House bill would ban arbitration clauses in insurance contracts

A bill introduced Thursday by House Democrats would prohibit forced arbitration clauses in health insurance contracts that prevent customers from suing over denied claims.

These clauses require patients go to a private arbiter to settle disputes with their insurance companies, but Democrats argue that practice is unfair.

“Right now, health insurance giants are using mandatory arbitration to escape accountability when they cheat patients and deny them coverage of the care the law requires,” Rep. Katie Porter (D-Calif.), the bill’s sponsor, said in a statement.

The bill, which has four Democratic cosponsors, would prohibit the inclusion of mandatory pre-dispute arbitration clauses and clauses limiting class action lawsuits in health insurance contracts.

Porter cited a report from Public Citizen, a consumer rights group, that claims a growing use of binding, pre-dispute arbitration clauses.

The report argues that insurance companies use the clauses to “immunize” themselves from lawsuits over consumer fraud, denials of treatment in managed care and “unfair” claims settlement practices.

“This important legislation protects patients from being forced to sign away their rights in the fine print of a contract when they should have the right to seek judicial relief if an insurer illegally denies coverage, refuses to provide required notice and appeal rights, fails to provide required premium rebates, or otherwise acts in bad faith,” said Rep. Lloyd Doggett (D-Texas.), chair of the House Ways and Means Health Subcommittee.

Arbitration is typically cheaper than litigation and can take less time. But opponents say forced arbitration gives companies an unfair advantage over consumers and workers.