Does Verizon Wireless Settlement Spell Doom For Early Termination Fees?

Verizon Wireless agreed last week to pay $21 million to settle a class action lawsuit alleging that it unlawfully charged consumers early termination fees for ending cell phone contracts before they expired.  According to the report at Cellular-News.com, a Verizon Wireless spokesman called the lawsuit a "distraction" and said "this was an easy way to resolve it."  But with similar lawsuits pending against Sprint, and the Federal Communications Commission (FCC) waiting in the wings to enact rules which permit such fees under a national framework, the question of whether these fees will continue has not yet been resolved.

 

Certainly a wireless provider that sells a phone at a discount to a customer is entitled to recoup the difference between what it paid for the phone and the amount that it charged the customer for the phone.  The problem lies with charges to customers that have already paid enough during the term of their contract to fairly compensate the wireless provider for the phone, and to others that did not purchase the phone from the wireless provider.

 

It makes no sense at all, for example, to charge a customer early termination fees when that customer bought his or her phone on eBay, and simply signed up with the wireless provider for cell phone service.  Likewise, a customer that has had their phone for 5 years should not pay an early termination fee.  And yet, these customers are charged the same amount as a customer that bought a phone from the wireless provider and then terminated the contract a month later.  It is not right, it is not fair, and this practice should be stopped.  With any luck, Verizon Wireless, Sprint, and every other wireless provider will get the hint: start treating customers fairly or pay the consequences.

Something We Can Agree On: Passage of Medicare Improvement Act Is "Good Medicine" for Everyone

Last night, the United States Senate approved the Medicare Improvement Act for Patients and Providers (H.R. 6331) by a vote of 69 to 30. In an important demonstration of bipartisan support for the measure, 18 Republican Senators joined with Democratic Senators in voting to approve the legislation. The House of Representatives had previously approved the legislation by a vote of 355 to 59. The legislation now moves to the desk of President Bush, who has said that he "strongly opposes" the bill. The good news is that the bill will likely be enacted even if President Bush exercises his veto power because the necessary majorities in both houses of Congress have pledged their support.

If enacted, H.R. 6331 will reverse the 10.6 percent cut in Medicare payments to healthcare providers became effective July 1, 2008, as well as the projected 5.4 percent cut forecast for 2009. It will also continue the 0.5 percent increase in payments for the remainder of 2008, and physicians would receive an additional 1.1
percent increase over 2008 levels in 2009.

Why is this important to consumers? Medicare pays hospitals, physicians, and other healthcare providers, for medical treatment needed by elderly and disabled patients, as well as military families and retirees that do not have private insurance to pay for such treatment. When Medicare reduces payments for legitimate claims, healthcare providers are forced to look elsewhere to cover the costs of providing medical treatment to these patients. Many private insurers have tied their reimbursement rate to the rates paid by Medicare, thus even private insurance pays less when Medicare pays less.

Additionally, hospitals and emergency room physicians are required to treat patients in hospital emergency rooms under EMTALA regardless of whether such patients have insurance. Thus hospitals/doctors are required to care for many patients who cannot pay for their emergency room treatment, and hospitals/doctors may not receive adequate reimbursement from Medicare if Medicare reduces payments for such care. The result is that patients with private insurance, and those that are "self-pay," wind up paying more for medical care in order to subsidize those patients whose claims are paid by Medicare, and those patients who are treated under EMTALA without any reimbursement to the hospital and/or physician.

Hospitals, doctors, and other healthcare providers have used this dilemma to justify caps on damages in medical malpractice lawsuits. The solution to ensuring that medical care is provided to those that need it is not limiting the damages available to victims of medical malpractice, however. While it is true that hospitals and doctors must cover their costs, including the cost of paying for medical malpractice insurance, it is unfair to shift the burden of loss to victims of medical malpractice merely because Medicare does not adequately reimburse hospitals/physicians, or because hospitals/physicians are required to treat patients under EMTALA without reimbursement.

It is unfortunate that the healthcare industry and the legal profession have not worked more closely together to resolve this problem. It seems that both have a desire to serve their clients, and yet neither is willing to work toward a solution that addresses both the economic needs of the healthcare industry, and the right to fair compensation for medical malpractice victims. One must wonder what might be possible if lawyers were willing to acknowledge that healthcare providers are entitled to be fairly compensated for the medical treatment of patients, and if healthcare providers were willing to acknowledge that patients are entitled to be fairly compensated for their pain, suffering, and disability, when a healthcare provider is medically negligent.

The truth is that neither healthcare providers, nor medical malpractice victims, should be required to bear the burden that we, as a society, place upon ourselves in ensuring that all Americans receive adequate medical treatment. The answer to this problem lies in a solution that provides adequate reimbursement to hospitals and physicians, while preserving the fundamental right of American citizens to seek redress in our courts for their injuries. The passage of H.R. 6331 is only one component of this solution. We need to look next toward increasing the reimbursement rates for Medicare, Medicaid, and other government funded insurance programs, as well as the reimbursement rate for private insurers, in an amount sufficient to cover the cost of medical malpractice insurance.

If we are unwilling, or unable, to pay for the costs associated with ensuring adequate medical care for all Americans, including the cost of ensuring adequate victim compensation, we face the risk of creating a disparity between the "haves" and the "have nots," e.g. those that have private insurance, and those that do not. It is unfair to require those who are able to afford private insurance to subsidize those who cannot by paying more for insurance and/or relinquishing their right to compensation for their injuries. Likewise, it is unfair to require hospitals and physicians to cover the losses they sustain when they underpaid by Medicare for a legitimate claim, or when they are not paid for the cost of treating a patient they are required to treat under EMTALA.

Should we choose not to properly fund medical treatment for all Americans, including paying for the cost of medical malpractice insurance, we will have to face, as a nation, the difficult decision of whether we are willing to require the "haves" to subsidize the "have nots" by paying more for medical care and/or giving up their right to fair compensation through limitations on medical malpractice damages. Alternatively, we will have to decide whether we are willing to tolerate a disparity between the "haves" and the "have nots," by affording greater protection to those who can afford to pay for it. Burying our heads in the sand, and hoping that the problem will just go away, is not an option.

Report Names 10 Worst Insurers for Consumers

A report released today by the American Association for Justice (AAJ) ranks Allstate at the top of a list of "the worst insurers for consumers."  This dubious distinction is based on what the AAJ calls "a comprehensive investigation of thousands of legal documents and financial filings."  The report accuses these insurers of using tough tactics to "deny, delay, and defend" claims in order to increase profits.

 

According to the AAJ press release announcing the report, "the rankings show a distinct pattern of insurance industry greed amongst 10 companies that refuse to pay just claims, employ hardball tactics against policyholders, reward executives with extravagant salaries, and raise premiums while hoarding excessive profits."  “While Allstate publicly touts its ‘good hands’ approach," AAJ CEO Jon Haber says, "it has instead privately instructed its agents to employ a ‘boxing gloves’ strategy against its policyholders.” Haber added, “Allstate ducks, bobs and weaves to avoid paying claims to increase its profits.”

 

The rest of the rankings were summarized in the AAJ press release as follows:

 

2.      Unum (NYSE: UNM) – Unum’s actions are even more shameful considering the type of insurance it sells: disability.  Unum’s behavior was epitomized when it denied the claim of a woman with multiple sclerosis for three years, stating her conditions were “self-reported,” contrary to doctors’ evaluations.  In 2005, Unum agreed to a settlement with insurance commissioners from 48 states over their practices.

 

3.      AIG (NYSE: AIG) – The world’s biggest insurer, AIG’s slogan was “we know money.”  AIG, described by commentators as “the new Enron,” has engaged in massive corporate fraud and claims abuses.  In 2006, the company paid $1.6 billion to settle a host of charges.

 

4.      State Farm – State Farm is notorious for its deny and delay tactics, and like Allstate, hired McKinsey consultants.  State Farm’s true motives became apparent during Hurricane Katrina; for example, it employed multiple engineering firms until they could deny the claims of the Nguyen family of Mississippi.  In April 2007, State Farm agreed to re-evaluate more than 3,000 Hurricane Katrina claims.

 

5.      Conseco (NYSE: CNO) – Conseco sells long-term care policies, typically to the elderly.  Amongst its egregious behavior, the insurer “made it so hard to make a claim that people either died or gave up,” said a former Conseco-subsidiary agent.  Former Conseco executives were fined when they admitted to filing misleading financial statements with regulators.

 

6.      WellPoint (NYSE: WLP) – Health insurer WellPoint has a long history of putting profits ahead of policyholders.  For instance, California fined a WellPoint subsidiary in March 2007 after an investigation revealed that the insurer routinely canceled policies of pregnant women and chronically ill patients.

 

7.      Farmers – Swiss-owned Farmers Insurance Group consistently ranks at or near the bottom of homeowner satisfaction surveys, and for good reason.  For example, Farmers had an incentive program called “Quest for Gold” that offered pizza parties to its adjusters that met low claims payments goals.  Like Allstate, it also hired the McKinsey consultants.

 

8.      UnitedHealth (NYSE: UNH) – The SEC opened an investigation into former UnitedHealth CEO William McGuire for stock backdating, which ultimately led to his ouster in 2006 and returning $620 million in stock gains and retirement compensation.  Physicians have also reported that their reimbursements are so low and delayed by the company that patient health is being compromised.

 

9.      Torchmark (NYSE: TMK) – According to Hoover’s In-Depth Company Records, Torchmark’s very origins were little more than a scam devised to enrich its founder, Frank Samford.  Torchmark has preyed on low-income Southern residents and charged minority policyholders more than whites on burial policies.

 

10.     Liberty Mutual – Like Allstate and State Farm, Liberty Mutual hired consulting giant McKinsey to adopt aggressive tactics.  Liberty’s tactics were highlighted when a New York couple’s insurance was “nonrenewed” by Liberty, even though they lived 12 miles from the coast and never experienced weather-related flooding.

 

 The AAJ hopes that consumers will use the information contained in the report to hold the insurance industry accountable.  The full report is available at: http://www.justice.org/docs/TenWorstInsuranceCompanies.pdf.

 

 

 

ERISA Preemption Robs Wife of Dying Worker of Insurance Benefits

A story from the Associated Press appearing in the Tampa Tribune this week chronicles the plight of a woman who was robbed twice: once when her husband died of cancer, and once when her husband's company and its insurer failed to pay her claim for life insurance proceeds.  The story is a sad example of how well-intended federal legislation can deprive Americans of even their most basic rights through the legal principle of federal preemption.

 

According to the story, Thomas Amschwand knew that he was dying of a rare form of heart cancer and did everything he was told that he needed to do to make sure his wife would collect on the life insurance policy he had through his employer, Spherion Corp.  He filled out the paperwork, paid his premiums, and asked repeatedly whether there was anything else he needed to do.  Spherion told him no. He even asked for a copy of the policy, but Spherion never sent it to him.

 

When Thomas died in 2001 at the age of 30, his wife, Melissa, filed a claim for the $426,000 payable to her as the beneficiary under the policy.  But Spherion told Melissa that she would not receive a dime under the policy.  Why?  Because Spherion switched insurers after Thomas was diagnosed with cancer, and the new policy did not take effect unless and until an employee had worked one full day.  Melissa says that Thomas could have, and would have, worked that one day if only he had known that is what he needed to do to make sure that his death was covered under the policy.  But the fact is Thomas didn't know, because Spherion didn't tell him, even though he asked.

 

Never mind the fact that Spherion never informed Thomas of the one-day-of-work requirement despite his repeated inquiries to ensure that his wife would be taken care of under the policy.  Never mind the fact that Spherion could have waived the one-day-of-work provision for Thomas, as it did for other employees.  And never mind the fact that Thomas had paid all of the premiums due under the policy.  When Melissa filed suit to collect her money, the court told her that her claim was preempted by ERISA, and the most that she could receive was her money back for the premiums Thomas had paid. 

 

What?!  That's right.  The Employee Retirement Income Security Act (ERISA) was originally intended as means of protecting employee benefits, but it has been used as shield by employers like Spherion who say that any claims against an insurance policy governed by ERISA are subject to the provisions of ERISA, which means that the most you get is your premiums back in cases like that of Thomas and Melissa Amschwand.  And, courts have said, ERISA preempts or overrides state law tort claims against the employer for fraud or negligence - e.g. for telling Thomas that everything was taken care of when it allegedly knew that it was not.

 

Even the Bush administration thinks that this result is unfair, but has anyone done anything about it?  No.  One would think that Congress would have stepped in to prevent this sort of injustice but it has not.  Thus claimants like Melissa, or you if you happen to be unfortunate enough to find yourself in the same position, have absolutely no recourse. 

 

For those wondering about what federal preemption means, this is what it means: Congress, and by delegation of Congressional power, federal agencies, can and do deprive innocent victims such as Thomas and Melissa Amschwand of their day in court.  God forbid that one day that victim might be you or your family.  It is not right, it is not fair, and the law should be changed.

 

New Filing Fees: The Cost of Justice Just Went Up

Effective July 1, 2008, new court filing fees went into effect in Florida state courts that make filing a claim, including a counterclaim or cross-claim, substantially more expensive in certain cases. Most notably, the filing fee for county court evictions increased from $80 to $270, a 238% increase. Additionally, there was previously no fee assessed for filing a counterclaim or cross-claim, but there is now: $295.00. This means that a defendant who wishes to "counter sue" a plaintiff must now pay slightly more than the plaintiff in filing fees in order to assert a claim against the plaintiff in the same lawsuit. It also means that landlords are likely to do more to try and resolve a claim before filing an eviction action against a tenant, or perhaps engage in "self-help" to ensure that non-paying tenants vacate.

This development is not surprising, given the lack of funding that has been provided to our state court system by the Florida legislature. It is also unlikely to curtail the filing of most lawsuits because, except in eviction cases, filing fees are not substantial enough to serve as a deterrent to filing suit. What is probably of greatest concern is that landlords may attempt to avoid paying the filing fees in eviction actions by taking matters into their own hands, and forcing tenants out by other means. If this occurs, we may see an increase in civil actions against landlords by tenants that claim the landlord violated Florida's landlord-tenant statutes by doing things such as turning off utilities, changing locks, or blocking access to rental units, all of which are prohibited.

There is no doubt that our courts need more funding, the state court system is already operating on a shoestring budget as it is. However, increasing fees is a short term fix to a long-term problem. Electronic case management and filing (ECMF), already being used by most federal courts, is a means by which we can reduce or eliminate the need for future rate increases. Once an initial pleading is filed, ECMF permits the parties and/or attorneys for the parties to file documents with the clerk of the court electronically, bypassing the need for the clerk's office to process the vast amount of paper that is being processed now. It also reduces the cost, and increases the speed, of litigation - a benefit to both plaintiffs and defendants.

The Florida State Court system is working on implementing ECMF, but again, the problem is funding. It amounts to a "chicken and egg" dilemma, where the State is required to invest money in order to save money. Of all of the worthwhile projects that deserve funding, ECMF should be at the top of the list. Perhaps when the new filing fees begin to impact the pocketbooks of attorneys and their clients, we may see a greater interest in addressing our court funding shortfall.

Doctors Say Preemption Is A Bad Idea

In an astonishingly frank and well-written article published this week in the New England Journal of Medicine, three doctors make the case that preemption of state law tort claims against drug and medical device manufacturers is a bad idea, and that physicians should be concerned about it. The physicians, Gregory D. Curfman, M.D., Stephen Morrissey, Ph.D., and Jeffrey M. Drazen, M.D., say:

Why should doctors be concerned about preemption? In stripping patients of their right to seek redress through due process of law, preemption of common-law tort actions is not only unjust but will also result in the reduced safety of drugs and medical devices for the American people. Preemption will undermine the confidence that doctors and patients have in the safety of drugs and devices. If injured patients are unable to seek legal redress from manufacturers of defective products, they may instead turn elsewhere.

We Are The Federal Government And We're Here to Help

The preemption issue is a hot topic in Was hington as a result of the landmark U.S. Supreme Court decision in Riegel v. Medtronic, 128 S. Ct. 999 (2008). Although limited in its application, Riegel has bolstered efforts by the FDA and drug/device manufacturers to limit lawsuits involving defective drugs and medical devices. Essentially, what preemption means to consumers is that the United States Government would be placed in the position of determining whether or not a drug or device is safe, and if it says that it is, the manufacturer of that drug or device cannot be sued if the product is later found to be dangerous or defective, even if the manufacturer knows that it is defective and distributes it anyway.

The problem, of course, is that the FDA is notoriously terrible at providing an oversight role in the design and manufacturing of drugs and medical devices. Even its own scientists have left in disgust after the FDA failed or refused to properly regulate the pharmaceutical industry. The same can be said of other federal agencies that simply do not have the staff, the funding, and most importantly, the passion, to ensure that the health and safety of American citizens are protected.

The truth is that we should all be concerned about preemption. While the concept may have superficial appeal because it would no doubt wipe out what we all know to be meritless lawsuits, it would be a classic case of "throwing the baby out with the bath water." If preemption proponents prevail, the meritorious claims of injured citizens against companies that knowingly manufacture and distribute defective products would be denied merely because such products bear the imprimatur of a federal agency. The doctors are right, preemption is a bad idea.

Soldiers Reportedly Used as Human Guinea Pigs in Chantix Tests

Investigations by The Washington Times and ABC News have recently revealed evidence that the VA is using soldiers diagnosed with Post Traumatic Stress Disorder as "human guinea pigs" to test Chantix, the brand name for the generic drug varenicline. According to the reports, doctors did not warn study participants about the risks for three months despite knowing that Chantix is linked to suicidal tendencies and neuropsychiatric behavior. It was not until one veteran who was taking Chantix suffered a psychotic episode and had a violent incident with police that study participants were warned. 

News about the risks associated with Chantix were made public a few months ago and many people are just now discovering that their health problems, depression and suicidal tendencies may have been related to their use of the drug. The FDA issued a warning in November, 2007, that patients taking Chantix may experience "suicidal thoughts, and aggressive and erratic behavior."  In May, 2008, the FDA issued a public advisory in which it states: "as FDA’s review of the data has progressed it has become increasingly likely that the severe changes in mood and behavior may be related to Chantix."

 

The Anderson Law Firm, located in Tampa, Florida, is currently investigating claims that Chantix has caused persons taking Chantix to experience serious adverse side effects.  Please contact us if you have experienced problems using Chantix.