NEW YORK (Reuters Health) Jan 11 - The future of state laws that entitle health plan members to have an independent third party review an HMO's decision to deny coverage could be determined by the US Supreme Court, health policy experts say.
A total of 37 states now have laws on the books providing an avenue for consumers to resolve coverage disputes with health plans. In the absence of legislation that would allow people to sue their HMOs, external review helps to assure that patients are covered for medically necessary care, advocates say.
But in two high-profile cases, health plans have challenged those laws on grounds that state external review is "preempted" by federal law. If the high court decides to take up the issue, it could vindicate those state mandates or cause them to be stricken from the books.
"Clearly these laws could be wiped out...if the court so chooses," said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, "so this is a real danger to state law."
Susan Pisano, a spokeswoman for the American Association of Health Plans, says the industry's commitment to outside review "is as strong as it's ever been." In roughly half of the cases involving external review across the country, the decision favors the patient, she said, and plans are living with that.
But in the Court's view, HMOs are disingenuous in saying they would rather have an independent review system than have those disputes go to court. When a decision comes down against an HMO and it involves big bucks, "it uses the court system to appeal forever," he said.
External review processes may not be in any imminent danger of extinction, but the outcome of the legal fray will have significant implications for the ongoing public debate over patient protection legislation, policy experts said.
One of the cases before the Supreme Court involves a Texas law that provides for "independent, external physician review of adverse determinations of medical necessity made by managed care organizations."
It challenges a 5th US Circuit Court of Appeals ruling that Texas' independent review process conflicts with the Employee Retirement Income Security Act (ERISA), the federal law that governs private benefit plans, as well as the Federal Employee Health Benefits Act (FEHBA).
Texas Attorney General John Cornyn and State Insurance Commissioner Jose Montemayor appealed to the Supreme Court, saying that the 5th Circuit erred in its ruling. "No basis exists for the 5th Circuit to conclude that Congress intended for ERISA S514(a) and FEHBA to preempt Texas' historical state right to regulate healthcare," they write in their petition to the court.
The original challenge to Texas' 1997 Independent Review Organization law was brought by four subsidiaries of Aetna Inc.
On Monday, the high court asked the US Solicitor General for its views on whether the court should take the case. It could take several months for the government to prepare its response.
The other case involves Debra C. Moran, a Rush-Prudential HMO member, who had shoulder surgery performed by an out-of-network specialist at a cost of $95,000. Although an independent reviewer determined that the surgery was medically necessary, Rush refused to pay for it.
Last October, the Court of Appeals for the 7th Circuit upheld the state's independent review law, saying that Rush-Prudential HMO must comply with the reviewer's decision. The 7th Circuit ruling overturned a lower court decision that ERISA protected the health plan.
Rush-Prudential, which is owned by Thousand Oaks, California-based WellPoint Health Networks, recently filed a petition with the US Supreme Court, asking the court to review the 7th Circuit's decision, which directly conflicts with the 5th Circuit's ruling.
If the Supreme Court decides to take the case, "it could set a precedent for any state that requires independent review," said Daniel P. Albers, an attorney with the Chicago law firm of Barnes & Thornburg, which represented Moran.
Healthcare attorneys and policy experts suspect that the Supreme Court will take up the matter because the 5th and 7th Circuit rulings create a split among the federal courts that needs to be resolved.
"Not to be over-dramatic, but I think it's hard to overstate the importance of these cases," said Maryland Insurance Commissioner Steven Larsen, who has been aggressive in taking action against HMOs that fail to comply with the state's own external review requirement. "I personally believe that external review is the most important part of our patient protection arsenal," he added.
What remains unclear, added Larsen, is whether Congress will eventually pass a federal patient-protection law and how that law would mesh with state external review requirements. "What Congress does may depend on what the Supreme Court does," he said.
Susan L. Burke, a healthcare attorney with Covington & Burling in Washington, predicts that the court will uphold state external review laws. Based on past rulings, the high court appears leery of extending the ERISA preemption too broadly, she said.
Instead of ruling that ERISA preempts states' external review laws, the court could decide that the laws are protected by a clause that allows states to regulate the insurance industry, she told Reuters Health.
Regardless of the outcome for state laws, external review is likely to continue to exist in some form, according to Guy D'Andrea, a senior vice president with URAC (formerly known as the Utilization Review Accreditation Commission), which accredits external review organizations.
D'Andrea explained that a number of health plans voluntarily provide independent external review. Furthermore, he said, any federal patient-protection law that is passed is likely to include external review language.
That, according to
consumer advocate Court, would be the best of all outcomes. The current
conflicts show the need for "one national standard imposed by Congress,"