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Wyoming Supreme Court Holds Waiver Of Preexisting Condition Not Affected By HIPAA


HLD, v. 31, n. 11 (November 2003)

Wyoming Supreme Court Holds Waiver Of Preexisting Condition Not Affected By HIPAA

In 1991, plaintiff Dixie M. O'Donnell was treated for a cervical spine injury. In 1994, O'Donnell obtained an individual health insurance policy from Blue Cross Blue Shield of Wyoming (Blue Cross), and Blue Cross required O'Donnell to waive coverage for any treatment of her cervical spine. O'Donnell signed the waiver. In 1995, Blue Cross issued an endorsement to the policy clarifying that the definition of "waiver of coverage" waives coverage for a particular disease or medical condition. O'Donnell denied receiving the endorsement. In 1997, Blue Cross issued another endorsement to ensure the policy complied with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The endorsement also modified the exclusion for preexisting conditions to conform to HIPAA. The endorsement incorporated the HIPAA preexisting condition exclusions located in the Group Markets Reforms section of HIPAA. In 1999, O'Donnell underwent cervical disc surgery and submitted her medical bills to Blue Cross, which denied payment for the preexisting condition.

O'Donnell sued Blue Cross challenging the validity of the waiver in light of the HIPAA conforming endorsements, and claiming Blue Cross should be estopped from denying coverage because it breached its duty to inform her of alternative coverage through the Wyoming Health Insurance Risk Pool (WHIP), Wyo. Stat. Ann. �� 26-43-101 through 26-43-113. The parties cross-moved for summary judgment, and the court granted Blue Cross' motion. The court held the waiver was valid, HIPAA was not applicable to the policy, and Blue Cross had no duty to inform O'Donnell of WHIP. O'Donnell appealed.

The Wyoming Supreme Court affirmed the lower court's judgment. O'Donnell argued the Group Market requirements of HIPAA do not permit permanent exclusion of preexisting conditions, the 1997 endorsement's use of the Group Market requirements rendered the policy ambiguous, and any ambiguity should be construed in her favor. The high court looked to the language of the original waiver and noted it did not define "waiver," which was only defined in the 1995 endorsement. The waiver was "originally intended to operate separately from the preexisting conditions clause," said the high court, and none of the endorsements expressly superseded the waiver. The high court found the clear language of the waiver specifically related to the cervical spine condition and the preexisting conditions clause had no effect on the waiver.

The 1997 endorsement to the policy, which tracks the language in HIPAA, did not apply to all of the sections of the policy and also did not affect the waiver. O'Donnell argued the 1997 endorsement that amended the definition of "preexisting conditions" followed HIPAA, which applies to group insurance policies, and thus the adoption of the HIPAA language indicated Blue Cross intended to adopt all of the provisions relating to group policies. The high court rejected O'Donnell's arguments that the waiver was separate from the policy, that the policy was an individual and not a group policy, and that HIPAA bans the imposition of any preexisting conditions exclusion unless the state has implemented an alternative mechanism. In this case, said the high court, the state had provided alternative coverage through WHIP. Having found the language of the waiver and policy to be clear and unambiguous, the high court rejected O'Donnell's argument for the application of the "reasonable expectations" doctrine because her expectations were irrelevant where the provisions at issue are clear.

Alternatively, O'Donnell argued Blue Cross had an affirmative duty to inform her of alternative coverage through WHIP. By breaching its alleged duty O'Donnell contended Blue Cross was estopped from denying her coverage for her preexisting condition. O'Donnell supported her argument by citing the holding in Darlow v. Farmers Ins. Exchange, 822 P.2d 820 (Wyo. 1991), which held that an insurer had a duty to inform the insured of the scope of coverage in a policy. The high court determined O'Donnell misconstrued the holding because Darlow only requires the insurer to inform the insured of what is covered by the policy and what is not covered, and in this case O'Donnell signed the waiver and was aware that her preexisting condition was not covered. The duty to inform the insured does not include informing the insured of alternative coverage of anything not covered by the policy, and therefore Blue Cross did not breach any duty to O'Donnell. Accordingly, the high court affirmed the lower court's judgment.

O'Donnell v. Blue Cross Blue Shield of Wyo., No. 02-251 (Wyo. Sept. 9, 2003).   

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