TDI Reminds Health Insurance Plans To Issue Independent Review Notices

By Ronald L. Scott

In a July 29 press release, Texas Department of Insurance (TDI) Commissioner Elton Bomer reminded HMOs, insurance companies, and utilization review agents that a recent Texas law requires them to notify patients of their right to binding independent review of decisions denying "medically necessary" treatment. When the law was passed, TDI expected more than 5,000 appeals to be filed annually. However, as of July 28, 1998, only 167 cases have been submitted for review in the approximately eight-month period since the law became effective.

Both the number of cases submitted and the results of the cases that have been decided may be interpreted in a variety of ways. One argument is that the low number of cases submitted simply means the health plans are treating plan participants fairly. Alternatively, plans may now be more likely to approve some inexpensive procedures rather than risking the cost of independent review. Under the TDI regulations, the HMO or insurance company pays outside reviewers $640, and the planís total cost of review would also include the internal administrative expenses associated with a review. Yet another reason for the lack of cases may be that plans are failing to notify participants of their right to independent review. This reason appears to have prompted Commissioner Bomerís press release.

Of the cases decided, 66 were in favor of the patient, and 70 upheld the health plan. Eight cases were "split" decisions, allowing some but not all of the requested treatment, and 23 cases are pending. Some supporters of managed care organizations have been encouraged by the results, expecting independent reviewers to side more frequently with the patient. Despite early contrary predictions, no lawsuits have been filed against health plans as a result of the Texas law that created both the independent review process and authorized suits against health plans for the denial of medically necessary care.

There are two other possible reasons for a dearth of cases that have received little or no attention. First, the form that TDI mandates that plans send to participants when treatment is denied is not very "user friendly." The first two sentences, in capital letters and bold type, proclaim: "THIS IS A NOTICE OF THE DECISION ON YOUR REQUESTED APPEAL OF THE UTILIZATION REVIEW AGENTíS DENIAL OF HEALTH CARE SERVICES. THE DECISION TO DENY YOUR REQUEST FOR HEALTH CARE SERVICES BASED ON MEDICAL NECESSITY OR APPROPRIATENESS OF CARE HAS BEEN UPHELD ON INTERNAL APPEAL." Some participants, particularly those experiencing serious medical problems, may not get past these two sentences to read about their right to independent review.

Another plausible reason for the paucity of cases may be the shadow of ERISA. Aetna has already filed suit against the state of Texas alleging that the state may not regulate self-insured plans sponsored by employees on the grounds that such regulation is pre-empted by federal law. Although the issue has not yet been decided in the Aetna litigation, aggressive attorneys representing health plans may have advised their clients that administer self-funded plans not to send the TDI-mandated notice, on the basis that they are not subject to the Texas law. One approach TDI should consider would be to require that the appeal notice be sent in every instance where care is denied, with a "disclaimer" on the notice that the patient may not enjoy the lawís protections if they are in an employerís self-funded plan.