California’s Knox-Keene Health Care Service Plan Act of 19751 (hereby known as the Knox-Keene Act) regulates health maintenance organizations (HMOs) within the state. Cindy Ehnes, the Director of California’s Department of Managed Health Care (DMHC) described the core benefits provided under the Knox-Keene Act as a “prototype” of the services that should be provided as essential health benefits (EHB) under the Patient Protection and Affordable Care Act (ACA). The DMHC provides an “insurance product” with benefits that must be priced and valued in annual contracts. Thus, the department has extensive experience balancing the interrelated issues of benefits, costs, cost sharing, and provider networks. Three panelists from the DMHC—Ms. Ehnes; Maureen McKennan, the Acting Deputy Director for Plan and Provider Relations; and Andrew George, the Assistant Deputy Director of the Help Center—were asked to compare and contrast the Knox-Keene Act’s covered benefits with the ACA’s EHB and to describe the DMHC’s legislatively mandated appeals and external review processes.
Because there is a question of the extent to which state mandates should be included in the EHB, Susan Philip, Director of the California Health Benefits Review Program (CHBRP), discussed CHBRP’s process for reviewing and evaluating benefit mandates proposed by the California legislature. Anthony Wright, Executive Director of Health Access California, then relayed consumer concerns about the fine print of insurance contracts and fear of personal bankruptcy, as well as consumer perspectives on benefit design and the coverage review processes presented by other panelists.
Ms. McKennan began by explaining that California is a “dual regulatory state” in that health plans are regulated by the DMHC under the Knox-Keene Act, and other forms of health insurance are regulated by the Department of Insurance under the state’s insurance code. She said this distinction means that DMHC regulates all of the HMOs and some of the preferred provider organizations (PPOs) products offered in the state. These products offer comprehensive benefits (hospital, medical, and surgical services) and must include a set of basic benefits specified in the Knox-Keene Act. In addition to the eight basic benefits included in Table 12-1, plans regulated by the DMHC must also cover separately statutorily mandated benefits including mental health services, cervical
1 Knox-Keene Health Care Service Plan Act of 1975. California Health and Safety Code, Chapter 2.2 § 1340.
|Covered Basic Health Care Services
||Examples of 44 Statutorily Mandated Benefits||Optional Benefits|
|• Hospital inpatient services*||• Mental health parity* for severe mental illness and serious emotional disturbance of a child [1374.72]b||• Outpatient prescription drugs* [1342.7, rule 1300.67.24]b|
|• Physician services*||• Various cancer screenings such as cervical and prostate cancer screenings and mammography [1367.665, 1367.66, 1367.64, 1367.65]||• Chiropractic services|
|• Outpatient/ambulatory care*||• Testing for Expanded Alpha Feto Protein (AFP) (prenatal testing) [1367.54]||• Dental care|
|• Lab and radiology*||• Prohibits plans from limiting inpatient hospital care following childbirth to less than 48 hours (vaginal delivery) and 96 hours (caesarean section) [1367.62]||• Hearing aids|
|• Home health||• HIV testing [1367.68]|
|• Preventive health services*|
|• Emergency services* (including ambulance and out-of-area coverage)|
|• Hospice (only for group coverage)|
NOTE: The asterisk (*) indicates similar benefits are also listed as categories under Section 1302(b) of the ACA. In addition to the above-starred categories, the ACA specifies maternity and newborn care, rehabilitative and habilitative services, chronic disease management, and pediatric services including oral and vision care. Maternal and newborn care, and rehabilitation/habilitation are not listed separately in Knox-Keene but considered subsumed under hospital, ambulatory, and physician services. Additionally, while prescription coverage is an optional benefit in California (but usually purchased as a rider), it is required under the ACA. The preventive health services provision under Knox-Keene includes vision screening and oral health risk assessment for children.
a Knox-Keene Act Section 1345 (b); Section 1367 (i). rule 1300.67.
b Brackets include Knox-Keene Act sections.
SOURCE: DMHC, 2011.
cancer screenings, and HIV testing. Ms. Ehnes clarified that many of these statutorily mandated benefits fall under the Knox-Keene covered benefits, but because there were disputes over whether they were covered, the state legislature took the added step of explicating their inclusion in benefit plans.
Grievance and Appeals Processes
Ms. McKennan proceeded to detail the DMHC’s policies and processes for addressing grievances and appeals when consumers seek care that has been denied. The Knox-Keene Act describes what Ms. McKennan called “the how, the what, and the when for the plan to respond to these grievances”2:
- For standard grievances, the plan has to respond within 30 days, whereas for urgent grievances, the plan has to respond within three days.
- The plan needs to send the enrollee a written response that includes a clear and concise explanation of the denial, including the clinical reasons, the criteria, or the guidelines that were used in making the determination.
- For coverage denials, the plan needs to cite a specific portion of the evidence of coverage or plan contract.
- When the plan denies a grievance, the plan needs to inform the enrollee of the right to appeal to the DMHC.
Unless an earlier review by the DMHC is warranted, enrollees must first exhaust the plan’s internal grievance and appeals processes before appealing to the DMHC, but enrollees are not limited in the content and issues about which they can appeal, including access to care and denial of service. Once these grievances and appeals reach
2 § 1368.
the DMHC, the Department has two processes for conducting an external review: the standard complaint process and independent medical review (IMR).
Mr. George clarified that neither review process occurs automatically after a plan has completed its internal grievance process; these processes are “initiated by the enrollee.” Ms. Ehnes described this as one of her principal concerns as director: “They have to raise the complaint. So there must be a process where people who do not complain are able to start accessing the advances in science and medicine.” This exchange prompted committee chair Dr. Ball to ask whether DMHC knew anything about those enrollees who were denied coverage but did not file a grievance. In response, Mr. George noted that DMHC oversees care for 21 million enrollees, and in 2010, 6,800 grievances were filed through the standard complaint process and 1,776 grievances were filed through the IMR process.3 While DMHC constantly reviews information to look for trends (e.g., a specific insurer frequently denying coverage), internal appeals data are not easily accessible. The DMHC’s triennial plan survey could, though, provide insights into these denials; the DMHC’s public health and clinical professionals conduct on-site surveys of all licensed plans at least every three years and issue reports to the public that discuss plan performance in the areas of health care accessibility, utilization management, quality improvement, and member grievances/appeals. Ms. Ehnes noted that even a single case can provide clues to what might be a more widespread problem.
Standard Complaint Process
Standard grievances and appeals might involve coverage issues, billing disputes, and enrollment and eligibility determinations. These issues tend to be “easily resolvable” by reviewing the evidence of coverage or plan contracts. When disputes involve both a coverage determination and a health care service question, such as disputes related to reconstructive surgery, oral surgery, and some services for autism, the DMHC is the “final arbiter” on whether the grievance should proceed through the standard complaint process or an IMR.
Independent Medical Review
An IMR is a process by which expert independent medical professionals assess clinical coverage decisions made by an insurance company. IMRs are conducted when a grievance or appeal relates to a disputed health care service, and the decision in the case is binding on the health insurer. In 2010, the most common grievances by type of treatment involved pharmaceutical benefits (20 percent of all IMRs) and mental health benefits (11 percent of all IMRs) (see Table 12-2). Ms. McKennan informed the committee that the most common pharmaceutical grievances related to Botox treatment for migraines and growth hormone therapy for idiopathic short stature; the most common mental health grievances related to treatment for autism spectrum disorders and inpatient treatment for substance abuse and eating disorders.
Table 12-3 describes the major classes and quantity of grievances filed in 2010 and their disposition. In 2010, 661 decisions (out of 1,452 grievances that proceeded through the IMR process) were in favor of the enrollee; for each of these, the plan was required to authorize the treatment within five days of receiving the decision. Regardless of the outcome, the IMR decision is given to both the enrollee and the plan and these redacted decisions are posted on the DMHC website.4
Ms. Ehnes described the additional 324 cases reversed by the plans themselves, before external review was initiated upon being notified that an IMR was filed, as “very significant.” She said that when the DMHC sees a plan reversing “a lot of decisions,” the department utilizes its enforcement mechanisms to “drill down” and ensure the plan is not “denying things and just pro forma waiting for someone to complain.” Frequent reversals may indicate that a plan is making denials despite evidence in favor of the service. In response to a question from committee member Dr. Ho, Mr. George confirmed that these reversals did not tend to result from the plan reconsidering new
3 The California Department of Health Insurance has authority over non-managed care related appeals; during 2010, its IMR program had 428 reviews (California Insurance Code, Section 10169).
4 To review these decisions, go to the DMHC website: http://www.hmohelp.ca.gov/dmhc_consumer/pc/pc_imrdec.aspx (accessed April 26, 2011).
|Acute Medical Services Outpatient||10||5||5|
|Diagnostic Imaging & Screening||2||2||3|
|Durable Medical Equipment||9||8||7|
|Electrical Thermal Radio Frequency Interventions||2||3||4|
|General Surgical Procedures||5||5||5|
|Reconstructive/Plastic Surgery Procedure Rehab/Outpatient||3||2||3|
|SOURCE: DMHC, 2011.|
Types of Reviews
|Upheld by Review
|Overturned by Review
|Reversed by Plan Before Review
|Qualified IMRs(Total Number)|
|Experimental and Investigational||269(51%)||195(37%)||67(13%)||531|
|Emergency Room Reimbursement||55(53%)||14(13%)||35(34%)||104|
|SOURCE: DMHC, 2011.|
clinical information, as most of this new information should have already been brought to light through the plan’s internal review process.
Ms. McKennan further discussed the three categories of IMRs in Table 12-3: those that review medical necessity determinations, those related to experimental and investigational therapies, and those that address reimbursement for emergency room (ER) visits.
Medical necessity IMRs occur when a provider recommends a health care service and the plan denies the service throughout the plan’s internal appeals process on the grounds that it is medical unnecessary. The Independent Review Organization (IRO) selects an expert reviewer who considers all pertinent medical records, provider reports, and other relevant information. The reviewer decides whether the disputed service is medically necessary based on specific medical needs and any of the following: peer-reviewed scientific and medical evidence, nationally recognized professional standards, expert opinion, generally accepted standards of medical practice, or treatments that are likely to provide a benefit compared to other available treatments.
Experimental and Investigational (E&I) Therapies
For a grievance to be addressed through an experimental and investigational (E&I) IMR, the enrollee needs to have a life threatening or seriously debilitating disease or condition. If a plan denies coverage for an E&I treatment, the plan must notify the enrollee within five days of the right to pursue IMR. In these cases, the enrollee
does not need to go through the plan’s internal grievance and appeals process but can instead proceed directly to the external IMR process.
Ms. McKennan described the E&I process as “a little bit easier than the medical necessity standard of review” as it principally aims to address whether or not the requested therapy is likely to be more beneficial than any other available standard therapy. To do so, a panel of three independent experts considers the enrollee’s specific medical condition, relevant documents, and medical and scientific evidence.
The E&I IMR process has resulted in some changes to benefit packages by driving standards of care for new and evolving therapies. This translation of benefits from being experimental into practice occurs when the DMHC “sees a pattern, either from a particular insurer or related to a particular form of therapy.” For example, when E&I denials related to oncotype testing for breast cancer were repeatedly being overturned by the IMR, Ms. Ehnes said DMHC “went back to the plan and to other plans to say this is now really accepted practice, and it needs to be translated into your review process so that we aren’t continuing to get denials.”
Denial of Emergency Room Reimbursement
The third type of IMR is used when an enrollee received emergency services that a provider thought was medically necessary but the health plan denied reimbursement. In these cases, the IMR reviewer applies a “prudent layperson” standard to determine whether the enrollee “acted reasonably in seeking emergency services.”
Grievances and Appeals Under the ACA
ACA requires plans to have internal and external grievance and appeals processes.5 Until further regulatory guidance is provided, the HHS has deemed most states’ external review processes as compliant with the interim regulations. Ms. Ehnes said the forthcoming regulatory guidance is expected to provide specific requirements for the external review process and detail ways in which states can eliminate barriers to filing a grievance or appeal. Ms. McKennan said this latter issue, in particular, is not a concern in California as enrollees can complain to the DMHC about “any kind of subject they wish” and there are no barriers to filing a complaint (except, in some instances, that the enrollee must first proceed through the plan’s internal grievance and appeals process). Table 12-4 provides a side-by-side comparison of the appeals process under both the Knox-Keene Act and the ACA.
Broad vs. Narrow Definitions of EHB
Ms. McKennan concluded by exploring ways in which the committee might learn from California’s experiences with benefit design. She said that while the ACA requires the Secretary to define EHB, it does not specify whether the Secretary should adopt “broad or specific regulations” to define these benefits. DMHC’s experiences indicate that while broad categories allow for flexibility as new diagnoses and treatments become professionally recognized standards, these broad categories, Ms. McKennan said, may create uncertainty about whether a treatment must be covered by a plan. This latter concern has resulted in numerous mandated benefits (see the center column in Table 12-1). The need for clarification given the “broad” nature of the Knox-Keene covered benefits was highlighted by an exchange between committee member Dr. Wadhwa and Ms. Ehnes: while the Knox-Keene Act does not specifically list maternity and newborn care, such coverage is considered to be part of the basic health care services. Ms. McKennan explained that more defined benefits eliminate this uncertainty by providing clarity about whether a particular service is covered, but may increase the risk that something not specifically listed will be considered excluded.
Ms. Ehnes said that one of the challenges DMHC faces is when a new product or service “comes on the scene,” coverage policies may not explicitly state whether this is or is not covered. While the insurance products are contracted on an annual basis and thus provide opportunity to include these new treatments, the continual
5 Several regulations and guidance on internal appeals and external review processes have been issued. For more information go to: http://cciio.cms.gov/resources/regulations/index.html#ea (accessed August 17, 2011).
|Internal claims response time for non-urgent cases||5 days||15 days with 15 day extension possible|
|Internal claims response time for urgent cases||3 days||24 hours|
|Internal appeals response time for non-urgent cases||30 days for both pre/post-service requests||30 days for pre-service requests/60 daysfor post-service requests|
|External review response time for non-urgent cases||30 days||45 days|
|Claimant’s right to present evidence||Does not address (enrollees are allowed to submit additional information by writing to the DMHC)||Expressly allowed (unclear if the regulation would allow evidence be presented through an administrative hearing/testimony)|
|Cost to enrollee for IMR (Independent Medical Review)||Free (paid by plan)||$25nominalfee(balancepaidbyplan)|
|SOURCE: DMHC, 2011.|
addition of new products and services “potentially creates some issues related to the pricing of that package and the year-to-year sustainability and affordability.”
Because the Knox-Keene Act does not define medical necessity, enrollees can more easily make the case for covered services. This open-ended “definition” of medical necessity means that an IMR may determine if a particular enrollee must be given a particular treatment. This standard requires the reviewers to consider the evidence base for a treatment labeled “experimental” and authorize the treatment if it might be better than current alternative treatment options. While noble in purpose, in practice it means that few treatments will not meet this very minimum threshold for evidence, reducing the notion of scientific rigor. For instance, disputes regularly arise over coverage of applied behavioral analysis (ABA) for autism; plans assert that this is an educational treatment, whereas enrollees maintain it is a medical service. Insurers have traditionally set definable and predictable parameters to exclude coverage of non-medical services. Furthermore, she pointed out that habilitative services differ from rehabilitative services in that they do not serve to improve the patient to a pre-illness or injury state, and therefore, do not always have a clearly defined endpoint in either time or scope of services. Without some limitations, these services can substantially increase costs and lead to unaffordability and adverse selection in the insurance market. Ms. Ehnes described medical necessity determinations for autism treatments as “enormously difficult.” As HHS considers medical necessity and standards of evidence, Ms. Ehnes advised it to consider “providing clarity on whether a service such as ABA should be covered as an essential health benefit,” and if there is a sufficiently rigorous evidence basis for it at this time.
Ms. Philip introduced CHBRP before discussing how her organization evaluates proposed benefit mandates and sharing insights she has gleaned from the evaluation process. Established in 2002 by the state legislature, CHBRP’s researchers (i.e., faculty and researchers from the University of California, San Francisco, and the University of California, San Diego, and program staff) analyze the medical effectiveness, cost, and public health impact of proposed state legislative health insurance benefit mandates or repeals and provide this independent, evidence-based information to the legislature. To ensure timely information, CHBRP has only 60 days to complete its analysis. The findings do not include any policy recommendations; rather, Ms. Philip said, CHBRP provides its report, and legislators use the information to determine whether the mandate is a “policy worth pursuing.”
Of all the types of benefit mandates CHBRP evaluates, Ms. Philip described two, in particular, that are relevant to the committee’s work: mandates that require coverage for a bundle of services associated with screening,
diagnosis, or treatment of a condition or disease (e.g., a bill to require coverage for services associated with pregnancy, including prenatal care, labor and delivery, and postpartum care) and mandates that require coverage for a specific service, item, drug, or procedure (e.g., hearing aids for children, coverage for the human papillomavirus [HPV] vaccine). More than 20 million Californians are potentially affected by these proposed benefit mandates.
CHBRP uses three criteria to evaluate proposed mandates—medical effectiveness, cost impact, and public health impact—and relies on a “hierarchy of evidence” to determine the medical effectiveness of the potentially mandated service.
Cost impact concerns the marginal cost of the mandate. CHBRP does not examine the cost of adopting a new technology or of having the benefit being newly covered throughout the entire California health care system. Rather, researchers examine the marginal or incremental impact, including changes in health care expenditures, premiums, and out-of-pocket costs. This marginal impact analysis ensures CHBRP does not over- or underestimate the cost of the mandate.
Similarly, using measures such as morbidity, mortality, disparities, and the economic burden of illness, CHBRP’s public health impact analysis estimates the marginal impact of the proposed mandate on the health and productivity of Californians. For example, if there is strong evidence that a particular technology is effective, but the research finds that the insured population already has coverage and there would be no change in utilization, then, Ms. Philip said, “we might say there’s no public health impact attributed to the bill.” However, if evidence shows the technology is effective and that more Californians being covered would increase utilization, then CHBRP estimates a positive public health impact. Though not always possible, CHBRP attempts to quantify these public health impacts; for example, researchers quantified school absenteeism due to asthma.
Analysis of Repeal Bills
In 2010, a bill introduced in the California legislature would have permitted out-of-state carriers to sell insurance in California without being subject to existing state mandates.6 This proposal, Ms. Philip said, would have amounted to a repeal of all 44 mandates then required by California law by “allowing carriers to develop, market, and sell products previously prohibited in the market.” This issue, she said, is “of particular relevance to the IOM committee.” To evaluate the bill, CHBRP performed an “opposite analysis” to see what the reduction in cost would be if the 44 mandates were taken away.
Assessing cost impact was “definitely a challenge,” Ms. Philip said, because researchers had little data to anticipate how the market would respond to plans that did not offer such comprehensive coverage. CHBRP developed “prototype” plans based on a review of limited benefit plans in other states. Using these prototypes, researchers developed scenarios of cost reductions and “take-up rates” if the prototypes were available in California.
Assuming plans in the market still offered the basic health care services mandated by California’s Knox-Keene Act, researchers determined there would be a 2 to 5 percent cost reduction in the absence of the 44 mandates (CHBRP, 2007, 2010). Stated differently, Ms. Philip said, the mandates add 2 to 5 percent to insurance premiums. Committee member Dr. David Guzick pointed out that this estimate varies significantly from the estimates provided by a previous panel (Chapter 3, Figure 3-1 describes Ms. Malooley’s estimate that 69 state mandates in Rhode Island raise premiums by more than 34 percent), which prompted Ms. Philip to reiterate that CHBRP studies the marginal cost of the mandates whereas other studies, she said, “actually look at the cost of the benefit as a whole as opposed to looking at the marginal impact of the requirement.”7 In other words, removing all mandates would not mean that plans would drop all coverage since there is considerable overlap with basic health care services and since the market may continue to demand the benefit or service.
6 California Assembly Committee on Health AB 1904: Out-of-State Carriers.
7 The CHBRP analysis of Assembly Bill 1214 strictly examines benefit mandates, vs. mandates on process or eligibility.
In response to an inquiry from committee member Mr. Schaeffer, Ms. Philip described the potential impact on public health and the potential for adverse selection resulting from limited benefit plans:
- While the state mandates often overlapped with the Knox-Keene Act’s covered services, the mandates tended to go into “further detail” by requiring coverage of mastectomy, for example, rather than just coverage of breast cancer treatment;
- About half of the mandates had a “strong” evidence base—that is, had clear and convincing or a preponderance of evidence of the effectiveness of the mandated benefit or service;
- Approximately one-third of the mandates did not have a “preponderance of evidence;” and
- A “small minority” of the mandates had evidence that the mandated benefit is ineffective or associated with potential adverse effects (CHBRP, 2010).
Evaluation and Research Needs
Ms. Philip suggested that information on fiscal impacts, long-term impacts, and comparative effectiveness are essential for the legislature to thoroughly evaluate a bill, but that providing these analyses is often quite challenging. Given states’ budget crises, states particularly need “reliable fiscal impact analysis” by independent parties to gauge the states’ fiscal liability if existing mandates “are considered to exceed the EHB floor.” Reliable fiscal impact analysis also helps decision makers weigh the utility of the benefit with the potential tradeoffs. Recently, for instance, California legislators used CHBRP’s cost-effectiveness analysis to weigh the merits of mandated tobacco cessation services. During a public discussion hearing of the Assembly Committee on Health, legislators cited CHBRP’s report and its summary of cost-effectiveness research as a reason for voting in favor of the bill (State of California, 2010).
Evaluations of proposed benefits should, where feasible, include a long-term impact analysis. Though doing so is challenging, CHBRP summarizes the available cost-effectiveness analysis to present the effect of a mandate in terms of quality adjusted life years. Ms. Philip pointed out that such analysis allows policy makers to consider the long-term societal impacts and ramifications of their decisions. Long-term analysis that examines effects over 10 to 30 years is particularly important when evaluating benefits for preventive services or chronic care management.
For assessing specific benefits, Ms. Philip believes comparative effectiveness research (CER) would be very valuable in determining which benefits to include in an EHB package. Recently, for instance, CHBRP analyzed a bill that would require parity in cost sharing for anticancer medications (CHBRP, 2009a). Under the bill, co-pays for intravenous injectable drugs obtained in a physician’s office would have had to be “on par” with co-pays for oral anticancer medications.8 In the absence of reliable CER, CHBRP was unable to conduct medical effectiveness analysis on the comparative effects of benefit design on access to anticancer medication.
Ms. Philip concluded her presentation by sharing some of the feedback CHBRP has received from policy makers, stakeholders, and researchers, and by providing her own insights. First, the independence of the evaluation process is important, and the process must allow for stakeholder input. The transparency of CHBRP’s processes has helped improve its methods while enhancing the credibility and reliability of its reports. Second, the reports are actually used by policy makers, she said, because they “show up” in time for the deliberation process. Third, the analysis must be clearly communicated to lay audiences; translation of technical research findings into “readable” text must be a “built-in” part of the evaluation process.
Ms. Philip concluded by emphasizing that while somewhat unsatisfying, a lack of evidence can be just as important as other research findings. If there is not enough evidence to actually draw a conclusion, she said, then it is important to highlight the lack of a strong evidence base. In CHBRP’s experience, when a mandated benefit
8 California Assembly Committee on Health Bill 161: Health care coverage: Chemotherapy treatment.
lacked a strong evidence base, the bill is typically not pursued either because the author decides not to pursue the bill or the legislature fails to pass the bill (CHBRP, 2009b).
In its 25-year history, Health Access California has become, Mr. Wright said, “the statewide health care consumer advocacy coalition,” working on developing and passing specific consumer protections and broad health reforms at the state level. The organization was actively involved in the creation of the DMHC and its IMR process. Mr. Wright expressed his support for both the DMHC’s IMR process and the CHBRP’s benefit review process, calling these “balanced processes that are iterative, allow for the evolution of benefit design, and have consumer-based criteria as part of their processes.”
With its state partners, Health Access has “grappled” with issues around health care coverage and the tradeoffs related to affordability. While recognizing the need to balance affordability and the comprehensiveness of benefits, Mr. Wright expressed that “a cheap premium is always attractive, but even cheap junk is still junk.”
A “Layperson’s Definition of Coverage”
As part of several health reform efforts, including one by Governor Arnold Schwarzenegger in 2008 that eventually stalled (State of California, 2008), Health Access participated in privately-funded focus groups and other opinion research projects. During this research, Mr. Wright said, consumers and small businesses were asked for their opinions about what constitutes basic health benefits. The list, he said, was “remarkably consistent” from group to group and included physician services, hospitalization and ambulatory care, diagnostic laboratory tests, diagnostic and therapeutic radiology, home health services, preventive health services, emergency health care services, hospice care, prescription drug coverage, and mental health parity. This “layperson’s definition of coverage,” he said, “includes an expectation of coverage for basic services.” These basic benefits were regarded as those benefits covered by most employer-based plans in California.
“The Fear of the Fine Print” and Bankruptcy
Mr. Wright said that one of the things he most often hears from consumers and patients is a “fundamental fear of the fine print.” Exclusions, loopholes, and caveats are of great concern to patients as they worry about not having care “when they most need it.” The ACA tries to mitigate these fears with strict regulation of rescissions,9 no denials for pre-existing conditions, a standard on medical loss ratios,10 out-of-pocket maximums, and an end to lifetime and annual limits for EHB—these policies address the core problem of patients not feeling a “sense of security,” he said.
Mr. Wright described the ACA as being “as much about economic security as it is about health care coverage” for patients. During the health reform debate, for instance, consumers rallied (via Facebook® and Twitter®) behind the notion that “no one should go broke because they get sick.” However, he said, people buy coverage based on the above-discussed “layperson’s definition of coverage,” and therefore, when there are holes in the benefits, people are left in a “financial trap.”
Mr. Wright proceeded to elaborate on California’s Knox-Keene Act. Because of this law, he said, “most health coverage sold in California has a much better standard for a basic benefit package” than in other states. Under the Knox-Keene Act, the DMHC regulates approximately 80 percent of coverage in California (an estimated
9 Under Section 1001 of the ACA, adding § 2712 to the Public Health Service Act, plans or issuers are generally prohibited from cancelling or discontinuing coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. A rescission is defined as “a cancellation or discontinuance of coverage that has a retroactive effect, except to the extent attributable to a failure to pay timely premiums towards coverage” (DOL, 2011).
10 Patient Protection and Affordable Care Act of 2010 as amended. Public Law 111-148 § 10101(f), adding § 2718 to the Public Health Service Act, 111th Cong., 2d sess.
17 to 18 million covered lives). A low standard for minimum essential benefits could undermine the Knox-Keene standard provided to a majority of Californians.
The remaining 10-20 percent of coverage is regulated by the California Department of Insurance, where, Mr. Wright said, there is not a basic standard of included services. Some of these plans, for instance, may cover hospitalization for the first night, but not the second night, or vice versa. Some limit prescription drugs coverage to only generics and do not cover even medically necessary brand-name drugs without a generic equivalent. These plans, he said, do not have “an appropriate mechanism for setting essential benefits.”
Mr. Wright used two examples to show how even consumers who “do the right thing and voluntarily purchase health insurance” regulated by the Department of Insurance can see their “financial security destroyed by the fine print”:
- Susan Braig, a self-employed graphic designer, bought what she thought was catastrophic coverage; when she was diagnosed with breast cancer, virtually none of her care was covered because her treatments were provided on an outpatient basis and she had purchased a hospital-only plan. She ended up uninsurable and with tens of thousands of dollars in medical debt.
- Laura Burwell, a small business owner, thought she was purchasing private nongroup coverage that was as comprehensive as the coverage offered by her previous employer. When she was bitten by a rattlesnake in the backyard and taken to a local hospital, her plan did not cover the first and most expensive day in the hospital. Her bill for that first day of care was over $73,000; her insurance covered only $3,000.
Mr. Wright argued that having insurance products with these kinds of loopholes provides no benefit to consumers. Consumers cannot and should not be expected to anticipate needing care for every ailment and “even when plans prominently disclose the holes in their benefits (which many do not), they rely on consumers to have actuarial and medical information to provide context and evaluate risk appropriately.” In making an argument that “simplicity matters,” Mr. Wright said that a competitive marketplace in which insurers compete on cost and quality rather than on “how confusing the benefit packages are” will be in everyone’s best interest.
Consumer Insights on Medical Necessity Determination
The Knox-Keene Act specifies that care recommended by a provider, including out-of-network providers and emergency care, is subject to a determination of medical necessity. If care is disputed, IMR determines whether the disputed service was indeed medically necessary, based on the “specific medical needs of the enrollee.”11 This requirement means that if a diabetic with a broken leg needs physical therapy because of delayed healing due to diabetic complications, the reviewers must take that into account. As a result, allowable medications, length of hospital stays, and specific types of surgical procedures may vary depending on the individual medical needs of the patient. Health Access, Mr. Wright said, supports the consideration of individual medical needs and opposes inclusion of uniform limits of medical necessity on the grounds that specific limits often “short-change persons with disabilities or degenerative conditions.” Without specific limits, he said, medical necessity determinations can be more iterative.
Consumer Insights on Benefit Mandates and Exclusions
Mr. Wright stated that Health Access supports some state benefit mandates, including mental health parity and coverage of prenatal and maternity care in the individual market. He cautioned, though, that even as consumer advocates, Health Access does not regularly endorse specific benefit mandates (sometimes proposed by industry to promote specific drugs, devices, or tests). One of the reasons his organization does not always support these mandates, he said, is that once enacted, mandates do not tend to evolve as treatments and evidence change. Health Access supports CHBRP’s process to evaluate the marginal cost and public health impact of potential mandates.
11 California Health and Safety Code, Section 1374.33.
Mr. Wright concluded by stating that exclusions on benefits often “impose costs on public programs and taxpayers” because when frequently used therapies are not covered, public programs “pick up the slack.” For example, Medi-Cal covers the cost of durable medical equipment (DME) for some eligible patients if the equipment is not covered by a health plan. The lack of maternity coverage has meant additional government costs in programs like Medi-Cal and Access for Infants and Mothers. Furthermore, Mr. Wright advised the committee that “consideration of affordability must include not just premiums, but the full costs to the patient, including cost sharing due to co-payments, deductibles, and benefits not covered.” He reiterated that “you want to give people confidence in their coverage.”
CHBRP (California Health Benefits Review Program). 2007. Analysis of Assembly Bill 1214: Waiver of benefits. Oakland, CA: California Health Benefits Review Program.
____. 2009a. Analysis of Assembly Bill 161: Health care coverage: Chemotherapy treatment. Oakland, CA: California Health Benefits Review Program.
____. 2009b. Implementation of Senate Bill 1704: California Health Benefits Review Program. Analysis of legislation mandating or repealing health care benefits and services. Oakland, CA: California Health Benefits Review Program.
____. 2010. Analysis of Assembly Bill 1904: Out-of-state carriers. Oakland, CA: California Health Benefits Review Program.
DMHC (California Department of Managed Health Care). 2011. Independent state review processes. PowerPoint Presentation by Cindy Ehnes, Director, Maureen McKennan, Acting Deputy Director for Plan and Provider Relations, and Andrew George, Assistant Deputy Director, Help Center, Department of Managed Health Care to the IOM Committee on the Determination of Essential Health Benefits, Costa Mesa, CA, March 2.
DOL (Department of Labor). 2011. FAQs about the Affordable Care Act implementation Part II. http://www.dol.gov/ebsa/faqs/faq-aca2.html (accessed April 27, 2011).
State of California. 2008. The governor’s health care plan. http://www.fixourhealthcare.ca.gov/plan (accessed May 10, 2011).
_____. 2010. Analysis of Senate Bill 220, hearing held on June 22, 2010. http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0201-0250/sb_220_cfa_20100618_142408_asm_comm.html (accessed May 10, 2011).