Most standard major medical policies should cover hospitalizations and related treatment for COVID-19 provided they have sufficient reserves to cover the number of claims made. However, people who have purchased limited benefit indemnity plans or short term plans may find themselves on the wrong end of a health insurance claims denial.
As to limited benefit indemnity plans, these plans only provide defined monetary benefits that usually do not cover the whole cost of care. For instance, a limited benefit plan may pay $750 a day for a hospital stay. Any charges over this amount may not be covered.
I also anticipate that many short term insurers may try to deny claims for various reasons. Many of these insurers do not have the reserves that larger companies have and are only used to paying approximately 50% of every premium dollar they make on claims. A large influx of claims will threaten their very survival.
These policies contain exclusions for pre-existing conditions. Usually, when these companies receive larger claims, they order medical records to look for pre-existing conditions and to determine if the insured made a misrepresentation on the policy application. If they can find a misrepresentation or pre-existing condition, they may deny some or all of the claim. In most cases, COVID-19 should not be a pre-existing condition. However, because of the way many of these companies handle health claims, they may wrongfully deny some of these charges.
Life insurance policies typically cover death by illness and this would include Coronavirus. However, whenever a policyholder dies within two years of the issuance of a policy, the insurance company usually will do an investigation in which it orders medical records and attempts to determine if the insured made a misrepresentation on the policy application. If the company finds a misrepresentation, it rescinds the policy and denies the claim. If we have a large number of deaths because of Coronavirus, life insurers could be under increased pressure to rescind policies based on misrepresentation.
Commercial Property Insurance/Business Interruption Coverage
Whether or not your Commercial Property Policy will provide business interruption coverage for the COVID-19 pandemic will come down to the language of the policy and its endorsements. Many of these policies do contain virus and pandemic exclusions which would bar coverage. In addition, most require direct physical damage to property. However, at least one lawsuit has been filed by a New Orleans restaurant asking that its insurer cover its lost income due to the pandemic. In addition, lawmakers in different states have debated the need for insurance legislation creating coverage for pandemics.
If you have any questions, please call us or reach out through our website or Facebook page. We represent policyholders and as part of our COVID-19 relief efforts will provide a free review of any insurance policy and consultation relating to COVID-19.