TMA Backs Banning Discretionary Clauses

TMA is asking State Insurance Commissioner Mike Geeslin to use his discretion and ban Texas insurance companies from hiding behind discretionary clauses in their policies. Such clauses, already outlawed in 22 states, give the insurers free rein to interpret policy terms and evaluate a patient's claim for benefits any way they choose.

TMA supports an attempt by the Office of Public Insurance Counsel (OPIC), a state agency that represents consumers' interests, to convince Commissioner Geeslin to eliminate the clauses. OPIC cites this example of a discretionary clause: "The company has full, exclusive, and discretionary authority to determine all questions arising in connection with the policy, including its interpretation, and when making a benefit determination under the policy, the company has the discretionary authority to determine your eligibility for benefits and to interpret the terms and provisions of the policy."

TMA President William H. Fleming III, MD, says in a letter to the commissioner [PDF] that it is "incumbent upon Texas to take the necessary steps to protect its patients. At a time when criticism regarding the state of health care coverage has reached a fever pitch and captured the national spotlight, it is imperative that Texas demonstrate its commitment to protecting the rights of its patients to full review of their benefit denials. Certainly, we can all agree that the citizens of this state are equally deserving of the same level of protection as that which is provided to citizens in states that have prohibited the use of discretionary clauses."

Dr. Fleming's letter, a response to questions raised by the Texas Department of Insurance at a hearing on OPIC's petition to ban the clauses, cites numerous court cases and decisions to back TMA's position.

Earlier in the month, Dr. Fleming wrote Commissioner Geeslin [PDF] and asked him to prohibit discretionary clauses as unfair, deceptive insurance business practices. Discretionary clauses, he wrote, create a "fox guarding the henhouse situation that serves to provide the insurer with the authority to consistently deny benefits that a reasonable insured person would believe falls within the terms of the policy." He also said discretionary clauses are unfair to patients and employers who purchase insurance because they require an "incredibly high burden of proof" to challenge the interpretation of an insurance contract containing such clauses.

The February issue of Texas Medicine will have additional information on discretionary clauses and TMA's efforts with OPIC to eliminate them.

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Action, Dec. 31, 2009

Last Updated On

March 05, 2012