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In gestational surrogacy arrangements, questions of insurance can be a big deal. Like even multimillion-dollar deals. There are medical costs all over — from getting pregnant with IVF (often not covered at all by insurance), to the maternity and delivery costs of the gestational carrier, and (obviously) the newborn baby’s medical care. And like many insurance issues, which of these expenses are covered by a health insurance policy can be a matter of debate.
A recent decision of the United States Court of Appeals for the 10th Circuit — my home circuit here in Colorado — demonstrates the importance of getting it right. In Moon v. Tall Tree Administrators, the court ruled in favor of the insurer that denied coverage for medical costs incurred by a gestational carrier (surrogate) during a surrogacy pregnancy for another couple.
Wendy Moon, the plaintiff, was twice a surrogate. Coverage for the second surrogacy was at issue in this case. The first time, she called her insurer to ask if her plan would provide coverage during a surrogacy pregnancy. She was told “no” it would not. Despite this bad news, she proceeded to use her insurance for the first pregnancy. She got lucky for reasons described below, and coverage was provided anyway.
Changing The Coding
Only on her second time around as a surrogate did the insurer reject coverage. As explained in the opinion, with the first pregnancy, the insurance company was never told that her pregnancy was not for a child of her own, but for another couple. What changed?
Sarah Paige, who’s an insurance expert with ART Risk Financial and Insurance Solutions, explained that the way medical providers code services for insurance purposes only became more specific a few years ago. Providers previously coded all pregnancies under ICD-9 coding, however, in 2015, ICD-10 was introduced adding 5 times the amount of coding as its predecessor. Sub-code “Z33.3” was introduced with ICD- 10, specifying “pregnant state, gestational carrier.” Prior to Z33.3, unless the insurance company, administrator, or employer had seen specific medical records or were otherwise notified about the type of pregnancy, they were unlikely to know if an insured’s pregnancy was related to a surrogacy arrangement. That is no longer the case.
Is This Language Ambiguous?
The plaintiff argued that the plan exclusion language was ambiguous, and therefore must be construed against the insurance company. So for all the lawyers, and those who appreciate construction and interpretation of language, here it is. In the exclusion section, paragraph 31 specified as follows: “Not specified as covered. Non-traditional medical services, treatments and supplies which are not specified as covered under this Plan, including, but not limited to pregnancy charges acting as a surrogate mother.” Clear enough?
Plaintiff argued that the language could mean the traditional medical services of a surrogacy pregnancy would be covered, but non-traditional medical services related to surrogacy would not be covered. The insurance company argued, and the District Court and Appellate Court both agreed, that the phrase “pregnancy charges acting as a surrogate mother” was used as an illustrative example of nontraditional medical service that were excluded from coverage. The court rejected Moon’s interpretation of Exclusion 31 as “not reasonable,” and Moon failed to raise any other interpretation that would render the provision ambiguous.
Surrogacy attorney Catherine Tucker gave context to the ruling, explaining that gestational surrogacy is a very expensive process, which often exceeds $100,000. Tucker says that there’s nothing wrong with relying on a gestational carrier’s insurance policy when it applies. Intended parents, after all, are already in an unfortunate position of paying enormous sums to have a child, and often can only wish they could experience a “traditional” pregnancy that their own insurance would cover.
Even when the policy at issue doesn’t clearly cover an insured’s surrogacy, an insurance company might still be held responsible if the policy is ambiguous. As Tucker notes, “the law assumes — and rightly so — that the insurer will know how to properly write an exclusion.” And it’s not unreasonable to think an insurance company would provide coverage for a surrogacy pregnancy, since many still do. The burden is therefore on the insurer to get it right. Hence the “ambiguity favors the insured” rule.
But in this case, the issue wasn’t even close to reaching “ambiguity.” In fact, Tucker notes that this is one of the most clear-cut surrogacy exclusions she has ever seen. So here, the court got it right, and protected the insurance company from being responsible for something that its plan didn’t cover.
The lesson: always carefully review an insurance policy before relying on it! Or, if you want more predictability, find a gestational carrier who lives in Nevada or Wisconsin, two of the states in the country, so far, where insurers are not permitted to exclude coverage for the medical expenses of a gestational carrier. But, for now, the rest of the states will require a thorough reading of insurance plans (or the hiring of a legal professional to do so), or risk potentially expensive consequences when unambiguous exclusion language applies.
Ellen Trachman is the Managing Attorney of Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-host of the podcast I Want To Put A Baby In You. You can reach her at [email protected].
Assisted Reproductive Technology (ART), Ellen Trachman, Family Law, Surrogacy
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