When you obtain a health insurance policy to cover you and your family, you expect to enjoy coverage in the event of an illness, accident, or other similar events. Health insurance premiums and deductibles seem to rise every year. And as the cost increases, so do the expectations of coverage.
However, insurance claims tend to be denied when you need treatment the most. You or a loved one may be seriously ill, only to find that an insurer declined your application for coverage. Such cases often cause intense stress and uncertainty to the patient. It is ironic that missing a single premium payment may cause your insurance coverage to lapse, yet you may be denied coverage even after years of faithfully paying your premiums in promptly.
If your insurer has denied you healthcare coverage, you may feel powerless and out of options. However, there are several ways through which you can contest a denied claim. The most common is through filing an appeal, where you will provide more supporting evidence regarding your medical condition.
You can also have a denied coverage claim reversed in cases of a breach of contract. Health insurance companies work through contracts and are thus governed by contract law. The contract stipulates situations where you should enjoy coverage and situations where coverage may be denied. It is not uncommon for an insurer to breach its contract with an insured person (the patient). For example, if your insurance company fails to investigate a claim properly or it denies a legitimate claim, you can sue the insurance company for breach of contract.
What is Breach of Contract?
Under contract law, breach of contract occurs when an insurance company fails to honor its end of the bargain. A contract is a legal document that stipulates the responsibilities of each party to the agreement. In the case of health insurance, the insurer agrees to provide healthcare coverage for various conditions and under specific circumstances. You, as the insured person, agree to pay regular premiums and a deductible to cover any associated healthcare costs.
A breach of contract typically occurs when the insurance company fails to honor its obligations as stipulated under the contract. In such cases, you can file for action against any loss you may have experienced as a result of the breached contract.
It’s not uncommon for insurance companies to avoid paying on a claim (even if the claim is valid). This is particularly true if the claim is costly and can potentially affect the insurance company’s bottom line. Ironically, it is these large claims that patients need coverage for the most. Paying high healthcare costs out of pocket can easily drive any person into bankruptcy. In most cases, a breach of contract happens when there is a difference between what the insurance company did and what it should have done.
How Breach of Contract Can Occur
You may be wondering how an insurance company can end up breaching its contract. Cases of breach of contract can occur in any of the following ways.
- Failing to investigate a claim
A common reason why insurance companies breach their contracts is that they fail to investigate a claim before issuing a denial thoroughly. Every patient that files a claim for coverage should have their case investigated for legitimacy and medical necessity. Simply overlooking important details can result in a wrongful denial, thus breaching the contract.
- Denying a legitimate claim
Health insurance companies may also deny a legitimate claim due to various reasons. For example, they may try to avoid paying a high-cost claim even if the claim is fully legitimate. This is a clear breach of contract as it denies a patient the treatment they need to enjoy better health.
A company may also hide behind medical necessity as a reason why a claim was denied. This means that they may try to claim the procedure as being unnecessary to help a patient recover. If a legitimate claim is denied, the patient has a right to appeal and even sue the health insurance company.
- Issuing improper benefits to a claim
Your insurance company may also be in breach of contract if it issues improper or insufficient benefits to a patient. For example, if you need to undergo surgery and the insurance company is supposed to pay 80% of the cost, a breach of contract occurs if the insurer only pays 50% of the cost.
Issuing improper or insufficient benefits can cause a patient to undergo significant financial hardship when seeking treatment.
- Delaying payment to a patient for a legitimate claim
Healthcare coverage should also be provided in a timely fashion. If your insurer delays payment or reimbursement for healthcare costs, they may be in breach of contract. All approved claims for treatment should be made on time to allow patients to receive the care that they need.
- Unreasonable interpretation of a contract
In most cases, it is the insurance company that drafts a contract according to the established laws. Therefore, interpretation of this legal agreement is typically construed against the company. This means that any ambiguities related to the contract are often interpreted to favor the patient as opposed to the health insurance company.
If your insurer unreasonably interprets the terms of a contract, they may be found to be breaching the contract itself. Unreasonable interpretation is often made to favor the health insurance company at the expense of patients.
Breach of Contract Due to Ambiguity
Vaguely worded contracts can be another cause of a contract breach. More specifically, an ambiguous contract is often subject to multiple interpretations under the law. If your insurer issues a vaguely worded contract, they may choose to interpret it in a manner that is unfavorable to you when you need coverage for a procedure.
Ambiguous language can be difficult to challenge without legal representation. And because it’s the insurance company that prepares the contract, odds of interpretation may be in their favor. Make sure wording on the contract is precise regarding situations when your insurer should cover the cost of a procedure.
The insurer should also clearly state the deductible amount as well as timelines for issuing payments to healthcare providers. With clear wording, any ambiguous interpretations by the insurer may constitute a breach of contract.
An Example of a Breach of Contract
Understanding breach of contract can be complicated at first, but it will make more sense with some clear examples. Any situation that goes against what was stipulated in the legal agreement can constitute a breach of contract. This includes coverage denial due to negligence, bad faith, or poor investigation of a claim. The following is an example of a breach of contract:
A patient has a life-threatening health complication associated with obesity. After undergoing many years of alternative treatment options such as diets, weight loss programs, and physical activity, a doctor recommended weight loss surgery as the only reliable treatment plan. While many weight loss surgery procedures are deemed as being medically unnecessary, the doctor proposes this procedure as being essential for the patient to restore their overall health. The doctor also provides sufficient evidence that details the associated health risks and benefits.
Under the patient’s health insurance policy, a clause states that “any necessary medical services are covered when ordered and authorized by a physician.” As long as there are no specific exemptions for the procedure, proper coverage should be provided by the health insurance company.
In this case, the patient was denied coverage because the insurer claimed that the procedure was not medically necessary. The patient proceeded to file an appeal that presented evidence for the health risks she faced as well as other associated health benefits. The appeal was also denied. The patient’s last course of action was to file a legal claim for breach of contract. She was able to win the case, as her insurer was determined to have neglected her health condition and failed to investigate enough about her claim.
Such a case is a good example of a breach of contract. An insurer cannot just neglect sufficient medical evidence provided in favor of a procedure (a procedure that should be covered under the patient’s insurance policy).
Types of Contracts in Healthcare
In the healthcare industry, there are four main types of contracts that are used on a regular basis. Understanding these different types of contracts will give you a better idea of what a contract breach is and how you can respond when such cases occur.
- Employee and Facility Contracts
This is a contract that is signed between the employees of a healthcare facility and the facility itself. Such a contract covers the actions that can be carried out by employees while on the job. They mostly relate to patient privacy and the level of care that a patient ought to receive. For example, if an employee posts pictures of a patient on social media without their permission, they may be in breach of contract and can be terminated.
The same applies to employees who abuse patients under care. A particular healthcare facility may have stipulations that cover how patients are to be treated. If this level of care is not adhered to, a breach of contract may occur. The reverse is also true, where a healthcare facility may be required to protect its employees against abuse and negligence from patients and management.
- Physician and Patient Contracts
Contracts are also often signed between physicians and patients. Such contracts ensure that relationships between the two are professional and in accordance with the law. They also cover both physicians and patients against liability arising from disagreements and negligence. For example, a contract may stipulate that the physician will provide additional care to a patient if the initial treatment didn’t work.
Similarly, the same contract may protect the physician against a potentially abusive patient who may behave in a threateningly while under care.
- Insurance Company and Patient Contracts
Perhaps the most complicated contract in the healthcare industry is one between an insurance company and its patients. Such a contract (which is the primary focus of this piece) covers the specific circumstances under which an insurance company is responsible for providing coverage to a patient.
The contract should stipulate which medical procedures are covered, which ones are exempt, and how much a patient should pay in deductibles. If the insurer fails to honor the stipulations of this contract, they may be determined to have breached the agreement.
- Health Care Facility and Service Provider Contracts
This contract covers relationships between business entities. A healthcare facility may have suppliers who provide medical equipment, utility services, among other needs that the facility may have.
You can think of healthcare facility and service provider contracts as business contracts that govern the delivery of goods and the provision of services.
Cases Where A Health Insurance Claim May Be Denied
Many patients rely on their healthcare policy to cover important medical procedures. Indeed, healthcare coverage in the United States is expensive. Without health insurance, covering medical procedures out of pocket can easily cause one to become bankrupt.
It can be even more frustrating to have a medical claim denied after faithfully paying your premiums on time. A denied claim for coverage may result in financial distress and failure to receive the treatment that you need. It may also constitute a breach of the contract you signed with your insurance company.
There are several reasons why a health insurance company may decide to decline coverage. Some of these reasons may be valid, while others may be in breach of contract.
- Denial due to procedures not covered by your policy
There are cases where you may need to undergo a procedure not covered by your insurance policy. If the contract stipulates that your intended medical procedure is exempt from coverage, you may not have any other option but to foot the expense of the procedure (or to seek an alternative procedure that is covered).
Determining whether a specific procedure is exempt from coverage can be a complicated process. It’s advisable to work closely with a law firm to determine if indeed your desired medical procedure isn’t covered by insurance.
- Denial due to using a provider not approved by your insurance company
Not all healthcare facilities are typically included in an insurer’s provider network. You should only seek care from physicians and hospitals that have been pre-approved by your health insurance company.
You may be denied coverage if you undergo a medical procedure from a provider not within the insurer’s network.
- Denial due to a claim filed outside established timelines
You may also be denied coverage based on the timelines within which you filed a claim. Different insurance companies may put in place timelines for filing a claim. If you wait too long, the claim may be determined as invalid.
Many grey areas surround timelines for filing a claim. If your insurer is unreasonably interpreting timelines and stipulations of the contract, they may be in breach of the original agreement.
- Limitations in policy amounts
Another common reason why coverage may be denied is that you have exceeded the limits of your policy. Most health insurance-policies have limitations in how much coverage a patient can receive.
Expensive procedures may push your overall coverage cost beyond what the insurance company can cover. In such cases, a better alternative is to seek a more affordable treatment procedure (or to possibly increase your policy limits).
Filing an Appeal for Breach of Contract
If you believe that your health insurance company is unfairly denying you coverage for a medical procedure, you can file an appeal for breach of contract. Health insurance is a legally binding contract between the insurer and the insured.
If your claim for coverage is wrongfully denied, you can establish a case for breach of contract. This most often occurs when an insurer denies you coverage in bad faith. A bad faith denial occurs when your insurer decides to deny a claim based on no valid grounds. Some of these scenarios were explained above, and they include denial due to a refusal to accept evidence, refusing to investigate a claim, unreasonably delaying a claim investigation, and unreasonably delaying the disbursement of funds for a procedure.
If you have sufficient grounds to determine that your health insurance company breached the signed contract, you can file an appeal on your denial, followed by a lawsuit against the insurance company. And if your claim is valid, not only will you receive the coverage you truly deserve, but you may also be compensated for any damages incurred on your end.
Breach of Health Insurance Contract Attorney Near Me
Taking on a health insurance company by yourself can be intimidating and gut-wrenching. Many health insurance contracts are also quite complicated to understand, as they tend to use complex language that goes over the heads of most patients.
The unfortunate part is that many people are denied coverage for treatment procedures that they truly qualify for. And because they don’t have the resources to fight against health insurance giants, they remain without much-needed coverage.
Luckily, the professionals at Stop Health Insurance Denial are here to help. We provide legal services that help patients to fight breach of contract situations. If your insurer is denying your coverage against the established contract that you both signed, we can help you receive the treatment that you need to restore your health. Need breach of contract services? Contact us today at 310-695-5241 for more information or to schedule your free consultation.