Untreated Alcoholism and Drug Addiction Can Lead to Loss of Health Insurance Coverage

It’s no secret that insurance companies are in business to make a profit. They agree to compensate policyholders in the event something unexpected happens; policyholders agree to pay money each year, regardless of whether compensation is actually paid out.

Insurance companies commonly use three methods to maximize potential profits. First, insurance companies make more profit when claims are not filed and, thus, try to only take on policyholders where the risk of a claim being filed is low. Second, even if the applicant is high-risk, if the threshold of “unacceptable” risk is not met, the company may cover the individual, albeit at premiums high enough to cover the increased risk. Finally, insurance companies will often deny a claim on an otherwise valid policy if there is a legal way to do so. One major problem for insurance companies is that they cannot always determine, in advance, that a potential customer is high-risk; they only discover the problem once a claim has been filed.

People with active substance abuse issues, such as alcoholism or drug addiction, are one subclass of high-risk policyholders that may experience problems either obtaining insurance at affordable rates or, even if insured, getting claims paid out. How could this be legal, you ask? I asked the same question, and was shocked at what I discovered.

Even though in recent decades mental health practitioners and doctors have classified substance abuse issues, such as alcoholism and drug addiction, as illnesses, old stigmas and stereotypes of the past have not completely eliminated discriminatory practices against substance abusers in the private sector or government.

The Uniform Accident and Sickness Policy Provision Law of 1947

The UASPPL was a model law drafted in the 1940’s to guide states in developing legislation to regulate the insurance industry. What’s a model law drafted in the 1940’s got to do with insurance coverage today? Well, many states adopted this model law and have yet to make modifications to it! The law allows for wide-scale discriminatory practices by insurance companies against people who actively suffer from untreated alcohol and drug addiction. Thirty-eight states and the District of Columbia adopted the USAPPL.

When drafted, the USAPPL was intended to prevent people from using insurance to protect themselves against the risk of unlawful conduct. One example of a provision in the model law states “insurer shall not be liable for any loss sustained or contracted in consequence of the insured’s being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.” A similar provision allowed for exclusion of coverage for medical care after suicide attempts. The USAPPL holds alcoholics, drug addicts and those who attempt suicide on the same level as, say, criminals.

Denial of medical claims of active alcoholics and other substance abusers

Health insurance claims for substance abuse issues come in two forms. The first type of claim is for treatment of the underlying substance abuse. If a health insurance policy offers coverage for substance abuse treatment, the company cannot deny claims related to that treatment such as admission to an addiction treatment center. This type of coverage is not the focus of the USAPPL.

However, alcoholics and drug abusers often injure themselves in the course of drinking or taking drugs. Alcoholics typically find themselves in the emergency room after a DUI accident, or as the result of alcohol poisoning. Drug addicts are commonly treated in emergency rooms for overdoes. Chronic alcoholics and drug addicts can even contract life-threatening illnesses such as cancer or cirrhosis. For these types of injuries, many health insurance companies can legally refuse to pay for medical treatment if 1) the claim arose from the insured’s use of alcohol or drugs, and 2) there is an exclusion provision for substance abuse-related illness and injury in the policy.

In recent years, doctors and hospitals have come under fire from mental health professionals for failure to diagnose and treat alcohol and drug related issues, especially if the problem presents itself during a substance-related trauma. While it is commonly believed that substance abuse and related injuries can only be reduced with proper diagnosis and intervention, trauma and primary care doctors often fail to address the underlying substance abuse issue when they have the chance. Why?

The idea that a health insurance claim could be denied due to an insured’s substance abuse problem puts doctors in an untenable position. On the one hand, doctors know that chronic substance abuse issues, if left untreated, could be life threatening to the patient or to others. The proper course of treatment for a patient who is a potential substance abuser would include, at a minimum, laboratory testing to uncover the presence and extent of the problem.

However, doctors also know about the USAPPL substance abuse provision and, therefore, are faced with a moral dilemma. If a doctor documents that substance abuse caused a medical claim, insurers can refuse to pay the doctor or hospital for treatment and the cost will likely be borne by taxpayers or will result in an increase of fees charged to the general public. Doctors also know that the inability to get coverage for future medical care, such as expensive treatment for liver cancer, could be a death sentence for a patient. On the other hand, doctors must uncover the full extent of the medical problem in order to adequately treat the patient. This requires testing, the results of which are discoverable by an insurance carrier.

Doctors have responded to the dilemma by reducing or eliminating laboratory testing for drugs and alcohol. As a result, insurance companies have begun mandating testing upon admission for certain types of injury; they have also lobbied state legislatures to also start requiring hospitals and doctors to undertake such testing. Connecticut now requires acute care hospitals to record the extent and outcome of any screening for alcohol for each patient, under established protocols.

Lawsuits arising from medical claims denied due to alcoholism or substance abuse

Most state courts have been unwilling to entertain fairness or discrimination arguments against imposing USAPPL-type exclusions. In the states where the USAPPL has been adopted, lawsuits filed by policyholders over denied claims are typically unsuccessful if the insurance company has been diligent in using that state’s required exclusion language in policy documents.

Courts vary in the degree of causation that the insurance company is required to prove. Although all courts require the insurance company to show at least some connection between intoxication and the injury, a “causal” connection is not necessarily required.

For example, in Illinois insurance companies need only prove that the insured’s blood alcohol content (BAC) was .10 or higher when the injury occurred in order to deny a claim. See, Burgess v. JC Penny.

On the other hand, Florida courts have come down hard on insurance companies by requiring them to show a high degree of causation. In Blue Cross v. Steck, the intoxicated policyholder was hit by an oncoming vehicle while attempting to cross a busy highway. Steck lost a leg and incurred roughly $350,000 in medical bills. The Court divided possible alcohol-related injuries into two categories. The first category, deemed “direct” injury, included alcohol poisoning and liver damage. “Indirect” injury included injuries from motor vehicle accidents. The Court held that Steck’s injuries were not excludable because Blue Cross’s policy language was not specific enough to exclude both direct and indirect injuries.

As federal legislation for health care reform is implemented over the coming years, it will be interesting to see if injuries and illnesses related to alcoholism and drug addiction will be deemed the type of “pre-existing” conditions that are immune from the exclusionary practices of insurance companies.