How much can a health insurance company charge for premiums?
For each type of policy, insurance companies have rating guidelines that determine your premium.
These are based on factors such as age, location and tobacco use. Certain types of medical coverage consider your health history.
For example, the premium for an auto insurance policy will vary depending on the applicant’s driving habits, such as number of miles driven and whether the auto is used for business, the age and model of the vehicle, and whether the applicant has recently been convicted of a traffic violation.
The premium for a life insurance policy will vary depending on the applicant’s age and health condition. Rating factors must be reasonably related to the risk being insured, and state and federal law often limits the specific rating factors that may be considered for certain types of insurance.
The rates and rating factors for most types of insurance must be filed with the insurance regulatory agency for each state where the insurance is to be sold.
In some states and for some types of insurance, the rates must get regulatory approval before they can be used. This is only true of domiciled health insurance companies, so if your health insurance company is part of an association chances are that their health insurance premiums are not affected by the state that they operate in.
United Health One is an individual health insurance company that is part of an association, so are Assurant, Mega, Midwest, and United American. The latter three are health insurance companies that you should never enroll with. Chances are if your health insurance company charged an enrollment fee or application fee, or charges a monthly amount for an association that gives you discounts, it is not a domiciled health carrier – and should be avoided!
HMO health insurance companies must always file their rates with the state, and are usually domiciled and in business in the state in which they offer coverage. This also includes POS health insurance companies, which have to file as HMO’s anyways so their rates must be approved by the State.
Are there any government agencies that regulate how health insurance companies or plans operate?
Health insurance is recognized at every level of government as involving an important public interest.
At the Federal level, there are a number of important statutes applicable to health care insurance. The McCarren-Ferguson Act provides that even though the insuring or provision of health care may be national in scope the regulation of insurance is left to the states. Likewise, the Health Maintenance Organization (HMO) Act provides that HMO’s or health service plans are regulated by the states. As a result of these two Federal statutes, much of the task of health insurance regulation is left to the states.
Regulatory practices vary from state to state.
For instance, California health insurers are regulated by the Department of Insurance and HMO’s and health service plans are regulated by the Department of Corporations.
In addition, the Federal Old Age, Survivors and Disability Insurance Benefits laws (Medicare) provide that the Health Care Financing Administration (HCFA) of the Federal Department of Health and Human Services oversees grievances involving Medicare recipients. As a result of the foregoing, if a consumer has a complaint about an insurance company, they can contact their state’s Department of Insurance, if they have a complaint against an HMO or health service plan, they can contact either the Department of Insurance, the Department of Corporations, or in some states, the Department of Health. If the insured or plan member is a Medicare recipient and is not satisfied with the insurer or plan action, he or she can contact the federal agency, in addition to the applicable state agency. If the consumer complaint involves medical negligence or malpractice, in addition to the foregoing, the consumer can contact the state’s medical governing board in addition to the insurance, corporations or health departments.
What is the appeals and grievance process like?
What specific appeals and grievance procedures apply, and the extent and nature of legal remedies available, vary significantly from state to state, company to company, and often depend upon whether the health insurance or plan is or is not one covered by the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiple Employer Pension Protection Act of 1980 (MEPPA), typically collectively referred to as ERISA.
The original, noble idea behind this federal law was protection of employee benefits and pension moneys from mismanagement or theft by incompetent or greedy trustees or by organized crime.
Unfortunately, except for state laws that actually regulate insurance companies or health plans, ERISA also preempts (eliminates) any state law or remedy for insured or plan members that might otherwise relate to the administration of employee benefits, including health care insurance benefits, obtained through employment.
In other words, as a practical matter, if a claim for health benefits or service is denied to a person who obtained health insurance coverage through employment, they are limited to the appeals and grievance procedures in the policy or plan and cannot sue in court for such things as breach of contract, breach of the implied covenant of good faith and fair dealing (bad faith), infliction of emotional distress, fraud, etc..
Typically, if the policy or plan is governed by ERISA, the only legal remedy outside of the policy or plan is to ask a court to review the claim denial decision to see if there was an abuse of discretion, which is extremely difficult to establish.
Even if an abuse of discretion is established, the claimant is only entitled to receive the benefit or service that was originally denied, and that is often too late to help. In contrast, if the plan is an insured plan, and NOT subject to ERISA, the Insurer’s Bad Faith can give rise to punitive damages.
Nearly 70% of the health care insurance currently in place in the United States is subject to ERISA. The balance of the health insurance in America is not subject to ERISA. The primary exceptions from ERISA are any health insurance policies or plans issued to individuals, and any group health insurance or plan coverage for employees of any state or local governmental agency or district, and any employee of a church or church affiliated organization.
In addition, ERISA may not apply even if the health insurance coverage is obtained through private employment if the following four factors all apply: (1) the employer or employee organization did not contribute in any way to or any portion of premiums, (2) the participation in the employee benefit plan or program was voluntary, (3) the employer or employee organization did not endorse or administer the insurance and, (4) the employer or employee organization did not receive any commission or participation fee in connection with the insurance program or plan.
What to Ask Insurance Salespeople When Buying a Medical Insurance Policy
The late-2000s legal problems of insurance companies such as MEGA Life and Health Insurance Company, NASE, Midwest National Life Insurance Company of Tennessee, Alliance for Affordable Services and Health Markets have prompted consumers to make sure they are not only getting the kinds of coverages they are paying for, but the kinds of coverages they need.
In order to do this, it’s important to know what questions to ask the salesperson or agent prior to buying.
According to experts, here are some questions that you should ask your potential provider:
- What is the cost of the monthly premium, deductible, co-payment amount and cap? How does changing one amount affect the others?
- What does the policy cover? What does it exclude? Are there limits on the number of days the insurance company will pay for services such as prescription drugs, maternity or out patient services?
- Are preexisting conditions covered?
- Does coverage begin immediately or am I subject to a waiting period?
- Is there a lifetime maximum cap the insurer will pay? This is important to know if you or someone in your family has a chronic or expensive illness or medical condition. Experts recommend that you choose a plan that has at least a $1 million maximum benefit.
- How do I obtain emergency care? Can I use urgent care facilities without pre-approval? Am I limited to using certain facilities in the plan?
- What else is covered? It’s important to find out if routine services, such as preventive care, immunizations and mammograms are covered under the policy.
A Stitch in Time…
It is better to get your questions answered up front instead of wondering if the amount and type of medical healthcare insurance you purchased will actually cover you when you need it. If you do decide to purchase the policy, make sure that all of the information you obtained is detailed in the policy.
Consumers should realize that many insurance salespeople are generally just that – salespeople.
Unfortunately, many are more concerned with meeting quotas than they are about your personal well being. Part of what got MEGA and its partners in trouble was that their salespeople were never really informed about the products they were selling. Instead, they were taught how to sell and close the deal, leaving many policyholders without proper coverage.
If you need to find an attorney in your area to review your policy, or if you were a victim of one of the insurers listed in this article, click here to find an attorney who is a veteran in insurance matters.
What are my legal remedies if a health insurance company or plan refuses to pay a claim for a benefit or service?
In a circumstance where an insurance company or health service plan (HMO) has denied a claim for a benefit or service, has upheld the denial through internal appeal and grievance procedures, and ERISA does not govern the policy or plan, an insured or plan member who has been denied a benefit or service can sue on a number of legal theories, including breach of contract, breach of the implied covenant of good faith and fair dealing (bad faith) and under some circumstances infliction of emotional distress and fraud.
The two primary legal remedies available in most cases are breach of contract to recover the value of the denied benefit or service and any incidental damages and bad faith.
Bad faith is the unreasonable denial of a benefit and may allow recovery for emotional distress, interest on out-of-pocket losses, damages for any attorney fee obligations incurred and, in limited circumstances involving malicious or willful misconduct, punitive and exemplary damages. These legal remedies are ones that are available under state law, not federal law.
In addition, especially with regard to the tort remedies of bad faith, infliction of emotional distress and fraud, the availability of the remedy and the nature and extent of damages recoverable vary from state to state.
I currently am on worker’s compensation. Can my employer make me pay for my own health insurance while I’m off?
The employer generally has no obligation to maintain health coverage at its expense, although you probably have a right to COBRA it. Also, check the firm’s long term and short term disability policies. Depending on what state you work in, your rights may be also different under some states’ workers comp laws.
What are health care maintenance organizations?
Private health service plans which promise to provide care, not merely pay for it, are often referred to as Health Maintenance Organizations or HMO’s. Some are “closed panel plans” and operate out of a central facility, with all the health care providers employed by the HMO. When you go to the facility you may see the doctor on duty, or your “assigned physician”.
Other HMOs are more loosely affiliated models, sometimes called Individual Practice Associations, where the participating health care providers operate from their own offices.
How does a health insurance policy or health plan protect me?
A health insurance plan or a health service plan protects an insured or member by promising to either pay for medical care or provide medical care.
In the case of a health insurance policy, traditional insurance provided that it would pay for any reasonable, medically necessary care required to treat an illness or injury. The insured, as a patient, was free to choose his or her health care provider, who would then in turn apply to the insurance company for reimbursement. While traditional fee for service health insurance policies are available, premiums for them have become very expensive.
In an effort to control health care costs, new forms of health insurance and health service plans have developed which have resulted in lower premiums.
The lower premiums generally are achieved through a reduction in choice of health care providers, a reduction in the type and amount of benefits available, stricter controls on the type and amount of care given by providers and/or negotiated reduction of compensation to health care providers. These cost control measures include:
(1) limiting the health care providers the insured or member choose from to pre-approved list of health care providers,
(2) a requirement that any specialized care be can obtained only if recommended by a primary care physician, known as a “gatekeeper,”
(3) a requirement that any significant or costly care, such as any involving hospitalization, be pre-approved by the insurer or plan, and
(4) an application of aggressive utilization review which determines whether the care that was given was appropriate and not excessive.
Would I need a lawyer to handle my case?
Given the complexity of the legal issues involved and the tendency of insurance companies and health plans to vigorously defend claim denials, especially after appeal and grievance procedures, evaluation of any potential legal claim on behalf of an insured or plan member should be undertaken by an attorney experienced in insurance claims and bad faith litigation.
Cases against health insurers and health plans resulting from claim denials, including bad faith remedies, are frequently undertaken on a contingency fee basis whereby the attorney investigates and evaluates the case before filing a complaint, advances the costs of investigation and litigation, and is paid attorney fees only if there is a recovery. In the event of recovery, the attorney is paid a percentage of the recovery as attorney fees.
While the details of contingency fee contracts may vary from state to state, and within a state from attorney to attorney, as a general rule the typical contingency fee is 25 to 33-1/3% of the value of benefits or services recovered and 33-1/3 to 40% of any extra contractual or tort damages, such as emotional distress and punitive damages recovered.
What are ‘definitions,’ ‘benefits,’ ‘limitations,’ and ‘exclusions?’
Every health insurance policy or health plan agreement or evidence of coverage is divided into different sections.
For instance, a section may identify “benefits” as including services by a physician or surgeon, hospital services, nursing services, medical equipment and the like. This section, in effect, gives a broad outline or index of the benefits covered by the insurance or plan.
Sometimes within the same section, but also sometimes in a separate section, there are specific “definitions” of benefits or related terms.
For instance, the term “physical therapy” may be defined as “medically necessary therapy ordered by a physician and provided by a registered physical therapist.” The benefit section may list physical therapy as a benefit, as an example, by identifying it as “acute physical therapy.”
The term “acute” then may be defined in the policy as being only for a period of 60 days following injury or onset of illness. Then in the “limitations” section of the policy there may be a further qualification of acute physical therapy as only being authorized if it is anticipated that the therapy would result in substantial improvement of the condition within 60 days, or there may be a statement that the therapy is limited to a total dollar amount of charge, such as $1,000 or $5,000.
Further, in the separate “exclusions” section there might be a statement that specifically says that any physical therapy beyond 60 days would be excluded or any physical therapy that would not result in substantial improvement of a condition within 60 days is not a covered benefit.
In summary, this typical example concerning physical therapy shows that benefits, definitions, limitations and exclusions operate together to define what is covered and what is not covered under the policy or plan.
Can a health insurance company or health service plan cancel my policy for membership for any reason?
As a general proposition, insurers and plans cannot cancel an individual’s coverage under a policy or plan arbitrarily.
In addition, federal and state laws prohibit discrimination based upon race, national origin, gender or age. Some states have been proactive, as well, in the area of discrimination involving particular medical conditions or traits.
For instance, some states prohibit insurers and plans from denying health care coverage to, or canceling health care coverage of, persons with mental dementia (such as Alzheimer’s disease) or human immunosuppressive virus (HIV) or mental illness.
A limited form of cancellation can occur involving reduction or elimination of benefits. Other than a requirement of reasonable notice, insurers and plans may reduce or eliminate benefits, unless the contract or plan prohibits it or limits it. In some states there is a major exception known as “vesting,” which means that if the insured or member already has a claim or has received benefits for a particular injury or illness, they may continue to receive the benefit even if it is otherwise canceled.
What is a health insurance policy?
A health insurance policy is a binding contract issued by an insurance company to an individual or group which promises to pay for health care reasonably required by the “insured” or “policy holder” or “certificate holder” to treat illness or injury.
If the insurance policy is issued to an individual, the individual applies for the policy and pays the premiums either directly or through payroll deduction. Typically, in individual health insurance the individual policyholder is insured and also, in exchange for a higher premium, the insurance covers a spouse and dependent family members.
In the circumstance where the health insurance is obtained by an employer or a group or an association, the entity is the “group policyholder” and the covered individuals receive “certificates” of insurance. Generally, in addition to payment of premiums by the policyholder, the insured is also responsible for payment of deductibles and co-pays (a percentage of actual charges or a fixed amount per visit) which are predetermined in the policy at set amounts or rates.
Can the insurer or plan cancel or rescind at any time?
Your insurer can cancel your benefits if you neglect to pay the premium.
Under Obamacare, rescissions are banned. Previously, state law and the policy itself provided that the insurer had only 2 years from the date of application to rescind.
If discovery of the omission or misrepresentation occurs after the passage of the 2 year period of “contestability” the insurer is generally out of luck and can not cancel the policy. After that, an insurer may only be able to contest a claim on the basis of actual, intentional fraud on the part of the policyholder, and even that may be severely limited.
Because some insurers engaged in “post-claim underwriting,” a practice in which the insurer would write a policy and take the premium, and only after a claim was submitted look to “find a way out of it”, many states have statutes which prohibit “post claims underwriting.” In those states an insurer or plan cannot rescind or cancel a policy once an insured has filed a claim for benefits unless the insurer or plan can prove intentional fraud.
Can I cancel my health insurance, and will there be a penalty or adverse consequence?
Generally, there is no prohibition against insured or plan members canceling their health insurance coverage or their participation in a health service plan.
One major exception to this generality is in the case of Medicare assignments. If a Medicare recipient has chosen to obtain private insurance or HMO coverage involving an assignment of the Medicare benefits to the insurer or plan, the Medicare recipient must apply to the Health Care Financing Administration (HCFA) before changing insurers or plans. Otherwise, there is no financial penalty per se to canceling health insurance coverage.
What if the insured lied about a heart attack?
If he dies within 2 years of the date the policy was issued — and the insurer can prove the applicant knew he had had a heart attack — the life insurer would deny coverage.
His statement that he did not have a heart attack on the application is regarded as a “representation” and not a guarantee. If he had what is known as a “silent” heart attack — which was only detected on autopsy — the insurer would pay the claim.
If he dies after 2 years — unless the insurer instituted a legal action to “rescind” the policy within 2 years — the policy is essentially “uncontestable”.
The means the insurer would have to pay the claim even if the insured had lied as blatantly as Bill Clinton lied about Monica Lewinsky, alt least in almost all cases. (There is an exception for misstatements of age, and in some states, if an “imposter” took the physical for the insured.)
What will happen to our health insurance for my dependent children and I after the divorce from their father?
Your husband may keep the children on his policy.
However, as you are no longer married you are no longer eligible for coverage on his policy. However, most plans offer a conversion package to individual coverage under COBRA, a federal law. The cost of insurance is usually the responsibility of the separate parties after a divorce. However, coverage for the children may be available.
My father who has congestive heart failure and type 2 diabetes recently underwent a quintuple heart bypass. His medical bills are staggering and he has no health insurance. Short of filing bankruptcy, what are his options in getting these amounts reduced?
You could offer to pay immediately at the same discounted level those bills would have been paid by a health insurer (Blue Cross and HMO have agreements with the hospital and medical/surgical providers to substantially discount bills). That’s a very substantial discount from the full “list price”.
If that offer is not accepted, when he is sued, he might be more successful by saying the discounted price is the “reasonable and customary” price, rather than the list price they are seeking to collect. This approach is based on the fact that the discounted rates are what they receive on the majority of payments. He could do extensive pre-trial discovery to make them disclose their actual reimbursement rates (they would likely settle rather than disclose).
This whole process could be handled far better with the help of an attorney. If you don’t have the money and fear bankruptcy is his only recourse, see a bankruptcy lawyer soon as Congress is about to change the bankruptcy laws and make it very difficult to wipe out bills.
How long will my medical insurance allow my new baby and myself remain in the hospital following childbirth?
Because many insurance companies would not pay for hospital costs beyond the bare minimum, Congress enacted legislation that allows mothers and their newborn infants longer hospital stays.
The law requires, among other items, insurance companies to pay for at least a 48-hour hospital stay for mothers and their newborns after a regular delivery. The legislation provides for a 96-hour hospital stay if the baby is born through a caesarean section.
(The legislation follows on the heels of several states that have enacted similar legislation, but due to loopholes many insurers escaped enforcement of states’ laws since they are regulated by federal law.)