Blue Cross must be having financial problems these days. I understand that they are initiating demand letters to Gestational Carriers who were insured by them for medical and obstetric coverage.
The demand proffers two reasons for its demand. First, Blue Cross argues that because “surrogacy is not listed as a covered service”, it is not covered by the policy. Second, Blue Cross concludes that as surrogacy pregnancy is not medically necessary, they have no legal obligation to pay.
There have been more than a few lawsuits where Blue Cross has argued services were not medically necessary. One case required medically necessary services to be consistent with the diagnosis and in accordance with the standards of good medical practice. Another case required coverage when the services could not have been omitted without adversely affecting the patient's condition.
I think you can see what is going on here. Blue Cross/Blue Shield is trying sleight of hand by shifting your view from obstetrics, the procedure, to gestational surrogacy, the precursor to the obstetric event. Why? This gets them around having to explain why surrogacy related obstetrics is not listed in the EXCLUSIONS section of the of the policy.
Medical coverage is a complex area of the law. There are however, two basic tenants to policy interpretation. First, the coverage side of the policy will construed broadly in the patient's favor. Second, the exclusion side of the policy will construed narrowly against the insurance company.
So how does this demand play out? A court will ignore that the obstetric services arose from a gestational surrogacy. Obstetric services is listed in the medical insurance policy as a covered item but is not modified or limited by the exclusion language of the policy. The bad part of here is that the carriers will be faced with no legal representation for these activities. Agency owners, take care of your carriers!