Texas nixes the so-called "discretionary clause"
POSTED: Tuesday, December 7, 2010 - 5:34pm
UPDATED: Wednesday, December 8, 2010 - 3:06pm
The state insurance commissioner has decided to limit the ability of insurance companies to decide what they will and will not cover. And consumer groups are very happy about it.
It’s called a discretionary clause, and it is contained in most health and disability plans.
We all know, the cost of health care is an issue for everyone.
And any solution depends on everyone playing it straight. But can you really depend on that?
When you really need it, insurance can literally be a life saver. But health insurance policies are complicated, difficult to understand. And according to the Insurance Commissioner, they can be downright deceptive.
A typical discretionary clause might read…”Benefits under this plan will be paid only if the Plan Administrator or its designee decides in its discretion that the applicant is entitled to them.”
In other words, even if a procedure is technically covered under the plan, the insurer will have the final call on payment.
Dr. Gary Gross of the Blood and Cancer Center of East Texas, has seen it all. “I’ve seen a situation where they just willy nilly raise their rates. I’ve seen a situation where they just push back all the time against treatment. I’ve had a patient where the cancer is shrinking on the x-ray, and I’ve called the insurance company and said, we’d like to extend Mrs. Jones treatment and , well, ‘we’re not going to cover that.’”
Before today, the patient could go to court, but the clause stacked the deck in favor of the insurance company.
Now, they will have to justify to the insurance commission the denial of a claim, if the patient protests.
Right now, the clause leaves it up to the insurance company’s discretion whether or not to deny the claim, and then to determine if the denial was justified if there is an objection.
That sort of in-house investigation creates an opportunity for conflict of interest, according to the commissioner.
“Now the discretionary clause that insurance companies have has come to light,” Gross says, “It’s ultimately their discretion, their decision whether they are going to pay a claim or not. And no amount of fact is necessarily going to interfere with that. So it’s really a kangaroo court. They’re always going to be right, so finally that’s come to light and now several states have overturned that and they won’t have that immediate ability to always be right and now it’s going to be really a more level playing field.”
The new rule goes into effect in February for disability income insurance and iin June for all other policies.
The clause is already outlawed in 22 other states.