Old policies vs. new technology: what is 'medical necessity'? Cracking insurance claim disputes

Holding a stack of policies only to be denied when illness strikes is every consumer's nightmare. Faced with a claim dispute, many first instinctively call a legislator, the media, or post online — yet these routes usually lack real legal force.

This episode's guest, Chairman Lo Chun-wei of the Financial Ombudsman Institution (FOI), is direct: insurance is a commercial contract of actuarially calculated risk and consideration — whether a claim is paid is never decided by who shouts loudest or seems most pitiable. We go to the heart of claim disputes, unpack how the FOI works, and lay out a practical self-help strategy.

1. How the ombudsman works: complain first, then mediate

The FOI is an alternative dispute resolution (ADR) body established under the Financial Consumer Protection Act, with a clear remit and rules.

• Binding force within statutory amounts: the FOI's greatest weapon. If a ruling falls within the statutory cap (currently NT$120,000 or NT$1.2 million by product type), the insurer must accept it. If it refuses to pay, the consumer can take the ruling to court for enforcement.
• Clear timelines: unlike drawn-out litigation, a case formally entering evaluation must close within 90 days.
• No criminal matters: 'the agent tricked me with sales talk' is fraud — a criminal matter the FOI cannot take. It handles only civil disputes over contract interpretation.
• No skipping levels: by law you must first complain to the insurer; only if it refuses or fails to respond may you apply to the FOI. Going through legislators or consumer groups ultimately routes back into this statutory process.

2. The biggest minefield: old policies meet new medical technology

Today's largest category of disputes: older medical policies that cannot accommodate new treatment technology — classically, targeted cancer therapy and outpatient chemotherapy.

Insurance rests on the balance of consideration: policies were priced on the medical norms of their era. Policies from twenty or thirty years ago required hospitalization because serious illness then truly meant hospitalization.

• The insurer's position: paying hospitalization benefits for voluntary stays or outpatient injections would hand claim triggers to consumer discretion — violating the core principle of unforeseeable events, blowing out loss ratios and endangering the system.
• The consumer's plight: technology advanced; targeted drugs need no hospital stay — and thus fail the policy's trigger. To claim, patients ask physicians for unnecessary admissions, straining NHI resources and spawning further disputes.

3. Who decides 'medical necessity' — the attending physician or an objective standard?

Disputes over claim-driven hospitalization turn on medical necessity. Many consumers assume that if the attending physician writes 'hospitalization necessary' on the certificate, the insurer must pay. A serious myth.

Three views operate in practice:

• Subjective (consumers' favorite): my physician treats me; my physician decides.
• Objective (adopted by most courts and the FOI): judged by whether most physicians of the same specialty would consider hospitalization necessary in the same circumstances.
• Hybrid: defer to the attending physician in principle, but allow clear unreasonableness to be rebutted by objective evidence.

The FOI and most appellate courts lean objective: if most physicians deem a treatment outpatient, the insurer may deny — even if your physician indulgently admitted you.

4. Practical strategies to stay clear of disputes

Disputes are born of blind buying and mismatched expectations at claim time. Better to get things right up front than to fight afterward.

• Don't chase discontinuation panics: stampeding into a reimbursement-style policy you haven't read is not buying protection. Clarifying your needs is always step one.
• Face the contract: a policy is a legal contract — know the claim conditions and exclusions before you buy.
• Confirm before treatment: before any high-cost self-pay course, check the planned treatment against your policy terms or consult a professional, confirming claim eligibility — don't spend big only to face denial.

If a dispute does arrive, park the emotion. Follow procedure: complain to the insurer first; if that fails, assemble complete medical documentation and policy terms and use the FOI — a friendly official resource with real teeth. Rational evidence and command of the rules are your strongest ground.