Posted on: Tuesday, December 28, 2004

Court limits appeals of insurers' decisions

By Deborah Adamson
Advertiser Staff Writer

Most Hawai'i residents will now find it more difficult and costly to appeal a health insurer's decision when they are denied medical coverage.

Instead of going through a review panel at the state Insurance Division — a less formal forum where it's easier for patients to represent themselves — they now have to take their disputes to court, following a Hawai'i Supreme Court ruling last month.

"People now do not have a neutral third party to review the decision of the insurance companies when they are denied coverage," said state Insurance Commissioner J.P. Schmidt. "They have to go to court, which is far more expensive and time consuming."

Hawai'i's highest court ruled that the Insurance Division's panel — which heard cases after medical coverage is denied by an insurer — is superseded by the federal Employee Retirement Income Security Act of 1974, known as ERISA.

Two weeks ago, the Insurance Division quietly stopped hearing cases involving health plans covered by the federal law, which includes most private company health plans. Government workers are not affected since they do not get their healthcare insurance through a private-sector employer.

Cancer patient's case

About a dozen cases pending before the Insurance Division's panel will be dismissed, Schmidt said. Each year around 70 cases are heard by the panel.

The state Supreme Court ruling limiting the use of the appeals panel came in the case of kidney cancer patient Kevin Baldado.

"It's a travesty, what they've done," said Baldado's lawyer, Andy Winer. "This one took me by surprise."

Baldado was given less than a year to live when his kidney cancer spread in 2001, Winer said.

Baldado's doctor recommended a treatment called "nonmyeloablative stem cell transplant," according to court documents. The treatment would transplant bone marrow from Baldado's identical twin. The fact that Baldado had a twin increased his chances of success, Winer said.

But Baldado's insurance company, Hawaii Management Alliance Association, denied him coverage because it considered the treatment "experimental" or "investigational," which is not covered under its policy.

HMAA and its attorney did not return calls yesterday for comment.

Baldado took his case to the state appeals panel and the panel sided with HMAA. However, the panel awarded nearly $12,500 in attorney's fees and costs to Baldado, as allowed under state statute, according to court filings.

Jan. 11 public meeting

HMAA argued that it shouldn't have to pay Baldado's attorney's fees because the appeals panel ruled in HMAA's favor. To bolster its argument, HMAA contended that the state appeals board itself violates federal law. The state Supreme Court ruled in favor of the insurance company.

While his court case was pending, Baldado underwent treatment which was paid for by Medicaid, the government medical assistance program for the low-income and disadvantaged. Baldado's medical bill came to more than $200,000. Now Baldado, 44, lives in the Pacific Northwest and his cancer has regressed, Winer said.

On Jan. 11, a public meeting will be held at the offices of the Insurance Division to discuss appeals alternatives in light of the Supreme Court ruling.

Schmidt said his agency is looking at three options: use independent review organizations, amend state law or appeal the ruling to the U.S. Supreme Court.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.