Responsibility of Electric Utilities to Trim Trees and Other Vegetation

It is hard to believe that summer is coming to an end and storm season will be upon us. It is never too early to be prepared for the property losses caused by high winds and winter storms. This blog explores the duty of electric utilities to trim trees and other vegetation around power lines.

Often utility lines are downed by tree limbs that fall on the power lines during ice storms and high wind events. In turn, the downed lines send electrical surges into residences and businesses, which may cause a fire. Many subrogation professionals fail to seek recovery in such cases believing that downed electrical lines are an act of God or that the local utility did not have a duty to actively inspect for and remove vegetation that may pose a threat to the electrical distribution system. Before closing such a case, one should be mindful that most states have adopted the National Electric Safety Code (“NESC”). The NESC is a national industry standard for the safety of utility lines. The NESC requires electric utilities to prune trees away from power lines and other electrical equipment. Rule 281 of the NESC, found in the NSB Handbook 81 provides:

Where trees exist near supply-line conductors, they shall be trimmed, if practicable, so that neither the movement of the trees nor the swinging or increased sagging of conductors in wind or ice storms or at high temperatures will bring about contact between the conductors and the trees.

National Electric Safety Code, NBS Handbook 81 (National Bureau of Standard, 6th Edition 1961).

Many states require utilities to proactively inspect for and remove vegetation that pose a risk to wires. For example, in New Jersey, utilities are required “to perform vegetation management on vegetation that pose a threat to its energized conductors at least once every four years.” New Jersey Administrative Code 14:5-9.4(b). The utility is also required to remove all vegetation that is close enough to the electrical line to “affect reliability or safety” once the utility becomes aware of the threat. N.J.A.C. 14:5-9.4(c).

In sum, when deciding if a utility should have or could have prevented a fire caused by a downed line, at the very least, the subrogation professional should check the NESC and the state code to determine if the utility complied with the mandatory vegetation control requirements. This is in addition to inverse condemnation arguments, where applicable, as this site has written about previously.

PART II: What level of reimbursement are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders?

In Part I we posed the question of what rules a court will employ to determine a reimbursement rate for out-of network providers. In this installment, we examine the Initial Standing Issue: Who Can Sue in a Reimbursement Dispute – Provider or Patient?

Without a legal structure to resolve payor-provider payment disputes, non-participating providers were forced to engage in "balance billing"—a practice by which providers charged patients for the difference between the bill charged to the patient’s insurance company and the reimbursement amount provided to the provider by the insurance company. A legal structure for the resolution of reimbursement disputes began to develop. In Bell v. Blue Cross of California, (2005) 131 Cal. App. 4th 211, the Court held that emergency room physicians who did not have a written contract with a health plan nevertheless have a common law right to sue to be reimbursed for emergency services they rendered under a theory of quantum meruit (the fair value of services, or what one has earned). In early 2006, a California appellate court ruled in Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, (2006) 136 Cal. App. 4th 1155, that a health plan’s contracted medical group (which acted as the plan’s agent in paying physicians for emergency services) had standing to litigate the “reasonableness” of the rates charged by non-participating physicians who provided emergency services to the plan’s members. On July 25, 2006, Governor Arnold Schwarzenegger issued an Executive Order (Cal. Exec. Order No. S-13-06) directing the Department of Managed Health Care (DMHC) to promulgate rules protecting consumers from balanced billing.

In 2008, DMHC promulgated regulations which prohibited balancing billing (28 C.C.R. § 1300.71.39). This new rule was added to other fee reasonableness rules for providers providing services to either HMO or PPO subscribers (28 C.C.R. § 1300.71(a)(3)(B) (listing six subjective fee reasonableness factors to calculate reimbursement for services provided to HMO enrollees) and 28 C.C.R. § 1300.71(a)(3)(C) (providing that the terms of an enrollee’s Evidence of Coverage with a PPO or POS plan will determine the fee reimbursement level for a non-participating provider).

In 2009, Prospect Medical Group made it up to the California Supreme Court, (2009) 45 Cal.4th 497, and successfully framed the overarching legal issue as follows:

In the typical model, familiar to many, doctors contract to provide medical care to enrolled HMO members. Members generally use the services of one of the contracting doctors. When they do, and except for copayments the members must make when services are rendered, the HMO (or its delegate) pays the doctor under the existing contract . . .

The typical payment model sometimes breaks down, however, in the case of emergency care. In an emergency, an HMO member goes to the nearest hospital emergency room for treatment. The emergency room doctors at that hospital may or may not have previously contracted with the HMO to provide care to its members. In that situation, the doctors are statutorily required to provide emergency care without regard to the patient's ability to pay. Additionally, when the patient is a member of an HMO, the HMO is statutorily required to pay for the emergency care. For HMO members, it is always clear in advance who has to provide emergency services—any emergency room doctor to whom the member goes in an emergency—and who has to pay for those services—the HMO. The conflict arises when there is no advance agreement between the emergency room doctors and the HMO regarding the amount of the required payment.

Thus, there is inherent potential for disputes between the emergency room doctors and the HMO regarding how much the HMO owes the doctors for emergency services. When no preexisting contract exists, the doctors either submit a bill to the HMO that they consider reasonable, or the HMO makes a payment that it considers reasonable; but often, the there is a wide gap between what the doctors want, and what the HMO is willing to pay. The resolution of such disputes can create difficult problems.

IN considering this payment model breakdown and reimbursement dispute, the California Supreme held that emergency room providers cannot balance bill their patients. Furthermore, out-of-network emergency department physicians had standing to assert direct claims against health care service plans, when the plans paid an amount which the physicians believed was too low.

Noticeably missing from this analysis was (1) the legal standing of non-participating physicians who render non-emergency services to plan enrollees and (2) the legal recourse of both emergency and non-emergency non-participating providers rendering services to an enrollee of a California Department of Insurance-regulated policy (non-HMO).

Non-participating providers rendering emergency services to a plan enrollee can sue directly for reimbursement. But, non-participating providers rendering non-emergency services are left to either suing their patients, or convincing patients to file a lawsuit in their name against their insurance company to try and force the insurer to pay the fair value of services rendered.

Our next post will cover the legal theories that providers and patients are legally allowed to allege in order to enforce their rights to reimbursement for services rendered. ...

PART II: What level of reimbursement are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders?

In Part I we posed the question of what rules a court will employ to determine a reimbursement rate for out-of network providers. In this installment, we examine the Initial Standing Issue: Who Can Sue in a Reimbursement Dispute – Provider or Patient?

Without a legal structure to resolve payor-provider payment disputes, non-participating providers were forced to engage in "balance billing"—a practice by which providers charged patients for the difference between the bill charged to the patient’s insurance company and the reimbursement amount provided to the provider by the insurance company. A legal structure for the resolution of reimbursement disputes began to develop. In Bell v. Blue Cross of California, (2005) 131 Cal. App. 4th 211, the Court held that emergency room physicians who did not have a written contract with a health plan nevertheless have a common law right to sue to be reimbursed for emergency services they rendered under a theory of quantum meruit (the fair value of services, or what one has earned). In early 2006, a California appellate court ruled in Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, (2006) 136 Cal. App. 4th 1155, that a health plan’s contracted medical group (which acted as the plan’s agent in paying physicians for emergency services) had standing to litigate the “reasonableness” of the rates charged by non-participating physicians who provided emergency services to the plan’s members. On July 25, 2006, Governor Arnold Schwarzenegger issued an Executive Order (Cal. Exec. Order No. S-13-06) directing the Department of Managed Health Care (DMHC) to promulgate rules protecting consumers from balanced billing.

In 2008, DMHC promulgated regulations which prohibited balancing billing (28 C.C.R. § 1300.71.39). This new rule was added to other fee reasonableness rules for providers providing services to either HMO or PPO subscribers (28 C.C.R. § 1300.71(a)(3)(B) (listing six subjective fee reasonableness factors to calculate reimbursement for services provided to HMO enrollees) and 28 C.C.R. § 1300.71(a)(3)(C) (providing that the terms of an enrollee’s Evidence of Coverage with a PPO or POS plan will determine the fee reimbursement level for a non-participating provider).

In 2009, Prospect Medical Group made it up to the California Supreme Court, (2009) 45 Cal.4th 497, and successfully framed the overarching legal issue as follows:

In the typical model, familiar to many, doctors contract to provide medical care to enrolled HMO members. Members generally use the services of one of the contracting doctors. When they do, and except for copayments the members must make when services are rendered, the HMO (or its delegate) pays the doctor under the existing contract . . .

The typical payment model sometimes breaks down, however, in the case of emergency care. In an emergency, an HMO member goes to the nearest hospital emergency room for treatment. The emergency room doctors at that hospital may or may not have previously contracted with the HMO to provide care to its members. In that situation, the doctors are statutorily required to provide emergency care without regard to the patient's ability to pay. Additionally, when the patient is a member of an HMO, the HMO is statutorily required to pay for the emergency care. For HMO members, it is always clear in advance who has to provide emergency services—any emergency room doctor to whom the member goes in an emergency—and who has to pay for those services—the HMO. The conflict arises when there is no advance agreement between the emergency room doctors and the HMO regarding the amount of the required payment.
Thus, there is inherent potential for disputes between the emergency room doctors and the HMO regarding how much the HMO owes the doctors for emergency services. When no preexisting contract exists, the doctors either submit a bill to the HMO that they consider reasonable, or the HMO makes a payment that it considers reasonable; but often, the there is a wide gap between what the doctors want, and what the HMO is willing to pay. The resolution of such disputes can create difficult problems.

Given this payment model breakdown and reimbursement dispute, the California Supreme held that emergency room providers cannot balance bill their patients. Furthermore, out-of-network emergency department physicians had standing to assert direct claims against health care service plans, when the plans paid an amount which the physicians believed was too low.
Noticeably missing from this analysis was (1) the legal standing of non-participating physicians who render non-emergency services to plan enrollees and (2) the legal recourse of both emergency and non-emergency non-participating providers rendering services to an enrollee of a California Department of Insurance-regulated policy. Non-participating providers rendering emergency services to a plan enrollee can sue directly for reimbursement. Non-participating providers rendering non-emergency services are left to convincing their patients, who perhaps received services long ago, to file a lawsuit in their own name to assist the provider in recouping reimbursement for services rendered.

Our next post will cover the legal theories that providers and patients are legally allowed to allege in order to enforce their rights to reimbursement for services rendered. ...

PART II: What level of reimbursement are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders?

In Part I we posed the question of what rules a court will employ to determine a reimbursement rate for out-of network providers. In this installment, we examine the Initial Standing Issue: Who Can Sue in a Reimbursement Dispute – Provider or Patient?

Without a legal structure to resolve payor-provider payment disputes, non-participating providers were forced to engage in "balance billing"—a practice by which providers charged patients for the difference between the bill charged to the patient’s insurance company and the reimbursement amount provided to the provider by the insurance company. A legal structure for the resolution of reimbursement disputes began to develop. In Bell v. Blue Cross of California, (2005) 131 Cal. App. 4th 211, the Court held that emergency room physicians who did not have a written contract with a health plan nevertheless have a common law right to sue to be reimbursed for emergency services they rendered under a theory of quantum meruit (the fair value of services, or what one has earned). In early 2006, a California appellate court ruled in Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, (2006) 136 Cal. App. 4th 1155, that a health plan’s contracted medical group (which acted as the plan’s agent in paying physicians for emergency services) had standing to litigate the “reasonableness” of the rates charged by non-participating physicians who provided emergency services to the plan’s members. On July 25, 2006, Governor Arnold Schwarzenegger issued an Executive Order (Cal. Exec. Order No. S-13-06) directing the Department of Managed Health Care (DMHC) to promulgate rules protecting consumers from balanced billing.

In 2008, DMHC promulgated regulations which prohibited balancing billing (28 C.C.R. § 1300.71.39). This new rule was added to other fee reasonableness rules for providers providing services to either HMO or PPO subscribers (28 C.C.R. § 1300.71(a)(3)(B) (listing six subjective fee reasonableness factors to calculate reimbursement for services provided to HMO enrollees) and 28 C.C.R. § 1300.71(a)(3)(C) (providing that the terms of an enrollee’s Evidence of Coverage with a PPO or POS plan will determine the fee reimbursement level for a non-participating provider).

In 2009, Prospect Medical Group made it up to the California Supreme Court, (2009) 45 Cal.4th 497, and successfully framed the overarching legal issue as follows:

In the typical model, familiar to many, doctors contract to provide medical care to enrolled HMO members. Members generally use the services of one of the contracting doctors. When they do, and except for copayments the members must make when services are rendered, the HMO (or its delegate) pays the doctor under the existing contract
. . .
The typical payment model sometimes breaks down, however, in the case of emergency care. In an emergency, an HMO member goes to the nearest hospital emergency room for treatment. The emergency room doctors at that hospital may or may not have previously contracted with the HMO to provide care to its members. In that situation, the doctors are statutorily required to provide emergency care without regard to the patient's ability to pay. Additionally, when the patient is a member of an HMO, the HMO is statutorily required to pay for the emergency care. For HMO members, it is always clear in advance who has to provide emergency services—any emergency room doctor to whom the member goes in an emergency—and who has to pay for those services—the HMO. The conflict arises when there is no advance agreement between the emergency room doctors and the HMO regarding the amount of the required payment.
Thus, there is inherent potential for disputes between the emergency room doctors and the HMO regarding how much the HMO owes the doctors for emergency services. When no preexisting contract exists, the doctors either submit a bill to the HMO that they consider reasonable, or the HMO makes a payment that it considers reasonable; but often, the there is a wide gap between what the doctors want, and what the HMO is willing to pay. The resolution of such disputes can create difficult problems.

Given this payment model breakdown and reimbursement dispute, the California Supreme held that emergency room providers cannot balance bill their patients. Furthermore, out-of-network emergency department physicians had standing to assert direct claims against health care service plans, when the plans paid an amount which the physicians believed was too low.
Noticeably missing from this analysis was (1) the legal standing of non-participating physicians who render non-emergency services to plan enrollees and (2) the legal recourse of both emergency and non-emergency non-participating providers rendering services to an enrollee of a California Department of Insurance-regulated policy. Non-participating providers rendering emergency services to a plan enrollee can sue directly for reimbursement. Non-participating providers rendering non-emergency services are left to convincing their patients, who perhaps received services long ago, to file a lawsuit in their own name to assist the provider in recouping reimbursement for services rendered.

Our next post will cover the legal theories that providers and patients are legally allowed to allege in order to enforce their rights to reimbursement for services rendered. ...

PART II: What level of reimbursement are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders?

In Part I we posed the question of what rules a court will employ to determine a reimbursement rate for out-of network providers. In this installment, we examine the Initial Standing Issue: Who Can Sue in a Reimbursement Dispute – Provider or Patient?

Without a legal structure to resolve payor-provider payment disputes, non-participating providers were forced to engage in "balance billing"—a practice by which providers charged patients for the difference between the bill charged to the patient’s insurance company and the reimbursement amount provided to the provider by the insurance company. A legal structure for the resolution of reimbursement disputes began to develop. In Bell v. Blue Cross of California, (2005) 131 Cal. App. 4th 211, the Court held that emergency room physicians who did not have a written contract with a health plan nevertheless have a common law right to sue to be reimbursed for emergency services they rendered under a theory of quantum meruit (the fair value of services, or what one has earned). In early 2006, a California appellate court ruled in Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, (2006) 136 Cal. App. 4th 1155, that a health plan’s contracted medical group (which acted as the plan’s agent in paying physicians for emergency services) had standing to litigate the “reasonableness” of the rates charged by non-participating physicians who provided emergency services to the plan’s members. On July 25, 2006, Governor Arnold Schwarzenegger issued an Executive Order (Cal. Exec. Order No. S-13-06) directing the Department of Managed Health Care (DMHC) to promulgate rules protecting consumers from balanced billing.

In 2008, DMHC promulgated regulations which prohibited balancing billing (28 C.C.R. § 1300.71.39). This new rule was added to other fee reasonableness rules for providers providing services to either HMO or PPO subscribers (28 C.C.R. § 1300.71(a)(3)(B) (listing six subjective fee reasonableness factors to calculate reimbursement for services provided to HMO enrollees) and 28 C.C.R. § 1300.71(a)(3)(C) (providing that the terms of an enrollee’s Evidence of Coverage with a PPO or POS plan will determine the fee reimbursement level for a non-participating provider).

In 2009, Prospect Medical Group made it up to the California Supreme Court, (2009) 45 Cal.4th 497, and successfully framed the overarching legal issue as follows:

In the typical model, familiar to many, doctors contract to provide medical care to enrolled HMO members. Members generally use the services of one of the contracting doctors. When they do, and except for copayments the members must make when services are rendered, the HMO (or its delegate) pays the doctor under the existing contract
. . .
The typical payment model sometimes breaks down, however, in the case of emergency care. In an emergency, an HMO member goes to the nearest hospital emergency room for treatment. The emergency room doctors at that hospital may or may not have previously contracted with the HMO to provide care to its members. In that situation, the doctors are statutorily required to provide emergency care without regard to the patient's ability to pay. Additionally, when the patient is a member of an HMO, the HMO is statutorily required to pay for the emergency care. For HMO members, it is always clear in advance who has to provide emergency services—any emergency room doctor to whom the member goes in an emergency—and who has to pay for those services—the HMO. The conflict arises when there is no advance agreement between the emergency room doctors and the HMO regarding the amount of the required payment.
Thus, there is inherent potential for disputes between the emergency room doctors and the HMO regarding how much the HMO owes the doctors for emergency services. When no preexisting contract exists, the doctors either submit a bill to the HMO that they consider reasonable, or the HMO makes a payment that it considers reasonable; but often, the there is a wide gap between what the doctors want, and what the HMO is willing to pay. The resolution of such disputes can create difficult problems.

Given this payment model breakdown and reimbursement dispute, the California Supreme held that emergency room providers cannot balance bill their patients. Furthermore, out-of-network emergency department physicians had standing to assert direct claims against health care service plans, when the plans paid an amount which the physicians believed was too low.
Noticeably missing from this analysis was (1) the legal standing of non-participating physicians who render non-emergency services to plan enrollees and (2) the legal recourse of both emergency and non-emergency non-participating providers rendering services to an enrollee of a California Department of Insurance-regulated policy. Non-participating providers rendering emergency services to a plan enrollee can sue directly for reimbursement. Non-participating providers rendering non-emergency services are left to convincing their patients, who perhaps received services long ago, to file a lawsuit in their own name to assist the provider in recouping reimbursement for services rendered.

Our next post will cover the legal theories that providers and patients are legally allowed to allege in order to enforce their rights to reimbursement for services rendered. ...

Burden of Proof: The “What Changed?” Argument from “A Medley of Interesting Disability Cases”

Hegger v. Unum Life Ins. Co. of America2013 U.S. Dist. LEXIS 28587 (N.D. Cal. 2013)

Facts and holding: Plaintiff Tami Hegger (“Hegger”) was employed as a medical device sales representative until she left work in December 2004 due to back and neck pain. Hegger was covered by her employer’s ERISA-governed, long term disability (“LTD”) plan , which was insured by Unum Life Insurance Company of America (“Unum”). In April 2005, Unum approved Hegger’s claim for LTD benefits. Unum continued to pay her LTD benefits for five years, and during this time, Unum periodically reviewed Hegger’s file and determined that she remained disabled.

In November 2010, Unum terminated Hegger’s disability benefits, stating that she was physically able to perform her own occupation as a field sales representative and that the occupation would provide her with a gainful wage as defined by the Plan. Unum’s termination letter relied on the medical information in Hegger’s file, as well as the results of vocational analyses, surveillance, and Hegger’s Social Security disability benefits denial. Hegger appealed, and Unum upheld its determination. Hegger then filed suit.

Applying a de novo standard of review, the Court ruled in favor of Unum after a bench trial, and held that Hegger was not disabled under the terms of the Plan.

First, the Court found that there was “a clear medical consensus among nearly all of [Hegger’s] numerous physicians – whether retained by [Hegger], independent, or retained by Unum – that [Hegger] was able to work in a sedentary or light duty capacity.” Id. at *30. Notably, at least eight physicians arrived at this conclusion, and although several physicians stated that at times Hegger was unable to work, “these diagnoses were expressly temporary.” Id. at *31. The Court acknowledged that Hegger suffered from legitimate medical conditions that caused her some level of pain; however, it noted that this did not mean that Hegger was disabled under the terms of her Plan.

The Court stated that she had not “lived the life of a person who . . . suffer[ed] from frequent, excruciating, and debilitating pain.” Id. at *32. Indeed, Hegger continued her advanced martial arts training (and even competed in Tae Kwon Do tournaments), went to the gym, ran errands, and carried her own groceries without assistance. She walked, drove, and stood for more than six hours at a time. She also took regular vacation trips to Hawaii and, starting in 2008, intermittently worked in her prior occupation of medical device sales.

Despite Hegger’s own statements to her doctors and Unum regarding her alleged disability, the Court questioned her credibility. Specifically, the Court noted that Hegger made false and misleading statements to her doctors and to Unum regarding her physical abilities, her functional capacity to work, and her earnings.

Finally, the Court stated that although Unum’s five years of disability payments to Hegger weighed against the propriety of Unum’s subsequent benefits denial, this fact alone was not dispositive. Rather, the Court stated that “Unum is not precluded from changing its evaluation, taking a fresh look at a claim file, or re-interpreting evidence in light of developments in the administrative record over time.” Id. at *35. Thus, the Court concluded that Hegger was not disabled under the terms of the Plan and that the evidence showed she could obtain gainful employment.

Lessons learned: In the author’s opinion, the outcome of this action was likely due to the claimant’s lack of credibility, her assertions regarding her activities being contradicted by surveillance and other evidence that discredited her claimed disability. That was so, even though the claimant pointed out that the surveillance did not reveal any activities inconsistent with her reported activities. While the Court found that to be true, it found the surveillance inconsistent (and persuasive) with the claimant’s reports of debilitating, excruciating pain.

The claimant in Hegger also raised the “What changed?” argument, that is, the argument that if a disability insurer concedes and pays a claim for total disability, it should have to demonstrate some reason for changing its conclusion. While the Court acknowledged that it is appropriate to examine what new evidence the insurer is relying upon, it declined to adopt a strict estoppel approach, noting at page *35: “An initial grant and payment of disability benefits may be evidence relevant to whether a claimant is disabled, but it is not necessarily dispositive.” This issue has been discussed before. It is present in the Williams and Held cases, discussed elsewhere in this Medley, and it also arose in Muniz v. Amec Construction Mgmt., 623 F.3d 1290 (9th Cir. 2010) (discussed in the Smorgasbord), Hoffman v. Reliance Standard Life Ins. Co., 2012 U.S. Dist. Lexis 140854 (E.D. Kan. 2012) (discussed in the Ensemble); and McCollum v. Life Ins. Co. of North America, 2012 U.S. App. Lexis 17798 (6th Cir. 2012) (also discussed in the Ensemble).

Finally, the author is pleased to see another court explicitly recognize the distinction between a medical condition and a disability. As the Court stated at page *32: “The evidence establishes that plaintiff suffers from legitimate medical conditions and that these conditions cause her some level of pain. She is not, however, disabled."

From A Medley of Interesting Disability Cases

A Medley of Interesting Disability Cases: Reviewing 2013 Cases

Another year has passed, and what better way to celebrate than by taking a look at the various interesting disability cases that have been issued during that time. This year they are collected in the Medley.

In this booklet I have summarized a couple of dozen individual and group disability opinions that were issued by both state and federal courts primarily over the 2013 calendar year. As is the case with each of my yearly collections, the cases included are meant to be illustrative of how judges resolve various issues, but those cases are not necessarily the only recent cases pertinent to each issue discussed. I have included both DI and LTD cases, with a focus on substantive over procedural issues (though both are included).

The format of this year’s Medley is the same as that of past collections: I have summarized the pertinent facts of each case and set forth how the court ruled on certain of the issues raised. At the conclusion of each case summary, I have provided my personal thoughts in a “Lessons Learned” section.

For those keeping track, this sixth booklet is the latest in a series that includes: (1) the Potpourri (2008 cases); (2) the Cornucopia (2009 cases); (3) the Smorgasbord (2010 cases); (4) the Cavalcade (2011 cases); and (5) the Ensemble (2012 cases). I am hopeful that collectively they provide a gestalt-ish “feel” for how courts seem to be resolving the issues that we all face. I am also hopeful that these summaries provide helpful guidance to those in the industry, whether they be making the initial decisions (the examiners and others working for disability carriers and third party administrators), giving legal advice about those decisions (in house counsel), defending those decisions (outside counsel), or performing other functions. We can all learn from the experience of the litigants whose disputes were resolved in these cases.

I would like to thank very much Natalie Ferrall, who gave significant time and great insight in assisting me with this publication.

If you would like a copy of this year's publication, or any prior year, please email me here.

 

Federal Appeals Court Rules that Sun Life Can Offset VA Benefits Even Though Such Benefits Are Not Listed in the Policy

In an unpublished opinion issued on July 7, 2014 from the United States Court of Appeals for the Tenth Circuit, a Federal Court ruled somewhat surprisingly and approved Sun Life’s decision to “offset” VA Benefits from a disabled Veteran’s monthly disability benefits. While this case is not “binding precedent,” it can serve as a warning for those that are receiving VA Benefits, or any other income benefits, that are not listed in their Long Term Disability (LTD) ERISA Policy.

What Are Other Income Benefits?

Most, if not all, LTD ERISA group insurance policies contain language in the policy entitled “Other Income Benefits.” This section of the policy states that if a claimant is receiving Long Term Disability benefits and also benefits from other sources, the insurance company may reduce the Disability Benefits by the amount of money the claimant is getting from the other sources. The policies will then list what other income benefits they will “offset” for. In most instances, the policies will allow an offset for Social Security Disability Benefits and Social Security Retirement benefits the claimant or the claimant’s dependents receive. Often times other income benefits will also include retirement benefits if they were funded by the claimant’s employer who sponsored the LTD Policy, workers compensation benefits, and benefits received from other Group Disability Insurance Policies. Some policies will even offset for VA benefits. With the case in question, the policy did not specifically state that VA benefits would be offset.

Facts of the Case

Dr. Howard Holbrooks served for six years as a physician in the United States Army. After being honorably discharged in 2003, Dr. Holbrooks worked as an Anesthesiologist for Community Health Systems. On May 7, 2009, Dr. Holbrooks was unfortunately diagnosed with Amyotrophic Lateral Sclerosis (ALS, or better known as Lou Gehrig’s Disease). As a result of his diagnosis, Dr. Holbrooks applied for and was approved for LTD benefits under a Sun Life Long Term Disability Insurance Policy that was provided to him through his employment with Community Health Systems. Under this policy, Dr. Holbrooks would receive benefits in the amount of 60% of his prior monthly earnings.

In addition to his disability benefit from Sun Life, Dr. Holbrooks also was entitled to receive service-connected disability benefits from the Department of Veterans Affairs. After being awarded VA benefits, Sun Life determined that such benefits were “other income benefits” and thus reduced the amount of benefit they paid each month by the amount he was getting from the VA.

Seeing as the policy did not specifically list VA Benefits as being “offsettable”, Dr. Holbrooks appealed Sun Life’s decision to offset the benefits. Sun Life upheld its decision and ultimately a lawsuit was filed. Unfortunately for Dr. Holbrooks, the trial court and the court of appeals have upheld Sun Life’s Decision.

The Court’s Rationale

The Policy in question states that any benefits under the following sources are considered “other income benefits”: (a) workers’ compensation law; or (b) occupational disease law; or (c) unemployment compensation law; or (d) compulsory benefits act or law; or (e) an automobile no-fault insurance plan; or (f) any other act or law of like intent…

The Courts noted that VA benefits are “nondiscretionary, statutorily mandated benefits, [which][a] veteran is entitled to… upon showing that he meets the eligibility requirements set for in the governing statutes and regulations.” The Courts further noted that “VA regulations establish a presumption of service connection for ALS for any veteran who develops ALS any time after separation from military service.” The Courts then concluded that because “the VA was required by law to pay Dr. Holbrooks’s disability benefits, Sun Life was entitled to offset those benefits under the terms of the Policy.” The Court thus ruled that such benefits were “compulsory benefits” and thus eligible to be an offset under the policy in question.

Why Does This Decision Matter?

This decision can serve as an educational tool for those receiving both LTD benefits and VA benefits. If the insurance company is now not offsetting those benefits, they may be able to in the future and an overpayment may be owed to the insurance company. Additionally, the courts’ decisions show that while benefits might not be specifically listed in the policy, they may still be “offsettable.” Therefore, it is never safe to assume that your other income benefits cannot be offset just because those benefits are not specifically listed in the policy.

Why Ryan’s New Anti-Poverty Plan Is Another Missed Opportunity

On the surface, Rep. Paul Ryan may seem to be an advocate for those in poverty. His policy proposals, however, would undermine anti-poverty efforts by systematically weakening successful safety net programs like the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) and rental housing vouchers. Previously, we did the math on how much his “Path to Prosperity” FY 2015 budget resolution would damage the safety net and hurt those in poverty. Ryan’s new proposal for anti-poverty reform, introduced recently at the American Enterprise Institute, is in effect more of the same.

Ryan calls his plan, Expanding Economic Opportunity in America, a “discussion draft.” On that point, we agree. Ryan does need to have more discussions—with poor people. This newest plan is just a repackaging of ideas we’ve already seen.

The cornerstone of the proposal is the Orwellian-named “Opportunity Grant,” which would consolidate 11 existing benefit assistance programs, including SNAP, housing subsidies, cash welfare (Temporary Assistance for Needy Families, or TANF), and child care assistance, into a single block grant to states. States would choose whether to participate in the program and receive an Opportunity Grant, which would replace their current system of receiving funding under each individual program. States wishing to participate in this pilot program would have to submit a plan for approval by the federal government. Because the Ryan plan is deficit-neutral, the overall amount of federal funding would not change for participating states.

Under an Opportunity Grant, aid would be distributed to beneficiaries in a way that mirrors how the states would receive their funding: consolidated. Eligible individuals and families in those states would receive a “single payment” intended to cover multiple forms of aid. These Opportunity Grants would have to be administered by “at least two service providers” in each state—in addition to the state government offices, for-profits and non-profits could also be service providers. All of this is problematic for a number of reasons.                                             

According to Ryan, current federal programs “don’t see how people’s needs interact.” And yet, his proposal to consolidate these very different programs into a single, capped funding stream virtually guarantees that fewer individuals’ and families’ needs will be met and understood. Turning safety net programs into block grants with fixed levels of funding is one of the quickest ways to undermine the safety net’s effectiveness, as block grants by design are not responsive to economic changes. Although Ryan says a countercyclical element could eventually be incorporated into the block grant, it would not happen in the pilot stage. In addition, history shows that virtually every program that has been converted into a block grant has had its funding cut significantly in subsequent years.

The flat funding structure of a block grant also means its value depreciates over time. In the case of the Opportunity Grant, if a number of programs are combined and then the price of housing goes up, the amount allotted toward housing costs doesn’t necessarily follow that increase. In other words, the amount of funding is no longer tied to the real-world cost. This alone would greatly diminish both the reach and effectiveness of the Opportunity Grant. According to the Center for American Progress, “consolidating multiple programs into a single funding stream can reduce accountability for program outcomes and leave needed services vulnerable to later cuts.”

We’ve already seen how this played out with the cash assistance program. Since its transformation into TANF in 1996, the program’s funding has been flat. As a result, the real value of TANF has decreased by almostone-third. The program TANF replaced, Aid to Families with Dependent Children, used to reach nearly 70% of families with children living in poverty. Today, just 25%of families with children living in poverty receive assistance. The fact that Ryan repeatedly lauds this reform as an exemplary model does not bode well for the safety net under his new plan.

The Opportunity Grant would pose a special threat to SNAP and housing vouchers and other rental assistance programs, since they make up three-quarters of the funding being combined into the Opportunity Grant and would be most impacted by future cuts. These programs are our most effective anti-poverty tools, with SNAP currently lifting five million people out of poverty and rental assistance lifting three million people out of poverty.  

While states would be subject to few requirements in implementing Opportunity Grants, beneficiaries would have to comply with new, harsh standards. This includes extending work requirements for eligible recipients to every type of aid that would be consolidated within the Opportunity Grant. All recipients would also have to fill out what Ryan calls a “customized life plan” with their caseworkers that would actually amount to a binding contract punishable by the loss of assistance if broken. In addition, families and individuals would face time limits for how long they could receive any sort of assistance. Effectively, Ryan wants to add more barriers to accessing the programs that help people escape poverty.

Despite his professed concern with efficiency and holding down costs, Ryan has proposed a plan that would not only require additional funding to support, but would also create more administrative delays and roadblocks for people receiving assistance for even the most basic needs. For example, contrast the current operation of the SNAP program with how assistance would be distributed under the Ryan proposal. SNAP is currently one of the most efficient social services around. Administrative costs make up just 5% of the budget. In addition, SNAP can also be expedited—destitute families and individuals can receive benefits in just seven days. If every SNAP participant had to sit down with a caseworker and create a plan complete with benchmarks and employment requirements, as would be the case under Ryan’s proposal, the program’s ability to reach those in need quickly and efficiently would be dramatically impaired. Moreover, had Ryan listened more closely to those in poverty, he would have learned that the majority of SNAP participants are already working.  

One element in Ryan’s proposal we agree with is expanding the Earned Income Tax Credit (EITC) to childless adults aged 21 and over, and doubling the maximum credit and phase-in and -out rates. Currently, only adults aged 25 and older are eligible for this credit. Unfortunately, Ryan wants to pay for this by eliminating “a number of ineffective programs.” Ironically, one of those “ineffective programs” is the Social Services Block Grant (SSBG), a program just like the Opportunity (Block) Grant. Before 1981, the SSBG was actually a number of separate social services, including child care, adoption, counseling, and employment services. Since the combination of these services into the SSBG, the block grant “has lost 77% of its value due to inflation, cuts, and funding freezes.” As a result, Ryan has called for the elimination of the program, saying it “is duplicative and does not have accountability.” And yet, Ryan is proposing the same plan with the Opportunity Grant.

If eliminating the SSBG and other services, including two nutrition programs (the Fresh Fruit and Vegetable Program and the Farmers’ Market Nutrition Program), still isn’t enough of an offset, Ryan says he’ll then “eliminate corporate welfare.” Considering he just included major tax cuts for the wealthiest 2% and major corporations in his budget, we’re doubtful.

There’s nothing like missing the opportunity to give others more opportunities—and that’s exactly what Ryan did with this latest proposal. His tour around the country may have provided a valuable introduction to the extremely complex issues of poverty. But Ryan’s understanding of poverty is just that: rudimentary. A contract will not help people fight against the systemic causes of poverty. They are fighting already, with or without a contract. What they need—and what Ryan needs to understand—are policies that provide more true opportunities. No one says it better than Tianna Gaines-Turner, who testified at Ryan’s last Budget Committee hearing:

Families are [already] working. We don’t need to be placed in more work programs, we need our jobs to pay living wages, and to offer family-oriented policies like paid sick and paid family leave. This way, we can earn more, save money, and create our own safety net so that we never have to turn to the government for help again.

Ryan’s plan to combine all assistance programs into a single block grant with burdensome work and contract requirements would only limit those opportunities.

The author thanks Kali Grant, Economic Justice and Opportunity VISTA, for her extensive work on this blog.

PART I: What level of reimbursement are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders?

On August 1, 2014, Orthopedic Specialists of California (OSSC), a provider group, urged an appellate panel to revive its putative class action alleging that California Public Employee’s Retirement System (CalPERS) health plan did not properly compensate out-of-network health care providers for non-emergency services rendered to its subscribers. Orthopedic Specialists of Southern California v. California Public Employees’ Retirement System (Cal. Ct. App. July 15, 2014) B248535, 2014 WL 3749525.

OSSC argued that a lower court wrongly denied its right to seek usual, reasonable and customary (UCR) reimbursement for out-of-network services provided to CalPERS-covered patients. Additionally, OSSC argued that CalPERS' paid unreasonably low rates, though its plan calls for non-emergency, out-of-network care providers to be paid based on factors including the value of the services rendered, geographical region and the provider's charge patterns. CalPERS countered with the argument that non-emergency providers are not protected or restrained in the same way emergency health providers are. Emergency care doctors are entitled to UCR payment because they are legally compelled to provide treatment regardless of insurance coverage or ability to pay.

At center stage in Orthopedic Specialists was the following question: What level of reimbursement—(1) reimbursement terms located in a Plan’s Evidence of Coverage; or (2) UCR rates as calculated by the Department of Managed Health Care’s subjective regulatory factors (described below)—are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders? Typically, medical groups, independent practice associations, hospitals and emergency physician groups will contract with health care payors and negotiate fees for services rendered to payors’ policyholders. When no such contract exists between payor and provider, providers will charge fees that do not reflect any negotiation and which may be more or less reflective of the actual costs of providing such services. When payor and provider are not bound by the terms of a contract (which lays out fees for services to be rendered) patients are left caught in the middle of a payor-nonparticipating provider reimbursement dispute.

For example, imagine you suffer from chronic lower back pain. You feel numbness up and down your left arm and begin to lose significant functional mobility in your back and arm. You spend two years attempting to manage the pain and functional decline by utilizing conservative treatment methods, such as cortisone injections, inverted table therapy or other non-invasive treatment options. Finally, your neurosurgeon specialist recommends that you undergo medically necessary lumbar spinal fusion surgery. The procedure has been shown to provide high efficacy rates and provides more long-term pain relief than any option. You undergo the non-emergency procedure and begin to experience the benefits of this aggressive treatment option. Your neurosurgeon bills your insurance company $150,000 for the procedure. Months or even years later you come to find out that your neurosurgeon was reimbursed only $11,000 for the procedure, and now wants to be paid the rest. Do you have to pay him, or should your insurance company? (Never mind, you don't really have to answer that!)

Now imagine the following scenario involving the same neurosurgeon. You experience a freak off-road biking accident and sustain a life-threatening head and neck injury. You are rushed into the emergency room at the local hospital and the same neurosurgeon performs life-saving cranial and neck surgery on you. You undergo the emergency procedure and the neurosurgeon bills your insurance company $150,000. Months or even years later you find out that the neurosurgeon was reimbursed $11,000 for the procedure that saved your life. What happens next? What are the provider and the patient’s legal rights as it relates to the outstanding fee bill?

California law provides two very different outcomes for these scenarios. Furthermore, the type of plan the policyholder has—HMO or PPO —will also determine what law will be applied to resolving a reimbursement dispute in court. Thus, this series of posts seeks to address three aspects of provider-nonparticipating provider reimbursement disputes: (1) Who can sue in a reimbursement dispute; (2) How can providers or patients sue in a reimbursement dispute; and (3) What rules will a court employ to determine a reimbursement rate for providers in resolution of such a dispute.

Stay tuned for more....