Health Insurance

The cost of health care keeps going up. A recent report issued by an industry consulting firm pegs the annual cost for a family of four at more than $28,000.

As the cost of health care increases for individuals, the cost to health insurers of providing health care has also increased. This results in greater scrutiny of health care claims, more limited coverage, and, inevitably, more claim denials.

Health care claim denials, and mental health care denials in particular, come for many reasons. The treatment may be experimental. It may be “out-of-network.” The insured may not have followed the proper preauthorization procedures. Since most health care policies only guarantee coverage for medically necessary treatment and care, insurers regularly deny claims on the basis of medical necessity.

Who determines medical necessity?

Sometimes the term is defined in the policy or health care plan. Even so, the answer should be obvious—the treating physician determines what care is medically necessary for a given patient. He or she is presumably a specialist in the relevant medical area; has treated or examined the patient, often on an ongoing basis; and is familiar with the patient’s medical history. Who else is in a better position to recommend the proper course of treatment?

Unfortunately, insurers too often supplant treating physicians’ judgment with their own. Insurers regularly deny medically necessary treatment for their insureds. Rarely are these claim denials scrutinized. Regulatory agencies have limited resources to address the many complaints they receive, and most claims are so small that the insured cannot find an attorney to assist them. As a result, improper claims handling practices continue, with impunity.

The process of evaluating “whether health care services are medically necessary, consistent with acceptable treatment patterns care requests,” is commonly referred to as “utilization review,” or “utilization management.”

Utilization review comes in many forms. Sometimes it is conducted by the health insurer itself. Some health insurers contract directly with an outside entity such as a local or regional medical group. Under a “capitated” contract arrangement, the insurer remits a fixed payment to the medical group, based on the number of subscribers and regardless of the amount of care provided. The group then approves and pays for the subscribers’ medical care. The practitioner must understand which entity does makes the initial claim decision, which one decides the appeal, and how many levels of appeal are available.

A utilization review is the ultimate second opinion. But when generated by an insurance company (or third party) that is more concerned with its financial results than sound medical analysis, the result is the withholding of legitimate medical care and treatment, with often tragic consequences. The irony of this is that when an insurer or medical group denies a claim through utilization review, it is rejecting the considered opinion of a doctor it chose to include in its own physician network. What is the point of having health care coverage when your insurer rejects its own doctors’ treatment recommendations?

When the utilization review process results in a denial based on lack of medical necessity, it is imperative to explore what standard operating procedures the decision was based upon. Indeed, there is no statutory definition of “medical necessity.”

Medical necessity analysis often begins with the doctrine of reasonable expectations. This doctrine, which can come into play in any insurance context, holds that when considering coverage ‘and evaluating potential breaches of the covenant of good faith and fair dealing, the “‘reasonable expectations of the insured’” must be upheld. In health care, the insured’s reasonable expectations are that he or she will receive the care recommended by the treating physician. That is the promise that the insurer makes to its insureds—that they will receive the care they require. This does not mean that a treating physician has “an unreviewable power to determine coverage,” but that the policy language regarding medical necessity should be construed liberally “so that uncertainties about the reasonableness of treatment will be resolved in favor of coverage.”

Has your health care or mental health care claim been denied? Our San Jose insurance law attorneys can help.

The San Jose health insurance and mental health insurance lawyers of the DL Law Group are insurance law experts. We have won millions of dollars in verdicts and settlements for clients whose claims were denied or underpaid in an insurance dispute. If you are being treated unfairly by an insurer, contact us. We can evaluate your case and decide upon a firm, effective legal strategy.