The 7th circuit panel, citing a recent Supreme Court decision, seems to have established new insurance verification laws under ERISA, in a case where a patient is entitled to a $77,974 monetary damage award after her health plan falsely verified coverage for a procedure when none existed thereby creating an ERISA fiduciary breach, holding the plan fiduciary liable for money damages as an equitable relief under ERISA, by failing to provide accurate and complete coverage information and/or means to obtain authoritative and binding information specifically requested by a patient or provider prior to the treatment.
Case info: Deborah Kenseth v. Dean Health Plan, Inc., In the United States Court of Appeals for the Seventh Circuit, Case No. 11-1560, Decided June 13, 2013.
This is the first court decision in the 37 year history of ERISA that provides money damage protection against a plan’s false coverage verification loophole in violation of ERISA, even if no true coverage existed under the plan. The court decisions have profoundly changed the entire healthcare industry compliance and litigation landscape with respect to insurance coverage verification and/or precertification for both in-network and out-of-network patients, providers, health plans and managed care TPA’s.
The facts of the case are commonplace in the healthcare industry: A doctor recommended gastric bypass surgery for Kenseth in 2005 to deal with complications from a previous surgery in 1987. At the time of the gastric bypass surgery, Kenseth worked for Highsmith Inc., which used Dean Health to provide health insurance benefits to its workers. She called a Dean Health customer service representative to get pre-approval for the surgery and was told that her surgery would be covered and all she had to pay was a $300 deductible. Kenseth underwent the surgery which cost close to $78,000 in medical bills. The claim was then submitted to the health insurer for payment. One day after her surgery, the plan decided to deny coverage for the surgery and all associated services based on the exclusion for services related to a non-covered benefit or service, namely, surgical treatment of morbid obesity, according to the court documents. Kenseth eventually got a bill from her provider for nearly $78,000.
After exhausting all her appeal remedies, she sued the plan in federal court for ERISA fiduciary breach and reimbursement of surgical costs of $77,974. The district court twice ruled against her and she twice appealed to the 7th Cir. Court, losing the first one but winning the second appeal, due to a recent Supreme Court decision in Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011, Case No. 09–804), clarifying the relief available for a breach of fiduciary duty in an action under the ERISA, according to the court document.
The 7th Cir. Court concludes: “Cigna substantially changes our understanding of the equitable relief available under section 1132(a)(3). Kenseth has argued for make-whole relief in the form of monetary compensation for a breach of fiduciary duty from the start of this litigation. We now know that, in appropriate circumstances, that relief is available under section 1132(a)(3). See Cigna, 131 S. Ct. at 1881-82”, according to the court document.
In addition to the new money damage remedies available under ERISA, the 7th Cir. Court also clarifies the plan’s fiduciary duties or obligations to provide “accurate and complete” information and documents when a patient or provider inquires about insurance coverage, regardless of in-network or out-of-network provider status.
The 7th Cir. Court clarifies: “we have previously held that an insurer has an affirmative obligation to provide accurate and complete information when a beneficiary inquires about her insurance coverage…….The most important way in which the fiduciary complies with its duty of care is to provide accurate and complete written explanations of the benefits available to plan participants and beneficiaries……But if the documents are ambiguous or incomplete on a recurring topic, a fiduciary may be liable for mistakes that representatives make in answering questions on that subject”, according to the court document.
Avym Corporation offers new seminars to examine why and how these new court decisions will immediately and profoundly change the entire healthcare industry’s insurance coverage verification and/or precertification process for both in-network and out-of-network patients, providers, health plans and managed care TPA’s; how health plans should comply with ERISA in order to avoid money damage ERISA surcharge; and how to obtain money damage reimbursement even without a plan coverage if a plan breached its ERISA fiduciary duties and harmed a patient, as prescribed by the Supreme Court.
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