A state health benefit plan (SHBP) created for state employees is a being of law. When the charter requires that the person seeking benefits must submit any dispute over coverage for arbitration and other administrative measures before it can sue the insurer acting for the state requesting payment from the state treasury.
I Advanced Orthopedics & Sports Medicine Institute, PC v. Aetna Life Insurance Company, Civ. 20-7693, United States District Court District Of New Jersey (October 27, 2020) USDC Treated a State and Federal requirement that a SHBP whose funds come from central government finances will be interpreted strictly differently than if the benefits were from a commercial insurance company.
Aetna Livförsäkringsbolag rejects the plaintiff's case. On 26 November 2014, the plaintiff's contractor, Dr. Grigory Goldberg, back surgery on a patient ("Patient") at Centrastate Medical Center. The patient was admitted with a ruptured fracture and appeared to have a significant amount of pain. Dr. Goldberg, the on-site orthopedic surgeon, performed the operation within hours of the patient arriving at the hospital.
Patient health insurance coverage was through the New Jersey State Health Benefits Plan ("SHBP"). Defendant Aetna administered the patient's insurance plan (the "Plan") through SHBP. The plan is a health care organization ("HMO") that requires a referral from a primary care physician before certain types of care or treatment outside the network is obtained. The plan does not require a referral from a primary care physician to receive emergency care. The plaintiff is an off-network provider.
After the patient's surgery, the plaintiff filed an invoice for the total amount of $ 167,542.02 to the defendant. The defendant denied all claims related to the operation because there was no precedent or jurisdiction for the claims. On 29 January 2015, the defendant sent the plaintiff a declaration of benefits which contained denial codes “The service is not authorized” and “Pre-certification / authorization / notification absent. The complaint does not state that the plaintiff took any further action to appeal the defendant's decision after receiving the letter of February 25, 2015. With unpaid interest, the total outstanding amount from the complaint was $ 268,067.00.
The plaintiff lodged the complaint on 23 June 2020, requesting (1) reimbursement of the original operating costs on the basis of unfair enrichment, and (2) prompt payment of interest. On 30 July 2020, the defendant filed an action for inadmissibility, arguing that (i) the defendant is not a proper party to the claim, (ii) that court has no jurisdiction over the allegations made in the complaint, and (iii) the plaintiff does not exhaust SHBP's mandatory appeal procedure.
SHBP is a state and state-funded plan that provides health insurance to government employees. It is in fact the state of New Jersey that acts as the self-insurer. The state contracts directly with insurance companies, such as Aetna, to provide medical coverage to SHBP members. The State Health Distribution Commission ("the Commission") administers SHBP and has the authority to develop rules and regulations related to its activities. The funds to pay SHBP claims are allocated by the legislature and come from the state treasury of the state of New Jersey. As SHBP is state-controlled, it is exempt from the requirements of the Employee Retirement Income Security Act (“ERISA”).
State law and the New Jersey Administrative Code govern SHBP. The code specifically deals with the process of appealing a decision on negative benefits taken by a carrier. The Code provides that '[a] a new member of SHBP who does not comply with the carrier's decision and has exhausted all appeals under the plan, as well as any external review required by [Patient Protection and Affordable Care Act (‘PPACA’)] if applicable, may request that the matter be considered by the Commission. The Commission's final administrative decision may be appealed to the New Jersey Superior Court, Appellate Division.
Emptying of administrative remedies
All available and appropriate administrative measures should generally be fully examined before legal action is sanctioned. Exhaustion ensures that claims will be tried as a preliminary matter by a body of expertise, an actual register can be created for review of the appeal and there is a chance that the Agency's decisions can satisfy the parties and keep them out of court.
The Plan Requires Exhaustion
The Plan Handbook describes two types of appeals: appeals on health claims and administrative appeals. The parties disagree on how the plaintiff's claims should be classified according to the plan. However, both types of appeals require the member to exhaust administrative measures before seeking external review.
Regardless of how the plaintiff's claims are classified, the court concluded that the plaintiff was obliged to exhaust administrative remedies before filing the action. Both the New Jersey regulatory system and the simple language of the plan indicate that the consumption of remedies is mandatory for claims arising from SHBP.
Federal and state courts have consistently reached the same conclusion and have denied claims for unpaid SHBP benefits because the Appellant did not first appeal under the New Jersey Administrative Code. Reaching any other conclusion would result in circumvention of all appeal procedures provided for in the plan and in state law. appeal or any form of appeal to the Commission. The plaintiff was obliged to exhaust administrative measures before proceeding with disputes. As the plaintiff did not exhaust administrative remedies, the plaintiff's claims were rejected. Since the damage and the operation were performed as a result of an emergency, the coverage should have been applied and an appeal according to the policy language could have solved the problem easily. The plaintiff lost out by deliberately insisting on disputes without taking advantage of the available administrative measures.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant. specializes in insurance coverage, insurance claims handling, unfaithful insurance and insurance fraud almost equally for insurers and policyholders He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
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