The health care provider tries to cover itself by the "verification" process. That is, a phone call is made to the insurer, and the terms of the insurance policy are verified. Then the provider must decide if taking the case is too risky from the reimbursement point of view. Frequently the decision must be made instantly, because the patient is very ill and desperately needs treatment.

When the insurance company decides that it will not pay, the consequences are that the patient must pay, if able. Most patients cannot pay for expensive treatment, and the provider is stuck with the bill. Many providers cannot survive an illness that requires expensive treatment. Hospitals survive because many can go to their constituency in fund raising charity drives. But the provider as well as the patient is hurt, and hurt badly.

But the most difficult part of this situation is that providers tend to give great credibility to an insurance company or a Medicare denial. Thus, if an insurance company denies a claim, as not being covered by the policy, then the provider takes the insurance company's word as gospel, and simply tries to collect from the patient. That is not fair to the patient, and is also not fair to the health care provider. Hospitals especially fail to challenge the insurance company's decision.

Very frequently, the decision by an insurance company to deny a claim is incorrect. We have seen that in Medicare about 50% of the lowest level denials have been reversed on appeal (see "What Every Lawyer Should Know About Medicare Coverage of Long-Term Care" by Anthony Szczygiel, New York State Bar Journal, December, 1992). Since all Medicare claims are administered by insurance companies under contract with Medicare, it is easy to assume that where an insurer administers its own claims a substantial number of claims would be reversed, either on appeal or in a lawsuit.

The writers have found that situation to be true. We have found that many insurance claims are either reversed prior to litigation, or resolved during litigation. That is because the claims people or the data entry people may not have the command of the terms of the insurance policy as the insurers would like. Mistakes are usually made in favor of the insurer. The supervisory people also make mistakes. On questions of judgment the insurers have no incentive to decide in favor of paying the claim. In the following cases the insurers denied the claims, and then, after suit was started, the denial was reversed:

1. Payment was denied for a fetal monitor at home where a similar monitor in the hospital was covered and paid for.
2. Payment was denied for a bone marrow transplant, then reversed.
3. Insurer paid the patient, although the patient had assigned the benefits to the provider. The insurer had to pay again.
4. Payment was denied for a cancer drug, as experimental. The claim was paid when medical journal articles showed widespread use of the drug.
5. Payment was denied for treatment as above the policy lifetime maximum. The claim was paid when it was shown that substantial payments were charged to that maximum in error.
6. Payment was denied for treatment as above the policy lifetime maximum. The claim was paid when it was shown that the verification disclosed a much higher maximum.
7. Payment was denied for home care, but the claim was paid when it was shown that home care was covered by a rider.
8. Payment was denied for Lyme disease treatment after 28 days of illness. The matter was resolved during litigation when the treating physician showed good reason for the treatment after 28 days.
9. Payment was denied because the charges were not "usual and customary". The matter was resolved during litigation when it was shown that most other providers' charges in the area were approximately the same for the same treatment.
10. Payment was denied by two insurers, each claiming that the other was liable. The matter was resolved in litigation when the liability was shared.

These are only a small sample of cases that went against the insurance companies. Not all cases end in payment. However, if the insurer is not sued, there is no incentive for reviewing the file. In litigation, different personnel re-examine the file, from a different point of view.