One type of insurance abused by life, health, and accident insurance companies in Texas and other States nationwide 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 when diagnosed with or receiving treatment for a specific medical issue. That may be cancer, heart attack, stroke, or other critical illness, or just any emergency or intensive care, among other types that may be covered.
The most ubiquitous of these types of insurance are cancer treatment policies, often issued by a life insurance company and sold through an employer’s benefits, which are designed to provide cash payments directly to a policyholder if you (or a family member, spouse, or other dependent) are diagnosed with cancer and need chemotherapy, radiation, immunotherapy, surgery, or other treatment. The idea is to pay cash benefits upon realizing an unexpected serious diagnosis—typically without regard to existence of health insurance—much how a life insurance policy pays on death, but with the amount depending on the costs of treatment or a daily rate for hospital stays and other fixed criteria.
However, the companies that issued such policies in the past, and their successors in particular looking to squeeze out ever more profit since, have not been holding up their end of the bargain. Increasingly they try to limit or deny benefits on improper grounds that have nothing to do with a defined benefit policy.
A method insurers regularly use is seizing on a nuance in the way that the health care market has evolved in how providers set prices and get paid. As most have seen in an insurance EOB, there is a difference between what a doctor or hospital may charge versus what primary health plans end up paying, with laws these days protecting patients from having to pay the difference (sometimes known as “balance billing” or “surprise billing”). That is because large payors—i.e., the government for Medicare/Medicaid and private health insurance conglomerates—set or negotiate the prices at which they pay and those providers who agree to accept that insurance can receive only the pre-set amount no matter what the charges may actually be. Insurance companies holding cash benefit policies have sought to leverage that to their benefit by claiming they are then not liable to pay the amount charged by a doctor or hospital if other insurance exists to adjust it downward, or if the doctor is actually paid 100% by another payor. Yet, typically nothing in a cash benefit policy limits the payment due for those reasons.
That is why such companies have preferred to start labeling their policies as “supplemental” health insurance, to make it seem as if the benefit was meant to apply only to the extent a policyholder needs to come out of pocket after a health plan pays for care. That is merely a convenient excuse exploited now as most defined benefit policies issued in the past never made reference to such other insurance and were not marketed in a way meant to vary the payout based on whether a policyholder has other insurance. They were promoted as paying cash to a policyholder directly—and not to a provider like health plans do—in the event of getting cancer, a critical illness, or anything else promised to be covered, and chose to set the payout based on whatever may be charged for the service. The triggering risk insured against was getting ill; not whether a provider was already paid by others. There are distinct other forms of insurance specifically designed for that often referred to as “gap” (or “excess”) insurance policies, like those commonly marketed as and clearly only intended to cover the difference not paid by Medicare or Medicaid (i.e., a “Medigap” policy). That is different from a defined cash benefits policy, as the insurance companies who issued them know, yet they still seek to alter the policy language after-the-fact now to limit the amount that is owed to a policyholder under 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 adjusters seek to unjustifiably exploit that nuance in health care pricing when receiving a claim on a cash benefits or defined policy–which often is only after decades of receiving premiums–is by unilaterally interpretating the language governing the amount payable in a way that avoids a higher charge (or even seeks to avoid payment altogether). That will key you into on whether 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 those 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 for your 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 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 other tangential benefits that may exist for things like mileage traveling 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 when 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 else being 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 all 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 often change hands over time with new or successor companies appearing or changing their names and affiliations as well, so there are undoubtedly others that have issued 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 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 payment 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 prompt payment along with treble or exemplary (aka “punitive”) damages, as well as attorneys’ fees and court costs.
If you suspect that you or a loved one (perhaps now deceased as well) who has a cash benefits, defined benefit, or supplemental treatment policy was the victim of improper conduct by an insurance company within the past few years, the first thing you should do is make sure to get or have a response in writing from the insurance company. They are required to provide a written explanation for denial. Some claim departments make it a habit to only give information over the phone or continually demand more material to defer having to do that. Make them put a decision in writing. You are entitled to that.
After you have a written explanation that does not make sense or seems suspicious to you, it may be time to contact an attorney to review your claim. It is best not to wait too long 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 the 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 assist you obtain full compensation as well.