What is the Kaiser Permanente Arbitration Agreement?
The Kaiser Permanente arbitration agreement is a pre-dispute settlement contract between Kaiser Permanente and its members that requires any disputes over medical benefits, or any dispute that "involves or relates to the provision of healthcare benefits from Kaiser," to be submitted to binding arbitration in order to be resolved.
The purpose of the Kaiser Permanente arbitration agreement is to create a private forum for resolving disputes, rather than forcing disputes into a public forum like a court or class action, which both Kaiser and many of its members argue would require more time and privacy concerns. In the agreement , Kaiser agrees to provide members with a long and expensive list of benefits. In exchange, those members agree to submit all disputes to arbitration, rather than a court of law. The decision of an arbitrator is final and can only be overturned in very limited circumstances. In the event that an plaintiff can get his or her case into court anyway, the damages are capped at $5,000.
The Kaiser Permanente arbitration agreement has been reviewed by many courts, and has been repeatedly found to be valid and enforceable. There are even some situations where a court has agreed to allow a member to file a court case against Kaiser even though they signed that agreement.
The Differences between Arbitration and Litigation
Arbitration, unlike litigation, is not part of the public judicial system. Its purpose is to provide an alternative path for resolving disputes. An arbitrator or panel of arbitrators, in a preferred setting, has the opportunity to hear from each party and then decide how the controversy should be resolved. The parties define the terrain and are engaged in creating a resolution that meets their needs, instead of one dictated by the formal rules of a court.
Unlike judges, arbitrators do not prepare opinions explaining their decisions. Instead, each party receives only a decision — the "award" — that resolves the dispute. With an award, the parties walk away with their own private, binding resolution.
Kaiser Permanente chooses to use arbitration for several reasons. One of the most important is that arbitration limits the rights and remedies that parties can seek from one another. Generally, neither party is entitled to punitive damages, relocation expenses, travel costs, or attorney’s fees (unless permitted by law or statute). Another reason is that Kaiser Permanente does not want large amounts of information about a contracting doctor and his or her practice and patients to be public.
The Pros and Cons of the Arbitration Agreement
Because arbitration removes the cost and time of litigation, a hospital or practice may not incur the cost of having a jury trial, which may also benefit the patients by keeping costs down. Another potential benefit to the patient is that they may have a more favorable outcome through arbitration as opposed to if the case was taken to a jury. There are many unknowns in a jury trial such as the makeup and beliefs of the jury, whereas in arbitration the parties can elect to have the arbitration panel made up of an expert in the medical field or area of the dispute.
However, the drawbacks are that a patient may not obtain a judgment that is as favorable as what they would have received at a jury trial, and will not be able to go to a jury trial to try to receive a more favorable award. The downsides for the hospital or practice are that they may not be able to recover all their fees if they win the arbitration, the neutral expert (if used) will be expensive and may not work in favor of either party, and the most likely possible downside for the practice is that they may not win an arbitration and therefore have no recourse.
How Arbitration Affects the Rights of Patients
Patients retain many rights under the Kaiser Permanente arbitration agreement. The agreement does not preclude patients from seeking care, treatment, or services in the every day course of their health insurance coverage. This includes the ability to see their own doctors, receive any covered care and/or services, and at times obtain drugs or other medications from the Kaiser facility pharmacy.
What patients agree to in the Kaiser Permanente arbitration agreement is not to file a lawsuit in civil court regarding anything related to the health plan or the services rendered under the health plan. Kaiser Permanente argues this is fair because arbitration is a faster and cheaper means of resolving health insurance disputes than going through the courts. Patients and their legal representatives are also bound by the agreement, meaning that once the agreement is signed, both the patient and their representative have agreed not to file suit.
Patients are still able to file an administrative complaint with the California Department of Managed Health Care, the California Department of Insurance, and/or the federal Centers for Medicare & Medicaid Services regarding Kaiser Permanente and/or its medical group providers. Also, patients still have the ability to go through an independent medical review process to dispute denials of coverage for health care procedures, services, and/or treatments.
If a patient receives a non-covered service they can appeal the non-coverage decision through Kaiser’s normal complaint or internal appeal process. Again, if the patient is dissatisfied by the internal appeal Kaiser may authorize the patient to pursue an independent medical review.
Taking Steps To Initiate Arbitration With Kaiser Permanente
Once a patient determines that s/he wishes to move forward with arbitrating a dispute with Kaiser Permanente, the patient must initiate the proceeding within one of the following time frames: (1) within 4 years of the event or incident that caused the injury or damages; or (2) within 6 months of the patient’s learning about his/her potential injury from a recognized medical issue, such as a medical malpractice error. Arbitrations must be filed in writing. Patients must include the following information in their demand for arbitration: (1) the patient’s name and address; (2) the name and address of the persons against whom arbitration is sought (Kaiser Permanente & the treating doctor); (3) a description of the dispute and a general statement of the facts and circumstances that lead the patient to believe he/she has a claim; (4) a demand for monetary relief; and (5) the signature of the patient. Time is of the essence .
After the demand for arbitration is filed, the patient will receive a letter from Kaiser Permanente confirming receipt of the claim generally 30 days after filing. The letter will also generally refer to specific codes for the independent administering Company/Organization and it will provide a list of potential arbitrators. The patient must then select 3 potential arbitrators in ranked order. The demand for arbitration must be sent to Kaiser Permanente within the following timelines: (1) 6 months after Kaiser Permanente sends a letter referring the claim to arbitration; or (2) within 4 years from the time of the incident. The cost of the arbitration filing is usually covered by the relevant Kaiser Permanente facility under the arbitration terms. Post filing, the patient will receive a cover sheet to complete. Both Kaiser and the patient must sign the cover sheet and return it to the arbitrator. Upon completion of the entire process, an arbitrator will send the final award to the patient and to Kaiser Permanente.
Recent Controversies and Changes
In response to these criticisms, Kaiser Permanente dropped the automatic binding arbitration agreement for all members enrolled after December, 2017, but continues to require it of all those who had already accepted it, including thousands who brought lawsuits resulting in substantial jury verdicts against the company. In July 2019 Kaiser agreed to a $70 million settlement involving over 3,500 policy holders who were enrolled between July 2004 and December 2017. Kaiser plans to automatically bind these enrollees to this agreement with little or no right to opt out – unless it can find adequate number of policy holders who are willing to participate in the class action. The Third Wave of Arbitration Challenges is currently being contested in the California courts. The Kaiser cases that have been filed contend that patients have no real affirmative notice of the arbitration contract because it is not printed front of the membership agreement, nor did a Kaiser representative explain it. It also claims that even if patients did receive a copy, they are induced into agreeing through the "firewall" provision of the Plan. In essence, Kaiser threatens to stop providing coverage unless patients agree to be bound. It is easy to see how, even if they do receive an explanation, the patients would hesitate to jeopardize their access to medical care.
Seek Legal Advice and Resources
If you have questions or concerns about, or are dissatisfied with the terms of your arbitration agreement with Kaiser Permanente and the issue cannot be resolved directly by using the internal complaint process with the health plan, you may seek advice or counsel from an attorney, the Medical Board or the California Department of Managed Health Care (DMHC). The Medical Board of California oversees and regulates the licensing of licensed health care providers . The DMHC’s Office of the Ombudsman assists consumers in resolving health plan complaints. Both agencies can escalate complaints to the appropriate regulatory entity, if necessary.
For questions or assistance with filing a complaint, patients can contact:
California Department of Managed Health Care
Office of the Ombudsman
Phone: 1-888-466-2219
Website: http://www.dmhc.ca.gov/
Medical Board of California
CLEAR – Complaint Language Education and Referral
Telehone: 1-800-633-2322
Website: http://www.mbc.ca.gov/Consumers/Clear/index.html