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Regarding state initiatives on grievances and
appeals processes for managed care enrollees

Testimony by Delegate Marilyn Goldwater

Good morning, Mr. Chairman and Members of the Committee. My name is Marilyn Goldwater. I am the Deputy Majority Whip in the Maryland House of Delegates. I am testifying on behalf of the National Conference of State Legislatures (NCSL), where I serve on the Executive Committee, the governing board of the conference. The National Conference of State Legislatures is a bipartisan organization created to serve the legislators and staff of the nation’s 50 states, its commonwealths and territories and the District of Columbia.

This morning I am here to discuss state initiatives on grievances and appeals processes for managed care enrollees. Legislation on grievance and appeal procedures is part of an evolving body of state law designed to address consumer concerns regarding quality of care in the managed care setting. The fact that we have a bifurcated health insurance regulatory structure makes the development of a fair and efficient system both complicated and challenging.

As you know, states have no regulatory authority over plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). Therefore, laws we pass and policies we adopted at the state level do not apply to these plans. At the same time, as more individuals and families receive their health care services through managed care entities and as the tension grows between efforts to contain costs and to provide quality care, states will continue to be called upon to ensure that proper consumer protections are in place.

Today, every state requires managed care entities to have an internal appeals process in place. The federal government has imposed similar requirements on ERISA plans. The requirements vary widely across the states and plans, but there are some common features. These features fall into two major categories: (1) information to plan enrollees; and (2) process. States may provide guidance on the form and content, and the frequency or schedule of the dissemination of the information to plan enrollees. With respect to process, states typically provide guidance on the timeframes for filing and responding to complaints, responding to grievances and appeals in emergency situations, the form of the appeal (e.g. written, oral, face-to-face), and the appropriate credentials for individuals or entities performing the reviews.

It is important to have a strong, effective and responsive internal grievance and appeal mechanism in place. Without a functioning internal grievance and appeals process, the external process, if one is developed, is likely to become overburdened. States continue to strengthen internal review requirements and seek to assist consumers by establishing hotlines, ombudsman programs and by requiring plans to assist enrollees with their grievances and appeals.

There is growing support for the establishment of independent and/or external appeal requirements. Currently 16 states (Arizona, California, Connecticut, Florida, Maryland, Michigan, Minnesota, Missouri, New Jersey, New Mexico, Ohio, Rhode Island, Tennessee, Texas, and Vermont) require plans to establish an external appeals process.

In recent testimony, Insurance commissioner Jack Ehnes of Colorado identified six different models among the 15 states with external appeals processes. There are even more than that if you also consider which state agencies are involved in the process. This points to the complexity of the issue and the difficulty of developing a workable federal structure.

Finally, states continue to revise and refine both internal and external grievance and appeals processes. Below is a description of what a few states are doing.

Our legislature passed and the governor recently signed legislation that: (1) strengthens our internal grievance and appeals process; (2) establishes an external appeal mechanism; and (3) provides additional regulatory authority to the insurance commissioner over medical directors in Health Maintenance Organizations (HMOs).

The new Maryland law:

• Requires health insurance carriers, including HMOs, to establish a 30 working day internal grievance process that an enrollee may use to resolve a utilization review determination that a covered health care service is or was not medically necessary, appropriate, or efficient.
• For grievances involving retrospective denials, the internal grievance process is required to be completed within a 45 working day period.
• The internal grievance process must include procedures for use in an "emergency" case to render a decision within 24 hours of the filing of a grievance.
• Requires enrollees to exhaust the internal grievance process before filing a complaint with the insurance commissioner, unless the enrollee can demonstrate a "compelling reason" for doing so.
• Requires carriers to provide enrollees with written notice of the grievance decision, including the factual bases for the decision. A carrier may not solely use generalized terms in the notice, such as "experimental procedure not covered" or "not medically necessary."
• Requires the Insurance commissioner to complete an investigation on a complaint filed by an enrollee, or a health care provider on behalf of an enrollee, within 30 working days for a complaint involving pending health care services; within 45 working days for a complaint involving health care services already rendered; and within 24 hours in emergency cases.
• Allows the Insurance commissioner to prioritize complaints on the basis of whether they involve pending health care services or health care services already rendered.
• Permits the Insurance commissioner to seek medical advice from an independent review organization or independent medical expert on issues in a complaint filed with the commissioner that involve a question of whether a health care service provided or is to be provided is medically necessary. The carrier that is the subject of the complaint must pay the reasonable cost of the independent review organization or medical expert.
• Requires the insurance commissioner on or before January 1, 1999 to adopt regulations requiring carriers to provide a mechanism that will enable a member to be informed of the member's right to challenge a decision made by a carrier that resulted in the nonpayment of a health care service.
• Makes the insurance commissioner the single point of entry of all complaints concerning HMOs, including "quality of care" complaints. The insurance commissioner is to refer "quality of care" complaints to the Department of Health and Mental Hygiene for investigation. The Department of Health and Mental Hygiene is required to submit a report to the Insurance commissioner detailing the results of its investigation.
• Transfers regulatory authority over private review agents from the Department of Health and Mental Hygiene to the insurance commissioner. Increases penalties if private review agents violate utilization review standards.
• Requires the insurance commissioner to adopt regulations establishing a certification process for medical directors of HMOs, who also are required to be physicians licensed in Maryland. Specifies the responsibilities of medical directors and allows the insurance commissioner to revoke or deny a certificate to a medical director that violates those responsibilities.

Florida created the first state external review process in 1985. The Statewide Provider and Subscriber Assistance Panel, a panel of six state employees, reviews cases that cannot be resolved through the internal grievance and appeal process. Even with 13 years of experience, Florida continues to fine tune its process. In 1997, the legislature strengthened the internal review process. This session, the legislature established explicit timeframes for the external review process. The new law requires the panel to: (1) hear "extreme emergency" cases (life-threatening) within 24 hours and requires the panel to issue a final order within 24 hours; (2) provide an "expedited review" for cases involving immediate or serious conditions which requires a response within 45 days; and (3) hear "non-urgent" cases within 120 days. According to statistics from the Agency for Health Care Administration, the administering agency for the state’s external review process, 65 percent of all cases heard by the panel are decided in the favor of the consumer.

New Jersey contracts with an independent utilization review organization. In 1997, the state enacted legislation requiring HMOs to establish an external appeal process. This year, the legislature required all managed care entities to establish an external review process. New Jersey operates a consumer hotline, which according to state officials responds to many consumer questions and complaints. State officials report that the process is working well and that of the 46 appeals received in the year the program has been in operation, 36 have been resolved, with 23 resolved in favor of the HMO, and 13 resolved in favor of the patient. Of the 13 cases found in favor of the patient, the HMOs have accepted the decision of the utilization review organization in 11 cases, rejected the decision in one case and one case remains undecided.

Last year Texas enacted landmark legislation that would permit managed care enrollees to sue their health plan for malpractice in cases where they have been harmed by a plan’s decision to delay or deny treatment. While many are familiar with the "HMO liability" provisions of the law, most are not aware that the same law establishes an independent external review process as well. The HMO liability provisions have been challenged by insurers and cannot be implemented until the court case is resolved, but the external review process is being implemented. According to the insurance commissioner’s office the process is working well and cases are running about 50-50 for consumers and insurers. Insurers in the state are hopeful that the external review process will continue to work well, so that even if the HMO liability provisions are upheld there will be few cases that go forward to litigation.

There are a number of proposals that would establish federal internal and external grievance and appeals processes. I urge caution. It is difficult to imagine a one-size fits all federal structure. As you can see, almost every state has a distinct process. It is also clear that most programs are works in progress.

I do not believe the model used in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is appropriate or would work in this area. I would urge the Department of Labor (DOL) to strengthen its requirements for internal appeals for ERISA plans. That would be an important first step. If it is determined that a federal external appeals process is appropriate, it should be administered by the federal government according to rules established by federal law. States would then be left to manage those plans under their regulatory authority. It may be possible that some ERISA plans may want to opt to participate in the state external review process, which would be an interesting turn of events.

I thank you for this opportunity to testify today and look forward to working with you over the coming months on this and other managed care issues.

AFI Health Committee

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