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February 11, 2010 05:36 PM UTC

SB10-076 Insurance Bonuses to Deny Claims

  • 13 Comments
  • by: morgancarroll

( – promoted by Colorado Pols)

Last year I carried SB 09-103 which prohibited bonuses or financial incentives by insurance companies to adjusters to deny claims. It passed the Senate but was killed by the insurance industry in the house. I am continuing this fight for consumers this year in SB 10-076.

Q: What is the problem?
A: When someone buys insurance they should get what they pay for and no one should receive a financial incentive to act directly against the interests and rights of the insured. This is a very serious conflict of interest and an act of insurance bad faith.

THE BILL: It is an unfair claim practice (bad faith) to be:

(XVIII) PROVIDING COMPENSATION IN ANY FORM TO INDUCE OR ENCOURAGE THE DECISION TO DENY, OR DELAY THE RESOLUTION OF, A CLAIM OR TO CANCEL OR RESCIND AN INSURANCE POLICY.”

You might be wondering who could actually oppose this. The insurance industry response ranged from honest surprise that some would actually do this and acknowledging that it should be against the law right now to suggesting this is a widespread practice and they fear the legislation because this is integrated into many insurance business models.

Q: Are there examples of this practice?
A: Yes, but the full scope is unknown because carriers are not generally forthcoming about these programs that they know are illegal.

Better insurance companies would know to stay far away from this practice and certainly wouldn’t discuss it publicly. That said, Farmers sent their employees down to the capitol to lobby against the bill and included in their “fact sheet” that there are no examples of this happening. Extra credit for Chutspah considering.

This is an illegal bad faith practice in virtually every state in common law, and 16 other states clearly codify the prohibition against this practice and virtually any court familiar with the common law on bad faith would have to conclude it is an obvious bad faith conflict of interest.

However, Colorado has not codified the prohibition of this practice in statute and SB 10-076 seeks to remedy that. To find out which insurance lobbyists have worked defeat this year and last year’s common sense reforms, go to:

http://www.sos.state.co.us/pubs/lobby/lobby_home.htm

In fairness there are good carriers who would not engage in this practice who have not and do not oppose codifying this bad faith practice.

Comments

13 thoughts on “SB10-076 Insurance Bonuses to Deny Claims

  1. Your post started with the following:

    “…Last year I carried SB 09-103 which prohibited bonuses or financial incentives by insurance companies to adjusters to deny claims. It passed the Senate but was killed by the insurance industry in the house. I am continuing this fight for consumers this year in SB 10-076…”

    THIS is what is WRONG with YOU and every legislator in every branch of government!  The insurance industry didn’t kill it in the house, Representatives killed it in the house!  

    Legislators are no longer allowed to try to make us afraid of boogiemen in the shadows!  You are officially warned that we are well aware that lobbyists don’t vote, YOU DO!  Stop blaming lobbyists!  

    STOP IT, STOP IT, STOP IT!!!!

    Start telling us the truth!  Legislators are afraid of their own shadows!  EVERYONE who puts their name on a ballot should be willing to serve one term so they can tell the lobby to go to hell and vote for US!

    YOU FAILED!!!

    1. that lobbyists don’t vote.  It is a figure of speech.  What happens, mtnhigh, is that lobbyists pressure politicians, especially those who contribute to their campaigns.  It is a problem faced by every politician at every level of government.  Unfortunately, the lobbyists have to influence just enough people to stop a bill like this from passing.  In the case of the Senate bill last year, MANY things failed, including the representatives, the lobbyists, the insurance industry, and, quite simply, our form of corporation-run government.  This sort of thing is exactly why the Supreme Court decision about corporations a couple weeks ago was such a travesty.

      1. I know exactly what happens!  I completely disagree with you!  All a lobby can do is give money to your opponent, or say nasty things about you in an ad.  

        THEY DON’T VOTE, but legislators have given them this power!

        All their money is completely, totally useless against a legislator that votes with the needs of their constituents in mind instead of their next election!

        1. mtnhigh, while the deep structural defects of our state and national legislative systems is a perennial issue, and, in a sense, “always” the issue at hand, it is rarely ever the only issue at hand. The right-wing strategy of trucking out distractions like this one, drawing attention to anything but the policy being discussed, any time any legislator proposes a solid and necessary piece of legislation, is a great example of why the Democratic Party is the last responsible and credible party standing. Interestingly enough, you did not comment on the fact that you were responding to a state senator who has been, and continues to, fight to pass this legislation, or on the value of the bill itself. Hmmm. I wonder why that is?

          You keep bulling little bunnies out of your derby, bud. Some of us are interesting in being responsible citizens who try to get things done, despite the obstacles.

    2. Senator Carroll got her bill passed in the Senate last year.  She only has so much lobbying power in the House, though.  I’d say if you want to go with the (correct) meme that legislators are the ones who pass laws, then it was the Representatives in the State House that failed.

  2. I commented once before, when this subject came up, that insurance companies provide a great example of the challenge involved in leaving moral responsibilities to the market. When there is a moral imperative implicated in a market exchange, that is precisely when the public should step in with the necessary oversight to ensure that that moral responsibility, which a company contracted to meet, is, in fact, met. This is the basis of public utility law, which established that those enterprises that are “clothed with a public interest” require such oversight (Munn v. Illinois, SCOTUS, 1877).

    To those insurers who require no such oversight, kudos! You deserve praise and admiration. But laws are not passed to insult those who do not require their guidance; they are passed to constrain those who would not act ethically on their own.

    Business models predicated on avoiding rather than meeting the moral responsibility that the company contracted to meet are grievously unethical, and should be criminal, subject to sanctions severe enough, and enforced consistently enough, to utterly disincentivize such behaviors. Period.

  3. Oh, wait……  

    How ANY American citizen who doesn’t receive their income from these vultures (and their many ilk)can keep supporting the Republican non-agenda is beyond my comprehension.  

  4. with serious or ongoing problems.  One common trick that falls short of wrongly denying in a way that would lead to legal difficulties is to “accidentally” deny a claim. .  

    I had a friend whose young son was battling cancer and this happened to her all the time.  After spending hours making phone calls it would be resolved and the claim paid and it would be chalked up to error.  

    It happened so often it became pretty clear that it wasn’t a matter of innocent errors. There was a clear plan here to deny for no reason, probably because they knew many stressed, sick, suffering, or less educated clients would not catch all the “errors” or have the will or energy to track every little thing down.  Often it was something less expensive that ought to have been covered and wasn’t, something a person might miss in all the complicated billing and figure was just part of what they owed on their 10 or 20 percent. Sometimes it was wrongly listed as out of network and therefore covered at a lower percentage when it was not out of network. Eventually she’d get it corrected.

    If the error wasn’t detected the company saved itself money.  if it was they paid. They no doubt got away with not paying often enough to keep trying.

    The cruelty of subjecting a worried sick mother to these “errors” over and over again, forcing her to spend so much precious time on the phone talking to several levels of bureaucrats just to get what they owe her and were, in fact,  willing to pay her after putting her through all those hoops is something for which I wish we could sentence the CEOs to long prison terms. Not two weeks went by for two years that she didn’t have to fight for something that should have been automatic. Absolutely reprehensible.

  5. I had 2 seizures in December.I had an eeg, MRI, and a sleep study. The co pays were $1600.00.

    FOrtunately for me, they were determined to be caused by tramadol. I’ve dscontinued the drug.  Unfortunately for me, I needed the co pays like I needed the seizures.

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