One type of insurance often abused by life, health, and accident insurance companies is that which provides a cash benefit or defined benefit—or the label preferred by insurers now, a supplemental health policy—that is supposed to kick in and pay benefits when diagnosed with or receiving treatment for a medical issue. That may be cancer, heart attack, stroke, or other critical illness, or any emergency or intensive care, among others that may be covered.
The most ubiquitous of these are cancer treatment policies, often issued by a life insurance company and sold through an employer’s benefit plan. They are designed to provide cash payments directly to a policyholder if you (or a family member, spouse, or dependent) are diagnosed with cancer and need chemotherapy, radiation, immunotherapy, surgery, or other treatment. The idea is to pay cash directly to you upon an unexpectedly serious diagnosis in the same way that a life insurance policy pays on death, with payments based on the actual costs of treatment or a daily rate for hospital stays and other events.
However, the companies that issued such policies in the past, and their successors looking to squeeze out ever more profit since, have not been holding up their end of the bargain. Increasingly they seek to limit or deny cash benefits on improper grounds that have nothing to do with such a policy.
A method insurers regularly use is seizing on a nuance in how the health care market has evolved in pricing and how doctors get paid. As most have seen in an insurance Explanation of Benefits (or EOB), there is often a difference between what a doctor or hospital charges and the health plan ends up paying, with laws protecting patients from needing to cover the difference (sometimes known as “balance billing” or “surprise billing”). That is because large payors—e.g., the government for Medicare/Medicaid and private health insurance conglomerates—set or negotiate the prices they pay and those providers willing to accept those insurance plans can then receive only the pre-set amount no matter what their normal charges may be. Insurance companies with cash benefit policies have sought to leverage that nuance that has developed to their own benefit by claiming they are not obligated to pay the amount charged by a doctor or hospital if other insurance exists to adjust that down, or if the doctor is actually paid 100% by another payor. Yet, typically nothing in a cash benefit policy limits a payout for those reasons.
That is why insurance companies have subtly shifted to now call these policies “supplemental” health insurance, to make it seem as if the benefit was meant to apply only to the extent a policyholder must come out of pocket after their primary health coverage. That is merely a convenient excuse though as most defined benefit policies issued in the past do not reference other insurance and were not marketed in a way that varied payouts based on whether a policyholder does or does not have other insurance. They were promoted simply as paying cash to a policyholder directly—and not to a provider as health plans—in the event of getting cancer, a critical illness, or anything else covered, and set the payout amount as based on whatever may be charged for the treatment. The triggering risk insured against was getting ill; not whether a provider was or was not paid. There are distinct forms of other insurance specifically designed and priced to cover the difference that are referred to as “gap” (or “excess”) insurance policies, like those commonly marketed as a “Medigap” policy (to pay expenses not covered after Medicare). That is far different from a defined cash benefits policy, as the insurance companies who issued them know well, yet they still seek to alter the policy language after-the-fact now to minimize what is paid to a policyholder despite the contract’s plain language.
How to Know if You Are a Victim of Bad Faith or Deceptive Insurance Practices Involving a Health Care Treatment Policy
The means by which insurance companies and their adjusters seek to unjustifiably exploit this nuance in health care pricing when a claim is made on a cash benefits or defined policy–which often is only after decades of premiums being paid–is by unilaterally interpretating the language governing the amount payable in a way now that avoids the higher charge (or even seeks to avoid payment altogether). That should key you into whether or not your insurance company is acting properly.
In particular, if your insurance claim on a cancer or other critical illness treatment policy was denied or limited on the basis it supposedly does not pay the full amount of a doctor or hospital’s “cost,” “charge,” or “expense” for a treatment, then you may be a victim of deceptive, unfair, and bad faith insurance practices. Insurance companies engaging in these practices often say one or more of the following:
- Your policy only pays the “actual incurred” amount of a cost, charge, or expense
- There is language in your policy saying we only cover what a patient is “legally liable” for, and you did not have to pay anything (or less than the full charge) to the doctor or hospital
- This is a supplemental policy; we only pay your actual out-of-pocket costs
- We need the insurance Explanation of Benefits (EOBs) or Medicare summaries to further assess your claim and see what the doctor or hospital really charged or got paid for your treatment
- Medicare/Medicaid or some other insurance plan already paid 100% (or other percentage)
There are multiple other ways unscrupulous insurers seek to limit or deny payments on a treatment policy as well, such as by never informing you of tangential benefits that may exist for things like mileage travelled in a private vehicle, ambulance costs, blood/plasma/platelet charges, initial diagnosis or testing benefits, in-patient, hospital confinement, or attending physician benefits, while also making it burdensome for a policyholder to get paid by demanding ever-increasing information that is not necessary and wholly unfamiliar to a consumer—such as Form UB-04 or CMS-1500, or detailed hospital, surgical, and other reports—and not responding to inquiries on a timely basis to string policyholders along in the hopes they will eventually give up (or worse, die with no left to be the wiser).
Companies publicly sued in the past or otherwise alleged to have issued a treatment policy that could be subject to such practices includes each of the following: American Family Life Assurance Company; American Fidelity Assurance Company; American Public Life Insurance Company; Bankers United Life Assurance Company; Central United Life Insurance Company; Conseco Life Insurance Company; Dixie National Life Insurance Company; Equity National Life Insurance Company; Great American Reserve Insurance Company; Jefferson National Life Insurance Company; Life Investors Insurance Company of America; Occidental Life Insurance Company; Philadelphia American Life Insurance Company; Transamerica Life Insurance Company; and Texas International Life Insurance Company. Such insurance policies change hands over time with new or successor companies appearing or changing names and affiliations often as well, so there are undoubtedly others involved with these policies over the years.
What to do if You Are Denied Benefits on a Cancer, Critical Illness, or Other Health Care Treatment Policy
Policyholders in Texas and most other States are entitled to prompt processing and payment of claims, and for insurance companies, adjusters, and claims departments to act in good faith to help them obtain all the benefits to which they are entitled. Using the practices described herein to mislead a consumer and deny or limit a payout based on an improper re-interpretation of policy language, is a deceptive practice that can be subject to increased statutory interest for a failure to make timely payment along with treble or exemplary (aka “punitive”) damages, plus attorneys’ fees and court costs.
If you suspect that you or a loved one (perhaps deceased now) who held a cash benefits, defined benefit, or supplemental treatment policy was the victim of improper conduct by an insurance company within the past few years, then you should consider contacting an attorney.
It is important not to wait too long either as the statute of limitations in Texas for a bad faith insurance claim is two years (while a routine breach of contract claim can still exist up to four years, unless validly limited by policy language to something less). Wright Commercial Litigation has experience with diverse types of insurance claims in Texas, including cash benefit treatment policies.
Contact the firm to see if it can help you obtain the full compensation to which you are entitled.