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Jul 09, 1999
CONTACT: Jamie Court - 310-392-0522 x327
Internal Memo Shows Insurer Tries To Reclassify Cases Under ERISA; Seeking "Gray Areas" Where "ERISA...May Influence Our Course of Action"
U.S. Senate Can End Divide Seperating Remedies of Private and Public EmployeesIn a memo marked "privileged" by one of the nation's largest insurers, Provident, but made public by a judge, the insurer announces a task force "to initiate active measures to get new and existing polices covered by ERISA [the Employee Retirement Income Security Act, governing private sector employer-paid benefits, where no damages are available for wrongful denial of a claim]….in order to take advantage of the protection offered by ERISA."
"While our objective is to pay all valid claims and deny invalid claims, there are gray areas, and ERISA applicability may influence our course of action," Provident's memo states, suggesting that costly claims may not be paid if they can be classified under ERISA.
The insurer also touts the advantages of trying to reclassify policies under ERISA for litigation purposes, "The advantages of ERISA coverage in litigious situations are enormous: state law is preempted by federal law, there are no jury trials, there are no compensatory or punitive damages, relief is usually limited to the amount of the benefit in question, and claims administrators may receive a deferential standard of review."
Released to every U.S. Senator today by Consumers For Quality Care, the memo contemplates providing a questionnaire "for all claims" that asks such questions as whether an employer sponsors an individual plan, which might reclassify it as ERISA-covered. Beginning on Monday, the Senate will debate whether to allow damages in ERISA cases.
"Insurers will continue to treat workers with private industry coverage like second-class citizens until we even the playing field between public and private sector workers, one of the greatest inequitable divides in our health care system," said Jamie Court, director of Consumers For Quality, the watchdog group that released the memo. "Without the threat of damages, insurers and HMOs will continue to find 'gray areas' by which they can deny medically necessary claims. This memo shows that patients with private industry coverage are being denied both remedies and just claims payments based simply on their employment status. Only when there is no more shield of immunity will there be no more abuses."
"The economic impact on Provident from having policies covered by ERISA could be significant," wrote one of Provident's in-house supervisors Jeff McCall in the memo, which was uncovered in Schneider v. Provident U.S. District Court for the Northern District of California C-97-4646SC.
In that case, Grahm Schneider claimed his individual disability insurance benefits were terminated unreasonably despite the fact that he was in excruciating pain from herniated disks where surgery was inadvisable. Provident sought to remove the case based on ERISA grounds, unsuccessfully. Schneider, however, did not win his bad faith lawsuit, but a motion for new trial is currently pending.
Independent Review System An After-thought
The McCall memo goes on to state that "to take advantage of the protection offered by ERISA [we must] establish a formal appeal process for ERISA situations. When we deny a claim, we must include language in our letter that informs the claimant of the right to appeal our decision within 60 days." McCall goes on to recommend himself and other people to sit on the appeal "panel."
"Those who would replace judicial rights with a review panel might want to consider reading Provident's memo," said Court. "It's clear these companies treat appeals in the same manner as they do denials of the original claim."
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