Hard-Luck Cases Make Bad Law, Especially When the President Doesn't Understand Them

The third example used by President Barack Obama in his Sunday New York Times op-ed arguing for more Federal control of healthcare contains serious errors at both the factual and at the conceptual levels (as opposed to his first example, where the error is entirely conceptual)…

OUR nation is now engaged in a great debate about the future of health care in America. And over the past few weeks, much of the media attention has been focused on the loudest voices. What we haven’t heard are the voices of the millions upon millions of Americans who quietly struggle every day with a system that often works better for the health-insurance companies than it does for them.

These are people like Lori Hitchcock, whom I met in New Hampshire last week. Lori is currently self-employed and trying to start a business, but because she has hepatitis C, she cannot find an insurance company that will cover her. Another woman testified that an insurance company would not cover illnesses related to her internal organs because of an accident she had when she was 5 years old. A man lost his health coverage in the middle of chemotherapy because the insurance company discovered that he had gallstones, which he hadn’t known about when he applied for his policy. Because his treatment was delayed, he died.

The third example is that of Otto Raddatz of Illinois, who was initially denied a stem-cell treatment by his insurance company (Fortis). However, as Mr. Raddatz’s sister described in Congressional testimony, the decision was eventually reversed…

My brother was accused by Fortis Insurance Company of falsely stating his health insurance history, despite the fact that he had no knowledge of ever having any gall stones or aneurysms.

Luckily, I am an attorney and was able to aggressively become involved in solving this life threatening situation. I contacted the Illinois Attorney General's office and received immediate and daily assistance from Dr. Babs H. Waldman, M. D., the medical Director of their Health Bureau.

During their investigation, they located the doctor who ordered the CT scan. He had no recollection of disclosing the information to my brother or treating him for it.

After two appeals by the Illinois Attorney General's Office, Fortis Insurance Company overturned their original decision to rescind my brother's coverage and he was reinstated without any lapse.

Forget the fact that treatment was ultimately approved; the more important question, from a healthcare policy perspective, is why payment for the treatment was denied in the first place -- especially when there is a very good chance that the decision made by the greedy bastards at the insurance company not to pay was strongly influenced by Federal insurance law, which says that insurers are not liable for the consequences of their decisions to deny treatment, in cases where policies are sold through an employer.

Since we don’t know what was actually going through the minds of the Fortis employees involved in the "routine review" that led to a decision to deny payment, let’s suppose for a moment that the decision really was an honest mistake of some sort. Had the denial gone unchallenged and Mr. Raddatz died as a result, even if the denial was later determined to have been improper, if the insurance policy was provided through his employment, (let’s emphasize this one more time) Federal law (the Employment Retirement Income Security Act of 1974) dictates that the only damages recoverable would have been the costs of the treatments themselves. The Raddatz family would have not been able to recover anything related to the fact that a mistake by an insurance company led to loss of life.

Now, suppose the people of Illinois decide that this situation needs to be fixed, at least in their state. They bribe their legislators (What, you think I’m being unfair to Illinois here? Remember, I am writing this from Rhode Island, where the courts have ruled it legal for legislators to make their decisions based on bribes. I just thought that was the way things worked everywhere. But I digress…) into passing a law that holds Illinois insurance companies liable for costs that follow from their failure to properly honor the agreements they enter into.

If the state of Illinois tried to enforce such a law, the Federal Government would step-in and prevent them from doing so, on the basis that Federal law pre-empts state law when insurance is purchased through an employer and therefore that state liability laws cannot be any more stringent than Federal ones. (Presumably there is some boundary where state laws against fraud take over, if insurance companies collect money for policies that they never intend to pay out on, but the courts have yet to set clear rules defining this boundary at the present time.)

Ultimately, this leads us to an important question yet to be asked about the "public option" that may or may not still be a part of the President's health reform plans. If a so-called “public option”, i.e. an insurance company created and run by the Federal government, is included as part of the reform package, will this company be protected from being held liable for consequences resulting from its decisions to deny treatment, in the same way employer-based plans are protected from liability today? Are the American people ready for a reform that allows the big, new insurer on the block to evade responsibility for the mistakes that it makes?

And before promising that more Federal intervention in healthcare is guaranteed to improve things, shouldn't the President and Congressional Democrats show they are capable of remedying the inequitable treatment of individuals versus corporations that the Federal government has already created?