By Mary R. Anderlik
Health Law & Policy Institute
In the continuing debate over how to balance cost-containment and patient protection in health care reform, external review of health plan decision making is a rare bird - a policy innovation championed by industry spokespeople and consumer advocates alike. Nearly half a decade into the experiment in the "laboratory of the states," some basis exists for a preliminary assessment.
Two features of managed care were catalysts for external review. First, some health plans implemented prospective review for health plan coverage of surgeries and other expensive services, and concurrent review for extended hospitalizations. In contrast to traditional retrospective review of benefit claims, prospective or concurrent review focuses attention on the practical equivalence of third-party payment decisions and treatment decisions in an era of high-technology medicine. In many cases, an up-front denial from the health plan meant the patient could not obtain the service. Second, the prominence of cost-containment and profit motives in managed care made consumers distrustful of health plans’ internal appeals mechanisms.
According to the Health Policy Tracking Service of the National Conference of State Legislatures, as of December 1999, 30 states and the District of Columbia had some form of external or independent review mandate. In addition, 10 states have passed external review laws this year, the latest being Massachusetts in a bill signed by Gov. Paul Cellucci on July 21. Key issues for drafters include:
Data Concerning Performance
The selection of criteria for assessment of a policy experiment is a tricky business. Even where there is agreement that something is important, measurement tools or data may be lacking. For external review, the list would likely include consumer awareness of the availability of review, actual and perceived fairness and timeliness of review, consistency of decisions across cases and with professional standards, effect of implementation on the volume of lawsuits filed against health plans by consumers and on consumer trust in the health care system, and direct and indirect costs.
Utilization of external review by consumers has been limited to date. According to data released by the American Association of Health Plans, the appeals rate per 10,000 covered lives in states with active programs ranges from a low of 0.1 in Missouri to a high of 1.3 in Texas, with the average somewhere around 0.6. There is nothing intrinsically bad about a low rate—it could reflect an absence of disputes or health plans’ readiness to reverse denials at a point in the appeals process prior to issuance of a formal reviewer opinion, among other things. Still, low utilization numbers may be an indicator of lack of awareness. In its National Survey of Consumer Experiences with Health Plans, Kaiser Family Foundation found considerable confusion among consumers, with substantial percentages mistaken concerning the availability of external review in their states.
Despite the many differences on specifics, most states with programs in place report that reviewers support consumers about half the time. (On July 20, Vermont officials reported that the majority of reviews in that state favored health plans, but with only 6 cases decided officials advised that any conclusions would be premature.) This result suggests success according to criteria of fairness and consistency–certainly a less balanced ratio would raise concerns that reviewers were biased in favor of one side or the other, and wildly different ratios across states might lead to skepticism about the possibility of consensus on standards of medical appropriateness. Direct costs appear reasonable, in the realm of $400-500 per case. For other areas of concern, reliable data is not yet available.
Legal and Other Challenges
The federal Employee Retirement Income Security Act, commonly referred to as ERISA, exempts employer self-insured plans from state regulation. Some health plans maintain that ERISA also blocks (in legal terms "preempts") any state law affecting benefit determinations. On July 27, the Fifth Circuit Court of Appeals affirmed its ruling that the Texas independent review organization (IRO) provisions are preempted by ERISA. At the same time, the Court hinted that it might bless some kind of anticipatory vicarious liability review: "We acknowledge that there is a powerful argument in support of an IRO procedure in which the only inquiry is whether a proposed treatment meets the standard of care demanded by Texas of physicians.... Under this view, what Texas can regulate through malpractice suits, Texas could also administratively regulate as a mandated term of insurance." Corporate Health Insurance v. Texas Dept. of Insurance (5th Cir. 2000) (ruling on state’s petition for rehearing). A similar challenge has been leveled against the Illinois HMO Act. Somewhat ironically, Texas health plans have continued to embrace the state’s IRO procedure, and at the national level accrediting agencies and trade organizations are working on their own external review requirements.
There is a possibility, now remote, that Congress will act to impose a uniform federal scheme. Otherwise, state regulators, and review panels, will need to strive for greater clarity concerning the goal of external review. As suggested in the preceding discussion, options include:
Final answer? External review is a modest policy success, and much work remains to be done.