Ineligible Plan Participants Prove Costly

A recent lawsuit reminds us why health plan ineligibility is a substantial risk that is both costly and avoidable.

The case of Denver Health and Hospital Authority v. Beverage Distributors and Principal Life Insurance was about a domestic partner enrolled in the employer’s health plan. After the participant racked up over $750,000 in medical bills from a motorcycle accident, the employer rescinded coverage because the domestic partner was ineligible according to the terms of the plan.

The insurance carrier preauthorized claims for the hospital stay for the participant. Later, the employer notified the carrier of the ineligible participant. Coverage was terminated retroactive to the application date, which preceded the date of the accident. The hospital then sued the employer and insurance carrier to recover the unpaid claims.

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