One of the biggest problems facing health care providers is the denial of claims made to major medical carriers. Carriers will often merely reject claims stating that the care is outside of their guidelines, or they will send the bills and some records to a consultant who recommends a reduction of the bill as the care was not medically necessary. Carriers even do this when it comes to some diagnostic procedures. It is very difficult to litigate these claims, and quite often doctors simply write them off. The following is a summary of my experience with this type of claim, and sorry to say, it is not good.
Most major medical claims fall under ERISA (Employee Retirement Income Security Act), which is part of the federal labor law. The ERISA statute is found in Volume 29 of the United States Code, and Section 1132 is the enforcement section and it comes into play when there is a dispute over a benefit. Since most individuals have their health care through their employment, any claims for a denial of a health care benefit falls under ERISA. There may be concurrent jurisdiction in the state courts, but if an action is started in the local court, most carriers will "remove" the matter into the federal court citing the ERISA statute as the basis. The end result is that if you sue a carrier in the local court, you will usually end up in the federal court.
Being in the federal court is not so bad, but the standard of proof under the ERISA statute is rather liberal. Under this statute, the claimant must demonstrate that the denial of the claim was an "arbitrary" or "capricious" act of the carrier. This means that there was no rational basis for the denial of the claim. So, if a carrier sends the claim to an outside consultant who says that benefits should be denied, and the carrier does deny, the actions of the carrier are not "arbitrary" or "capricious" as they relied upon the consultant's recommendation.
Additionally, the claimant must demonstrate that he has exhausted all administrative remedies and that he has appealed the carrier's denial. This means that the doctor has to show that he has provided all of the documentation and information which was requested from the carrier, and that the care or test was clearly necessary, and that the carrier continued to deny the claim. The doctor must show that he has "appealed" the determination of the carrier. If the doctor has not appealed the denial, he may lose based upon the fact that he failed to exhaust his administrative remedies.
Quite often a carrier may not respond to a bill, so how can you appeal the denial? According to the Code of Federal Regulations, 29 CFR CH. XXV, 2560.503.1, (e) (3), if a decision on a claim is not made within 90 days, that claim may be deemed denied. Thereafter you have to file your appeal from the denial. If the carrier does not respond to this appeal, you may then start litigation. If the carrier reconsiders your claim, and again denies it, you have to appeal again.
After the case is removed to the federal court, the doctor will usually have to turn over the patient's entire file to the carrier as part of the "discovery" phase of the claim. The doctor and the carrier are entitled to review documents in the adverse party's file, and they may ask each other questions, in the form of written "interrogatories."
Thereafter, depositions may take place. A deposition is where each party interviews the other party and asks questions regarding the subject claim. The testimony of each person is recorded for future use, and the transcript is ultimately sworn to before a notary public.
Some districts mandate that cases with a relative low value be arbitrated prior to trial. An arbitration is akin to an informal trial, and the court selects the arbitrator. Each side calls witnesses to testify and submits proof to support their respective position. The arbitrator will make a decision, and if either party is not satisfied with that decision, that party may request a trial de novo. Caution! The request for a trial de novo must be done within a specified time, and the parties should acquaint themselves with the time restraint in the court where the case is venued.
If the case goes to trial, it will be before either a United States district court judge, or a magistrate judge. witnesses will be called and documentary evidence reviewed. The judge, or jury will make a decision and that will be the end of the case, unless there is a basis for an appeal.
To reiterate, the standard of proof whether the claim will be paid is whether the plan administrator (this may be the insurance company) acted reasonably under the circumstances. This means that if the administrator has any basis for the denial of the claim, his actions were not arbitrary and capricious, and the claim may properly be denied. So, if the carrier sent the claim to a consultant, and the consultant said the that care was not needed, and the administrator relied upon that opinion, his (its) actions were not arbitrary and capricious regarding the payment of the bill.
The bottom line on all of the above is that many doctors will not challenge denials by major medical carriers because it is just not worth the time and/or effort.
How can this be corrected? It is this writer's opinion that those who are concerned about this process should correspond with their local legislators, congressional representatives, and request that the ERISA statute be amended as follows:
a) a declarative statement in the statute stating that jurisdiction for the payment of medical claims is vested in both the local court and the federal court;
b) that the assignment of benefits for the payment of a claim for health care services provided to an enrollee is not an assignment of the benefits of the plan;
c) that the standard of review by the court is whether the services rendered were reasonable and necessary to the diagnosis and care of the patient.
If these amendments are forthcoming, claims could be resolved in the local small claims court and the issues regarding the care of the patient will be resolved expeditiously.
James Hogan, Esq.
Patchogue, New York
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