HIPAA – Urban Legend Or Did It Just Get Worse?

From the MRF Leaders Report dated January 12, 2007:
The Department of Health and Human Services (HHS) recently printed the final rule concerning “Nondiscrimination and Wellness Programs in Health Coverage in the Group Market,” also known as the loophole that allows health insurance providers to refuse benefits on a claim that was the result of a motorcycle accident. The final rule is the result of a process that began almost 10 years ago when the interim rules were published in 1997 as a direct result to the original HIPAA (PL-104-191) legislation passed by Congress in 1996.

The idea of not delivering on health insurance coverage has it roots in a much different arena than motorcycles . . . domestic violence. Back in the early 1970’s in California, health insurance providers began exploiting a loophole that would become known as the “wife beater clause,” which essentially allowed insurance companies to not provide repeat coverage for damage done as a result of a heavy-handed husband. The insurance companies claimed that they would provide coverage for the initial incident of domestic violence, but after that they shouldn’t have to because the woman should have left the abusive husband, thus making the subsequent beatings her fault and uninsurable. Being 1970 and being California, that loophole did not last very long, but nevertheless began a troubling trend of insurance providers using every loophole to excuse themselves from paying on claims.

This final rule clarifies who exactly can be refused benefits and how many Americans are affected. The answer in both cases is a lot more than was previously thought. 135 million Americans are in the group insurance market, and every one of them can be refused any health insurance funds under what is called the “sources of injury rule.” The group market makes up the bulk of the insurance market when compared to the 2.5 million who participate in individual plans. Basically, if you have insurance through your job, even if you work for the government, you can be refused coverage of an injury based simply on the source of that injury and nothing else.

Can my employer do that? The answer is absolutely, if they tell you. Employers and insurance providers must provide with a full written or virtual explanation of your insurance plan, and each year after that they must provide you with an update that tallies any additions or reductions in material benefits. So if they are going to exploit this loophole, they simply have to tell you either in the initial book or in the yearly changes. It may be the fine print, but legally that’s ok.

Now for the real question: is it happening? Are insurance companies really denying benefits for hospital bills because the injured party was on a motorcycle instead of in a car? It would seem so, given that the insurance companies’ inherent greed and the practice of making a profit would encourage them to refuse claims whenever they had the legal authority to do so. Just ask any beach house owner in the Gulf Coast right now, and all you will hear about is the outrageous behavior of the insurance companies and how nobody is getting a fair market price for property or belongings lost. Well, it seems that the insurance companies aren’t too preoccupied with motorcyclists or snowmobilists or any other group of Americans potentially affected by this glaring loophole. For the past six months I have been asking for actual examples of individuals who can attest that they have been singled out for riding and have had to pay hospital bills out of pocket because they were hurt while doing some riding on a properly-licensed bike. To date, I have heard from no one. I thought it was me, so I inquired around some of other folks working on this issue, including the AMA, and none of the organizations I contacted have heard of any cases either.

So what’s going on? Do the insurance companies not know of this loophole? That’s doubtful given the hundreds of lawyers, accounts and actuaries they employ, many of whose sole mission is to uncover these exact types of loopholes to save their middle managers a few hundred thousand a year. Could it be that the insurance companies have some scruples and are not choosing to exploit bikers? That’s not likely either. In a closed door meeting I had with some of the original authors of this rule, they confessed that they think of this loophole as sort of an urban legend. Very little is known about why the original HIPAA bill included the source of injury rule, and very little is known about any actual examples of the rule being used by insurance companies, yet there is a lot of talk about it around the country. Undeniable is the fact that the loophole does exist and could one day be used, and if so it would spell the end of motorcycling as we know it.

One thing this final rule does carve in stone is the need for a legislative fix. In fact, in that closed door meeting with the folks at the Department of Labor and HHS they revealed that they, as an agency, don’t have the legal authority to close this loophole. In fact, if they did close it they feel that the insurance companies would sue and win, therefore making any chance at passing a legislative fix all that much more difficult. This sentiment was originally express by long time biker turned politico Tommy Thompson when he held the top spot at HHS a few years back. So I have every reason to believe the rank and file agency paper pushers are telling the truth.

So we have some work cut out for us in order to close this loophole before it does become a widespread problem. Legislation is being re-drafted and will soon be re-introduced in both bodies of Congress. When that happens, the push will once again resume toward fixing this loophole. However, Congress is going to want actual examples before they legislate the insurance industry. Without those examples, we have an uphill battle. Congress isn’t likely to waste valuable time and resources on something that may not be a problem right now, as that’s just the shortsighted nature of our Congress.

So to answer my own question, it just got worse.

You can read the final rule in the Federal Register Volume 71, Number 239. http://www.gpoaccess.gov/fr/index.html