PRE-AUTHORIZATION DOES NOT MEAN COVERAGE

It is a common story. The doctor tells the patient that surgery is needed. The doctor’s office contacts the insurance company, and the insurance company issues a “pre-authorization” letter. The surgery goes well and the patient recovers until the bills arrive with the notation -- NO COVERAGE UNDER POLICY.

A pre-authorization letter is just that – a determination by the insurance company that the procedure is “medically necessary.” It is not a determination that the insurance policy provides coverage for the procedure. That determination is usually not made until after the bills are submitted.

The insured can request a pre-determination of coverage. That should be done in situations in which the insurance policy includes riders. Riders are amendments to the insurance company’s form policy that limit or exclude coverage.

In Wellmont Health System v. John Quinton Qualls, No. E2009-00918-COA-R3-CV (Aug. 20, 2010), the patient discovered the importance of riders and exclusions to coverage. In that case, the insurance policy possessed two exclusions: one for pre-existing conditions and another specifically for diverticulitis. The patient had surgery for diverticulitis. The insurance company denied coverage after the surgery.

The patient argued that the insurance company issued a pre-authorization letter and that constituted a change to the policy. The court said no – the letter just confirmed that the surgery was “medically necessary.”

The patient then argued that he was confused about the exclusions. The “pre-existing condition” exclusion ended after 12 months. He had diverticulitis when the policy commenced; therefore, it was a pre-existing condition. He did not have the surgery until after the 12 month period ended. Therefore, the exclusion did not apply. Correct, the court said. If the insurance policy had only one exclusion -- the pre-existing condition exclusion, the insurance company would be paying the claim. But, the policy possessed two exclusions. The specific exclusion for diverticulitis lacked an expiration date. Consequently, that exclusion applied at the time of the surgery and the insurance company properly denied coverage.

THE MORAL OF THIS STORY: The words in red in the insurance policy really do have meaning. If you have any questions regarding coverage – ask the insurance company. If you are about to spend a lot of money for surgery, ask the insurance company if it is covered by the policy. And, make sure that the answer is in writing.