The 10 Biggest Legal Mistakes Physicians Make in ERISA Claims

Excerpted from The Biggest Legal Mistakes Physicians Make: And How to Avoid Them

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Executive Summary

The Employee Retirement Income Security Act of 1973 (ERISA) is a very peculiar statute. It was the subject of congressional concern for about 10 years, and it was finally enacted because of the Studebaker Motor Company disaster in the early 1970s, in which Studebaker dissipated pension funds to be used to pay worker pensions. When Studebaker went out of business, there was no money in the pension fund to pay benefits. What does the Studebaker disaster have to do with doctors? Very little. But as enactment was being considered to impose heavy protections on pension funds and to protect workers as to their retirement benefits, Congress wanted to encourage more employers to provide pensions for their workers. For the most part, the pension provisions help to protect workers. Under ERISA, one such encouragement for employers willing to provide for pension benefits is that they no longer have to be concerned about complying with the individual laws of each state in which they operate; state laws were superseded. Employers’ pensions would have to meet only federal (and U.S. Treasury and Internal Revenue Service) requirements. There would be a uniform standard for pension vesting, for fiduciary responsibility, and so forth.

Congress even put in a provision that requires these plans to be informative to the plan participants. If the benefit was to be denied, the plan was required to provide “adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a matter calculated to be understood by the participant.” It also then went on to require that the participant whose claim had been denied, to be afforded “a reasonable opportunity . . . for a full and fair review” by the appropriate named fiduciary of the decision denying the claim.

Now pensions have little to do with the practice of medicine and delivery of medical services and care for the patient. But as enactment of ERISA drew close, the health, life, disability, and other benefit insurers together with jointly administered employer-union plans approached Congress and asked that the law be expanded to cover not only pensions, but also all of the “welfare” type benefits (which includes benefits for patients, such as health coverage, long-term disability, etc.). They argued that in addition to protecting them from having to comply with the various regulatory laws in each of the 50 states, if Congress could establish national standards as well, employers would be encouraged to provide welfare-type benefits. The health care of Americans would increase, Congress was told. (It never happened.) And without any careful thinking about whether such expanded coverage of the law would require other or different kinds of protections from pensions, Congress added “welfare” benefits to the law.

The protections on claims handling quoted earlier became a curse rather than a protection. For Congress left the interpretation of the law to the federal judiciary. Those who serve as federal judges do not have backgrounds in patient protection; rather they come primarily from representing large insurance companies and businesses, whose interests are not patient-oriented. And even though Congress said the protection claim procedure cited earlier requires mandatory submission of any claim, the federal judiciary demanded that anyone and everyone who has a claim must follow any administrative exhaustion procedure the health insurer, the disability insurer, and the welfare plans set up, even though nowhere in the statute is that provided.

What is that administrative procedure? It’s a procedure that starts and a record that is developed without the employee’s knowledge. The physician often gets involved in the administrative procedure without even realizing it. If the physician is asked to provide medical records for the patient and the physician supplies them, he or she is participating in the development of an “administrative record,” which, as explained later, is the trial record. So the physician is, in fact, unknowingly participating in the development of the trial record. The physician who is sent a form by the insurer to answer questions is actually filling out a legal document. At this point in the process, there is no attorney to object to the insurer’s request or to point out that the questions are skewed, biased, incomplete, or insufficient to address the problem. Neither the physician nor the patient is warned that an adversarial legal proceeding has begun and the trial record has started. Only the insurer and the plan (and the federal judge to later rule) know that.

Sometimes this “trial” procedure starts simply by mailing the physician an explanation of benefits (EOB). If the doctor writes back explaining why the billing is proper or the procedure is necessary, this explanation becomes part of the “trial” record. No doctor realizes that sometimes, especially with cutting-edge medical procedures, it is important to submit in-depth medical peer-reviewed articles. Or the doctor may not know that the issue is whether the patient’s condition was preexisting, and thus be unaware that to help the patient (and to get the bill paid by the insurer), the doctor must show why the condition did not preexist under the definition of the policy.

Fortunately, there is a review process. The review is supposed to be conducted by a “named fiduciary.” But unlike trust law, as judicially interpreted under ERISA, “fiduciary” means “adversary.” Part of the reason for this interpretation is that when Congress enacted ERISA, it was thinking of the administration of pension trust funds, not health insurance and disability insurance in which there are usually no trust funds, so Congress allowed the employer, as plan sponsor, to name its officers, who are concerned about the corporate bottom line, to act as the fiduciary. Likewise, Congress allowed the health insurer to insist when it sold the policy that it would be the reviewer. Congress did not think of or demand an independent review, for at the time of enactment it was thinking about trust funds and their administration. So worker patients get an adversary deciding their fate in the review procedure.

The record made in the review procedure is added to the earlier record. If there is an adverse decision, the worker patient can sue in federal court regarding, for example, the denial of the benefit or the denial of payment of the doctor’s bill. But there is ordinarily no trial; the “trial” has already occurred: It was the administrative record for which the physician may have supplied information, not being aware that he or she would be unable to testify at a real trial, not aware of anything else in the record. Unlike all other cases, physicians may not be allowed to testify before a judge and perhaps jury. They were already at the “trial” and usually have no opportunity to explain or give details as they might have had they known they were participating in making a trial record.

Mistake 1 Failing to Realize That a “Trial” Is Taking Place

Physicians should understand that they are in a trial when their patients have insurance provided through their place of employment and they are asked to provide information on the care of those patients to the insurer. When asked for such information, physicians should not assume that all they are doing is providing a simple report. They are testifying; their medical records are testifying. If the medical records are not complete, do not address the real questions at hand, or do not provide sufficient informative data (through no fault of the physician, since he or she was unaware of the nature of this “trial”), the physician has unintentionally hurt or at least jeopardized the patient’s case.

Action Step Physicians should make sure they understand the issue, and carefully and fully support their medical opinion. If they send medical notes, they should state something like, “Not every note is intended to be a diagnosis and report of every continuing condition for claim purposes. These notes were written for the purpose of treatment and evaluation, cognizant of earlier notes that may not require repetition and still be relevant, and are not made for insurance evaluation or intended to address insurance issues.” Physicians should check with their attorney. Also, if the amount warrants it, the physician should suggest to the patient that a trial record is being prepared by the insurer and the patient must decide what he or she wants to do about it. Physicians must be aware, however, that several federal judges have frowned on the intervention of attorneys in these administrative proceedings, even though the trial record is being prepared, and prefer the patient to be unaided by legal counsel (which makes it a lot easier for the insurer to win if the patient later has to file suit).

Mistake 2 Staying “In the Box” When Filling Out a Form About the Patient

Often insurers send physicians questionnaires to be filled out. The questions and choices are “loaded” to try to limit answers, and often the choices to be checked are not how the physician might ordinarily answer. If, for example, the physician is convinced that the patient cannot work on a sustained basis in a competitive environment for any length of time during the day, but the only question asked is whether the patient can do some sedentary work, the physician might check the “yes” box, not aware that “yes” will be interpreted by the insurer (and likely by the federal judge) to mean the patient can do sedentary work on a sustained basis six and a half hours a day, day after day.

Action Step In filling out forms regarding a patient’s treatment and condition, physicians must be vigilant in looking for “trick” questions. In such instances, they should not check the box but give a narrative answer. There is no law requiring the physician to answer trick questions. Physicians should give answers, but in a way that helps the patient. Physicians should not stay in the box, but rather be aware that an innocent-looking question can be loaded.

Mistake 3 Giving Information Before Understanding the Issue Involved

Often the insurance company or benefit plan will ask misleading questions. A physician who is asked whether he or she thinks the patient is disabled should ask to be given the written definition of disabled in the policy before replying. Also, the physician should ask for a detailed description of the job from hour to hour, and for the cognitive and physical requirements of the job. Sometimes the physician may not think the patient is disabled, but what the physician’s idea of disability is and how it is defined under the policy may be different. The physician may state that a patient is not disabled believing that if the patient is accommodated and given light duty, the patient might be able to work. But ordinarily those suppositional conditions are not part of the definition of disability under the plan. So physicians must be careful, since they are likely to answer questions in a way they would not have had they known what they were really being asked. Physicians must always be wary of the “trick question syndrome.” Many doctors have disqualified their own patients when they did not mean to do so.

Action Step Physicians must remember they are participating in a “trial” that has already begun even though there may be no lawyers present or even retained. They should refuse to answer questions unless they have been given policy definitions and accurate job descriptions. Physicians should go on the offensive; they have a right to know the foundation of any question they are asked.

Mistake 4 Failing to Be Wary of Calls From Insurance Case Workers and Others

Sometimes the insurance investigator, case resource manager, or even a doctor hired by the insurance company will call the physician to discuss or ask for the doctor’s opinions about a particular patient.

Action Step The best option when physicians are called for their opinions on a patient’s case is to ask that all questions be put in writing to give them time to think about their answers. Physicians should also ask for job descriptions, job expectations, plan definitions, and so forth. Usually, the callers are reluctant to comply because they do not want to be pinned down or forced to be accurate. However, physicians should insist. It may also save a physician time in the long run and might even result in the physician being able to talk first with the patient’s lawyer, if the patient has one. Few do at that stage because they are unaware of how dishonest a process is developing.

Mistake 5 Failing to Impose Rules When Speaking With Insurance Case Workers and Others

The typical pattern of insurers is to call the physician, talk unrecorded, and then send the physician a letter stating the insurer’s view of what the physician said and that the physician (really the patient) is bound by what the insurer says that the physician said, unless the physician’s statements are corrected in an inordinately short period of time. The physician has a lot of things to do. The insurer will surely misquote or mischaracterize his or her statements. This sort of conduct is a trap, and physicians should not fall into it.

It would not be inappropriate for physicians to insist that the insurer’s representative record the telephone call and that an unedited copy of the entire recording be sent to them, as well as a transcript, if the insurer prepares one. If the representative says he or she has no recording device, physicians should insist that they be sent an agreement in advance of any discussion by telephone or in person stating that they can have as much time as they need to review and correct any letter the insurer prepares that characterizes what the insurer thinks they said. Physicians should not accept any short time limits. Physicians practice medicine, and have neither the time nor the inclination to meet an insurer’s time limits. In fact, physicians may not even want to look at what the insurer said they said until it becomes an issue.

Action Step By specifying the conditions listed in this mistake, physicians may find that insurance representatives—from caseworkers to physicians representing the insurer—may not want to talk to them. Physicians will not be falling into a rigged procedure to manufacture evidence that is not accurate. In addition, physicians will be asking for too much information that the insurance representatives know will better prepare the physicians for what may occur later. Finally, physicians will find themselves saving time for what they do best: practicing medicine and treating patients.

Mistake 6 Failing to Warn the Patient

As has been said repeatedly in the other mistakes in this section, by the time physicians receive a request from the insurer for information about a patient, the trial has already started. Physicians may be more aware than the patient that they are not being given definitions and job descriptions by the insurer and that they are not being given fully open forms and sufficient meaningful boxes to check (making it appear that the insurer is trying to limit the information they are given).

Action Step When this scenario occurs, physicians should tell the patient to start thinking about having a lawyer to participate in creating a “trial record.” This is when a lawyer should get involved if a lawyer would be able to help. At times, the amount involved may be too little to justify the hiring of a lawyer, but there are patient advocacy groups that help patients too, such as the Patient Advocate Foundation of Newport News, Va., which does not charge the patient. Other similar groups, and some physician organizations, are now available to help patients develop a “trial record.”

Mistake 7 Believing the Doctor Retained by the Insurer Who Claims to Be an Independent Medical Examiner

Many independent medical examiner organizations are really defense organizations that use doctors they have tested to ensure they will give biased reports in favor of the insurer. Often, these doctors are not specialists, and they will rely on medical literature that is not peer reviewed.

Action Step Physicians who receive telephone calls from doctors retained by the insurer should treat the call as has been described in previous mistakes in this section. Physicians should establish rules. Simply because the physician calling has a medical degree does not mean he or she is trustworthy. In fact, the physician receiving the call should find out if the physician representing the insurer knows the plan’s definition of disability and all the requirements (both physical and cognitive) of the job. In many cases, the insurer does not want to pay these physicians for the time it takes to even find out this information. Rather, they are paid to give an opinion that is adverse to the patient’s claim, often based on a paper review of only selective information. A physician receiving such calls should ask the questions, rather than allowing the doctor representing the insurer to do so.

Mistake 8 Failing to Inform the Patient of Contact by the Insurer

Physicians who are contacted by an insurance representative, whether it is a caseworker, a benefits analyst, a medical doctor, or someone else, may neglect to tell the patient. In one instance, a doctor received an EOB advising him that his treatment protocol was not an acceptable standard in the community and was not efficacious in the view of the insurer. The doctor did not send evidence to the contrary or any peer-reviewed research studies, and did not tell the patient until the patient found out later that he had large unpaid and unreimbursed medical bills. The insurer and court said that the patient was not entitled to a full and fair review because it was previously given to the doctor.

Action Step In such scenarios, if doctors tell their patients of their contact with the insurer, the patients might by able to retain a lawyer to help both of them. Often, the patient’s doctor does not know that there would be no other opportunities to explain and support the patient’s medical record and treatment; that there would be no live trial.

Mistake 9 Failing to Give Time to the Patient’s Attorney

Doctors are busy. They want to practice medicine, not help lawyers make the patient’s case. Some fear that in doing so, they will have to take time away from their practices, which is usually not true for ERISA cases.

Action Step Doctors take the Hippocratic Oath to protect their patients, and because the trial starts before the attorney gets involved, it is most important that they talk to the patient’s attorney. If it turns out that the insurer is trying to misstate the doctor’s opinion, the lawyer must be brought in to provide explanation and correction, and to do that the lawyer must rely on the treating or other doctor supplying him or her with medical reports. There is really no other way to do it.

Mistake 10 Paying Back Claimed Overcharges

Sometimes insurers providing insurance under ERISA benefit plans and other benefit plans demand that doctors pay them back for treatment they had paid for but later determined they did not have to pay. This happens, for example, in Medicare payments when an insured is not covered, but the insurer did not learn of the Medicare entitlement before the claim was paid. It may also occur when the insurer or plan finds out that the patient obtained a recovery from a third-party tortfeasor and refuses to pay the insurer or plan back under a reimbursement or subrogation obligation. Under ERISA, there is no remedy against its own participant, who is the doctor’s patient. Knowing they will not be able to get that money easily from the patient, they go after the doctors.

Action Step Physicians should not pay back money to insurers or plans unless they have a separate contractual agreement with the insurer or plan to so allow chargebacks. Without such agreement, the insurer likely cannot recover from the doctor. Physicians should insist that the insurer’s fight is with the patient and that they should be left out of it. There is a lot of law providing that the insurers cannot be successful against doctors in these situations, so physicians should not give in.

Conclusion Physicians should be aware of how the ERISA law works and how to avoid the above mistakes to better help their patients.

Written by:

Sheldon Weinhaus Esq.

Peer reviewed by:

Mark Potashnick, Esq.