CBS' 60 Minutes Segment “Denied” Highlights Insurers’ Wrongful Denial of Mental Health Claims

Posted in: Health Insurance, Insurance Commissioner December 16, 2014

On Sunday December 14, 2014, CBS’ 60 Minutes program contained a segment entitled “Denied” which highlights that insurers routinely deny, based on lack of medical necessity, treatment for patients with mental illnesses, especially those for long-term in-patient care at mental health facilities.  This segment was an indictment of health insurance companies’ actions (especially Anthem Blue Cross) to deny legitimate claims for such care, sometimes with tragic results.  According to 60 Minutes, “we found that the vast majority of claims are routine but the insurance industry aggressively reviews the cost of chronic cases.  Long-term care is often denied by insurance company doctors who never see the patient.  As a result, some seriously ill patients are discharged from hospitals over the objections of psychiatrists who warn that someone may die.”

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Recent Federal Cases Applying the State and Federal Mental Health Parity Acts: What Do They All Mean?

Posted in: Case Updates, Class Actions, Health Insurance, Legislation November 18, 2014

The Federal Mental Health Parity and Addiction Equity Act (“MH Parity Act”) requires, at a minimum, that the financial requirements and treatment limitations for mental health benefits set by group health plans and health insurance carriers be no more restrictive than those provided for non-mental health medical benefits.  The MH Parity Act was originally signed into law by President Bill Clinton in 1996 and amended the Employee Retirement Income Security Act (ERISA) and Public Health Service Act and Internal Revenue Code in 2008.  Now, the MH Parity Act is at issue in an increasing number of cases and has been addressed several times by the federal courts in the Ninth Circuit Court of Appeals.

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Third-Party ERISA Administrator Abused Discretion by Denying Medical Coverage: A Tale of What Not to Do

Posted in: Abuse of Discretion, Administrative Record, Conflict of Interest, ERISA, Fiduciary Duty, Health Insurance, Standard of Review September 16, 2014

Sometimes an administrator so unashamedly abuses its discretion in handling an insurance claim that its actions constitute a textbook example of “what not to do” for other administrators and the ensuing decision provides a clear illustration of how courts apply an abuse of discretion standard of review under the Employee Retirement Income Security Act (“ERISA”).  Indeed, a recent case clarified that plan administrators and third-party claims administrators alike are held to comparable standards when issuing claims decisions.  In Pacific Shores Hospital v. United Behavioral Health, 2014 WL 4086784; 2014 U.S. App. LEXIS 16062 (9th Cir. Cal. Aug. 20, 2014) (“Pacific Shores”) the Ninth Circuit Court of Appeal reversed the district court, finding the third-party administrator acted improperly by denying the insured’s claim based on clear factual errors.  Pacific Shores provides a clear example of how courts review a decision for an abuse of discretion, and shows that even third-party administrators, who purportedly have no conflict of interest with the insured, are still held to have the same duties in handling claims and must follow appropriate procedures.

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Ninth Circuit Emphasizes Need for an Insurer to Have a Meaningful Dialogue With the Claimant When Denying Benefits

Posted in: Abuse of Discretion, ERISA, Health Insurance April 15, 2013

A recent Ninth Circuit Court of Appeals decision reaffirmed the need for plan administrators to state the reasoning behind their denial of coverage.  In Lukas v. United Behavioral Health,  __ F.3d __, 2013 U.S. App. LEXIS 1230 (9th Cir. Jan. 17, 2013) the Ninth Circuit was faced with evaluating whether the district court properly weighed the factors necessary to determine if there was an abuse of discretion by the plan administrator in denying the benefits to the claimant.  On de novo review, the Ninth Circuit found that the lower court failed to properly weigh these factors and reversed the decision, remanding the case back to the district court for a benefit award and further necessary proceedings related to that award.

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Court Refuses to Enforce Health Net Arbitration Provision Because It Was Insufficiently Prominent

Posted in: Health Insurance, Policy Interpretation March 08, 2012

In the unpublished case of Probst v. Superior Court (Health Net of California, Inc., et al), No. A133742 (March 6, 2012), Division Five of the First Appellate District refused to enforce an arbitration provision in an enrollment form.  Brian Probst (who filed a putative class action alleging that Health Net of California, Inc. and Health Net, Inc (“Health Net”) failed to adequately protect private personal and medical information from unauthorized disclosure to third-parties) sought writ relief from an order compelling him to arbitrate his claims against Health Net.  The Court granted the requested relief because the health plan enrollment form signed by Probst failed to comply with the disclosure requirements of the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act, Health & Saf. Code, § 1363.1, subdivision (b)), rendering the arbitration agreement unenforceable.

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Court Approval is Not Needed to Assert a Punitive Damages Claim Against a Health Care Service Plan

Posted in: Case Updates, Health Insurance, Punitive Damages February 27, 2012

In a victory for health insurance policy holders over health insurers/health care service plans, in Kaiser Foundation Health Plan, Inc, v. Superior Court (Rahm, et al, Real Parties), 2012 Cal. App. LEXIS 138 (Cal. App. 2d Dist. Feb. 15, 2012), the Court of Appeals ruled that a plaintiff does not need to obtain approval from the trial court before asserting a claim for punitive damages against a health care service plan.  Specifically, the Court ruled that California Civil Procedure section 425.13 applies only to health care providers (such as doctors), but does not apply to health care service plans such as Kaiser Foundation Health Plan or Anthem/Blue Cross.

The Rahm family filed a lawsuit against Kaiser Foundation Health Plan and two Kaiser health care providers.  The Rahms claimed that Kaiser improperly delayed before ordering an MRI for their daughter Anna, resulting in the eventual loss of Anna’s right leg and portions of her pelvis and spine.  Specifically, despite numerous requests by Anna’s parents that Kaiser authorize an MRI for Anna, Kaiser refused.  As a result, there was a considerable delay in discovering that Anna was suffering from a “high grade” osteosarcoma, one of the fastest growing types of osteosarcoma.  The delay significantly contributed to Anna’s poor prognosis and the need for the amputations.

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McKennon Law Group Founding Partner Robert McKennon Featured in January 2012 Issue of Forbes Magazine

Posted in: Disability Insurance, Disability Insurance News, Health Insurance, Life Insurance, News, Super Lawyer February 09, 2012

Los Angeles – Noted Southern California insurance and business litigator Robert J. McKennon was featured in the “Southern California Legal Profiles” section of the January 2012 issue of Forbes Magazine in an article highlighting his experience as a top Southern California insurance and business litigation attorney.

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Cause of Action Asserted Against Blue Cross for Violation of Montana's Unfair Trade Practices Act is Not Preempted by ERISA

Posted in: ERISA, Health Insurance, Preemption, Unfair Business Practices/Unfair Competition November 09, 2011

In a recent decision, the Ninth Circuit Court of Appeals ruled that ERISA does not preempt causes of action based on unfair insurance practice claims brought under Montana’s Unfair Trade Practices Act.  However, the Court did find that Montana’s so-called “little HIPAA” was preempted by federal HIPAA, which is part of ERISA. 

In Fossen v. Blue Cross and Blue Shield, __ F.3d __ (9th Cir. October 18, 2011), the Court considered an appeal from a District Court ruling that entered summary judgment in favor of Blue Cross on two causes of action.  Plaintiffs – which consisted of three brothers, their corporations and a partnership of the three corporations – sued Blue Cross after the health insurer increased their premiums by over 40%.  The lawsuit, filed in state court, alleged two causes of action:  violation of Montana Code Annotated § 33-22-526(a) (also known as Montana’s “little HIPAA” statute) and violation of Montana Code Annotated § 33-18-101 (also known as Montana’s Unfair Trade Practices Act).  Plaintiffs alleged that premium increase violated little HIPAA’s prohibition against imposing a “premium or contribution that is greater than the premium or contribution for a similarly situated individual” on account of “any health status-related factor of the individual” and the Unfair Trade Practices Act’s prohibition against “unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged.”  The action, filed in state court, was removed to the District Court, which eventually granted Blue Cross’ motion for summary judgment as to all causes of action.

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Ninth Circuit Rules that California's Mental Parity Act Requires Health Insurers to Pay for Certain "Medically Necessary" Treatment for Mental Illnesses

Posted in: Abuse of Discretion, Case Updates, ERISA, Health Insurance September 07, 2011

In an important decision, the Ninth Circuit Court of Appeals ruled that California’s Mental Health Parity Act (“Parity Act” ) requires that health insurers cover certain medically necessary treatment for certain mental illnesses, even if the insurance policy explicitly excludes such coverage.  In Harlick v. Blue Shield of Calif., __ F.3d __ (9th Cir.  August 26, 2011), the Ninth Circuit reversed the district court’s granting of Blue Shield of California’s motion of summary judgment, and held that under the Parity Act, Blue Shield was required to provide medically necessary health insurance benefits for mental illnesses on par with the treatment for physical illness covered under Harlick’s ERISA-governed health insurance plan.

The California legislature enacted the Parity Act in 1999 after finding that “[m]ost private health insurance policies provide coverage for mental illness at levels far below coverage for other physical illnesses.”  1999 Cal. Legis. Serv. ch. 534 (A.B.88), § 1 (West).  The legislature further found that coverage limitations resulted in inadequate treatment of mental illnesses, causing “relapse and untold suffering” for people with treatable mental illnesses, as well as increases in homelessness, increases in crime and significant demands on the state budget.  Id.  Accordingly, plans that come within the scope of the Act – including the ERISA-governed plan established by Harlick’s employer – must cover all “medically necessary” treatment for nine listed mental illnesses (including anorexia nervosa), but can apply the same financial limits – such as yearly deductibles and lifetime benefits – that are applied to coverage for physical illnesses.

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California Courts Deal Another Blow To Plaintiffs' Efforts To Bring Class Actions Based on Insurer and Agents Misrepresentations

Posted in: Class Actions, Health Insurance, Life Insurance July 28, 2011

The California Court of Appeals for the Second District has upheld a trial court finding that may effectively limit and discourage attorneys from filing class actions based on misrepresentations in the sale of insurance policies through agents.  In Fairbanks et al. v. Farmers New World Life Ins. Co. et al., __ Cal. App. 3d __ (2011), the court of appeal affirmed the trial court’s denial of class certification on the basis that common issues did not prevail, and that the issue was incapable of common proof.  The case involved Farmers’ marketing and sale of universal life insurance policies.  It was alleged that Farmers created a common marketing strategy with respect to the marketing and sale of such policies, and that Farmers instructed its agents to implement such strategy by using Farmers’ marketing materials in the agents’ sales pitch to prospective customers.  After a lengthy discussion of the types of life insurance policies at issue, the appellate court focused on the actual narrow bases on which Plaintiffs sought relief, which was based on a single unified theory relating to fraudulent misrepresentations and concealments made by agents during the marketing of the policies to the individual prospective customers.  The court determined that the bases for class certification “were not four separate bases for class relief, but part of one overarching allegedly fraudulent scheme.”  The court noted, “Plaintiffs argued that proof of this fraudulent scheme could be established by common, rather than individual, proof, based on a combination of common policy language, common language in annual policyholder statements, and a common marketing scheme.”  Plaintiffs sought to certify a class based on very broad conduct involving myriad misrepresentations made in written marketing materials as well as alleged misrepresentations by Farmers’ agents.  Farmers argued that plaintiffs’ broad theory could not sustain a certifiable class in that it would require independent proof as to each policyholder.  Specifically, it would require proof as to the individual representations made to each policyholder, and the materiality of such representations as to each policyholder.

 

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