Legal Question in Insurance Law in California

You are likely getting caught up Anthem Blue Cross' claim audit process. The insurer's bean counters are seeking to determine if the surgery they pre-authorized was indeed covered under the policy.

If you spoke to one of the Anthem executives, she'd probably tell you that pre-authorizations are provisional, and based upon the then existing information provided to the insurance company. She'd go on to explain that although they pre-authorized the surgery and hospitalization, they did so based on what they were told (perhaps by you, the staff of the hospital and/or the surgeon), and they relied on that information.

She'd add, that if, for example, Blue Cross pre-authorized an appendectomy but what the surgeon did instead (or in addition) was weight-loss surgery that would not have been covered by the policy, then Blue Cross should not have paid the surgeon and will not be paying the hospital. She's also say that by checking up on what was done and why, they are protecting not only you but all their insureds, and they are helping reduce the costs of heath insurance for the American people, and preventing waste, fraud and abuse.

But before you start waiving the flag, if that same executive were to explain it AFTER she'd been given a full dose of truth serum, the story would change, just as Anthem Blue Cross changed about 10 years ago from a not-for-profit organization to a major profit-seeking business, making many of its executives multi-millionaires in the process. Every dollar they can avoid paying in claims is just one more dollar they have to pay higher salaries and bonuses to their executives, higher dividends to their shareholders, and higher earnings to report to Wall Street, making the market value of their shares greater.

Their claims audit process is primarily focused on larger claims -- the larger the dollar amount, the greater the potential savings they can achieve. If somebody lied to get them to authorize the surgery, they would not pay the claim, in full or part.

In fact Blue Cross notorious for doing "post-claim underwriting" -- although that is ostensibly illegal -- which involves an investigation to determine if the person with individual insurance who incurred big medical bills failed to properly disclose material things on his application for individual health insurance. (We've seen situations almost as bad as them saying "We see that you had an ingrown toe nail in 2005 that you didn't tell us about on you application last year, so we won't pay for that heart surgery you needed this year.")

My advice to clients in your situation is do not panic. If your insurance was provided by your employer's health plan, discuss the matter with the employee benefits manager or the broker for the plan. If yours is an individually purchased plan there is always the added potential that they might seek to rescind the coverage.

Make a record of each and every contact you have with the insurance company. Keep notes of each call and who it was with and when it occurred and what was said. Keep copies of everything they send you and you send them. Cooperate if you believe this is just a routine audit. Most audits are and the insurer winds up paying the claims. (And sometimes the insurance company does detect things that are wrong that have absolutely nothing to do with you. As most hospitals are large profit making institutions as well, some of them try to increase their profits by billing the insurer for services that were not needed or appropriate or were never performed.

If the insurer keeps coming back and asking more questions, or asks you if they can record the phone call (by the way, even if they don't be sure they are taking extensive notes of each call), or deny the claim it's time to seek a lawyer's advice.