Employees and executives in Chicago often ask what exactly the "out-of-pocket maximum" in their health insurance plan is. More often, participants in health insurance plans governed by the Employee Retirement Income Security Act of 1974 ("ERISA") merely assume they know what that term means.
Unlike other areas of law, such as Social Security, these terms in ERISA plans can vary in definition from plan to plan. Every plan will define that term, and the plan will place the responsibility on the participant to read and understand the plan's unique definition of "out-of-pocket maximum", among all the other definitions. Many plans require participants to call an eight-hundred telephone number for pre-authorization prior to having a surgery or other procedure, but it is crucial for the participant to also read about coverage, deductibles and out of pocket maximums in the plan, or the Summary Plan Description ("SPD") and schedule of benefits. A recent participant in a health insurance plan in the Midwest learned that lesson the hard way.
In Kitterman v. Coventry Health Care of Iowa, 632 F.3d 445 (8th Cir. 2011), the claimant had been diagnosed with ovarian cancer and her physician referred her to the Mayo Clinic. The participant called the plan's customer service, and learned that the Mayo Clinic was an out-of-network provider. Page 2 of the plan's schedule of benefits provided that the out-of-pocket maximum for nonparticipating health care providers was $8000 and $4000 for participating providers. The plaintiff asked the customer service representative whether she might have to pay more than the $8000 out-of-pocket maximum, but the representative merely told her to consult the schedule of benefits. The plaintiff then scheduled the procedure with Mayo Clinic, and underwent the surgery at a cost of about $45,000. Coventry paid just over $20,000 towards the procedure, leaving the plaintiff will a bill for nearly $25,000.
On the last page of the schedule of benefits, a clause purported to limit Coventry's liability by stating "Copayments and Charges that exceed our Out-of-Network Rate for Non-Participating Providers do not apply to your Out-of-Pocket Maximum . . . You are responsible for charges that exceed our Out-of-Network Rate for Non-Participating Providers." The district court held the schedule of benefits was a Summary Plan Description ("SPD"), and that the SPD did not adequately disclose the meaning of "out-of-pocket maximum." The Court of Appeals for the Eighth Circuit, however, reversed, holding when reading the definition of out-of-pocket maximum together with the limitation to pay claims based on out-of-network rates, the claimant received adequate disclosure of her benefits.
Perhaps she should have also advanced an argument that the plan administrator, Coventry, breached its duty of disclosure when not advising the plaintiff of the out-of-network rate for the particular surgery when she called the customer service number and specifically inquired about authorization for that surgery at an out-of-network provider. Some appellate courts have held that following a participant's request for information from the plan fiduciary, the fiduciary has a duty to disclose even information the participant did not specifically ask. If the fiduciary has been informed of the participant's circumstances, and the fiduciary must provide "full and accurate information material" to the participant, even if the participant did not specifically ask. In re: Enron Corp., 284 F. Supp. 2d 511, 557-58 (citing Shea v. Esensten, 107 F.3d 625, 629 (8th Cir. 1997)).
If you have a question about any terms in your health insurance plan or schedule of benefits, call an ERISA lawyer.