Effective January 1, 2007, New York passed a law entitled: “Rules relating to the processing of health claims and overpayments to physicians”.   At first blush, the new law appears to give a free 2-year look back period to the insurance companies in which they can freely request what they believe to be “overpayments”, without a need for establishing fraud.  On closer examination, however, the law appears to only set standards for when the insurance company can begin an audit process and it contains some of the standards and situations in which the insurance companies can “initiate overpayment recovery efforts.”

The law states that the insurance company or health plan cannot initiate an overpayment recovery effort more than 2 years after the doctor received the original payment from the insurer or health plan. The exception to the 2 year rule is when the insurer or health plan has a reasonable belief of fraud, intentional misconduct, or abusive billing or when the request for an audit is made by a self insured plan or there is a state or federal government program requiring the audit. The law defines “abusive billing” as billing practices that result in the submission of claims that are not consistent with sound fiscal, business, or medical practices and are engaged in at such frequency and for such a period of time as to reflect a consistent course of conduct.

Rather than answering questions and setting real standards, this new law actually raises a number of issues. The law only determines when an insurer or health plan can “initiate” an overpayment “recovery effort.” It does not state that after an audit is initiated and an effort has been made, that a refund must be paid by the doctor just because the insurance company has requested the refund. In short, while the insurance companies appear to be using the existence of the new law to accelerate their conduct of audits,  the law has not given the insurers or the health plans additional legal rights.  The law has not overruled the court decisions requiring proof of actual fraud in order for a refund to be due.

The law only addresses, in this writer’s view, the timing for the initiation of an audit or overpayment recovery request, not whether the doctor will indeed owe a repayment under any particular circumstance. For those doctors who are participating in a number of plans, there should be a review of the contract the doctor entered into with the insurer or health plan to see whether there are specific audit procedures and a delineation of significant rights granted to the insurer or the health plan. If the doctor has agreed in a contract to make a repayment under defined circumstances, the written agreement would supersede the fraud court decisions and control the relationship between the doctor and the insurer or health plan. The language in these contracts needs to be reviewed carefully, and qualified legal counsel may indeed identify numerous barriers that would prevent the insurer or health plan from obtaining a repayment from the doctor. Out-of-network plans present an entirely different legal situation, since the doctor has not entered into a contract with the insurer or health plan. There is no right to an “audit” in such cases and the doctor is in a stronger position when dealing with an audit request from an out-of-network insurer or health plan.

There are many additional legal issues involved and thus medical providers should seek highly qualified counsel when dealing with requests for medical records by insurers, health plans, or their affiliates on claims that have already been paid.

There is a growing practice by health insurers to pursue medical providers for a refund of monies paid on past claims.  The insurers typically start their alleged “overpayment” efforts with audits or ”post payment reviews” of the medical providers’ prior billing on previously closed and paid claims.  The medical providers have more defenses available to them than they realize, and they should employ specially qualified counsel to either resist such audit requests or have qualified counsel manage the process.

In the vast majority of situations, the health insurers have no entitlement to a refund whatsoever. For example, if the medical provider is out of network, there is no contractual or other legal obligation to undergo the audit.  However, the request by the insurer can indeed provide the medical provider with an opportunity to actually investigate the insurer, instead of having the insurer investigate the medical provider.  If the insurer is simply attempting to use the process to intimidate the medical provider, a well-informed and proper response by qualified legal counsel can set things back on track between the provider and the insurer.  Even if there are real issues of concern, there are ways to use the tools provided by ERISA (employee benefits law and regulations) to uncover the issues and resolve the problems.

Medical providers should know that they have much more leverage in this context than they realize.  With the help of experienced health insurance lawyers to identify the issues and their defenses, the medical providers can maximize their chances of success.

Quadrino Schwartz is also on the cutting edge in this area of health insurance law and has a track record of success in defending medical providers facing retrospective reviews / audits.

In the ongoing battle between auto insurers and medical providers in the no-fault system, the insurance companies have started to up the ante by bringing racketeering (“RICO”) lawsuits against medical providers.

RICO provides for “treble damages”, meaning that the loser could be required to pay triple the amount of any judgment obtained in court.  In the ongoing effort to intimidate medical providers, the auto insurers have been trying to use RICO as a weapon.

In one such recent case,  Quadrino Schwartz obtained a dismissal of a RICO lawsuit brought by a major insurer.  The Court ruled in GEICO v. Hollis Medical Care, No. 103431 (EDNY) that GEICO did not allege and cannot prove the existence of a racketeering “enterprise” and thus that portion of GEICO’s case was dismissed.

In a case involving “residential care” for anorexia nervosa, Blue Shield of California had refused to pay claims for an extended stay in a mental health facility.  The Plaintiff, Ms. Harlick, needed extensive treatment that she could not obtain in an outpatient setting.

The sole legal basis for Blue Shield’s denial was that “residential care” was not covered under the Blue Shield health insurance policy issued to Ms. Harlick.  In the claims and ERISA appeals process, Blue Shield did not assert that the mental health care was not “medically necessary”.   In its denial, it had relied solely upon its legal position as to care rendered in a “residential facility”.

A federal judge in California initially ruled against Ms. Harlick and dismissed her case.  On appeal, however, the 9th Circuit Court of Appeals reversed the decision and dealt a blow to Blue Shield.  See Harlick, V. Blue Shield of California,2011 Wl 3796177 (9th Cir, 2011). After finding that the residential care was covered due to California’s Parity law, the Court ruled that Blue Shield could not assert a medical necessity defense in the lawsuit because it did not do so earlier, in the claims process.  Blue Shield was thus ordered to pay in full for the many months of treatment provided to Ms. Harlick.

An insurance company’s late assertion of a defense to a health care claim is a violation of the ERISA regulations that govern health insurance claims under group insurance plans.  The health insurance lawyers at Quadrino Schwartz frequently use these regulations as weapons in the settlement and litigation of health care claims on behalf of medical providers and patients.

A jury in Colorado awarded the maximum $3 million under a property and casualty policy for the value of a building totally destroyed by fire. In addition, the building’s owner obtained a punitive damage award in the sum of $2.3 million due to the insurance company’s bad faith handling and denial of the claim.

The owner of the building was a mortgage company that had taken title by foreclosure. After the fire, the insurer alleged that the building was worth nothing because it was an abandoned apartment complex. The insurer also refused to pay claiming that it should have been notified that the building was vacant.

The jury rejected the insurance company’s arguments and found that it acted in bad faith.

The case was venued in the District of Colorado.

See James River Ins. Co. v. Rapid Funding, 07-cv-01146.

In the field of liability insurance, there is a special type of “bad faith” claim you can make against your insurer if there is a jury verdict against you in an amount higher than the amount of your insurance policy’s limits. If you are sued due to an auto accident or incident on your property, your insurance company has an obligation to settle the case against you within the limits of your insurance policy, when it has the chance, if there is a possibility that you could lose your case and get hit by a verdict bigger than the amount of your insurance policy. When the insurance company breaches its duty, in bad faith, and you get hit with such a large verdict, you can sue the insurance company for the amount in excess, over your coverage amount, plus punitive damages. That’s what happened in the Missouri case, described below.

A drunk driver was sued for severely injuring a couple when he crossed a divider and crashed his pickup truck into an innocent couple, injuring both of them severely. They were hospitalized for over a month. His insurer did not tell him that his insurance policy had a limit that was likely to be exceeded by this significant case, and it refused to settle on his behalf.

The drunk driver worked out a $5 million settlement with the injured couple and then allowed them to pursue his insurance company for its bad faith conduct in the handling of the liability claim against him, under his insurance policy. Allstate had an opportunity to resolve the case at an early stage, but by refusing to do so, it lost the opportunity and left its insured exposed for millions of dollars in liability to the insured couple.

After a trial on the bad faith case, the jury returned a verdict for $5.8 million in damages to compensate the injured couple for their injuries and financial harm and $10.5 million in punitive damages to punish Allstate for its conduct.

On appeal, the Court in Johnson v. Allstate, WD68169 Mo. App. West Dist. 2008, the court found that Allstate had exhibited a “reckless disregard” for its policyholder and upheld the verdict. The liability had been clear and Allstate failed to investigate and denied coverage in a manner that was a clear breach to its policyholder.

A federal judge in the State of Washington has ruled against a group of insurers in refusing to dismiss bad faith claims against them for their refusal to defend and indemnify a construction contractor faced with defect claims in a casino project.

In Aecon Buildings, Inc. v. Zurich of North America et al. No. CO7-832MJP (WD Wash, 2008), Aecon was faced with a number of construction defect claims from an Indian reservation upon which it was building the casino. It sued its subcontractors, seeking recovery from them, and the subcontractors tendered those legal claims to their insurers. Those insurers refused to defend and indemnify the subcontractors.

After a mediation in which Aecon settled the dispute with the owner for $3.75 million, it pursued the insurers for the subcontractors for reimbursement, alleging a bad faith investigation and an unreasonable coverage determination under the insurance policies in question. The claims were asserted under Washington’s Consumer Protection Act and under the common law duty of good faith and fair dealing under the insurance contracts.

The court found that even if it is ultimately found that coverage does not exist and there was never a duty to defend, Aecon can still proceed against the insurers for its bad faith and improper investigation and that due to their bad faith they are estopped from denying coverage.

The American Association for Justice recently published an extensive report listing the Top Ten Worst Insurance Companies In America; and considering all of the big names on this list, you should not be surprised to find your company on there.

Beginning with Allstate and ending with Liberty Mutual, with companies such as AIG, Conseco, WellPoint and Farmers in between, the list is a comprehensive and detailed report built on research and investigation of court documents, FBI records, state investigations and more. This is no late night TV show top ten list, but 29 pages packed with disturbing information.

As you read through the report, underlying the frustration and anger is a sinking feeling that this is a David and Goliath situation. As the insured, you’re likely to feel trapped, especially after reading about things such as the Powerpoint slide prepared for Allstate which features “an alligator and the caption ‘sit and wait’—emphasizing that delaying claims will increase the likelihood that the claimant gives up. According to former Allstate agent Shannon Kmatz, this would make claims ‘so expensive and so time-consuming that lawyers would start refusing to help clients.’”

If it was only one corrupt insurance company about which we were reading, it wouldn’t be so disheartening. But a list of ten (and you can be sure these ten aren’t the only ones employing the tactics of ‘deny, delay, defend’) indicates that it’s not an anomaly but a business model. These companies profit from lying, evading and taking advantage of their policyholders. It’s a situation that cannot continue.

Luckily the report isn’t all gloom and doom. The bad is tempered with the good, if you know how to see it, as with this quote about Unum, listed as the second worst Insurance Company, “Despite doctors’ orders to stop working, Unum told [the insured] he was not disabled and could still work—a decision the U.S. Ninth Circuit Court of Appeals would later describe as ‘defying medical science.’” It is shocking to read about the reprehensible acts of these insurance companies, but encouraging to read that judges and juries do side with the insured in many cases, ordering the insurance companies to pay what they have promised.

Cases can be won. Change can be made. And you can get your claims paid. Our firm specializes in taking on Goliath, and we’re dedicated to helping you get the security you deserve.

As a result of the recent spate of hurricanes, wildfires, floods and tropical storms, U.S. residents—and their insurance companies—have had their share of natural disasters and the clean-up and rebuilding that follows. Unfortunately, homeowners and commercial property insurance policies are not always clear regarding whether the damage caused by these natural disasters is covered, and insurance carriers are increasingly exploiting the language in these policies to attempt to avoid liability for these losses.

After Hurricane Katrina, many Louisiana residents found themselves without insurance coverage based upon their homeowner’s policy’s “flood” exclusion. Although both the trial court and intermediate appellate courts ruled in favor of the insured homeowners by finding the exclusion to be unambiguous and inapplicable to man-made events such as the failure of a level, the Louisiana Supreme Court reversed the decision and ruled in favor of the insurance carriers by finding the “flood” exclusion unambiguously applied to both natural and man-made floods in Sher v. Lafayette Insurance Company, __So.2d___, 2008 WL 928486 (La. 2008).

But Hurricane Katrina victims aren’t the only ones fighting with insurance companies to define and receive coverage for damages from natural disasters. CNN’s Money Magazine, in its article entitled Insurers Playing Rough, discusses a disturbing trend by insurance carriers to make lowball settlement offers to their insureds following natural disasters, thereby exploiting the insured’s financial vulnerability in order to avoid paying the total value of their legitimate claims. As detailed by Money Magazine, the carriers offer far less than the claims are worth because many of their insureds who have had their homes and businesses destroyed are desperate to rebuild their lives and will accept paltry settlements to survive.

Homeowners wonder what they can do if their insurance companies deny their claims or give lower payouts than what they feel is deserved. Although the Money Magazine article mentioned above gives some suggestions, your best opportunity to receive the financial coverage you deserve comes from having an experienced professional on your side. Our firm is experienced in negotiating with insurance carriers, has extensive knowledge concerning the intricacies of insurance law, and—unlike your insurance carrier—we always have your best interests in mind.

There is reason for optimism for insured individuals receiving treatment for a mental illness or substance abuse problem. The President just signed into law a bill that was 10 years in the making. It will “require that group health insurance coverage for mental illness and substance abuse be provided on the same terms as coverage for physical illnesses.” Although the bill will not require that mental illness and substance abuse coverage be added to group health plans, it will require that existing coverage for psychological illnesses be no more restrictive than coverage for physical illnesses.

The Bill passed in the House of Representatives by a large margin, and was approved by the Senate. On October 3, 2008, President George W. Bush signed it into law. The act is known as “The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act.” Congress joined the parity bill with the Emergency Economic Stabilization Act, the legislation created to address the economic crisis. The Senate passed the same version of the act earlier in the week.