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A Better Partnership
May 19, 2016

COA upholds the right to file a civil action for a denial of health insurance benefits, even after an unfavorable regulatory decision

Under the Patient’s Right to Independent Review Act (PRIRA), a person who is denied insurance coverage can appeal externally to the Office of Financial and Insurance Regulations (OFIR) and file a claim in county circuit court, the Court of Appeals held in Beaumont Hospital v Wass, No. 323393.  A circuit court claim is not barred by an unfavorable OFIR decision regarding the same appeal.
 
Jon Wass is a policy holder with Time Insurance Company who was denied coverage for cancer treatment because Time asserted that Wass’ cancer was a preexisting condition.  Wass appealed to Time’s internal grievance panel, which agreed and denied coverage.  Wass then sought external review from OFIR, who assigned the review to an independent panel. The panel reviewed documents from Wass’ case and also concluded that cancer was a preexisting condition, and upheld the decision to deny coverage.  Wass then appealed to the Oakland County Circuit Court, pursuant to MCL 550.1915(1), a section of PRIRA that provides for such appeals.  The circuit court, without conducting any evidentiary hearings, concluded that the OFIR review was authorized by law, and affirmed its decision.
 
William Beaumont Hospital later filed a complaint against Wass, seeking payment for medical services.  Wass brought Time into the suit, claiming it was the insurance company’s responsibility to pay.  Time moved to dismiss the action, stating that Wass’ claim was barred by the earlier action in circuit court between Time and Wass.  The circuit court agreed and granted the motion in Time’s favor.
 
The Court of Appeals reversed the circuit court and held that Wass’ claim was not barred because he never had the opportunity to adjudicate his case.  Because the proceedings were not adjudicatory in nature, the claim was not barred by either claim preclusion or res judicata.  The court further held that PRIRA contemplated an insured person being able to seek relief from both an administrative review and a circuit court claim.  The court addressed due process concerns and stated that a claim in circuit court will only be barred if the administrative review of the same appeal was judicial or quasi-judicial.  This means that individuals who are denied coverage are entitled to an adjudicative hearing—whether it is from an administrative agency or a county court—where they can present evidence, examine witnesses, and cross-examine evidence from the insurance company.  The Court of Appeals concluded that the Legislature intended insured individuals to have both an administrative review and court claim available to appeal coverage denial.

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