California Insurance Lawyer Blog

83-pound Sacramento-Area Woman Denied Life-Saving Treatment

Kantor & Kantor, LLP, is appealing to the California Department of Insurance on behalf of Kimberly Shepard, a young wife and mother in danger of losing her life from the debilitating effects of Anorexia Nervosa because her health insurer United HealthCare Insurance Company declined her claim for benefits to pay for residential treatment.

The appeal requests that the Department of Insurance order United Healthcare to reverse their denial of benefits. Earlier this month, the U.S. District Court for the Northern District of California denied Shepard’s temporary restraining order to enjoin United HealthCare from continuing to withhold benefits.

Shepard sought treatment in February at Monte Nido residential treatment center in Malibu, CA a preferred provider under Shepard’s health policy. Although Shepard’s condition more than met the policy’s conditions for residential treatment, United HealthCare denied her claim. As a result, Shepard exhausted her family’s financial resources to pay for treatment. By April 1, Shepard could not longer afford treatment, even though her doctors agreed she had not recovered enough to make appropriate life-sustaining decisions regarding food. Presently, Shepard’s prognosis for recovery is poor if she is not able to continue residential treatment.

“United Healthcare is obligated to pay benefits that will save Ms. Shepard’s life,” said Shepard’s lawyer Lisa Kantor. “The family is out of money. Her husband, an Elk Grove firefighter, and her 3-year-old son, are desperate to ensure that this loving wife and mother recover and return to her home. We are urging United HealthCare to do the right thing and pay for her treatment.”

Under her policy, Shepard must meet only one of the following three requirements to qualify for residential treatment at an eating disorder facility: severe impairment in psychosocial function due to a behavioral health condition; signs of a behavior health condition that clearly demonstrate a need for 24-hour supervision; or a deteriorating health condition likely to require inpatient care. Shepard’s psychiatrist Dr. Cindy Murrer and the attending physician at Monte Nido, Dr. Gary Schneider, both testified that she met all three requirements.

United HealthCare’s “peer review” report by a company doctor who never examined Shepard, conflicted with her treating physicians’ diagnosis, opined that even though Shepard weighed less than 85 pounds and was unable to care for herself, she “does not meet medical necessity criteria for admission to residential mental health treatment.” The report found that Shepard “is not showing any significant physical abnormalities,” had only “some suicidal ideation,” and “had not participated in appropriate eating disorder treatment at lower levels of care.”

“Those findings are untrue and inappropriate bases for denial of coverage,” says Kantor. “United HealthCare’s blatant disregard for its policyholder’s welfare is a flagrant breach of the terms of its policy.”

Shepard has also filed a complaint in the Northern District court against United HealthCare for damages for breach of contract and breach of the covenant of good faith and fair dealing.

In 2000, BusinessWeek wrote about Belle and Abe Lieberman, a Nebraska couple who had purchased a long-term care policy from Penn Treaty Network America Insurance Company. See “Long Term Policies That Will Last.” Back then, the Leiberman’s chief concern was not having purchased a policy that adjusted for inflation. When they increased their benefit from $50 to $100 a day, the yearly premiums jumped from $2,264 to $7,750. They could barely afford the insurance. Little did they know a decade ago that inflation adjustment might be the least of their worries.

About a year later, in April 2001, ElderWeb.com reported that Penn Treaty’s auditors had expressed doubts about the company’s 2000 financial statements. Penn Treaty’s reserves to pay claims had fallen below the regulatory limit and the carrier would need to generate an additional $40 million that year to ensure liquidity. See “Financial Problems for #2 LTC Insurer Penn Treaty.”

By July 8, 2004, Standard & Poor’s still rated Penn Treaty a B- but showed a positive outlook because the company had improved its underwriting and claims practices. The rating service found that the insurer was “Aged, Frail and Denied Care by Their Insurers.” In 2005, Penn Treaty was receiving one complaint for every 1,207 policyholders, one year after collecting $320 million in premiums. (By comparison, Genworth Financial received only one complaint for every 12,434 policyholders.) I spoke with reporter Charles Duhigg for this article, explaining how many LTC insurers conducted business as little more than profit centers, with little regard for their policyholders.

By October 3, 2007, complaints about claims-handling procedures prompted the Senate Finance Committee to conduct hearings. Complaints about LTC coverage had risen 92 percent between 2001 and 2006, reported the New York Times, “Scrutiny for Insurers of the Aged.” Congress asked Penn Treaty, along with Conseco and Genworth Financial, “to provide detailed information about how policyholders’ claims, inquiries and denials are handled and whether employees receive rewards for denying claims.”

In early 2008, rather than focusing on the delivery of services to its policyholders, Penn Treaty hired a new chief marketing officer to expand its national marketing efforts, and two national marketers to assist financial planners in selling Penn Treaty LTC policies. In October 2008, Street.com reported that Penn Treaty “fails,” two days after Pennsylvania insurance regulators seized the company. Options were to sell or liquidate. A March 13, 2009, letter to policyholders explained the Pennsylvania Insurance Commissioner Joel Ario is performing a financial analysis of the company with plans for “rehabilitation.”

What went wrong with Penn Treaty and what can other LTC carriers learn from its demise? First, it seems that Penn Treaty failed to properly underwrite the business, but no one noticed. The young, immature market, supported Penn Treaty's mistakes because they continued to offer product at low prices. When the claims finally started coming in, faster and more furious than predicted, Penn Treaty had little choice but to do everything it could to limit claims pay exposure. This led it to stop being responsive to its customer’s needs and start chasing revenue by way ramping up sales. Hindsight is 20-20, but for Penn Treaty policyholders an old addage proved to be true:"if it sounds too good to be true, it probably is."

And we can’t forget about Belle and Abe Lieberman, the Nebraska couple who sacrificed to pay for an LTC policy they believed would last. We hope the Pennsylvania Insurance Commissioner – and every insurance commissioner around the country who should be evaluating and regulating other LTC carriers before they fail – won’t forget them either.

Last week the health insurance industry informed U.S. Senate committees considering ways to overhaul the country’s health care system, that insurers are willing to accept more aggressive regulation of their premiums, their benefits, their underwriting practices and “other activities,” reports the New York Times “Insurers Offer to Soften a Key Rate-Setting Policy.” The concessions were documented in letters signed by the presidents of the major trade groups that represent most of the industry, Karen M. Ignagni of America’s Health Insurance Plans and Scott P. Serota of the Blue Cross and Blue Shield Association.

In the letter, the industry said it was willing to devise a new business model that would no longer charge sick policyholders, or those with a medical history that could lead to illness, higher premiums than healthy policyholder pay. Instead, they would spread the cost equally over both groups.

In return, the industry wants Congress to adopt a plan that requires health insurance coverage for everyone but cease its consideration of a government-run health insurance plan. And they still want to retain the right to base premiums on age, place of residence and family size.

While we would like to applaud the industry for finally considering what it should have done all along, we are still suspicious of the motives behind this change of heart. In truth, not much has changed.

The industry, fearing the loss of millions of policyholders to a government plan, is offering its own systemic overhaul in order to sign up millions more subscribers under a federal mandate. By retaining the right to base premiums on criteria other than health, a little creative accounting could place insureds right back into the same dilemma of unaffordable insurance they thought they were being rescued from.

Who will keep the industry honest? State regulators around the country are forcing companies to reinsure policyholders whose coverage was rescinded on mere pretext after they became ill. How much more time and taxpayer resources would regulators expend in the future ensuring carriers follow through on their promise to equalize premiums?

Now is not the time for Congress to cave in to insurance demands that will only solve part of our country’s healthcare problems. In addition to equalizing premiums, the industry should standardize its offerings and commit to restructuring claims-handling processes to make them transparent, streamlined and less burdensome on its policyholders. Congress should also insist that carriers return to making benefit decisions based on reliable medical diagnoses rather than the subjective evaluations of insurance adjusters charged with cost-control.

Insurers want a quick fix so they can get back to business as usual. We urge Congress to see beyond this sham compromise and use its leverage to ensure health insurance changes that will serve consumers well for decades to come.

On April 1, 2009, the New York Times ran an article about "hanky panky" with "Independent" Medical Exams (IME's) in the world of Workers' Compensation.

The bottom line is that the word "independent" is a misnomer. It turns out doctors sometimes don't even examine patients and are yet still miraculously able to write comprehensive reports. But wait, it also turns out that the doctors sometimes don't even write the reports...the consultants and insurance companies write them.

No big surprise to us. We think the very same thing happens in Long Term Disability insurance claims, which we handle every single day.

Read the article..and if you're a claimant...weep.

Time healthcare correspondent Karen Tumulty last month provided an eye-opening account of one man’s journey through the healthcare system by chronicling her brother Patrick’s three-year struggle to receive the level of treatment he needs to fight kidney disease. “The Health Care Crisis Hits Home.”

As the article unfolds, almost everyone involved in Patrick’s care – his family, his doctor, his treatment center, his medical creditors, and his county health care program – showed compassion and a willingness to offer solutions for his care. Everyone, that is, except his insurance company.

Tumulty’s brother, who also suffers from Asperger’s syndrome, a high-functioning form of autism, was relying on a series of short-term individual medical insurance policies he purchased as a temporary worker while seeking full-time employment with employer-provided health insurance. He paid premiums on the policies issued by Assurant Health for six years. It wasn’t until he got sick and was denied coverage that his family understood how “underinsured” he was.

Patrick had been continuously covered by Assurant since 2002, but as he transferred into successive short-term policies, the company treated him as a new customer each time. As a result, because Patrick underwent tests for possible illnesses while one policy was in force but was not diagnosed with his disease until after a new policy was issued, the company considered his illness a pre-existing condition and denied coverage.

Karen Pollitz, project director of Georgetown University’s Health Policy Institute and a leading expert on the individual-insurance market told Tumulty, “These short-term policies are a joke. Nobody should ever buy them. It is false security that is being sold. It’s junk.”

Tumulty’s experience with her brother has caused her to question the Obama Administration’s plan to allow people to opt out of the employer-provided insurance market to purchase their own individual coverage. The premise behind that initiative is that the consumer is the better able to determine which policy suits his or her own needs.

“Pat’s experience suggests it is difficult for an individual to make such judgments,” writes Tumulty. “And the existing market for these kinds of policies leaves a lot to be desired. A 2006 Commonwealth Fund study found that only 1 in 10 people who shopped for insurance in the individual market ended up buying a policy. Most of the others couldn’t find the coverage they needed at a price they could afford.”

Tumulty and Patrick ended up filing a complaint against Assurant with the Texas Department of Insurance. Less than a month later, the company – although it admitted no wrongdoing and even had the audacity to blame Patrick for purchasing inappropriate insurance – agreed to pay some of Patrick’s claims.

And guess what else Tumulty uncovered as she investigated Assurant and its claims-handling practice? Last year, Connecticut insurance regulators fined Assurant $2.1 million for alleged “postclaims underwriting,” that is, belatedly reviewing short-term policyholder’s medical records to uncover pretexts to deny claims or rescind policies. Assurant paid the fine, but admitted no wrongdoing.

Tumulty discovered what we’ve been saying on the blog for quite a while. Healthcare reform is a necessity, but it should begin where the majority of the problems lie: with an industry quick to collect your money for whatever fly-by-night products they create and market as long as you are well, but increasingly loath to fulfill their part of the agreement once you get sick.

The Wall Street Journal reported last month about growing concern among consumers about the safety of their insurance policies as insurers of all sizes suffer losses from their bad investments. Other carriers are being “dragged down by higher than expected claims in areas like long-term care insurance.” M.P. McQueen, “Worry Grows Over Insurers as Ratings Slip.”

The article refers to recent events in which regulators took over long-term care subsidiaries of Conseco Inc. and Penn Treaty American Corp. because their reserves fell below state-mandated levels of available capital.

“More trouble could be on the horizon,” writes McQueen. “More than a dozen major insurers have seen ratings downgrades in recent weeks, and several have dropped into categories reflecting relatively weaker financial health. Analysts say their ability to pay claims could be affected by continuing investment losses.”

We’ve been documenting this growing problem on our blog for some time now. And our best advice to consumers with potential claims is not to wait until you hear your long-term care insurer is targeted by regulators. Investigate their financial status now, and if the numbers worry you, perhaps start looking for alternate coverage. Talk to your agent or financial advisor, who may be able to transfer you into similar policies at a more secure company. It may cost you more, but that is better than paying for something that may ultimately have no value. If you already have a claim make sure you pursue it actively and expeditiously. If you need help, call us (800-446-7529), or any other person you know and trust who can help you.