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The Wednesday August 11, 2010 edition of the Los Angeles Daily Journal featured my article, entitled “The Waiver Doctrine, Alive And Well in ERISA Cases,” in the Perspective column. It explains a very recent case from the Ninth Cirhttp://www.dailyjournal.comcuit Court of Appeals in Mitchell v. CB Richard Ellis Long Term Disability Plan, 2010 DJDAR 11532 (9th Cir. July 26). The article is posted below with permission of Daily Journal Corp. (2010).
New Regulations Aim at Policy Rescissions
Insurance Commissioner Steve Poizner has announced new regulations that go into effect aimed at combating improper rescissions by insurance companies. These will go into effect on August 18, 2010. Poizner said in his press release of August 6, 2010: “Keeping your health insurance can literally be a matter of life and death, and I have zero tolerance for insurers who use pretexts to illegally rescind policies. These tough regulations embody my commitment to enforce the law and protect consumers who buy medically underwritten insurance coverage.”
Under current law, insurance policies can only be rescinded by a health insurer under very specific, limited circumstances.
The new regulations, according to Insurance Commissioner press release, will do the following:
- Prohibit insurers from rescinding policies when they are not in compliance with specified underwriting practices regulations.
- Restrict health condition and history questions on applications to those that are necessary for medical underwriting.
- Require all questions on health insurance applications be clear, specific and understandable.
- Require use of new and improved health history questionnaires approved by the Department before an insurer can rescind.
- Allow consumers to indicate that they are unsure of or cannot remember the answer to a particular health history question.
- Require that agents attest if they help applicants with a health insurance application.
- Prohibit confusing phrasing of application questions like double-negatives and certain compound questions.
- Require that consumers be given a copy of their application to check for discrepancies.
- Require that insurers not rely solely on self-reported health history when possible.
- Prohibit insurers from conducting certain rescission-focused investigations long after becoming aware of a possible misrepresentation or omission by the applicant. Also prohibits insurers from seeking information outside the scope of such an investigation.
- Require that insurers give consumers the opportunity to respond during rescission investigations, and that insurers must listen to consumer-provided information.
- Require that insurers identify and resolve any reasonable questions arising from the application. Insurers must document their effort to resolve these issues and make those documents available to the Commissioner
The new regulations, Article 11 Standards for Health History Questionnaires in Health Insurance Applications, Pre-Issuance Medical Underwriting and Rescission of Health Insurance Section 2274.72(b), requires insurers to apply a “reasonable layperson standard” which “recognizes and takes into account the level of understanding and appreciation of words and terms in a health history questionnaire by the average individual who lacks professional training and experience.” Health questionnaires will need to take into account the level of understanding of an individual who has no medical background or training. In addition, the questions asked on an application must be material to the underwriting process, and the consumer will be allowed to indicate they cannot remember, or are unsure of an answer to a particular health question.
With these new regulations, consumers should have an easier time obtaining and keeping their health insurance.
New Appeal Regulations For Health Plans Require Final Claims Decision To Be Made By External Reviewer
The Department of Health and Human Services issued new appeal regulations under the recently enacted Patient Protection and Affordable Care Act (“Affordable Care Act”). These regulations give claimants the right to appeal decisions made by their health plan to an outside, independent decision maker, regardless of what state they live in or what type of health coverage they have, i.e., both group and individual coverage. If a particular health plan or insurance is governed by a state law, the state regulations will apply as long as the protections offered to consumers is at least as strong as the National Association of Insurance Commissioners (“NAIC”) Model Act. At a minimum, the state external review process must provide:
- External Review of plan decisions to deny coverage for case based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.
- Clear information for consumers about their right to both internet and external appeals – both in the standard plan materials, and at the time the company denies a claim.
- Expedited access to external review in some cases – including emergency situation, or cases where their health plan did not follow the rules in the internal appeal.
- Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.
- Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflict of interest.
- Emergency process for urgent claims, and a process for experimental or investigational treatment.
- Final decision must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.[1]
For plans governed by ERISA or not otherwise covered by a state law external appeal process, a federal external review program will be required. Since these are still interim rules, a framework for the federal external review process has not been established. However, the federal review process will likely be modeled along the NAIC Model Act.
These regulations are clearly a win for consumers who have long complained that the internal appeals process is biased towards insurance companies. Unfortunately, it will take some time for consumers to reap the benefits of these changes. Health plans that were in effect on March 23, 2010 and have not been significantly modified since then are considered “grandfathered” and not subject to these regulations. However, over time, expect to see an external review process become a standard component of the claim review process.
[1] Source: “Fact Sheet: The Affordable Care Act: Protecting Consumers and Putting Patients Back in Charge of Their Care,” dated July 22, 2010.
Cell Phone Users Catch a Break
The Thursday August 5, 2010 edition of the Los Angeles Daily Journal featured my article entitled “Cell Phone Users Catch a Break,” in the Perspective column. It discusses the U.S. Copyright Office’s recent announcement regarding its decision to exempt wireless telephone handsets from the anti-circumvention provision under the Digital Millennium Copyright Act. The article is posted below with permission of Daily Journal Corp. (2010).
Federal Insurance Office Is Now A Reality
On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173). The Act directs the U.S. Treasury Department to create a Federal Insurance Office (“FIO”) The FIO has 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. The scope of the FIO’s authority extends to all lines of insurance, except health insurance. Also excluded from the FIO’s authority is long-term care insurance, except long-term care insurance that is included with life or annuity insurance components.
This is a departure from an earlier bipartisan proposal by Congressmen Ed Royce (R-Calif.) and Melissa Bean (D-Ill.) that would have enacted a federal insurance charter designed to mandate a national framework of state based regulation or market conduct, licensing, the filing of new products and reinsurance.
The FIO is seen as a “win” by many State Insurance Commissioners who had been advocating for closer collaboration with the federal government in the regulation of insurance companies.
District Court Provides Additional Guidance on Scope of Discovery Under Glenn
In the last several years, the scope of discovery in ERISA cases has been a point of contention between plaintiff and defense counsel. Plaintiffs typically want free range to conduct discovery on any potentially relevant information addressing the conflict of interest issue while defense counsel would like discovery requests to be as narrow as possible. Generally, discovery in ERISA cases is limited to what was before the plan administrator at the time the claim decision was made. In other words, the administrative record. However, in 2008, the Supreme Court in Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) held that a conflict of interest “should be weighted as a factor in determining whether there is an abuse of discretion.” Id. As a result, most Circuit courts have held that Glenn allows for discovery outside the administrative record, when it pertains to whether the plan/claims administrator acted in a manner consistent with the conflict of interest. Recently, in Zewdu v. Citigroup Long Term Disability Plan, 264 F.R.D. 622 (N.D. Cal 2010), Magistrate Judge Maria Elena James addressed the scope of discovery under Glenn and allowed the Plaintiff to subpoena the following information:
Number of claims reviewed, granted and/or denied by the medical review company.
- Employment agreements between Insurer and the medical review company.
- Invoices from the medical review company relating to the plaintiff’s claim.
- Information regarding the compensation between the insurer and the physician reviewer.
- Documents pertaining to the training of medical staff and handling of disability claims.
- Performance evaluations of medical professionals involved in the handling of the claim.
Similarly, Judge James denied requests for the following information:
- Insurance company’s underwriting file.
- Information from physician reviewer on time spent reviewing claims.
- Financial information regarding amount of benefits paid and total premiums collected.
- Medical Reports drafted by Physician Consultant on claims other than the plaintiffs.
- Documents relevant to Insurers decision to hire the physician reviewer.
These rulings from the district courts are far from consistent on the subject. Nevertheless, a consensus is beginning to develop among the district courts that mirror the rulings in this case. Of course, until the Ninth Circuit provides additional guidance, the district courts will continue decide for themselves what constitutes the proper scope of discovery. This case, and the opinions cited within, represent an excellent starting point for understanding the scope of discovery in ERISA cases.
