Another “insured” person cheated out of “insurance” by ERISA; UPDATE: Guardian caves in response to public pressure

Ian Pearl, since birth, has suffered from muscular dystrophy. He is now 37 years old, and is confined to a wheelchair and hooked to a breathing tube.

Fortunately for Ian, he had “insurance” through the ERISA plan offered by his father’s company. So while his health was terrible, he at least would have access to adequate care and his family could avoid going bankrupt from medical bills.

Not so fast. His insurance carrier, Guardian Life Insurance Company, decided it was just too expensive to live up to its contractual obligations to cover the care required by Ian and others like him.

So Guardian just pulled the plug. According to the Washington Times:

Legally barred from discriminating against individuals who submit large claims, the New York-based insurer simply canceled lines of coverage altogether in entire states to avoid paying high-cost claims like Mr. Pearl's.

At least Guardian was compassionate about condemning Ian to a life of inadequate medical care for his debilitating condition. You can just hear them choking back their tears:

In an e-mail to four other Guardian executives entered into evidence in the Pearls' suit, company Vice President Tim Birely discussed how the company could "eliminate this entire block to get rid of the few dogs."

Now how on earth is this legal? Simple:

The judge found that the company had not violated the Employee Retirement Income Security Act (ERISA), because it canceled entire policy lines.

Sorry, Ian. To Guardian, you’re just one of the “few dogs” they need to dispense with.

UPDATE:

Daylight,as they say, is the best disinfectant. In response to public pressure and lots of media coverage and widespread outrage, Guardian has caved and reinstated Mr. Pearl's coverage.

Now about all those people who didn't make the headlines...

ERISA to Insurance Companies: It’s OK to kill someone’s daughter, just don’t flip them off

Cigna Corporation, an ERISA health insurer, killed Nataline Sarkisyan in December 2007, denying a liver transplant on the pretext it was “experimental” (which is insurance company code for “expensive”; after all paying for the transplant would reduce its profits).

Nataline’s parents sued Cigna for killing their daughter. Nataline’s mom, Hilda, also appeared at Cigna’s Phildelphia headquarters in 2008, and said “You guys killed my daughter. I want an apology.”

What she got instead is described in an article in today’s Los Angeles Times:

Cigna employees, looking down into the atrium lobby from a balcony above, began heckling her, she said, with one of them giving her “the finger.” Sarkisyan walked out, stunned and hurt.

“They showed me their true colors,” she said. “Shame on them.”

Meanwhile, thanks to ERISA, a Los Angeles judge had to dismiss their wrongful death case against Cigna, because ERISA provides the Cignas of the world immunity from liability for killing people.

Cigna, of course, took this as some sort of endorsement of its decision to let Nataline die:

Cigna said the dismissal of the wrongful-death case in April showed that the court “agreed with our position that the Sarkisyans’ claims regarding Cigna’s decision making were without merit.”

But as the Times correctly observed

In fact, the court did not consider the merits of the family’s wrongful-death claims. Instead, it decided those claims could not be heard.

The insurance companies’ flack, one Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, defended the outcome, saying that to hold insurance companies accountable for killing people will “bankrupt these plans, and employers would no longer be able to offer coverage.”

That makes perfect sense. How can you be expected to offer your services at a reasonable price if the courts are going to nitpick about you killing people?

The Sarkisyans did get one bit of good news, though. They get to sue Cigna over its employees flipping off Ms. Sarkisyan: the court “said the Sarkisyans could pursue damages for any emotional distress caused by the Philadelphia incident.”

So they have that going for them.

Memo to insurance companies in ERISAworld: go ahead and kill people. Just keep your middle finger to yourself.

UPDATE: Film at 11:

Pre-existing condition? We don’t need no stinkin’ pre-existing condition...

One of the major points advanced in favor of health insurance reform is that insurance companies abuse the privilege of refusing to cover you if they decide you have a pre-existing condition, or pulling the plug on coverage you already have if they decide you had one you didn’t tell them about when you applied for coverage. That’s a sad state of affairs, without question. As in other areas, of course, ERISA manages to make a bad situation worse. Much worse.

If you get your insurance through your employment, ERISA wipes out any state law protection you might have in this area, and health plans can simply change your “coverage” to exclude a condition you might develop, never mind whether it was pre-existing or not. Consider the sad case of John McGann, who discovered in December 1987 that he was afflicted with AIDS. At least, he thought, he was fortunate to have good insurance from his employer, H&H Music Company, which provided coverage for AIDS treatment up to a $1,000,000 lifetime limit.

John McGann, unfortunately for him, failed to consider what ERISA was about to do to him.

Now, Mr. McGann had an insurance policy through his employment with H&H, already issued, already underwritten, premiums fully paid. There was absolutely no indication his AIDS was a pre-existing condition, and no one ever claimed it was.

But in 1988, when the insurance company, General American Life Insurance Company, got wind of his illness, all of a sudden things changed at H&H:

In July 1988, H&H Music informed its employees that, effective August 1, 1988, changes would be made in their insurance coverage. These changes included, but were not limited to, limitation of benefits payable for AIDS-related claims to a lifetime maximum of $5,000. No limitation was placed on any other catastrophic illness.

Now hold on a minute. John McGann had an insurance policy which said treatment for AIDS was covered up to $1,000,000. An insurance policy, which most people think of as a binding contract that the insurer will cover what it says it will. But H&H just canceled the policy and pulled it out from under Mr. McGann, replacing it with a self-insured plan with the aforementioned stingy AIDS benefit.

By the way, in court, H&H and General American proudly admitted:

the reduction was prompted by the knowledge of McGann’s illness, and that McGann was the only beneficiary then known to have AIDS.

The United States Fifth Circuit Court of Appeals reviewed ERISA, and concluded:

[ERISA] does not prohibit an employer from electing not to cover or continue to cover AIDS, while covering or continuing to cover other catastrophic illnesses, even though the employer’s decision in this respect may stem from some “prejudice” against AIDS or its victims generally.

It wasn’t even that hard, either. ERISA is pretty clear that your employer, if, say, the insurance company threatens to raise premiums in response to an employee coming down with a covered illness, can just cancel that part of the coverage and leave the sick employee, who didn't think they were in the ranks of the uninsured, high and dry. Indeed, never mind higher premiums, ERISA allows coverage to be precipitously canceled because of, say “some ‘prejudice’ against AIDS or its victims.”

That’s ERISA for you. If we don’t fix ERISA, now, then any “reform” we might achieve will be empty indeed.

The case is McGann v. H&H Music Co., and the citation is 946 F.2d 401 (5th Cir. 1991).

By the way, John McGann died in June 1991.

The Rising Judicial Chorus: Judge Young

William G. Young is a judge for the United States District Court for the District of Massachusetts; he was a 1986 Reagan appointee and served as chief judge from 1999 to 2005.

In 1997 Judge Young issued an opinion in a case called Andrews-Clarke v. Travelers Insurance Company. In a nutshell, Richard Clarke drank too much, and sought treatment for his alcoholism, which was a covered benefit under his ERISA-governed Travelers insurance policy. Travelers and its utilization review contractor, Greenspring, refused to authorize the in-patient stay requested by his doctors, and Mr. Clarke was released ahead of schedule. He tried to commit suicide, was readmitted to a detoxification facility, and was again released ahead of schedule due to Travelers’ and Greenspring’s refusal to authorize the requested length of stay.

Here’s what happened next, as described by Judge Young:

By now, it was tragically apparent to everyone but Travelers and its agent, Greenspring, that Clarke was a danger to himself and perhaps others. After conducting a commitment hearing, the Haverhill District Court so found, and ordered Clarke committed to a thirty-day detoxification and rehabilitation program. The court referred the issue of Clarke's placement to the Court Clinic, which in turn sought Greenspring's approval for an insured admission to a private hospital. When Greenspring - despite the fact that enrollment in a thirty-day inpatient detoxification program is a defined benefit of the Travelers insurance policy - incredibly refused to authorize such a private admission, the court ordered Clarke committed to the Southeastern Correctional Center at Bridgewater for his detoxification and rehabilitation.

Clarke's life now spiralled inexorably down and out of control. While a patient at Bridgewater, he was forcibly raped and sodomized by another inmate in his unit. He received little in the way of therapy or treatment. After his release from Bridgewater on October 25, 1994, he made his way back to Haverhill where his wife and four minor children still lived. Diane Andrews-Clarke told Clarke that he could return to the marital home only if he remained sober. Unable to do so without hospitalization, Clarke began a three-week drinking binge.

Richard Clarke, age 41, committed suicide on November 12, 1994. His wife, Ms. Andrews-Clarke, sued Travelers for wrongful death, and the case ended up before Judge Young. We’ll let him take it from there (I have omitted footnotes, but you can find them in the original case report; the citation is below):

Travelers and Greenspring promptly removed her case to this Court and then, just as promptly, asked this Court to throw her out without hearing the merits of her claim.

This, of course, is ridiculous. The tragic events set forth in Diane Andrews-Clarke's Complaint cry out for relief. Clarke was the named beneficiary of a health insurance policy offered through an employee benefit plan. That policy expressly provided coverage for certain medical and psychiatric treatments, including enrollment in a thirty-day inpatient alcohol detoxification and rehabilitation program. Doctors at several hospitals, and even the courts of the Commonwealth of Massachusetts, determined that Clarke was in need of such treatment, but the insurer and its agent, the utilization review provider, repeatedly and arbitrarily refused to authorize it. As a consequence of their failure to pre-approve - whether willful, or the result of negligent medical decisions made during the course of utilization review - Clarke never received the treatment he so desperately required, suffered horribly, and ultimately died needlessly at age forty-one.

Under traditional notions of justice, the harms alleged - if true - should entitle Diane Andrews-Clarke to some legal remedy on behalf of herself and her children against Travelers and Greenspring. Consider just one of her claims-breach of contract. This cause of action - that contractual promises can be enforced in the courts - pre-dates Magna Carta. It is the very bedrock of our notion of individual autonomy and property rights. It was among the first precepts of the common law to be recognized in the courts of the Commonwealth and has been zealously guarded by the state judiciary from that day to this. Our entire capitalist structure depends on it.

Nevertheless, this Court had no choice but to pluck Diane Andrews-Clarke's case out of the state court in which she sought redress (and where relief to other litigants is available) and then, at the behest of Travelers and Greenspring, to slam the courthouse doors in her face and leave her without any remedy.

This case, thus, becomes yet another illustration of the glaring need for Congress to amend ERISA to account for the changing realities of the modern health care system. Enacted to safeguard the interests of employees and their beneficiaries, ERISA has evolved into a shield of immunity that protects health insurers, utilization review providers, and other managed care entities from potential liability for the consequences of their wrongful denial of health benefits.

***

Does anyone care?

Do you?

The case again is Andrews-Clarke v. Travelers Insurance Company, and the citation is 984 F.Supp. 49 (D.Mass. 1997).

Timothy P. Carney in the Washington DC Examiner: health insurance reform omits ERISA reform

The Washington DC Examiner's Lobbying Editor, Timothy P. Carney, points out that current proposals for health insurance reform not only fail to reform ERISA, but explicitly preserve its perverse effect.

And you might think Democrats would tend to be on the side of the angels here and Republicans would tend to be in the insurance companies' thrall. Not necessarily. As Mr. Carney notes, Republican representative John Shadegg of Arizona has spoken up about this problem in the context of the pending reform efforts, so far to deaf ears adorning the heads of both parties.

Here's Representative Shadegg in action:


So: call, write, sound off, and support Representative Shadegg's efforts here!

There’s No Remedy if your Insurance Company Kills You

In December 1990, Rhonda Bast was diagnosed with cancer. At least she was not among the uninsured: she had health insurance, provided by her employer. When her doctor requested approval for a procedure which might save her life, Prudential Insurance Company said no. After Ms. Bast got lawyered up, Prudential changed its mind a few weeks later, but by then it was too late – Rhonda Bast died in January 1993.

So her family sued Prudential, claiming that if Prudential had not improperly delayed its approval for her therapy she would still be alive. The Northwest Women’s Law Center submitted a brief in the case, explaining “if insurance companies are not forced to disgorge the unjust enrichment that they gain by such bad faith denials, they will have no incentive to honor legitimate requests from their beneficiaries,” and that instead, insurance companies would “deny expensive treatments hoping that the beneficiary would not sue, or if she or her estate did, they would be left without a remedy.”

Thanks to ERISA, the Basts were indeed left without a remedy: the Ninth Circuit Court of Appeals said “Although moved by the tragic circumstances of this case and the seemingly needless loss of life that resulted, we conclude the law gives us no choice”; the “Basts’ state law claims are preempted by ERISA, and ERISA provides no remedy. Unfortunately, without action by Congress, there is nothing we can do to help the Basts and others who may find themselves in this same unfortunate situation.”

That was in 1998. We are still waiting for action by Congress.

The case is Bast v. Prudential Insurance Company of America, and the citation is 150 F.3d 1003 (9th Cir. 1998). You can look it up.