DISPUTE RESOLUTION AT WHOSE COST?
It is generally accepted that when a policyholder owes a premium to an insurance company, the premium is to be remitted on a timely basis. It is also generally accepted that a policyholder's failure to pay a premium on a timely basis will likely lead to cancellation of the insurance policy.
What happens when an additional premium is due and there is no current policy in place? Additional premium may be due to an insurance company under a dividend recapture provision or under a retrospective rating plan long after a policy has expired and, in some cases, even after the policyholder has switched insurers. Clearly, there are situations where an insurance company can be left in a vulnerable position when it comes to the collection of premiums from former policyholders. A court-imposed judgment against the policyholder can take years and the process can be very costly.
At least one insurer has adopted a side agreement as a means of preventing such premium disputes, which we will refer to here as the Dispute Resolution Agreement (DRA) to be used for non-guaranteed cost insurance programs. A detailed reading of the DRA will reveal its shortcomings from the policyholder's perspective. In some cases, however, the agreement is presented late in the negotiations for the insurance protection leaving the prospective policyholder feeling like it has a gun to its head. Often, the agreement is portrayed as a "standard" agreement to help prevent premium disputes. The less sophisticated insurance buyer is likely to sign the agreement with little consideration of the disadvantages.
Let's look at some of the policyholder's rights and obligations under this particular DRA:
The insurance company has some obligations/rights of its own under the DRA, which include:
The American Arbitration Association's procedures for binding arbitration are fairly well known and understood. The procedures under the insurance company's "Panel Appeals Process" are less known, and almost inconceivable.
Under the "Panel Appeals Process" the appeal will be decided by a three-person panel of insurance company employees selected by the insurance company from the insurance company's "financial, underwriting, claims and/or other departments involved with the dispute." The insurance company Appeals Panel will advise the policyholder of its decision within 60 days of receiving the information needed to make the decision.
The insurance industry supposedly exists as an alternative means for treating the risks of loss faced by insurance policyholders. With increasing regularity, however, the insurance industry actually creates avoidable risks for its policyholders. These risks must be dealt with just like any other risks of loss. Policyholders can try to control the risk by negotiating DRAs that are more palatable or simply avoid the risk by purchasing insurance from an insurer that does not require one-sided DRAs.
-- Charles H. Cox
Vol. XIX, No. 2
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We now have over two years experience with consumer directed health plans (CDHPs) and the Employee Benefit Research Institute (EBRI) has published the results of what we hope will be a continuing series of surveys of participants and sponsors. CDHPs are generally those with deductibles of $1,000 or more for individuals and $2,000 or more for families, and may or may not be linked to a health savings account (HSA) or health reimbursement arrangement (HRA). The good news is that people who received care under a CDHP were more cost-conscious than people covered by more comprehensive health plans. Unfortunately, those with CDHPs are also much more likely to forego or delay care because of the cost. CDHP participants also spent a larger share of their income on out-of-pocket health care expenses, plus they were less satisfied with their plan than individuals in comprehensive health plans. What this means for the future of CDHPs, HSAs and HRAs is unclear at this point, but it is something to keep an eye on. It does, however, seem to confirm that these arrangements may be more beneficial to employers as a means of controlling health care costs than it is to the employees involved. We'll keep you posted as more data comes in. --- Ed.
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