§ 33.2 Substantive Terms of Coverage

• Library: Insurance Law in Oregon (OSBar) (2020 Ed.)

§ 33.2 SUBSTANTIVE TERMS OF COVERAGE

§ 33.2-1 Health Insurance

Health insurance policies provide coverage for an insured's medical and mental-health treatment bills. Health insurers offer coverage to both groups and individuals. Health insurance benefit payments are made directly to the insured's providers, or to insureds for reimbursement of payments made to their providers.

Most health insurance policies include sections that describe what medical or mental-health services are covered by the plan, as well as exclusions and other limitations that restrict coverage.

Health insurance policies rarely provide coverage for the full amount of the insured's medical bills. Policies normally include deductible and copay provisions that require insureds to pay for a portion of their medical bills before the insurer's coverage obligation begins.

Most health insurance plans allow the insured to be treated by in-network or out-of-network providers. However, incentives are built into the policy to encourage the insured to obtain treatment from in-network providers who have contractual relationships with the insurer.

Federal and state laws require health insurers to include certain provisions in their policies that assure the insured gets minimum coverages, and that preclude insurers from including certain limitations and exclusions.

Most Oregonians get their health insurance coverage through employment-based group plans. Insurance coverage disputes that arise from group plans are governed by federal ERISA law. Disputes involving individual insurance policies are subject to Oregon state law.

If a health insurer denies an insured's claim for coverage of treatment bills, the insured can contest the denial in three separate ways. First, the insured can ask for an "administrative review" that is conducted by the insurer. If the insurer sticks with the denial, the insured can then ask for an "external review" of the claim by an "independent review organization" appointed by the State of Oregon. The insured's final option is to pursue a formal lawsuit against the insurer in state or federal court to contest any denial. Under federal ERISA rules, the insured is required to pursue the available administrative review of the claim denial prior to filing a lawsuit. Under Oregon state law, the insured can, but does not have to, pursue an administrative appeal prior to filing a lawsuit.

Any number of policy-related coverage issues can lead to claim denials, and subsequent appeals and litigation. However, certain kinds of health-insurer denials are frequently contested and litigated. This includes insurer denials based on an allegation that the insured put false information in the policy application for the policy, the treatment for which the insured is seeking coverage is "not medically necessary," and the insured's treatment is excluded from coverage because the insurer believes the treatment is "experimental" or "investigational."

Formerly, health-insurer denials based on an assertion that the insured's treatment was subject to a policy exclusion for treatment of "preexisting conditions" was a common source of litigation. However, preexisting-condition exclusions are currently banned by federal law. If the law changes, and preexisting-condition exclusions are allowed back into health insurance policies, the exclusion will likely once again be a source of frequent litigation.

§ 33.2-1(a) Statutory Requirements for Individual and Group Health Insurance Plans in Oregon

ORS chapters 743, 743A, and 743B set forth a variety of rules and requirements that apply to individual and group health insurance plans issued in Oregon. All health insurance plans must comply with those requirements. If they do not, the policy will be construed in a manner that complies with the requirements.

ORS 742.038 provides as follows:

(1) A policy in violation of the Insurance Code, but otherwise binding on the insurer, shall be held valid, but shall be construed as provided in the Insurance Code.

(2) Any insurance policy issued and otherwise valid which contains any condition, omission or provision not in compliance with the Insurance Code, shall not be thereby rendered invalid but shall be construed and applied in accordance with such conditions and provisions as would have applied had such policy been in full compliance with the Insurance Code.

See Cambron v. N.-W. Ins. Co., 70 Or App 51, 54, 687 P2d 1132 (1984), rev den, 298 Or 470 (1985) ("The law existing at the time and place of the making of an insurance contract is as much a part of the contract as if it had been specifically included in the contract.").

In Blanchard By & Through Blanchard v. Kaiser Found. Health Plan of the Nw., 136 Or App 466, 901 P2d 943, rev den, 322 Or 362 (1995), the court addressed a health insurance policy that excluded coverage for "maxillofacial prosthetic services." The court concluded that the Insurance Code required coverage for such services. ORS 743.706(1). Accordingly, the court ruled that the exclusion could not be enforced by the insurer.

§ 33.2-1(b) Health Insurance Plans in Oregon Are Subject to the Federal and State Mental Health Parity Acts

Mental-health parity describes the equal treatment of mental-health conditions and substance-use disorders in insurance plans.

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 ("Federal Parity Act"), Pub L 110-343, div C, title V, subtitle B, 122 Stat 3881, "requires that for group health plans, financial requirements and treatment limitations to mental health benefits must be no more restrictive than the predominant requirements or limitations applied to substantially all medical and surgical benefits." A.F. ex rel. Legaard v. Providence Health Plan, 35 F Supp 3d 1298, 1313 (D Or 2014) (citing 29 USC § 1185a(a)(3)(A)(ii)). Under the Federal Parity Act,

if an insurer "provides both medical and surgical benefits and mental health or substance use disorder benefits," the insurer must ensure that both "the financial requirements" and "the treatment limitations" applicable to mental health and substance use disorder benefits "are no more restrictive" than the predominant financial requirements and treatment limitations that apply to medical and surgical benefits.

Am. Psychiatric Assoc. v. Anthem Health Plans, 821 F3d 352, 356 (2d Cir 2016) (quoting 29 USC § 1185a(a)(3)(A)). "[T]here must be 'no separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits.'" Welp v. Cigna Health & Life Ins. Co., No 17-80237-CIV, 2017 WL 3263138 at *6, 2017 US Dist LEXIS 113719 at *16 (SD Fla July 20, 2017) (emphasis in original) (quoting 29 USC § 1185a(a)(3)(A)(ii)); see A.F. ex rel. Legaard, 35 F Supp 3d at 1314 ("the Federal Parity Act applies to both quantitative and nonquantitative limitations"). Under the Federal Parity Act, treatment limitations can be quantitative or nonquantitative. 29 CFR § 2590.712(a). Quantitative limitations include, for example, a limit on the number of outpatient visits covered. 29 CFR § 2590.712(a). Nonquantitative limitations include "restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the plan or coverage." 29 CFR § 2590.712(c)(4)(ii)(H).

For a list of policy types and plan types that must follow federal parity, see the website of the National Alliance on Mental Illness (NAMI), < www.nami.org/find-support/living-with-a-mental-health-condition/understanding-health-insurance/what-is-mental-health-parity >.

Much like the Federal Parity Act, the Oregon Mental Health Parity Act, ORS 743A.168, one of the most robust state parity acts, "requires parity among the services and treatment covered for medical conditions and the services and treatment covered for mental health and chemical dependency related conditions." A.F. ex rel. Legaard, 35 F Supp 3d at 1306 (emphasis in original). OAR 836-053-1405(1) interprets the Oregon Mental Health Parity Act, as follows:

A group health insurance policy issued or renewed in this state shall provide coverage or reimbursement for medically necessary treatment of mental or nervous conditions . . . at the same level as, and subject to limitations no more restrictive than those imposed on coverage or reimbursement for medically necessary treatment for other medical conditions.

Even with mental-health parity, a patient's mental-health coverage will be limited to the extent his or her health insurance plan limits coverage of physical conditions.

Under ERISA, a participant or beneficiary may challenge a plan for "any act or practice" that violates ERISA's provisions, including the Federal Parity Act, which was enacted within ERISA. Numerous recent cases have addressed the claims by plan participants that a plan or insurer has violated the Federal Parity Act or a state's mental-health parity law by including a blanket exclusion of services used to treat mental-health conditions or by imposing limitations or restrictions on mental-health treatment that are not applied to treatment for comparable health services. See Smith v. United Healthcare Ins. Co., No 18-cv-06336-HSG, 2019 WL 3238918, 2019 US Dist LEXIS 120151 (ND Cal July 18, 2019) (refusing to dismiss putative class action challenging reductions in reimbursements for out-of-network "mental health and substance use disorder services only" as violating the Federal Parity Act); Kerry W. v. Anthem Blue Cross & Blue Shield, No 2:19cv67, 2019 WL 2393802 at *4, 2019 US Dist LEXIS 96058 at *10 (D Utah June 5, 2019) (dismissing an action alleging violations of the Federal Parity Act based on insufficient pleading, when plaintiff alleged health plan "committed numerous errors in its decision to pay for . . . residential treatment," but did "not relate to an analogous treatment in the medical or surgical setting"); A.Z. by & through...