John Carroll

Health reform requires a uniform process for member appeals, and the NAIC approach has been adopted by the Department of Health and Human Services

John Carroll

In keeping with the Obama administration’s emphasis on consumer rights in the Patient Protection and Affordable Care Act, federal officials have been championing their stepped-up approach to ensuring that plan members get a fair and independent hearing for any challenges they may have on coverage decisions.

In July, federal officials at three different agencies joined hands to issue new regulations that call for an external appeals process through independent groups of experts, promising to shake up any states that lag behind the new national standards while sending $30 million to states interested in developing a more muscular approach to reviewing insurers’ decisions.

Internal reviews are nothing new to health plans, which over the years have had to consider appeals from both members and physicians of often-controversial decisions. But now they may have to consider how the feds’ approach to challenges will play among the independent boards that review those decisions — groups that have a history of overturning almost half of all plan decisions.

And even some observers who see little fundamental change inside their own states say that the government’s public campaign to standardize external reviews could result in challenges.

“Its a big deal for states that don’t have an external review process and it makes them more uniform,” says Kathleen Stoll, director of health policy at Families USA, which has been an enthusiastic supporter of the new provisions.

There are some details that still need to be clarified in the rules, she adds, highlighting the need to make sure the regulations offer appeals on the full scope of health plan decisions. But the new appeals process goes hand in hand with the reform bill’s provisions on consumer support, with the feds demanding more education and assistance on troubles with insurance coverage. And that can make a big difference for consumers — as well as the health insurance industry, which the Obama administration has frequently pilloried.

“With these new patient protections, we’re providing consumers with another strong defense against insurance company abuses,” said Michael Mundaca, the assistant treasury secretary for tax policy, when the new rules were rolled out.

Feds add a new floor

When the feds went looking for a new structure for the appeals process, they turned to a set of standards created by the National Association of Insurance Commissioners. Plans now have to provide their members with a detailed set of instructions on how to challenge their decisions, offer a “full and fair” process run by experts, and make sure that urgent appeals from the sickest patients are handled speedily. Members can be charged only a “nominal” amount for appeals, with plans covering the bulk of the cost and agreeing to binding external review. HHS officials say that if a state external review law meets the NAIC model’s criteria, it meets the minimum federal standards under PPACA and does not need to have external appeals for recissions, only for medical necessity.

A resident of any state that doesn’t meet those standards will have protection under the federal rules, which extend to large self-insured plans which are often administered by insurance companies. The process will also be open to people who feel their policies were rescinded unfairly — a subject that has provoked controversy in California.

America’s Health Insurance Plans, the managed care industry’s lead voice in Washington, has been largely mute on the topic, but is quick to point out that health plans have been building their internal review programs for years. “We support the National Association of Insurance Commissioners external review model,” says AHIP spokesman Robert Zirkelbach, “and we are reviewing the new regulations to see how they compare to existing state programs.”


“Maryland was the first to have an external review process, in the late ’80s and early ’90s. A number of states followed suit,” says Sandy Praeger, who effectively sealed her third term as the Kansas insurance commissioner in an election just days after the feds adopted an approach to appeals that she helped create at the NAIC. This federal approach provides uniformity in the way states handle reviews, which she sees as good. “It becomes the floor,” says Praeger. “But states can go beyond it.

“In Kansas, if someone requests an external review, we find panel members who are experts [on the topic under review]. Take varicose vein surgery. If someone challenges the decision to use invasive stripping of veins versus laser surgery, the experts would look at the decision and determine if the person is entitled to this benefit, if the plan coverage allows it, and whether this is the best quality of care. They look at evidence-based medicine and what the current literature says. It’s really not the science of medicine; it’s more of an art form, and oftentimes there is no one exact, obvious answer.”

States also have had an inconsistent record, according to one of the chief architects of the Obama administration’s new appeals process. In a 2002 study sponsored by the Kaiser Family Foundation, lead author Karen Pollitz, then a research professor at Georgetown University’s Health Policy Institute, found that while health plan decisions were overturned by external reviewers almost half the time on average, reviewers in Arizona and Minnesota overturned only 21 percent of the plans’ decisions, compared to a rate of 71 percent in Connecticut.

“It is important to note that the study used for Connecticut is based on 29 cases reviewed in 2000,” says Dawn McDaniel, a spokeswoman for the Connecticut Insurance Department. “In 2009, there were 184 external appeals. In addition, the average number of external appeals has increased significantly over time.”

Eleven states had a threshold on the dollar amount involved before a review was allowed. Timelines on an appeal varied widely as well. And Pollitz said that appeals are rarely made, which may be the result of the various state guidelines and a general lack of awareness among consumers.

One of the nation’s leading experts on external reviews, Pollitz took over last year as director of the Office of Consumer Support at HHS.

“With greater public awareness, there may be more individuals who challenge” plan decisions, says Praeger, the Kansas insurance commissioner. But she doesn’t expect any major shift in the outcomes for health plans. In Kansas, there has been a 50/50 split. “That tells me our review process is working.”

“In Connecticut, requests for external appeal are forwarded to one of five contracted external appeal entities for independent review,” says Connecticut Insurance Commissioner Thomas R. Sullivan. “The review of each case is based on its particular medical facts” and all appeals are final and binding.

The state already follows NAIC guidelines, Sullivan adds, that require plans to outline the external review procedure for members every time it rejects a claim. As for why Connecticut would stand out, insurance officials note that there’s no way to tell without assessing how every other state goes about the process.

Regional practice

One consideration in setting up an effective appeals process is making sure that the experts making the decision understand how medicine is practiced in their region, Praeger notes. So Kansas reviewers are Kansas doctors.

Like other facets of health reform, the new law is restricted to plans created on or after Sept. 23. Initially, the government estimates that will cover 31 million people, with the number rapidly expanding as new plans are rolled out.

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