When the Insurer Doesn’t Pay


The New York Times has been running a series on how the healthcare overhaul will affect peoples’ everyday lives. The most recent article addresses the issue of denied claims. It opens by stating that, “Fighting with a health plan over a denied claim can leave people feeling they’ve been injured all over again.”

The options for challenging an insurance company’s denial are limited. Appeals can be slow and cumbersome, if they are available at all, and most patients are barred from suing for damages resulting from denials and delayed treatments.

The new health law makes the system somewhat more consumer-friendly. Starting this fall, patients in all health plans can contest claim denials in an independent state-level review procedure. This recourse has not generally been available to employees of companies that pay their employees’ health claims directly.

Unfortunately, the provision does not apply to plans that were in existence on March 23 when the health law was enacted. Nor does the new law make it any easier for consumers to sue for punitive damages or for pain and suffering. People covered by employer health plans can sue in federal court only for the cost of the benefit that was denied them. Some state courts provide stronger remedies, but only to people with individual health insurance policies.

Some experts say that those who hoped for more powerful weapons to fight claim denials are likely to be disappointed. The new provisions do not significantly change existing law. They simply solidify where things are. Under the current system, health plans must have an internal appeals process. The process usually has more than one level of appeals, and the original denial is typically upheld.

Most states already offer an independent review of denials. The new law will extend that option to every state, as well as to the self-funded plans.

External reviewers rule in favor of consumers about half the time, but few people take advantage of them. A lot of people don’t know the external review process exists, or that they may have to exhaust multiple levels of internal appeals first.

Some states also require consumers to pay up to half the cost of an external review, and some allow the insurer to refuse to maintain insurance coverage during the appeals process. Consumer advocates hope that additional rules governing changes to the appeals process under the new health law, to be issued shortly by the Department of Health and Human Services, will address these and other concerns.

Finding an attorney to take the case can also being challenging. Because no damages are permitted, lawyers have no financial incentive to take them. And the same lack of financial incentive applies to the insurer, who has little to lose except the cost of the treatment denied.

The full article can be found here.

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