America’s healthcare system is complex. Unlike single-payer systems that exist in virtually all other industrialized countries, the U.S. relies on private health insurers to cover healthcare costs, many of which are for-profit companies. The way health insurance typically works in the U.S. is that when a patient sees a doctor or goes to the hospital, the patient assigns their right to the provider to be reimbursed by their health insurer for the medical expense they have incurred, and payment is then made directly to the provider by the insurance company. That system incentivizes doctors and hospitals to treat patients because payment for services rendered is assured.
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How Assignments of Benefits Work
To create an even greater incentive for medical providers to provide direct patient care, insurance companies have established provider networks. In exchange for a discount on the cost of services performed, medical providers are assured of receiving a set fee for each service they perform. Also, patients have an incentive to choose to receive treatment from in-network doctors and facilities that are in their network, or they will face higher out-of-pocket expenses. However, in order to join a network, a doctor or other medical provider is limited to accepting the reimbursement rate the insurance companies are willing to pay and may not “balance bill” the patient for additional charges. For some providers, especially behavioral health treatment facilities, the reimbursement rates they are offered are less than the cost of providing the services. Those providers are therefore out-of-network. However, they can charge patients what it costs them to provide necessary services, although they are still precluded from balance billing if they accept an assignment of benefits. But the ability of those providers to remain in business is dependent on having patient assignments recognized by insurance companies and receiving direct payment.
Out-of-network providers, therefore usually verify benefits with the patients’ insurance companies and seek recognition of the patients’ assignments of benefits before admitting patients or commencing treatments. Insurers have been known to disregard the assignments of benefits, though, which has triggered a wave of lawsuits.
Health Insurers Are Disregarding Benefit Assignments
A recent CNN report (“Insurer skips doctors and sends massive checks to patients, prompting million-dollar lawsuit” March 1, 2019) highlighted the problems faced by medical providers such as mental health rehabilitation facilities in obtaining payment for the services they provide when their assignments of benefits go unrecognized.
The CNN story exposes how insurers have sent payment directly to the patients who then refuse to reimburse their health care providers. That simply isn’t right since an assignment of benefits means the doctor or medical provider stands in the shoes of the patient and receives the patient’s right to be reimbursed by their health insurance company. Once the health insurer is on notice of an assignment of rights, they are not supposed to send payment to anyone but the assignee, i.e., the doctor or medical provider.
While it is the patient, not the provider, who has a contract with the insurance company, an assignment of benefits alters that relationship and places a contractual obligation on the insurance companies to honor the patient’s assignment and pay the medical provider directly, unless the policy or plan contains an anti-assignment provision. But such provisions are self-defeating since doctors, hospitals, and other medical providers have a disincentive to treat patients if they cannot receive an assignment of benefits and may refuse to treat patients if they are unable to obtain a valid assignment.
Doctors, hospitals, and rehabilitation treatment centers cannot afford to provide care if they are not being paid. A provider’s willingness to provide care depends on prompt reimbursement from insurance companies, and in some instances, the issue is even more pronounced. For example, facilities that treat patients suffering from substance use disorders are particularly vulnerable if the patient receives direct payment and may use what they believe to be a financial windfall to undo the treatment that has been provided since the patient is suddenly able to afford to purchase illicit drugs. After discharge, a patient’s recovery is dependent on being able to resist the temptation to resume drug abuse. Putting tens of thousands of dollars of insurance reimbursement directly into the hands of an addict can be like pouring gasoline on a fire. The patient’s recovery is jeopardized, and the patient’s access to future treatment is also impeded by the lack of direct payment by the patient’s insurer.
As the CNN story relates, one of the nation’s largest insurers, Anthem, has been sued over its practice of directly reimbursing patients; and our firm recently joined with another attorney in bringing a similar claim against a large Blue Cross Blue Shield company that has affiliates in several states. Plaintiffs not only allege a violation of their assignment rights, they further allege negligence and irresponsibility in turning over funds to individuals who are likely to misuse the payments and not reimburse their providers.
Proposed Solutions/Next Steps
A single-payer healthcare system would instantly end this problem. The single-payer can impose quality standards on providers and negotiate fair and reasonable reimbursement. However, under the current system in the U.S., the federal ERISA law (Employee Retirement Income Security Act), which governs employee benefit claims, adds a layer of complexity upon this issue since ERISA-governed plans insure roughly 136 million Americans according to AssociationHealthPlans.com. The ERISA law insulates insurance companies from having to pay damages in excess of the benefits due under the plan, no matter how egregious their behavior. And in many instances, courts are required to give deference to the insurance companies’ actions, which weakens the rights of claimants in court.
Therefore, when healthcare providers are denied recognition of their assignments, they need to immediately consult with an attorney who is experienced in issues unique to health insurance as well as knowledge of the ERISA law. A failure to do so leaves the provider at the mercy of the insurance company. The knowledge and experience of the attorneys at DeBofsky Sherman Casciari Reynolds, P.C. can assist with all issues relating to health insurance claims and litigation.