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Health Insurers Requiring “Step Therapy” May Be in Breach of Fiduciary Duties

Health insurance companies, in an effort to protect profits, are using step therapy with more frequency.  Step therapy is the insurance practice of requiring policyholders to try cheaper treatments before they can use more expensive ones.  Insurers can require step therapy even when the policyholder’s doctor concludes that the less expensive treatments will not work for a patient based on the patient’s medical history and condition.  

Step therapy comes with risks.  Every year, new treatments are developed that can alleviate conditions that were previously considered untreatable.  Yet under step therapy, insurers require their insureds to first try older, less expensive therapies for several months to see if the cheaper treatment works.  If the cheaper treatment fails, then the health insurer considers “stepping” up to the next, more expensive therapy which has a greater chance of success.

When a health insurer contracts to provide health insurance for a patient, the insurer vests in themselves the sole discretion to provide or authorize medically necessary treatment.  By taking on this responsibility, the insurer begins making medical decisions for the insured. This is how the relationship between insurer and insured has evolved over recent decades such that the insurer no longer merely pays claims or indemnifies the insured for healthcare costs.  

Now that the insurer is making healthcare decisions for their insureds, the insurance company acts in a fiduciary capacity.  By serving as a fiduciary, the insurance company has a duty to act in the best interests of their insureds when deciding whether or not to authorize treatment and services.  If an insurance company breaches this duty by wrongfully withholding treatment, and in doing so causes harm to the insured, the insurance company becomes liable for damages. Said another way, if a patient is harmed by an insurance company’s reliance on step therapy, the patient may have a claim against the insurer for the harm he or she sustained.  

Jason Cornell is a Florida attorney who represents patients who have claims against their health insurer.  You can reach Jason at 561 529-0535 or jcornell@liggiolaw.com.

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