Op-ed: Insurance companies get too much discretion in deciding claims
I make my living representing people who have had denied life, health and disability claims. Here is a fairly typical conversation I have with a potential new client in my law practice.
PNC: "My health insurer denied my medical claim and I don't understand why."
Me: "What reason did they give you for denying the claim?"
PNC: "They said the treatment I received wasn't medically necessary. That makes no sense to me. Why would my doctor recommend treatment I don't need?
Me: "Did you follow up and ask your insurer to explain its denial?"
PNC: "Yes. They said that my treatment didn't meet the definition of medical necessity in the policy. But that explanation doesn't make sense either. They didn't really explain to me why my treatment wasn't necessaryjust that it didn't meet their definition."
When their benefits are denied, most of my clients don't know where to turn. Insurers routinely ignore questions and requests for information from their customers. Federal and state insurance laws provide little by way of substantive remedies when insurers stonewall claimants or give opaque explanations for why a claim is being denied. Working people can't easily go through the judicial system alone.
Their struggle often ends up as a war of attrition. Few individuals have the resources to win when going up against some of the largest corporations in the country. And the advantage insurers gain over a competitor by denying claims that would otherwise be paid may make the difference between a business's survival or death in our market economy.
In addition, most insurance policies include what are commonly known as "discretionary authority" clauses: language which allows an insurer to tie a judge's hands and require that an insurer's denial be upheld by a court unless it is "arbitrary and capricious." Many states across the country have prohibited the use of discretionary authority clauses in policies in their states. The National Association of Insurance Commissioners has stated these clauses are fundamentally unfair and deceptive because they tilt the playing field so much in favor of the insurance.
Utah does not prohibit the use of discretionary clauses in all insurance policies. As a result, insurers have more leeway to make questionable decisions about coverage with no real consequences.
When the rewards associated with increasing profits by whatever means necessary become greater than the upside of honoring contracts, fleecing becomes inevitable.
A free market without an effective and accessible civil justice system guarantees that fattening the bottom line by cutting corners rather than engaging in honest business practices will quickly become standard operating procedure. Without the ability to retain a lawyer and obtain meaningful remedies when promises are broken, individuals and companies who stand to benefit from engaging in marginal or clearly unscrupulous business tactics will proliferate.
A healthy civil justice system that is capable of effectively adjudicating employment, consumer, and commercial disputes provides the assurance that those who violate agreements will be required to compensate people damaged by their actions. In short, a robust judiciary is, in many ways, more effective than government regulation in policing the excesses of the free market.
We all have an interest in a world where sharp business practices are discouraged, where personal and financial security grows because insurance contracts are honored, and where the reasonable expectations of consumers are fulfilled. These are things every rational person would like to have in our society. But we'll not see a strong economy with financial security for individuals and institutions unless and until every person has access to real civil justice. Fortunately, there are groups in Utah dedicated to ensuring individuals get access to lawyers for civil justice problems. I'm grateful for the work And Justice For All, http://www.andjusticeforall.org, among others, carries out to assist in promoting access to civil justice in Utah every day.
Rep. Brian King represents Salt Lake City in the Utah House.