Posted on: Saturday, May 28, 2005

Lawsuit an option in health disputes

By Deborah Adamson
Advertiser Staff Writer

Patients who want to contest the denial of a medical claim by their health insurer could soon have more choices for appeal.

This week, the Prepaid Health Care Advisory Council asked Hawai'i's health insurers to make their contracts more friendly to consumers when it comes to reviewing disputes.

"It will give consumers a fair review process," said Paul Tom, chairman of the council, which vets all health plans in the state to see if they conform to the state's Prepaid Health Care Act.

The state's two largest health insurers — Hawai'i Medical Service Association, or HMSA, and Kaiser Permanente Hawaii — will adopt federal arbitration rules and will also give patients the option of filing a lawsuit if they are unhappy with their coverage.

If patients have disputes, they can first file an appeal with the insurance company. If they are still unhappy, they can take their cases to a federal arbitrator or file a lawsuit.

Previously, health insurers would use the stricter federal arbitration rules without the choice of litigation, Tom said.

The new policies will go before the state Labor Department for approval. The Labor Department oversees the healthcare advisory council.

The action comes after a ruling last year by the Hawai'i Supreme Court that invalidated the use of a state medical appeals panel for most health insurance disputes. The court's ruling meant that instead of going through the less formal review panel, where it was easier for patients to represent themselves, they had little option but to take their disputes to court.

The court decision came in the case of kidney cancer patient Kevin Baldado. Baldado's doctor recommended a treatment called "nonmyeloablative stem cell transplant." But Baldado's insurance company, Hawaii Management Alliance Association, denied him coverage because it considered the treatment "experimental" or "investigational," which was not covered under its policy.

Several bills that would have set up an external review process in light of the Baldado ruling failed in this year's legislative session.

Tom said the council did not make its decision to ask health insurers to consider new policies for dispute resolution in response to the ruling. The council has been wrestling with the issue for a year and a half, he said.

Chris Pablo, Kaiser's director of public, government and community affairs, said the council may have overreached.

"The matter of dispute resolution is a matter for the Insurance Division and not the Department of Labor," he said.

The council has jurisdiction over benefits, Pablo added.

Insurance Commissioner J.P. Schmidt said that while his office does look at insurance contracts, the law does not mandate the use of specific arbitration procedures. Thus, the Insurance Division doesn't regulate those clauses unless it's a matter of an unfair business practice.

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