Medigap policy ambiguous but fairly debatable

Medigap policy ambiguous but fairly debatable

The Wisconsin Supreme Court affirmed a $130,725.63 judgment against National States Insurance Company under a Medigap insurance policy.

In Froedert Memorial Lutheran Hospital v. National States Ins. Co., 2009 WI 33, the Wisconsin Court found that the portion of the Medigap policy at issue was ambiguous because it did not specifically limit its liability to pay at the same rate as Medicare would have paid. Other portions of the policy did limit National States’ obligation to the lower Medicare payment rate. As a result, the portion of the policy at issue was construed against the insurance company. Both the trial court and the intermediate court of appeals had also ruled against National States, but they added on prejudgment interest at the rate of 12% per year under a Wisconsin insurance statute penalizing an insurer’s failure to timely pay a claim. The Wisconsin Supreme Court reversed the award of interest because it found interpretation of the policy provision was fairly debatable. Therefore, the insurer’s position in denying payment and forcing litigation was reasonable and could not be penalized.

The specific language at issue stated “If maximum benefits have been paid under Medicare for in-patient hospital expense, including the lifetime reserve days, we will pay all further expense incurred for hospital confinement that would have been covered by Medicare Part A.” National States argued that this provision meant that it would pay at the same rate as Medicare would have paid if the patient had still been eligible. The insurer contended that making it pay the hospital’s standard rates was “balance billing,” which is prohibited by the Medicare law. But the court held that this was not a case of balance billing. It also held that Wisconsin’s administrative insurance regulations (which have since been changed) were not entirely clear. However, the Wisconsin Supreme Court noted that other statutes regarding prejudgment interest, not considered by the lower courts in this case, might yet apply. So the case was remanded for further proceedings.

Thus, the only clear winner in this case was the patient’s estate. (The patient died as a result of the illness for which she was hospitalized.) The balance (or difference between the hospital’s standard rates and the Medicare rate) could clearly not be billed to the patient or her estate.

To download a free copy of the Wisconsin Supreme Court 's May 13 decision in Froedert Memorial Lutheran Hospital v. National States Ins. Co., simply click on the above link at the top of this blog to login to your insurance center account. If you don’t have an account set up yet, click on the ‘create an account’ link and follow the prompts.