How many times have you confirmed coverage and benefits for your patients with their insurance companies only to have the claim denied after treatment? Fortunately, there are some legal remedies for the provider, and these remedies arise in two general contexts.
First, Texas, both in state courts and federal courts, recognizes claims arising out of the representations of coverage and benefits which are routinely relied on by providers when they extend services. Courts have held that health care providers, when they provide services, act in reliance on the representations of coverage made by carriers, and misrepresentations as to coverage and benefits are violations of Article 21.21, Texas Insurance Code: Hermann Hospital v. National Standard Ins., 776 S.W.2d 249 (Tex. App. - Houston [1st Dist.] 1989, writ denied). These claims may arise from either insurance policies which are governed by the state insurance code or welfare benefit plans which are governed by the federal law known as "ERISA." Most group health insurance policies are welfare benefit plans. The second type of claim is a contractual claim for insurance or plan benefits brought by the provider when the insured assigns his benefits to the provider.
Instituting Office Procedures
To maximize the likelihood of a successful challenge to the denial of benefits, providers need to institute procedures before the problems arise.
One of the keys to success for providers is to ask the right questions and keep accurate written records of the verifications of coverage and benefits including dates, the names of the persons making and receiving calls, etc. Verifications generally require three telephone calls.
Usually, the insurance company confirms benefits and refers the caller to the employer to confirm current coverage. A third call may be required for precertification of benefits. The importance of the verification job should not be overlooked. Health care providers stay in business by receiving insurance and health benefit plan payments, so these procedures are very important. As it is often necessary for the provider to prove that it relied upon the verification of coverage and benefits to extend services, it is important to complete verification as early as possible; ideally, prior to admission. The provider's written policies and procedures relating to verification of coverage and financial responsibility should be formulated to achieve legal remedies if a suit must be filed. Because the documents are invariably requested in any litigation, it is recommended that they be drafted by attorneys who have experience in enforcing these types of claims and the use of the forms in the courtroom when necessary.
On the other hand, even if there was no misrepresentation, but the patient is covered and signed an assignment of benefits, the provider can bring a suit for breach of contract. The provider should obtain an irrevocable assignment of insurance or plan benefits from the insured. If this is done, the provider is able to pursue the insured's contractual claims just as if it were the insured person. The language of the assignment has certain legal requirements. An authorization to pay the doctor or hospital directly is not sufficient. An authorization to pay is only the insured's "permission" to pay the provider rather than the insured and is not binding on the carrier. An assignment, on the other hand, is a legal contract which gives the provider the legal right ("standing") to bring a claim or lawsuit against a carrier for wrongful denial of benefits. With an irrevocable assignment, you are standing in the shoes of the participant and bringing a claim just as if you are the participant. To prevail on this claim, the provider must prove that the terms of the policy or plan covered the patient's treatment.
In summary, the two types of claims are separate and distinct, and the provider may prevail on one claim or the other depending on the facts of the case. Sometimes the provider is faced with a denial made because there is no coverage under the terms of the policy. Perhaps the employee was terminated from employment before treatment or the policy was terminated because of nonpayment of the premium by the employer. If the provider was told there was, in fact, coverage, it may still prevail on its claim of misrepresentation whether or not the patient is covered. In this case, no assignment of benefits is required because the claim is that a misrepresentation was made to the hospital in its independent standing as a health care provider.
Contract Actions Under ERISA
ERISA is a federal law passed in 1974 to regulate employee benefit plans. Through a series of federal court decisions, it has been construed to govern virtually all employer-sponsored health benefit plans, provided the employer either contributes a portion of the premium or self-funds the plan. ERISA applies whether the employer self-funds its benefit plan or purchases a standard commercial group insurance policy. Because nearly 80 percent of all health benefit coverage is provided through employment, ERISA has a significant impact on the health benefit system.
In order for a provider to bring suit to enforce the terms of the plan and obtain payment, an assignment is necessary. It creates the necessary privily or legal relationship between the provider and the insurer or plan. ERISA suits are claims for breach of contract for wrongful denial of benefits under the policy or plan. The most common wrongful denials of claims are for claimed preexisting conditions. Generally, there must be a diagnosis or treatment prior to the effective date. The mere existence of a medical condition is insufficient to deny the claim. Another problem area is termination of the employee's coverage. The general rule under ERISA is that coverage terminates when employment terminates. Often, when a patient is sick or injured in an accident, his employment is terminated at or shortly after his admission to the hospital, and the provider finds out some time later about the termination of benefits. When coverage terminates, the employee or dependent is entitled to continuation of coverage under COBRA, another federal law. COBRA coverage must be initiated within 60 days of receiving notice of the right to continue the coverage. The provider should promptly determine the termination date to ensure these rights are exercised. If necessary, the provider should obtain an assignment and pay the premium.
In summary, the two most likely avenues of recovery are (1) the hospital's (or provider's) independent claim for misrepresentation of coverage and (2) the claim brought through the insured's standing via an assignment of benefits.
In order for these remedies to offer avenues of recovery for health care providers, proper admission verification and assignment procedures must be implemented, as well as follow-up procedures. Competent health care attorneys should be consulted in order to help institute correct procedures and to recover on these types of claims.
Published in the Greater Houston Edition of M.D. News, October 1996
The information provided in this article is not legal advice to any reader. Neither the transmission nor the receipt of this article creates an attorney-client relationship. The opinions expressed in this article may not be those of the firm.