Firm News Archives - Page 63 of 76

California’s Largest Health Insurers are Fined by California Department of Managed Health Care for Inadequate Claims Practices

In today’s Los Angeles Times Business Section, Duke Helfand writes about an 18-month investigation by the California Department of Managed Health Care into the payment practices of Aetna Inc., Anthem Blue Cross of California, Blue Shield of California, Cigna Corp., Health Net Inc., Kaiser Foundation Health Plan and United Healthcare/PacifiCare.

Here is his article:

California’s largest health plans are fined nearly $5 million

The seven companies failed to properly pay medical claims submitted by thousands of doctors and hospitals over the last three years, state insurance regulators say.

California’s seven largest health plans were fined nearly $5 million in total Monday for failing to properly pay medical claims submitted by thousands of doctors and hospitals over the last three years.

Insurance regulators said the companies also would pay “tens of millions of dollars” in restitution to medical providers whose claims were underpaid or incorrectly rejected.

The fines cap an 18-month investigation by the California Department of Managed Health Care into the payment practices of Aetna Inc., Anthem Blue Cross of California, Blue Shield of California, Cigna Corp., Health Net Inc., Kaiser Foundation Health Plan and UnitedHealthcare/PacifiCare.

“California’s hospitals and physicians must be paid fairly and on time,” Cindy Ehnes, the state department’s director, told a Los Angeles news conference. “The incorrect payment of provider claims by plans unfortunately is a persistent issue.”

Hospitals said Monday’s action would send a loud message across California’s multibillion-dollar insurance industry.

“In levying these fines, [the state] is addressing an ongoing, systemic issue that harms the ability of providers to care for their patients,” said Jan Emerson-Shea, a spokeswoman for the California Hospital Assn.

But doctors blasted the fines, saying they were a “slap on the wrist.” James Hinsdale, president of the California Medical Assn., called the penalties “chump change … for highly profitable health plans that systematically deny legitimate claims and routinely block, delay or limit physician reimbursements as one tactic to boost their bottom lines.”

The state agency reviewed samples of claims after providers who serve members of health maintenance organizations complained about problems. Auditors said none of the plans met a state legal requirement to pay 95% of their claims correctly. More than 21 million Californians have HMO coverage.

The reviews also found that most of the health plans lacked adequate procedures for settling disputes with providers. In some cases, health plan workers responsible for processing claims also oversaw appeals.

The trade group for health plans said the companies would work with state regulators to improve their performance. But the California Assn. of Health Plans also seized on a piece of positive news from regulators: The fined firms generally met state requirements for paying claims on time.

“We have long recognized that the administrative side of healthcare coverage can take valuable time away from patient care, which is why plans have been working to streamline processes both at the health plan level and in doctors’ offices,” said Patrick Johnston, the association’s president.

Only two health plans commented on the state’s action.

Kaiser spokesman Won Ha said the plan, which is based in Oakland, had taken steps to improve its processing of claims in a “timely and accurate manner,” although he did not provide details.

“We continue to build on our progress to meet the high standards of the Department of Managed Health Care and other regulators,” Ha said. “We are committed to achieving or exceeding all regulatory and customer requirements.”

Connecticut-based Aetna acknowledged problems with its payment procedures and said it took immediate action once regulators informed the company of its findings. Aetna pointed out that its penalty — $300,000 — was the lowest of those imposed on the seven health plans.

“Aetna takes our responsibilities to our members and providers very seriously, but we do sometimes make mistakes,” spokeswoman Anjanette Coplin said.

Anthem Blue Cross, a unit of Indianapolis-based WellPoint Inc., and Blue Shield of California received the largest fines — $900,000 each. UnitedHealthcare/PacifiCare was penalized $800,000. Health Net and Kaiser were fined $750,000 each, and Cigna was assessed $450,000.

State regulators said the size of the fines was determined by the volume of each plan’s business in California and the severity of its violations.

The health plans also must compensate providers for money they are owed, including penalties and interest, within six months. The plans must reopen their records dating back two to three years to their last financial review by the state.

Hospitals are likely to receive the largest share of the money because they submit bigger bills than doctors.

The restitution is the latest good news for some hospitals. Last month, regulators from the managed care department said that seven facilities would divvy up $1.62 million from Anthem Blue Cross to resolve unrelated allegations that the health plan improperly reimbursed the providers for patient costs that exceeded daily hospital rates. Anthem admitted no wrongdoing in the case.

By: Duke Helfand (November 30, 2010)
Copyright © 2010, Los Angeles Times

California Supreme Court Extends CGL Insurer’s Duty to Defend “Suits” To An Administrative Proceeding

In a closely watched case the California Supreme Court recently expanded the scope of a comprehensive general liability insurer’s (CGL) duty to defend “suits” to an adjudicative proceeding before the former United States Department of Interior Board of Contract Appeals (now the Civilian Board of Contract Appeals). Ameron International Corp. v. Insurance Company of Pennsylvania, et al., 2010 Cal. LEXIS 11679 (November 18, 2010). Many insurance industry analysts and counsel had expected the Court to continue to limit the duty to defend to court proceedings, as it had done in Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal.4th 857, 887, 77 Cal.Rptr.2d 107, 959 P.2d 265 (1998)(Foster-Gardner). In Foster-Gardner the Court held that the term “suit” in a CGL policy means “a court proceeding initiated by the filing of a complaint,” and declined to extend the duty to defend to an environmental agency’s pollution remediation order against a CGL policyholder. The Foster-Gardner rule has since been applied to bar a CGL insurer’s duty to defend other administrative proceedings.

In Ameron the U.S. Department of the Interior discovered defects in concrete siphons manufactured by Ameron for use in one of Arizona’s aqueducts. The Interior Department sought $40 million in damages against Ameron in a proceeding before the Department of Interior Board of Contract Appeals (IBCA). The proceeding took place before an administrative law judge over the course of 22 days. Ameron’s CGL insurer, Insurance Company of the State of Pennsylvania (ICSP), refused to pay for the cost of defending or indemnifying Ameron.

The question on appeal was whether a federal administrative proceeding before an administrative law judge would be considered a “suit” for purposes of the duty to defend. ICSP, relying on the Foster-Gardner rule, argued that since no complaint was filed, the proceeding before the IBCA was not a “suit.” Although initially upheld on appeal, Ameron sought review before the California Supreme Court.

Ameron drew a distinction between the environmental cleanup orders discussed in Foster-Gardner and the IBCA proceeding. In a unanimous decision the Court ruled that the IBCA proceeding was a “quasi-judicial” action. Since the proceeding took place in front of an administrative law judge, the Court reasoned, it was significantly different from the environmental cleanup orders discussed in Foster-Gardner. The proceedings before the IBCA involved witnesses under oath, cross examination, and the admission of evidence subject to generally accepted federal rules of admissibility. Since Congress enacted the IBCA as an alternative means to resolve contractual disputes, Ameron had a choice of forums for appealing the liability decision, which arguably included litigation in federal court. Accordingly, the Court found a duty to defend the IBCA proceeding.

Ameron effectively limits the applicability of the Foster-Gardner rule, and gives CGL policyholders a leg up on securing a defense in adjudicative-type administrative proceedings.

Commissioner Poizner Releases Results of His Second Preferred Provider Organization Quality of Care Report Card (And it is Not Good)

Last week, Commissioner Poizner released the results of his second Preferred Provider Organization (“PPO”) quality of care report card. The results are not good news for consumers, and show that California’s PPOs have much work to do in meeting customer needs. According to Poizner:

“California PPOs rank in the middle of the pack compared with the national average, and show some of the lowest overall scores that California has ever seen. HMOs began reporting on quality in 2001, and I got PPOs to join the effort beginning last year. I am grateful for their cooperation, but this report card shows they will have to do better. This should be their wake-up call,” said Commissioner Poizner. “These results show that insurers have a lot of room for improvement, particularly in the area of customer satisfaction. As I promised when I came into office, consumers now have much more information to make choices that are best for them, and to pressure insurers to do better. We all need to use this data to make that happen.”

None of the six PPOs on the report card received the highest four-star rating, but Aetna, CIGNA HealthCare of California and United Healthcare (California) each received three stars overall for delivering quality clinical care. Anthem Blue Cross, Blue Shield of California and Health Net each received two stars overall in that category. Rating criteria included asthma care, checking for cancer, diabetes care and treatment of children. The ratings are based on a set of standard measures developed by the National Committee on Quality Assurance.

In addition to grades based on clinical best practices, the report also includes grades, for the first time, on customer satisfaction. While all PPOs got the mid-range 2-3 stars for getting care easily, all insurers except Aetna received the lowest, single-star rating for plan service. This is clearly the area of greatest concern for California consumers and where there is the greatest room for improvement. The Plan Service category includes customer ratings on things like helpful customer service, getting information about your costs and paying claims.

The PPO report card is available at http://www.insurance.ca.gov. The companion report card on HMOs will be released separately early next year.

Court of Appeal Holds that Insurance Companies Are Not Required to Disclose the Lowest Premium They Would Accept But Reaffirms Insurers’ Duty to Disclose Material Facts as to Coverage

Understanding modern day insurance contracts is no easy task, even for experienced attorneys. The wording is dense and the language is often archaic and hard to comprehend. As a result, consumers often rely on their insurance company to help them navigate the multitude of different policy types, structures, pricing and provisions. Recently, the California Court of Appeal held that Blue Shield did not have a duty to disclose information on the lowest premium cost it would accept for a given coverage.

The case of Levine v. Blue Shield of California involved Michael Levine, who was an unmarried attorney with two dependants at the time he applied for health insurance. Blue Shield issued a health plan that covered Levine and one of his dependants and a separate policy was issued to cover his other dependent. After Levine married, he sought to add his wife on to his policy as an additional dependant. Blue Shield complied with this request and Levine continued to pay premiums.

At some point, Levine learned that the structure of his health insurance coverage was not ideal. Essentially, Levine claimed that he could have achieved the exact same coverage at a much lower rate if the polices were restructured as a family plan with his wife as a primary insured. Frustrated and understandably upset, Levine instituted a class action lawsuit against Blue Shield for fraudulent concealment, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and unfair competition. In response, Blue Shield filed a demurrer to all causes of action arguing, among other things, that it did not owe a duty to disclose information about the lowest premium charge it would accept to bind coverage. The existence of this duty was the key issue addressed on appeal.

Unfortunately for Mr. Levine, the California Court of Appeal for the Fourth Appellate District agreed with Blue Shield. It reasoned that “a person’s initial decision to obtain insurance and the insurer’s decision to offer coverage generally should be governed by traditional standards of freedom to contract.” Further, the court noted that “an insurer’s negotiation of an insurance contract is not the type of transaction that would give rise to heightened duties of disclosure concerning price.” In reaching this conclusion, the court acknowledged California Service Station etc. Assn. v. American Home Assurance Co., 62 Cal.App.4th 1166 (1998), which recognized that an insurer does have a duty to disclose information regarding the coverage created by an insurance policy. And yet, the court declined to extend California Service Station any further. Instead, the court reasoned that there is no duty of ordinary care to disclose pricing information during arm’s-length contract negotiations. The court acknowledged that the California Service Station court recognized that an insurer owes its insureds a duty concerning “representations about the coverage created by an insurance policy,” but went on to explain that this duty “should be distinguished from a duty to disclose information about the calculation of premiums.” (Id. at p. 1174, italics added.) Levine sought to distinguish California Service Station by highlighting the preexisting relationship with Blue Shield as an insured. This, Levine argued, imposed special obligations upon Blue Shield to adequately disclose information regarding the calculation of premiums. However, the court did not find this persuasive and instead noted that amount of money that an insurer is willing to accept in exchange for coverage is not information that implicates a special relationship.

Levine argued that Insurance Code Section 332 establishes a duty to disclose material facts. Blue Shield responded that this statute is not applicable to it as a health plan. However, the court assumed for purposes of argument that even if Section 332 applied, the Court found that it does not require the parties to an insurance contract to make available all information that may be material to the other party; rather, the Court said, it requires only that each party make available information that is “material to the contract [itself].” As a result, the court held that Blue Shield did not have a duty to disclose to Levine its best pricing.

This conclusion appears wrong. The distinction between that which is material to the other party vs. that which is material to the contract was a distinction here without a difference. Moreover, the court’s attempt to distinguish Pastoria v. Nationwide Insurance, 112 Cal. App. 4th 1490, 1492-1493 (2003) was not persuasive. Policyholders will want to emphasize that this decision is very limited and should apply only to a calculations of premiums issue. They will want to focus on the holding that confirms insurers have a duty to disclose material facts regarding coverage offered. Anticipate Levine filing a motion for a rehearing, and, failing that, the filing of a petition for review to the California Supreme Court.

Ninth Circuit Issues Strong Decision Emphasizing Insurer’s Obligations Regarding the Duty to Defend Insureds in Slogan Infringement Action

In an important decision favoring policyholders, the Ninth Circuit recently discussed the breadth of an insurer’s duty to defend its insured under California law, even where no potentially covered causes of action are alleged in the underlying complaint. The Ninth Circuit just issued this decision in Hudson Insurance v Colony Insurance, addressing coverage in trademark (and counterfeit sales) cases. Commercial general liability policies (“CGL”) generally have “advertising injury” endorsements that exclude coverage for claims “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” But these exclusions typically have this exemption: “this exclusion does not apply to infringement, in your advertisement, of copyright, trade dress or slogan.” Carriers always try to read this exemption from the exclusion narrowly.

However, in this case the Ninth Circuit disagreed and reasoned:

“Here, in contrast, the facts alleged in the NFL complaint state that All Authentic sold a “Steel Curtain Limited Edition Steelers Jersey” on its website, which “reads ‘Steel Curtain’ across the back and bears the numbers of four Pittsburgh Steelers players.” As the district court noted, “A fair reading of the [NFL complaint] reveals that ‘Steel Curtain’ is used to promote fan loyalty to the Steelers (an NFL Member Club) in general, and a subset of Steeler players in particular.” The district court concluded that this potentially stated a claim for slogan infringement because a “slogan” is a “brief attention-getting phrase used in advertising or promotion.”

In addition, because the complaint “potentially” stated a cause of action for infringement, the insurance carrier still had a duty to defend. The Ninth Circuit gave easily rejected Colony’s argument that the attorneys for NFL Properties consciously chose not to include a slogan infringement claim and therefore no duty to defend existed. The Ninth Circuit concluded that there was no basis under California law for such an argument.

Ultimately, this opinion offers an additional avenue for asserting coverage under a CGL policy and emphasizes an insurer’s broad duty to defend their insureds.

ERISA Claimant Retains Burden of Proof For Establishing Disability Under a De Novo Standard of Review

The question of who has the burden of proof can often decide the outcome of litigation. Given its importance, it is common to see litigants attempt to shift that burden to the opposing side in order to secure a tactical advantage. Recently, in Muniz v. Amec Construction Management Inc., __ F.3d __, 2010 WL 4227877 (Decided October 27, 2010), the Ninth Circuit Court of Appeals addressed the question of whether the burden of proof can be shifted in an ERISA disability case. In Muniz, a claimant diagnosed with HIV applied for benefits through his employer’s long-term disability plan (the “Plan”). Benefits were approved and paid for the first 24 months. However, as is common with many benefit plans, after 24 months the definition of disability changed. In order to qualify under the Plan, the claimant must be unable to perform all the essential duties of any occupation. As a result, the Plan terminated his benefits.

At trial, the parties agreed that the standard of review was de novo since the Plan did not grant discretion to the claims administrator. Accordingly, the district court placed the initial burden upon Muniz as the claimant to show that he was entitled to benefits under the terms of the plan. Muniz submitted evidence to the court from his primary physician, Dr. Towner, who concluded that Muniz was totally disabled from performing any occupation. This, argued Muniz, was sufficient to shift the burden of proof to the Plan to demonstrate that its claim decision was justified. However, the Ninth Circuit disagreed. Drawing from decisions in the Eleventh and Eighth Circuits, the Appellate Court concluded that the claimant retained the burden of proving that he was entitled to benefit even in light of the proffered evidence.

As concluded by other circuit courts which have addressed the question, when the court reviews a plan administrator’s decision under the de novo standard of review, the burden of proof is placed on the claimant. See, e.g., Horton v. Reliance Standard Life Ins. Co., 141 F.3d 1038, 1040 (11th SCir. 1998) (“A plaintiff suing under [29 U.S.C. § 1132(a) (1)(B)] bears the burden of proving his entitlement to contractual benefits.”); Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 658 (8th Cir. 1992) (“[W]e agree that it was [the claimant’s] burden to show that he was entitled to the ‘benefits . . . under the terms of his plan.’ ”) (omission in original) (quoting 29 U.S.C. § 1332(a)(1)(B)).”

In addition, the Ninth Circuit recognized that Muniz could cite to no precedent where a court conducting a de novo review shifted the burden of proof to the claim administrator. The case law cited by Muniz in support of his argument all dealt with cases where the standard of review was abuse of discretion. In those situations, the court focused on whether the Plan abused its discretion in denying benefits. However, under a de novo review, that analysis is irrelevant to the issue of whether the claimant was entitled to benefits. Similarly, case law that supports burden shifting under an abuse of discretion framework would be irrelevant where the standard of review is de novo. Since Muniz could not provide any precedent in support, he retained the burden of proof. The court did note that if the standard of review was abuse of discretion, the burden would shift to the insurer to prove that its actions were not tainted by the structural conflict of interest that results when it review and decides entitlement to benefits and also is the funding source.

Further, the court addressed Muniz’s argument that once a claimant proves he or she is totally disabled, the burden shifts to the insurer to show an change in condition:

Muniz argues that the district court committed clear error in its analysis because his medical records did not show a change in his condition over the years he was covered by the CGLIC plan. As noted above, the fact that the claimant was initially found disabled under the terms of the plan may be considered evidence of the claimant’s disability, but as the Eighth Circuit stated in McOsker v. Paul Revere Life Insurance Co., “[w]e are not suggesting that paying benefits operates forever as an estoppel so that an insurer can never change its mind.” 279 F.3d 586, 589 (8th Cir.2002). Muniz did not provide sufficient evidence to demonstrate that the district court committed clear error in its analysis of the record

After all of the evidence for and against Muniz’s position was balanced against each other, the end result as determined by the district court was that Muniz failed to prove that he was entitled to benefits. Ultimately, it is not clear whether Muniz would have won his case even if he did not have the burden of proof. However, this holding creates an additional obstacle for all future claimants and confirms that in the Ninth Circuit, claimants retains the burden of proof for establishing entitlement to benefits under a de novo standard of review.

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