Meeting with the agent or employer representative

Bring your notes on all of the above.

After discussing the issues of importance to you, you will be shown an application for the coverage.

In answering the questions on this application, remember that the company will rely on your responses in issuing the policy.

Read and answer all the questions yourself. Do not just have the agent read them to you.

a. Answer each question fully, honestly and literally. As previously mentioned, if a company later learns that any key answer in the application was inaccurate or incomplete, it may be able to rescind or void your policy and deny an otherwise valid claim. This can be so even if the misstatement was unintentional.

b. In reading the application, if you are unsure about the meaning of any question, ask the insurance company representative about it and write the person’s response on the application. If possible, have the representative initial it.

c. Application questions about prior medical histories can be especially tricky. For example you may be asked: “Have you or any applying family member ever had any signs or symptoms, been consulted for, received advice, sought treatment, had treatment recommended, received treatment or been hospitalized for the following conditions?” It is necessary to answer these types of questions thoroughly and completely. If you don't remember everything, write "I am not able to remember every symptom I have ever had or complained about but the following list is to the best of my recollection..."

Changes in Coverage

Ask the agent:

a. Whether the health plan under discussion would be able to reduce your coverage after you have purchased it;

b. Whether the plan can reduce continuing benefits after you have contracted a particular injury or illness and

c. What notice must be given to you concerning reductions in coverage before those reductions can take effect.

These are very important considerations. Once an insured has contracted a serious medical problem his or her ability to find a new insurer will be limited. Therefore you have to know whether an insurer can reduce the coverage it is selling you in future years. It is important to address this issue whether the policy in question is individual, group or employment based.

Last, ask the agent who his contact is at the insurance company. Get that person's name, phone number, email address and address. Ask if any of the materials shown to you, including any "proposal" came from the insurance company itself (as opposed to have been written up by the agent or the agency he or she is working for).

MEDICAL INSURANCE: FILING CLAIMS

Most claims are submitted in writing, not in person or by phone. However in many situations involving PPOs or whenever you have had a choice of a provider you will find yourself in contact with someone from the claims department. Here are the important things you should do before speaking to that person:

a. Review your policy and the notes you took and filed from your conversations with the agent or company representative;

b. Understand exactly what you have to establish in order to receive the benefits (e.g. that the benefit in question is covered; that the deductible or co-pay is $X; that the treatment was not experimental, cosmetic or something else not covered, etc.)

c. If your claim involves a substantial amount of money, run the facts by an attorney.

d. Play devil's advocate, asking yourself what the claims adjuster might say in evaluating the claim;

e. Determine any applicable co-pay, deductible or other limitations;

f. Make sure your doctor or other provider understands what is, and is not, covered before he/she sends any written letters or reports to the company.

g. Cooperate and be polite with company representatives but don’t let them put words in your mouth.

Understand your rights and responsibilities as a claimant. Unless your claim is ERISA Preempted (above) certain principles under the laws of most states have evolved to help protect you in the claims process. These rules can be very important in the handling of a given claim. You should be familiar with them. Generally, insurance companies are precluded from:

a. Making deceptive or misleading representations to insureds either at the time of sale of an insurance policy or with respect to a claim;

b. under-settling valid claims;

c. engaging in unreasonable delay in the settlement of a valid claim;

d. conducting prolonged or unfair claims investigations; or

e. compelling policyholders to sue them in order to collect payments due under a policy;

• Never use harsh, intemperate, extreme or threatening language when corresponding with an insurance representative. Do not say things like: “I’m going to sue you for everything you’ve got.” Or: “Keep it up and I’ll wind up owning your company”. Such letters will come back to haunt you.
  
  
• Do not send CCs of correspondence to VIPs such as Senators, Members of Congress, CNN reporters, The Pope or other luminaries. This never has the desired effect.
  
  
• Keep your correspondence concise, rational, articulate, reasonable and accurate. If you are going to send any CCs at all, send them to the Regional Claims Manager or the Vice President for claims in your company’s home office.
  
  
• Save everything you write and all responses from the company. Keep these letters in your insurance binder.
  
  
• Confirm in writing any significant oral representations or statements made to you. File these as well.
  
  

Save any significant letters or memos to or from third persons (such as contractors, physicians, appraisers or other experts) if they pertain to a claim or other insurance matter.

 

Speaking with claims representatives.

Preparing before you contact a claims representative gives you a big advantage. This will help you to discuss the most likely issues. You will know a good deal about your coverage and your rights and will have credibility with the company representative. Again, the key, as with all interactions with your company, is to be polite and reasonable in your discussions and negotiations. This is important -- particularly  in situations where you feel that a claims representative is acting unfairly.
    
 

Negotiating

The biggest problems encountered in the negotiating process arise when one or both sides are poorly-prepared, hold an untenable position, or are unwilling to compromise even in a situation that cries out for it.

If you have followed the steps outlined above, these problems should be minimized. The negotiating process is greatly enhanced when both sides are knowledgeable and open-minded. In such situations the negotiation process comes down to five important principles.

You should:

• Advocate your position without being arrogant or obnoxious about it;
  
  
• Listen carefully to the other side's perspective and try to understand where it is coming from;
  
  
• Try hard to bring a sense of humor (dark though it may be) to the table; and  
  
  
• Be firm but reasonable.
  
  
  

Mediation

If, in cases where the amount in controversy is substantial, you are unable to resolve the claim directly with your company, you should then consider contacting an outside mediator. You can do this whether your policy has an ADR provision in it or not.

Mediation is a process whereby an independent third party, chosen by the agreement of both sides and experienced (in this case in insurance matters), steps in and tries to facilitate a resolution of the disagreement. Mediation, unlike certain types of arbitration, is not binding. No decisions are made by the mediator. Instead the mediator simply tries to bring the two opposing sides together in a joint effort to avoid litigation.

There are professional mediators available through organizations such as The Judicial Arbitration and Mediation Services (JAMS), and other organizations which promote mediation services.

Be sure your mediator is objective and does not have a built-in tendency to favor one side or the other.

ADR

Insurers are keenly aware of the cost of prolonged internal claims processing and ADR options. For that reason, the company might be willing to have an experienced third party attempt to mediate a resolution to the impasse.  This is so even if your health policy contains an ADR provision. Your provider would far prefer an inexpensive and non-binding mediation process, to the time-consuming, more formal expense of binding arbitration.  The provider can assign a less highly skilled claims employee to the mediation process than would be required for formalized binding arbitration. Although it may often seem hopeless, a good mediator armed with experienced, non-threatening, persuasive skills, can often bring even the most headstrong parties together.  

 

Complaints to Government Agencies

Most states have handed over jurisdiction for patient healthcare complaints to specific government agencies, such as the state department of insurance, the state department of corporations or the state department of managed healthcare.

If you have a grievance against an HMO, PPO or other health plan your state department of insurance would be a good place to start. They can refer you to any other agency with jurisdiction over your particular situation. For a contact list of Departments of Insurance in the US, visit our DOI section.

 

Statutes of Limitations

Note carefully that there are provisions under the laws of every state that place absolute restrictions on the length of time a person has to file a civil suit for damages. These laws are called statutes of limitations. The time limits imposed depend on the legal theories involved. For example, the statute of limitations for a breach of contract case may be different from the statute of limitations for misrepresentation or fraud causes of action. You need to consult with the laws of your state on this.

In addition, there are often limitation provisions in the insurance contracts themselves. Many policies impose such contractual restrictions on how long an insured has, following a claims denial, to file a claim or suit against the company. This is known as a contractual statute of limitations. If your agreement or contract has such a provision and you do not file a lawsuit within the time period set forth, you may lose all of your rights to recover anything on your claim - regardless of how valid it might be.  

You must take these provisions very seriously. They are usually strictly enforced.

If all Else Fails

If all else fails, you either throw in the towel, or sue. If your case is a substantial one, and is neither ERISA Preempted, nor bound by a legally valid binding arbitration agreement, and if your state permits residents to file suits against insurers or HMOs in “bad faith” cases, you  can do so.