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Will Healthcare Reform Affect the Rate of Claim Denials?

On Monday October 19, 2009, Lisa Girion of the Los Angeles Times reported on the healthcare reform bills being debated in Congress and their potential impact on claim denials by insurers. Girion states that, “Despite growing frustration with the way health insurers deny medical treatments, major healthcare bills pending in Congress would give patients little new power to challenge those sometimes life-and-death decisions.” She further explains that “a patient’s ability to fight insurers’ coverage decisions could be more important than ever because Congress, in promoting cost containment and price competition, may actually add to the pressure on insurers to deny requests for treatment.”

The article discusses the wrongful death lawsuit filed by Hilda and Grigor Sarkisyan, whose daughter Nataline died in 2007 after Cigna decided not to cover a liver transplant. The lawsuit against Cigna over the transplant denial was dismissed this year by a federal judge, who ruled that the Employee Retirement Income Security Act (“ERISA”) preempts suits with state law claims for damages over such health benefit decisions. The Sarkisyans traveled to Washington this year to try to persuade members of Congress to pass legislation which would remove ERISA’s bar of certain types of damages that are now available under state law.

Rep. Adam B. Schiff (D-Burbank), who met with the Sarkisyans in Washington, said that there are not enough votes in Congress to pass such legislation. Insurers and employers strongly support ERISA’s limitations on damages. They say any increase in litigation would drive up costs and could force some employers to drop health benefits.

The healthcare reform bill pending in the House would extend the right to sue under state law for damages to anyone who buys coverage through one of the health insurance exchanges it envisions. That could include small businesses. However, the pending legislation does not remove ERISA’s barrier to such suits by employees who procure coverage in the employment-based insurance market.

As reported by the Associated Press, a House committee has voted to strip the health insurance industry of its exemption from federal antitrust laws as senators announced plans to take the same step. The House Judiciary Committee voted 20 to 9 to repeal a law that exempted the health insurance industry from federal controls over certain antitrust violations, including price-fixing. It is our belief that this repeal will not likely survive any national healthcare bill.

The Obama Administration is proposing the formation of a new office within the Treasury Department that would oversee the insurance industry. This announcement comes in the wake of statements from Treasury Secretary Timothy Geithner in February that some form of federal insurance oversight will likely be a part of a forthcoming financial regulatory overhaul.

Congressional bill H.R. 2609, also known as the Insurance Information Act of 2009, will establish within the Department of the Treasury the Office of Insurance Information. This new office will have the authority to monitor all aspects of the insurance industry, establish Federal policy on international insurance matters, serve as a liaison between the Federal government and the several States regarding insurance matters, and serve as an advisory to the Treasury regarding the export promotion of United States insurance products and services.

Congress is also debating legislation by Congressmen Ed Royce (R-Calif.) and Melissa Bean (D-Ill.) which would create an optional federal charter through an Office of National Insurance. A federal charter would create a framework for a national system of state-based regulation and create uniform standards in such areas as market conduct, licensing, the filing of new products and reinsurance. California Insurance Commissioner, Steve Poizner, has come out against the Royce-Bean legislation and is lending his support for the administration’s bill.

The administration’s plan avoids the trap of creating a federal insurance regulator, which I have consistently opposed. It appropriately acknowledges the primary role the states play in regulating the insurance business to benefit consumers. State oversight of insurance companies, coordinated among all state regulators, is the reason that, among all the financial players in this country, it is the insurers who are and remain the most stable and the least in need of federal assistance.

Although it is unclear which bill has more political support, the House Committee on Financial Services will review both the Insurance Information Act and the proposed federal charter in the coming months.

Will Healthcare Reform Affect the Rate of Claim Denials?

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