I-Team: Health insurance loophole

An NBC 10 I-Team investigation reveals what could be a costly problem with most private-employer health insurance policies in Rhode Island.

Many of these policies contain so-called "discretionary clauses," that give the insurance companies the sole right to decide whether a claim is approved.

Dr. Douglas Blake was an anesthesiologist in Rhode Island. Several years ago, after more than a year's worth of medical tests including MRIs, Blake was diagnosed with having a spinal stenosis. He has several operations that resulted in fusing a portion of his spine. He also has screws in his spine to help stabilize it.

Blake could no longer work the long hours in operating rooms, standing on his feet for 10 to 12 hours each day. He placed a disability claim into his health insurance company, but he was denied.

"I had documentation from my physician that I could not and should not work," Blake said.

Even though the medical evidence to support Blake's claim was overwhelming, the claim was denied after review from the insurance company's physician, who Blake called an "elderly doctor."

Because all health insurance policies that are provided through a private employer fall under ERISA, (Employee Retirement Income Security Act) Blake, like anyone else with these types of policies, had to appeal his denial in federal court.

But federal judges are bound to provide a limited review of private insurance policy claims. These policies, under ERISA, are considered trusts. So the insurance company is the sole entity to decide what's in the best financial interest of the company.

"The court is prevented from deciding the claim on the merits and must only decide, 'Did the insurance company have a reasonable basis for their decision, or whether the insurance company acted arbitrarily or capriciously,'" said lawyer Scott Kilpatrick, who represented Blake in his appeal.

These one sentence "discretionary clauses" are usually buried deep in hundreds of pages of the insurance policies, and go largely unnoticed by the insured.

Twenty states have banned these clauses, and two bills are pending at the Rhode Island General Assembly, to ban them in Rhode Island.

Blake finally won his appeal. But his cost him thousands of dollars in legal fees, and almost two years worth of appeals.

Most people can't afford to pursue their claims like Blake did. In fact, according to attorney Kilpatrick, most people, give up.