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The Importance and Meaning of Exhaustion in ERISA Appeals

Date: Oct 19 2015
Posted by: admin

Hues v. Federal Insurance Company (Case No. 2:15-cv-84)

Judgment Filed: 10/16/2015

Laws, in general, can be confusing to many people. Healthcare law is no exception. Today many patients find it harder than ever to understand why their claims for benefits under their healthcare plans are denied by insurance companies. Many times patients see no rationality in the decisions that are made by insurance companies—all they see is a denial—and a bill at the end of the day that they did not think they needed to pay. One way patients can avoid this confusion, and ultimately avoid such blatant denials, is by utilizing an effective ERISA appeals process. ERISA itself is not a new law—in fact it was enacted in 1974 after being signed into law on September 02, by then President Gerald Ford. Despite its age, however, many people are unaware of it—and even more are unaware of one of its intended uses: to protect patients from arbitrary decisions by insurance companies.

When patients submit claims to insurance companies, many times they receive back a letter or notice telling them that they must “exhaust” administrative remedies (ie, “exhaust” the insurance companies’ or plan’s appeals process) before asking a judge to review the decision. While the actual text of ERISA itself does not explicitly mention a need to exhaust any administrative remedy (See Kathryn J. Kennedy, The Perilous and Ever-Changing Procedural Rules of Pursuing an ERISA Claims Case, 70 UMKC L. Rev. 329, 358-59 n. 158 (2001)(“… ERISA has no express provision requiring exhaustion of administrative remedies prior to suit…”) and academics have suggested that the lack of such provision suggests that Congress never intended an “exhaustion requirement” (see Brendan S. Maher, Creating a Paternalistic Market for Legal Rules Affecting the Benefit Promise, 2009 Wis. L. Rev. 657, 676 (2009)(“Given ERISA’s protective intent, it is unlikely that Congress intended for administrative review to be a necessary precondition for a lawsuit…’’) some judges have imposed the requirement as a matter of discretion.

The court, in the case we are talking about today, (Hues) cited Costantino v. TRW, Inc., 13 F.3d 969, 974 (6th Cir. 1994) when it stated that “[t]he decision whether to apply the exhaustion requirement is committed to the discretion of the district court.” What this statement means is that a patient may be required to “exhaust” his/her insurance company’s  (or health care plan’s) appeals process if the district court judge who has jurisdiction over the patient’s case believes that the patient should be required to exhaust the insurance company’s (or health care plan’s) appeals process). To many people this doesn’t sound very fair—and we agree that it isn’t—but it is a fact of life that patients must deal with and prepare for when submitting appeals on their claims’ denials. In Hues, the patients said that they were not aware of the need to exhaust any appeals process—and because of this ignorance they merely filed a lawsuit against the insurance company two years after their denial. For the patients, the letter that they received from the insurance company was confusing—they didn’t know that they needed to appeal their denial before suing the insurance company. The court said that their ignorance was not an excuse and granted summary judgment in favor of the insurance company. Before granting summary judgment, however, the court also reminded us of another important rule: plans must provide patients with at least 60 days within which to submit their appeals. In Hues, the court said that “plan trustees have been known to waive time limits for pursuing an appeal. See, e.g., Hammonds v. Aetna Life Ins. Co., No. 2:13-cv-310, 2015 WL 1299515 at *4 (S.D.Ohio March 23, 2015).” However, the court went on to say that it wasn’t sure if the insurance company in the Hues’ case would waive the 60 day time limit.

The moral of the story is this: patients should not make any assumptions when it comes to their claims and the appeals process—and they definitely shouldn’t assume that their insurance companies will do the right thing for them if they make a mistake.

Don’t let this happen to you and your patients. Let us help you reduce the risk of making these mistakes. We can take the confusion out of ERISA appeals  so that you can focus more on what you dedicated your lives to doing: improving the well-being of the people who walk through your doors.

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