Merritt Personal Lines Manual: Delay Tactics and the Right to Sue
Some health insurance companies withhold payment of an entire claim when they're disputing only part of it.
Under current U.S. law, courts have said the federal consumer protections do not allow lawsuits for damages. So if, for example, an HMO denies a lung X-ray and it turns out the patient had undetected lung cancer, the patient can sue to recover the cost of the X-ray but cannot win money for the damage caused by delay.
Several consumer groups claim that patients need more and better legal tools. Some point to a notorious Aetna/U.S. Healthcare training video released in the late 1990s that implied the company gave more attention to cases in which patients already had the right to sue.
"We released this to fuel the HMO debate and to tell Congress it's absolutely outrageous that they would adjourn without dealing with this," said Jamie Court of Consumers for Quality Care, a group which lobbied for a "patients' bill of rights" from the U.S. federal government.
Consumer groups long have said that insurance companies are likely to delay or deny legitimate claims unless they fear big lawsuits. In the Aetna video, company attorneys are training case managers in how to handle claims. The topic is long-term disability claims, not health insurance, but the company says its policies do not differ.
Throughout the video, Aetna attorneys discuss the differences between ERISA and non-ERISA cases -- those where the company faces federal rules that prohibit lawsuits and those governed by state laws that allow suits.
At one point, company attorney Jeffrey Blumenthal explains the importance of having accurate information in determining whether to deny a claim when a wrong decision could lead to a big judgment:
We have an obligation, certainly in a non-ERISA setting, under state law, to conduct what's called a reasonable investigation. We could be subject to... bad faith damages, to punitive damages, to a whole range of extra-contractual liability that could be many, many millions of dollars
After the video was made public by the consumer advocacy groups, Aetna spokesman Fred Laberge said the company does put more time and money into cases not governed by the federal law -- that is, "non-ERISA cases" -- but only as part of the legal review that follows an initial decision whether to pay a claim. All cases get adequate attention from company officials who determine, on the merits, whether to pay for a certain insurance claim, Laberge said. And he said the differences do not affect whether a claim will be paid.
