Report to the General Assembly (Published)

Document Title

Possible Establishment and Implemantation of an Appeals Process for Insureds Denied Coverage for Experimental Technologies

Author

State Corporation Commission; Bureau of Insurance

Enabling Authority

HJR 432 (1991)

Executive Summary

Purpose

The State Corporation Commission's Bureau of Insurance was requested by
the 1991 Session of the General Assembly to study the possible establishment and
implementation of an appeals process for insureds denied coverage for
"experimental" medical technologies. As stated in House Joint Resolution No.
432, this study was requested because (i) the Commission on Health Care for All
Virginians had previously examined this issue; (ii) recent studies have revealed
inconsistencies in third-party reimbursement policies for medical procedures
considered experimental; (iii) some experimental therapies provide potentially life-
saving treatment and may actually be more cost effective than more traditional
treatments for which coverage is provided; and (iv) an appeals process is necessary
to provide Virginia citizens a "fair and objective" means of obtaining adequate
insurance.

Methodology

The Bureau of Insurance began studying this issue by analyzing the data
collected by the Commission on Health Care for All Virginians. The Bureau
surveyed the other state insurance departments to determine whether any states
had established an appeals process for insureds denied coverage for experimental
medical treatments and whether any states required coverage to be provided for
experimental medical treatments. The Bureau also surveyed the top twenty-five
accident and sickness insurers, health services plans, and health maintenance
organizations operating in Virginia to determine (i) whether coverage for
experimental treatments was being provided; (ii) how insurers determined which
treatments were experimental; (iii) who within the company made this
determination; (iv) whether a list of these treatments was maintained by the
company; and (v) whether any statistics were available to indicate the number of
claims that had been paid and/or denied for treatments considered experimental. In
addition, a public meeting was held to give the citizens of Virginia an opportunity
to provide testimony on problems they may have had in being reimbursed for
treatments deemed experimental by their insurer.

Findings

The Bureau's findings can be summarized as follows:

1. The Commission on Health Care for All Virginians concluded in its report
that, with so many assessment mechanisms already in place, a state panel
appointed to assess new technologies would simply replicate the current
assessment processes used by various organizations. It also concluded that
mandating and/or paying for experimental procedures would encourage the
expenditure of resources and money for tertiary care services and high technology
research which, in turn, would greatly increase health care costs.

2. There are certain advantages of setting up an appeals panel such as
impartiality, consistency in claims handling, reduction in litigation expenses, quick
resolution, and equity for the citizens of Virginia. An appeals panel could also help
address some of the concerns that have been noted in recently published medical
literature such as the concern that (i) cost containment has become the overriding
factor in determining the type of medical treatment a patient will receive, (ii) that
decisions regarding new technologies do not take into consideration the speed with
which biomedical research is advancing, and (iii) that reimbursement procedures
may actually negatively impact the development of new technologies.

3. Comments provided on the company surveys indicated certain disadvantages
associated with setting up an appeals panel. These included duplication of remedies
already available to insureds, existence of adequate assessment methodologies
currently in place, cost and the lack of predictability in determining adequate rates,
possible conflict with ERISA laws for self-insured single employer plans, lack of
impartiality by specialists making decisions in their field of expertise, and lack of
authority to override specific contract exclusions.

4. Thirty-five (35) state insurance departments responded to the Bureau's
survey. According to the responses received, none of the states require coverage
to be provided for experimental or investigative treatments. None of the states
have an appeals process for insureds who are denied coverage for experimental or
investigative treatments. However, three states provided additional information for
the study. The Georgia Insurance Department said they had taken the position that
experimental or investigative treatments could not be defined more restrictively
than any treatment, procedure, facility, equipment, drug usage, device or supply
not recognized as accepted medical practice by the American medical community.
The New York Insurance Department indicated that they could request an opinion
from their health department as to whether a treatment was experimental but that
such an opinion had only been requested once. The Connecticut Insurance
Department said that under questionable circumstances, the department could
require the company to justify or support its conclusion that a treatment was
experimental. This type of documentation can be and has been requested in
Virginia as well.

5. Twenty-two (22) usable company survey responses were received.
Seventeen (1 7) companies indicated that coverage for experimental treatment was
neither provided in their policy nor offered in a rider. Seventeen (1 7) companies
reported that they did not maintain a list of treatments considered experimental.
When asked if the company had ever paid a claim for a treatment considered
experimental, eighteen (18) companies answered "yes", but most of the companies
(17) said they did not track claims data for these types of claims so they were
unable to report the number of claims that had either been paid or denied. Finally,
five (5) companies indicated they would not be opposed to establishing an appeals
process in Virginia. It should also be noted that a number of different responses
were provided when the companies were asked how they determined what was
experimental, who within the company made this determination, and what types of
medical authorities were consulted in making this determination.

6. Twenty-one (21) people testified at the public meeting held in Richmond on
July 10th and thirty-four (34) individuals and organizations submitted written
comments. Excerpts from the testimony given at the meeting and from the written
comments received are contained in the report. Also, selected representative
samples of written comments are included in the Appendix. The following
summarizes some of the comments given: (i) insurers are given unlimited discretion
in determining what is experimental and, as a result, are restricting the delivery of
health care in Virginia; (ii) insurers do not use the same criteria to determine what
is experimental or investigative and vary considerably in their reimbursement
policies for these types of treatments; (iii) the court system is already over-
burdened and another system that allows quick resolution is needed; (iv) when an
insured proves his or her case in court it does not set a precedent for future
decisions made by insurers; (v) an arbitration forum should be available to the
average person where no lawyer needs to be present and no great legal expenses
are incurred; (vi) most insureds do not know or do not have a choice in deciding
what will be covered under their group insurance policies; and (vii) insurers have
been cited for making their own independent evaluation of published scientific
literature and disregarding the consensus of opinion of members of the medical
community.

Conclusion

While the Bureau of Insurance is of the opinion that an appeals process could
be established, such a process may not be the best solution to the problem that
currently exists. This type of proposal would have certain drawbacks such as (i)
increased administrative responsibilities for the agency in charge of overseeing the
activities of an appeals panel; (ii) additional costs associated with the added
administrative responsibilities; (iii) increased staffing needs; and (iv) difficulty in
locating panel members who would be impartial and who would be willing to serve
on the panel. In addition, no other state has established an appeals process for
insureds who have been denied coverage for experimental medical technologies.
Therefore, the Bureau of Insurance is unable to recommend that an appeals process
be established in Virginia.

The Bureau of Insurance concludes that if the public demands this type of
coverage, insurers should be encouraged to offer coverage for experimental
treatments. This coverage should be made available to those who are willing to
purchase it.