Health Insurers Think They Have the Upper Hand When a Claim is Made: Do They?

*By: Guy O. Kornblum

Health insurers as insurers of the insured when a consumer of medical services, and incur medical expenses for this care.  

Let’s look at how this health insurance works. There are three types of health insurance programs (not including Medicare which is somewhat different).  

There are individual plans, association group plans (through a common association), and employer sponsored “group” plans. Each has its own benefits and rules.

The premium charged for health insurance is based on the level of risk the insurer will assume. It must put limits on that coverage, and subject to federal and state laws, it has every right to do so. So, it is never going to agree to pay what is billed. It claims it needs to do this to make health insurance “affordable”.

In the group situation, the group has some leverage in negotiations only because the premium is usually a good sum of money because a “group” not an individual is insured. The competition among insurers selling this coverage is fierce and is very price driven — and the way to keep the price competitive is to reduce benefits. Usually, this reduction comes in negotiated:  a) deductibles, b) co-pays, and c) limitation on the benefits paid once coverage is triggered.

That is the way the large insurers get their nose under the camel’s tent and maneuver into a position to “sell” to a group — by keeping premiums down. But the only way the carrier can do this is to reduce and limit benefits.

As part of this the health insurers cut deals with providers for reduced payments. In many states, such as California, once the provider accepts the insurance payment, that provider cannot bill the unpaid “balance” to the insured/patient (but the insured still must pay. That is not the case everywhere.

But the bottom line is that as a general rule, the insurer has the right to limit its obligation to pay under the terms of its policy. The medical provider is not a party to this process and has no say in what the insurer agrees to pay. Thus, if there is no “balanced billing” the insurer has the choice:  accept what the insurance company offers and be done with it, or go after the insured for the money.   

To make it worse: Insurers use what are really “ambiguous” terms such as “reasonable and customary” and then say in the policy that the insurer has the RIGHT to determine what is “reasonable and customary”. Duh!  

Who is in control here? Of course, we know.

In some cases, you can overcome this process by claiming that the contract is “adhesive”, i.e. one sided, and so much so, the court should intervene and interpret the policy in a more favorable way for the patient (i.e. insured). Sometimes this is a very successful approach, but it takes litigation and lots of time. Meanwhile, the insurer does what it wants to do. It can afford to pay lawyers to guard its coffers.  

As a lawyer dealing with these insurers for many years, I have spent a career dealing with these issues. I know firsthand how difficult it is. 

Some insurers build in a mediation/arbitration provision as a vehicle for short cutting the resolution process to avoid these protracted disputes down the line. In many cases this is a prudent approach. It is certainly faster and more efficient that full blown litigation which is costly (often not justified) and time consuming.

That is my more than two cents!


*Mr. Kornblum is the principal in Guy Kornblum & Associates, a San Francisco based law firm that specializes in representing clients in mediations, trials, arbitrations and appeals.  Mr. Kornblum has had his own for firm for over 30 years.  He is certified in Civil Trial Advocacy by the National Board of Trial Advocacy and is a Charter Fellow, Litigation Counsel of America Trial Lawyer Honorary; a Life Member, Multi-Million Dollar Advocates Forum; a Platinum Member, The Verdict Club, which recognizes “the superior accomplishments of its professionals as measured by the achievement of significant settlements and verdicts;” and a The Legend Society Top Lawyer.  Mr. Kornblum has taught law at local law schools and has co-authored three legal texts, the latest, “Negotiating and Settling Tort Cases,” 2 Volumes, published by the American Association for Justice and Thomson West Publishing Company.

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