Posted on: Wednesday, January 12, 2005

Health insurers' clause deleted

By Deborah Adamson
Advertiser Staff Writer

Patients may now find it easier to win court cases in which health insurers deny them medical coverage.

The state Insurance Division has ordered Hawai'i insurers to drop a clause in their contracts giving them broad authority to make the final decision when a patient challenges a denial of coverage.

"People should care because if they have to contest this, they would like to contest it in a level playing field instead of fighting an uphill battle," said Tom Pico, the attorney for the Insurance Division.

The state began looking into "discretionary clauses" last summer after getting complaints from small businesses that complained insurers were abusing the clause in denying coverage.

The situation became more critical after a Hawai'i Supreme Court ruling in November that ended the use of the state medical appeals board for patients enrolled in nongovernmental health plans who wanted to appeal denial of coverage.

The appeals board — also called the external review board — could have overruled the clause.

With the elimination of the appeals board, patients who wanted to challenge an insurer's denial of coverage had to take their case to court. The existence of the discretionary clause left the courts little choice but to side with the insurers because the clause clearly stated that the insurer had complete discretionary authority over coverage, according to Pico.

"Now, there's a very big hole because there's no external review board," he said.

The Hawaii Medical Service Association has agreed to remove the clause, as have Summerlin Life & Health Insurance Co. and University Health Alliance. Kaiser Permanente and the Hawaii Management Alliance Association have yet to respond, Pico said.

"We will remove the language in the contracts as the contracts renew," said HMSA Spokesman Cliff Cisco, adding that the clause is "rarely invoked."

Such clauses have been prohibited in Maine, Minnesota, California, Illinois, Indiana, Montana, Nevada, New Jersey, Oregon, Texas and Utah, according to the Insurance Division.

Kaiser and HMAA did not return calls for comment.

Separately, the Patients Rights and Responsibilities Task Force met yesterday to look at alternatives to the state appeals board.

Insurance Commissioner J.P. Schmidt, who heads the group, plans to introduce a bill that would authorize the hiring of independent review organizations, or IROs — a company whose business is to hear appeals. In an initial draft of the bill, insurers would pay for the IRO but Schmidt will choose which one to use.

He also has asked the state attorney general to appeal the Hawai'i Supreme Court ruling to the U.S. Supreme Court.

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