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Addiction can lead to loss of Health Insurance Coverage-Are addicts a subclass?

For these types of injuries, many health insurance companies can legally refuse to pay for medical treatment if the claim arose from the insured’s use of alcohol or drugs.
For these types of injuries, many health insurance companies can legally refuse to pay for medical treatment if the claim arose from the insured’s use of alcohol or drugs.
Flickr Photo/Specialty Hospital

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.

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.

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.

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.

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.

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.

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

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 practices of insurance companies.

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