Claim denied: the $43,364.27 battery

Paige Riley has a serious medical condition: gastroparesis. The stomach cannot empty itself, causing nausea, vomiting and pain. Fortunately for Paige, her husband’s employer provided a very attractive insurance plan, so the installation of an Enterra – a device implanted under her skin which ameliorated her condition by prompting the stomach to do its job – was covered back in 2005. And when its batteries needed to be replaced in 2007 – which of course also required surgery since the device was under her skin – that was covered too.

Earlier this year, another operation became necessary to replace the fading batteries. As Forbes.com reports, Blue Cross & Blue Shield of Mississippi, the plan administrator for the insurance plan, decided Enterra was experimental and refused to cover the $43,364.27 bill to install new batteries. So Ms. Riley had to proceed to court.

Now guess which law governs her case. That’s right - ERISA. So her chances of prevailing in court and getting the procedure covered are drastically reduced because ERISA makes it exceedingly difficult to overturn an insurance company’s denial of your health insurance claim. And of course if you do manage to get it overturned the remedies you recover are very, very stingy. Indeed these factors do a lot to explain why an insurer will deny coverage to replace batteries in a device which had already been approved.

So Ms. Riley was left with the choice of going ahead with a dead Enterra device implanted under her skin, and living with the symptoms of gastroparesis, or scrambling to come up with $43,364.27 out of her own pocket.

I don’t know what to call that sort of arrangement, but it certainly isn’t “insurance.”

“Independent” medical exams and “reasonable” grounds for denying your claim

As we’ve seen when an insurance company has managed to grant itself “discretion” it gets the benefit of the most absurd judicial deference known to the law. The courts make no bones about it: a decision to deny benefits, even if the court agrees it is wrong, will nonetheless be upheld so long as the court concludes it was “reasonable” (not reasonable, “reasonable”).

So what does it take for a wrong decision to be “reasonable”? One way is for the insurance company to say hey, it wasn’t our decision, we hired an independent doctor to review all the files and we just abided by this fine fellow’s impartial and fair opinion. And the judge says, well, they did have someone with “M.D.” after his name say the claim was bogus, and who am I, a mere federal district court judge, to disagree with such a learned and considered opinion? (and the champagne and caviar doesn't affect my decision at all!).

Of course, as in all things ERISA, the books are cooked here. These so-called “independent” medical examiners are very, very frequently beholden to the insurance companies who hire them and pay the freight. These doctors are very handsomely contemplated for their time, and that gravy train stops abruptly if the insurance company sees they are issuing too many opinions which don't allow the insurer to deny a claim. So to all too many of these “independent” doctors, no one is ever disabled, and no medical treatment ever qualifies as “medically necessary.”

My colleague Michael Quiat, on his excellent disability law blawg, addressed this issue recently. You should read the whole thing, but here’s a taste:

To construct the façade of “impartiality”, insurance companies hire doctor “agencies” which hire physicians to do what are facetiously called Independent Medical Examinations, purportedly because the insurance company wants to catch malingerers. These doctor agencies scout out MDs, many of whom do not practice medicine as a vocation, but stick strictly to IME exams. These exams provide most, if not all of their income.

These physicians are paid to be highly skeptical of disability claim and claimants. Most of their exams are based on the written reports of claimants’ doctors, but yet they are supposedly able to determine that a claimant is not in pain or restricted in movement or otherwise afflicted, even though they never see the claimant!

Mike’s post includes a link to a recent article in the Los Angeles Daily Journal about this; it is worth your time to take a look at that too.

The U.S. Supreme Court, in a case called Black & Decker Disability Plan v. Nord, echoed the same concerns:

As compared to consultants retained by a plan, it may be true that treating physicians, as a rule, have a greater opportunity to know and observe the patient as an individual. Nor do we question the Court of Appeals' concern that physicians repeatedly retained by benefits plans may have an "incentive to make a finding of `not disabled' in order to save their employers money and to preserve their own consulting arrangements."

Not that that ended up meaning anything; the court in Nord decided that the opinions of treating physicians deserved no particular consideration, and it was perfectly OK for an insurance company to credit the views of its paid whores doctors over the views of the claimant’s treating physicians.

So that’s one way judges uphold decisions they know to be wrong, because the decisions are reasonable “reasonable.”

More ERISA talk on the Nicole Sandler show

My colleague Jeff Metzger appeared on Air America’s Nicole Sandler show last week. Jeff knows his stuff and well explained the problems ERISA causes and how it ruins lives. The audio is here.

HR 3962 preserves ERISA’s malignant scheme

Mark Hall of the O’Neill Institute posted the other day to comment that the “health reform process is ignoring the hash that Congress and the courts have made of ERISA’s pre-emption of state tort suits against health insurers.” Mr. Hall, of course, is precisely correct about that, as he is when he adds “personal injuries caused by insurance claims denials cannot be adequately redressed either under state tort law or federal law, due to ERISA’s complete pre-emption of the former, and its stingy remedies for personal injury to the latter.” No fooling.

Mr. Hall’s larger point is that the health “reform” bill passed by the House of Representatives over the weekend, HR 3962, does nothing to address ERISA’s malignant effects. Section 251 of the bill expressly provides:

Nothing in paragraphs (1) or (2) shall be construed as affecting the application of section 514 of the Employee Retirement Income Security Act of 1974.

(You can find the full text of the bill here).

Section 514 of ERISA, in turn, is the provision which preempts state law and leaves insurance company victims to the tender mercies of the federal courts and the ridiculously stingy remedies ERISA itself has been interpreted to provide.

Now Section 251 in general is the part of HR 3962 which discusses how the bill would affect the applicability of other laws. It says:

In the case of health insurance coverage not offered through the Health Insurance Exchange (whether or not offered in connection with an employment-based health plan), and in the case of employment-based health plans, the requirements of this title do not supercede any requirements applicable under titles XXII and XXVII of the Public Health Service Act, parts 6 and 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or State law, except insofar as such requirements prevent the application of a requirement of this division, as determined by the Commissioner.

OK that’s a bunch of legal mumbo jumbo, but it essentially talks about other laws which survive the enactment of HR 3962 (it designates other laws which are not to be “superceded”). And then comes the part about ERISA, which says essentially that, in the case of "employment-based health plans,“ don’t you dare think for one minute that the insurance industry will lose their licence to lie, cheat, steal and kill.

Mr. Hall discusses another part of HR 3962, which says that insurance purchased through the contemplated “Health Insurance Exchange” will not be subject to ERISA, or at least says “individual rights and remedies under State law shall apply.” Insurance purchased through the Exchange, however, won’t include the “employment-based health plans” which will continue to be subject to ERISA and its various malignancies. At section 100 HR 3962 defines “employment-based health plans” by referring the reader to (what else?) ERISA’s definition of “group health plans,” specifically ERISA section 733(a)(1), where we finally find the actual definition: it’s an “employee welfare benefit plan to the extent that the plan provides medical care.” Elswhere ERISA defines “employee welfare benefit plan” as any “plan, fund or program ... established or maintained by an employer...”

Ah the hell with it. I’m a lawyer and I'm paid to wade through this stuff, and I won’t inflict any more of on the reader here. Suffice it to say that Mr. Hall’s concerns are well founded, and that ERISA’s crappy effects will easily survive the enactment of HR 3962 in its present form.

There may yet be time to impact this. The Senate still needs to pass something, and then there has to be reconciliation in a conference committee. So please don’t stop making noise.

Kudos to Congressman Shadegg and his ERISA-reform efforts

Yesterday Congressman John Shadegg introduced to the press Florence Corcoran, whose baby was killed by an ERISA insurance company. Congressman Shadegg has been on the right side of this issue for a while now and deserves kudos for championing the cause in the halls of Congress. While it is clear his immediate motivation is to raise the issue to oppose current health care reform efforts on the Democratic side, the fact is he’s correct that those efforts will be an exercise in futility if ERISA is left untouched. Here’s some of yesterday’s press conference:



Now of course, the insurance industry will tell you that if you are going to hold them accountable for things like fraud and wrongful death, they just can’t do business on those terms. We’ve heard it before, and now we’ve heard it again. Here’s the response to Congressman Shadegg from ERIC, the ERISA Industry Committee:

The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America's major employers, strongly opposes a proposal by Representative John Shadegg (R-AZ) to subject employers' Employee Retirement Income Security Act (ERISA) plans to a patchwork quilt of state remedies and laws. Representative Shadegg earlier today held a press conference where he called on Congress to eliminate ERISA's preemption clause and allow state-based remedies.

In response to Shadegg's comments, ERIC President Mark Ugoretz warned that, "if Congress were to allow state litigation of ERISA plans, employers potentially could face thousands of lawsuits, under dozens of legal frameworks, resulting in a litigation nightmare.

Healthcare is a national not a state-by-state issue and must be dealt with in a nationally uniform system -- anything less results in healthcare chaos. Employer-provided healthcare coverage cannot survive if it is subjected to a patchwork of enforcement, remedies, and compliance rules by 50 states and a kind of product liability litigation. For the vast majority of employers, health care coverage is not a product, it is a benefit offered to employees. Employers, many of whom are struggling to offer health coverage to their employees, cannot provide health care coverage if they are subject to a patchwork of rules and multiple lawsuits in state courts."

***

Ugoretz further warned that, "any change in the law relating to ERISA-governed plans would result in a retreat from offering healthcare coverage for millions of Americans who rely on ERISA-governed plans for their health care needs. Such a proposal would drive up already escalating health care costs that ultimately will be passed on to employees. That new burden would amount to a 'litigation tax' on all of an employer's employees to pay for lawsuits initiated by a few."

So there you have it. As long as we can commit fraud with utterly no consequences, as long as we can kill people with utterly no consequences, as long as we can offer insurance but deliver fake, illusory, empty promises, we’re happy to do business with you. Otherwise, no sale.

Congressman Shadegg, as well as these other members of Congress who appeared at his press conference in support, deserve kudos: Senator Tom Coburn; Representative Jack Kingston; Representative Phil Roe; Representative Lee Terry; Representative Louie Gohmert; Representative Phil Gingrey; Representative Sue Myrick; Representative Steve King; Representative Mark Souder; Representative Todd Akin; Representative Jean Schmidt; Representative Paul Broun; Representative Lynn Westmoreland; and Representative Jim Jordan.

These folks are all Republicans.

I’m a Democrat and on this issue I profoundly disagree with my party leaders and their silence.

I think I’ll sit down and write a few letters.

The Problem, redux

On the first day of each month (OK, around the first day of each month) I'll be posting a reprise of the first post on this blog, which contains an overview of the Problem. It'll be updated and edited as we go along. But I'd like to have a summary of the Problem available frequently, hence the monthly repeat and update. So off we go...

ERISA is the Employee Retirement Income Security Act, and it is codified in Title 29 of the United States Code, starting with section 1001. It's federal law, enacted in 1974, and it was supposed to protect employees' rights in connection with their pension plans and benefit plans (health, disability, life insurance, that sort of thing). But it doesn't. Quite the contrary.

This blog is dedicated to the ERISA problem.

What is that problem? It mainly concerns those benefit plans (ERISA is actually not a bad law with respect to pension plans). Pension plans is what they had in mind when they enacted it -- benefit plans were an afterthought.

And it shows. If your insurance company wrongfully denies your claim, you might figure you can always take them to court. You can do that (usually), but when you get there you'll find things don't make any sense. We'll go into the particulars soon, but for now:

If you get your insurance coverage through your employment, then in virtually every case ERISA preempts state law (meaning it cancels it out, eradicates it, takes its place). But, having gutted state law relating to insurance disputes, it fails to provide any reasonable substitute. The remedies it provides (i.e. what you get if you win a lawsuit) are very, very stingy. And ERISA severely compromises your ability to secure even the scant remedies it does provide.

1. Remedies. ERISA limits the recovery you might get to the benefits which should have been provided in the first place, and an award on account of attorney fees in the court’s discretion. Example: you have your disability benefits wrongfully denied. As a result, you have no income, your credit rating is trashed, you lose your home and you are driven into bankruptcy. You file your ERISA suit and against the odds, you win. What do you get? The benefits they should have been paying you back when it might have done you some good. That's all (you might -- might -- get something on account of your attorney fees too).

The trashed credit, the lost home, the bankruptcy, the ruined life? Bupkis. ERISA does not allow for any recovery on account of these sorts of consequential damages -- none. And this applies even if the insurance company committed outright fraud when it denied your claim. Incidentally, I find it quite difficult to understand why the insurance industry, uniquely among all industries in America, needs to have immunity from liability for fraud if it is to offer its services at a reasonable price. Anyway, this concern goes beyond making people whole; it also directly impacts the behavior of insurance companies.

As of now we have a situation where the law tells insurers they face no meaningful consequences if they deny care improperly or even commit outright fraud. As one federal judge has commented, "if an HMO wrongly denies a participant's claim even in bad faith, the greatest cost it could face is being compelled to cover the procedure, the very cost it would have faced had it acted in good faith. Any rational HMO will recognize that if it acts in good faith, it will pay for far more procedures than if it acts otherwise, and punitive damages, which might otherwise guard against such profiteering, are no obstacle at all." Insurance companies, of course, are not charities, but corporations; their boards are subject to a fiduciary duty to maximize shareholder value. If it is possible to accomplish this by mistreating insureds, then it follows insurers will do precisely that (and believe me, they do).


2. Procedure. In ERISA litigation, courts have determined among other things that there is no right to a jury; that discovery (the pre-trial process where you obtain the other side's documents, take depositions and such) is to be significantly abridged; that the evidence which may be introduced at trial is limited to that which the insurer deigned to assemble during its claims evaluation process; and that, when the policy contains language vesting "discretion" in the insurer, if you prove the insurance company was wrong -- you lose. In order to win, you must prove the denial was "arbitrary and capricious" -- that is to say, ridiculous, absurd, unintelligible, crazy. And lo and behold, the insurance companies grant themselves "discretion" when they write their policies. In this way we treat insurance companies as if they were federal judges. But Learned Hand they are not.

These days we're all debating health care reform and what to do about the uninsured. ERISA matters a lot here, because if you get your insurance through your employment, then consider yourself to be in that group. If by "insurance" you mean something like an enforceable promise by an insurance company that it will pay for what it says it will, what you have doesn't qualify. What you have is a piece of paper saying some company will pay your claim if it feels like it. You don't have insurance at all -- you only think you do.