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Bulletin No. 89-01

Liability of health insurer for expenses related to a pregnancy

Issued and entered March 31, 1989 by Dhiraj N. Shah, Acting Commissioner of Insurance

The Michigan Supreme Court, in Providence Hospital v Morrell 431 Mich 194, (1988), held that a health insurer remains liable for expenses related to a pregnancy which occurred while a health insurance policy was in force, but which were incurred after the policy was terminated by the insurer.

Protecting the measurable expectations of the insured underlies the holding of the Court, which states:

We agree with the Court of Appeals that public policy considerations may override insurance policy language giving the insurer the right to terminate coverage. However, we conclude that the Court of Appeals expansion of that principle beyond the pregnancy context of this case to require coverage of all conditions arising during the life of the policy was unwarranted. Unlike most conditions requiring medical treatment, pregnancy often results from the deliberate decision of the insured. This brings into play the principle of giving effect to the reasonable expectations of the insured. [at p 200; citations and footnotes omitted]

While Morrell involved an insurance contract, it is apparent that reasonable expectations regarding pregnancy coverage may similarly arise from contracts with health care corporations, multiple employer welfare arrangements, prudent purchaser agreement arrangements and health maintenance organizations. In reviewing contracts and in evaluating claims conduct of insurers and others providing health care benefits, the Insurance Bureau will be guided by the public policy considerations enunciated in Morrell. This may result in administrative compliance action or the initiation of judicial action.