Beware the fine print in private health plans

‘Illegal Activity’ Fine Print Leaves Some Insured, but Uncovered

By Roni Caryn Rabin
The New York Times, July 20, 2015

There’s no video of the altercation between Monroe Bird III, a 21-year-old sitting in a car with a friend, and Ricky Leroy Stone, 56, a security guard who found them one night in the parking lot of an apartment complex in Tulsa, Okla.

Mr. Stone, the security guard, told police he approached the car because he had been instructed to look out for couples having sex in the parking lot.

But the tragic culmination of their encounter is not disputed: Mr. Stone drew his gun and shot Mr. Bird, leaving him paralyzed from the neck down.

Three months later, as he lay in the hospital hooked to a ventilator, Mr. Bird’s insurance company declined to cover his medical bills. The reason? His injuries resulted from “illegal activity.”

Yet Mr. Bird was not convicted of any crime in connection with the incident. He was not even charged.

Without insurance, Mr. Bird’s family could not move him to a rehabilitation center specializing in spinal cord injuries. He was discharged from the hospital and died at home last month from a preventable complication often seen in paralyzed patients.

But Mr. Bird’s story comes with a particularly bitter sequel relevant to Americans of any background: The plan’s refusal to pay has left his family owing as much as $1 million in medical bills and, experts say, shines a light on a little-known loophole buried in the fine print of many health plans.

There are no firm numbers on how often insurers deny medical coverage based on allegations of illegal activity. But cases like Mr. Bird’s “are more common than people think,” said Crystal Patterson, an attorney in Minneapolis and chairwoman of the American Bar Association’s committee on fiduciary litigation.

Insurers have long relied on allegations of illegal activity to deny coverage to patients injured in a variety of contexts, from traffic infractions to gun accidents. The judicial rationale is that “we don’t want to reward illegal activity,” she said.

Insurance exclusions for illegal activity have been outlawed in some states, but state laws do not apply to health plans administered under the federal Employee Retirement Income Security Act, which sets standards for most pension and health plans in private industry.

Even after passage of the Affordable Care Act, self-insured plans regulated under Erisa maintain wide latitude to determine coverage. These plans “can do pretty much what they want to do,” said Robert Laszewski, an insurance industry consultant in Washington.



By Don McCanne, MD

If a person is insured and needs medical care, is there any circumstance under which the health plan should not pay for that care when it is covered by the plan?

Insurers have always used loopholes to avoid paying for appropriate care. Some of these loopholes, such as rescissions, were patched by the Affordable Care Act. But as long as private insurance is based on a business model rather than a patient service model, insurers will continue to stealthily approach patients in need as being the enemy.

Health financing policies supported by conservatives often factor in blame-the-victim as an excuse to limit or deny private coverage, or at least to assess penalties. Examples include being overweight, smoking, drug dependency, or failure to achieve treatment goals in hypertension, diabetes, and other chronic conditions.

The tragic case of Monroe Bird III adds to this list injuries that result from illegal activity - an exclusion often found in the fine print of employer-sponsored health plans. In Monroe’s case, the illegal activity proved to be equivocal - shot in the back while fleeing a security guard (who had cannabinoids in his system) investigating him to see if he and a young lady were having sex in his car. The claim of “illegal activity” was so flimsy that, on appeal, the insurance administrator claimed that it was “hazardous activity,” another blame-the-victim reason for denial.

There is absolutely no question that Monroe Bird was insured and that he desperately needed medical care. The question came down to whether or not the health plan could get away with not paying for that care, based on a blame-the-victim clause in the fine print of his health plan.

We are often accused of challenging the ethics of the private insurance industry when they are simply businesses following standard business practices. But on the face of it, the refusal by the health plan administrator to pay the million dollar medical tab for Monroe’s injury is a contemptible act. It proves that the private insurance industry will commit evil acts if it furthers their own business interests.

If we close this blame-the-victim loophole the plans will find other innovative measures to chisel away at patient health care benefits. Narrow networks and unaffordable deductibles are only the beginning.

What we need is a universal system, serving the public, designed to remove financial barriers to care for patients in need - a single payer national health program, an improved Medicare for all. What we do not need are private administrators who deny us our plan benefits through the non sequitur that having sex in a car is a hazardous activity.