Lesson 11: Health Insurance

From The Business of Consuming section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003)

As the cost of medical care and the cost of health insurance go up, consumers are taking a closer look at what they are getting for their money. Employers who once gladly offered health insurance benefits to the members of their workforces now find this benefit too costly. They reduce the benefits or make the employees pay a greater portion of the premiums or both. Yet medical care providers complain that the payments they receive from the health benefit plans come too slowly, in miserly amounts, and with too much red tape and bureaucratic interference with care decisions.

As a consumer you need to be aware of the unique legal nature of health insurance. The first aspect that is unique is that most people who think they are covered with health or medical insurance policies are not entitled to insurance benefits at all. Technically, they are covered by “health benefit plans” that are regulated by a Federal Law (known as ERISA), not by insurance policies per se. “So what?” You may ask. One of the biggest distinctions is that insurance is regulated at the Federal level. If you sue a health benefit plan for refusing to pay benefits you cannot possibly get punitive damages; however, if you sue an insurance company for refusing to pay you insurance benefits you can ask for punitive damages.

Federal law gives a lot of discretion to the “Plan Administrator” in the making of decisions on the when, where, and how much of paying benefits. In most cases brought under federal law against health benefit plans juries will not make decisions; instead a judge alone will decide the outcome of each case.

Another key difference in insurance policies and benefit plans is who ultimately pays your claim. In a benefit plan the company itself often pays part or all of the benefits; however, an insurance company ultimately pays under a health insurance policy.

Yet another important difference is that the health benefit plan is always created by a document which spells out the procedures for appealing denials of claims. You have to follow these procedures before you can file a lawsuit. However, in some states an insurance policy cannot validly require that you follow certain appeal procedures before you file a lawsuit claiming the company wrongfully refused to pay benefits.

The Lesson: Become familiar with the details of your medical coverage. If you are changing jobs, evaluate the coverage which is offered jut as critically as you do the salary offered. Do not hesitate to re-file denied claims which you regard as legitimate. If your plan repeatedly denies a claim which you understand to be covered, seek the advice of an attorney.