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vebaguru

Is Health Insurance Company a Fiduciary?

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A participant in an employer-sponsored health plan obtained medical treatments that were not covered under the employer's health insurance coverage (but is covered under other health plans offered by the insurer).

The participant was directly billed a total of $25,000 plus for the medical expenses by the medical providers. The participant requested the medical providers to submit the claims to the insurance company, which they did. The famous-color insurance company refused to adjudicate the claims, even though it has contracts with the providers that would have reduced the overall billings to approximately $11,000.

The insurance company orally represents that its policy is not to adjudicate claims that it "knows" are not covered. The participant believes that the insurer has a duty to adjudicate claims under the health plan, and that failure to do so is a violation of ERISA fiduciary duties. (The employer agrees with the participant.)

Does the participant have a right to be a third-party beneficiary of the insurer's contracts with the medical providers? Should I advise the client to sue the insurance company. Is he likely to prevail?

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Guest jcarlos

Re: Questions:

1.Does the participant have a right to be a third-party beneficiary of the insurer's contracts with the medical providers?

Yes. The contract exists for the benefit of the participants. The insurance company is receiving premiums, probably at least partially paid for by the participant himself/herself.

2.Should I advise the client to sue the insurance company.

I would first try the case in the media.

3.Is he likely to prevail? See 2., above.

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jcarlos:

Where in ERISA do you find that the insurance company has any fiduciary responsibility?

Why would the insurer be legally obligated to adjudicate an uncovered expense?

Don Levit

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I want to add a bit of information. Fiduciary status is determined on a case-by-case basis. The insurance company may be a fiduciary, depending upon the degree to which it exercises discretionary control over the assets or administration of the plan. An insurance company does not become a fiduciary simply by performing administrative functions and claims processing within the rules established by the employer. This particular case has nothing to do with reviewing benefit denials or eligibility decisions. So, it looks like no fiduciary status would be applicable here.

Don Levit

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While fiduciary liability is determined on the facts and circumstances of each case, I don't see how they can avoid being a fiduciary. This is a small group plan. The insurance company designed the benefits included and excluded and profits from the denial of claims. The employer has nothing to do with the plan design: the plan is offered on a take it or leave it basis.

I'm not sure that trying the case in the media would do much good. ERISA issues are too complicated to generate much interest of sympathy.

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VEBAGURU:

I appreciate what you said about the conflict of interest regarding claims and profits. But, that conflict does not make the insurance company a fiduciary. A fiduciary would be accountable to all the participants. One could make the argument, even if the insurance company was a fiduciary, that to deny inappropriate claims helps keep the premiums down for all the participants.

Who has the final authority regarding benefit decisions? Who makes the final disposition of denied claims? Having these answers will help determine the fiduciary status.

Simply issuing insurance policies has nothing to do with an insurer's fiduciary duties, even if the employer had no say in the benefits.

Don Levit

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Guest georgia

guess I'm reading the initial post differently. how are you defining "refused to adjudicate the claims"? the post sounds to me that the insurer is refusing to process the claim and issue a written determination that the services are not covered. if that's the case, the refusal itself should be basis for litigation.

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Guest jcarlos

Georgia has raised a good point. This sounds like a sweet deal for the insurance co. It takes the premiums and then somehow just "knows" that a claim will not be covered and uses that as justification not to adjudicate claims.

Years ago, early in my career, I worked for an insurance company which had a wink wink nod nod policy of initially denying almost every claim that was not perfectly straightforward when it was first submitted. This lead to a healthy bottom line. Many never did follow up on claims. It was nasty. I left.

The thing that people often do not recognize is that insurance companies are not their friends. Insurance companies are in the business to make money.

Any chance of recovery by going in the direction of the State Insurance Code? Any violations there?

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Guest b2kates

I do not understand the basis for the participant's claim. It appears that the plan sponsor chose Plan A and not Plan B.

Why shoud insurance carrier have to provide Plan B type coverage, when Plan sponsor is only paying for Plan A?

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I do not think that the participant is trying to get Plan B coverage while only paying for Plan A. In fact this participant does not seem to even be trying to get any coverage or payment of the claim. All they are trying to do is to get the insurance company to make available their re-pricing procedures.

All the insurance company has to do is to process the claim with no benefits paid. The resulting claims statement will show what price they would have paid to that provider for the services rendered minus a $0 Claim Paid amount leaving a balance to be payable by the participant. This would allow the participant to try and get the service provider to accept a lower amount rather than the overpriced "retail" bill that was first issued.

It costs the insurance company diddly to process the claim and there would be no liability caused by the processing, that was not potentially already there.

It is so amusing to see this situation when many of these insurance companies tout the vailability of this same re-pricing service as a free service for use on out-of-network claims. Some even offer the service to non client employer groups.

Do a Google search on "PPO repricing" and see what is offered by many including large PPO networks like MultiPlan.

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G Burns is exactly correct.

This raises a follow-up question: can the participant use a TPA's repricing (UCR, not contractual) for a hospital claim?

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Although I do not see many TPAs with their own re-pricing ( I usually see them using their Network's schedule), there is no reason why it could not be used if the hospital is contracted with the TPA and has a reimbursement schedule.

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