Summary of Section Three 


Background - Once consumers enroll in a managed care plan, a paramount concern becomes protecting an individual's right to all covered benefits and the provision of high quality service and treatment.

Consumers that enroll in managed care plans enter a new and unfamiliar world of health care delivery and financing. Under the fee for service system, there was a reasonable expectation that the interests of consumers in receiving health services were aligned with the financial interests of providers, although over-utilization is a problem. The incentives of capitation changed this dynamic to the point where consumers now question whether physicians have greater allegiance to their contracted plan or to their patient.

Access to a complaint and appeals system is an important consumer right under any delivery system but particularly under managed care. To counterbalance managed care incentives to underserve, all enrollees must have the right to challenge the health care plan if they believe that medically necessary services are being denied, reduced, or terminated. Consumers must also have the opportunity to air complaints if they feel mistreated or believe that have received poor quality service or treatment.

Current complaint and appeals mechanisms for individuals enrolled in managed care plans are not well established. In the private commercial marketplace, most states require that managed care organizations have an internal complaint system but do not mandate specific procedures, like second level reviews by independent peer panels. In the absence of regulatory standards, managed care organizations are left as judge and jury for the care they provide.

The NAIC is presently developing model complaint and appeals standards for states to adopt. NAIC recommendations include: uniform standards for initiating complaints, first and second level review requirements with time frames, expedited reviews in the case of service denials that may jeopardize the life or health of an enrollee, appeals to the designated sate agency, and rights to judicial review.

An important difference between the NAIC standards and The Quality Imperative is the independence of the second level review panel from the managed care plan. Current NAIC drafts authorize health plan establishment of the second level review and stipulate that, "a majority of the panel shall be comprised of persons who were not previously involved in the complaint." Consumer advocates argue for an independent review outside the plan and the continuation of benefits at no cost to the enrollee during dispute resolution.

The structure and design of the managed care complaint and appeals system is becoming a contentious political issue at the state level. The managed care industry is well organized to fight comprehensive and independent complaint/appeals procedures and consumer advocacy groups are beginning to organize around the issue. In New York State, the industry was successful in blocking legislation pushed by consumer groups that would have granted independent appeal rights to managed care enrollees.

The Medicare and Medicaid programs represent the best currently operating model for a meaningful appeal systems. Both programs require review by an entity outside the plan and, where necessary, independent outside medical review. However, certain safeguards are lacking. For example, the Medicare program, which has an independent outside contractor review all medical issues arising between a beneficiary and an HMO, still does not have enough time limits for resolving cases where treatment has been denied, reduced or terminated and the beneficiary is not receiving care.

In addition, the federal Heath Care Financing Administration has been lax in communicating to beneficiaries what their rights are, and in requiring that managed care plans fully implement the procedures required under current law. A class action suit (Grijalva v. Shalala) has been brought in federal court against the Secretary of the U.S. Department of Health and Human Services by consumer advocacy groups both to compel more government oversight of the appeal process and to improve the appeal process.

Conclusion - Every managed care plan licensed in a state must have a fair and rapid system for resolving enrollee complaints and appeals. The need for such a system is particularly compelling in managed care arrangements where the plan actually provides services and makes all the decisions about what medical care a covered person will receive. The financial incentives of capitation encourages plans to limit the use of services and, as a result, many covered persons are at risk of a wrongful denial of care. An effective complaint and appeals system is a critical consumer protection and right under managed care.

Model Legislation Highlights

The model legislation establishes a complaint and appeals system that applies to all types of enrollee disputes with a managed care plan.

The system consists of review by the health plan (first level review) a second level review by individuals who have not participated in the first level, an appeal to a state administrative law judge, and judicial review. Specific time limits apply to each step through administrative review. The time limits are shorter for cases where the covered person has not received, or faces termination or reduction of services.

Where the issue is medical necessity or appropriateness, the second level review actually consists of review by one or more outside health care professionals having no financial interest in the outcome. Those experts are assigned to the case by a board, agency, or other entity (possibly a private organization such as a state medical society) which is operated by the state, or approved and monitored by the state, for the purpose of providing independent reviewers to resolve medical issues arising between health plans and covered persons. Funding for health care professionals necessary for the work of this entity would be provided by the health plans. However, a health care professional could not be assigned to a case involving a health plan with which s/he is affiliated.

Expedited review must be available if adherence to the time limits applicable to first or second level review would jeopardize the life or health of a covered person or would jeopardize or unreasonable burden the covered person's ability to regain maximum function. In expedited review, the complaint procedure must be completed as rapidly as the situation requires, with a maximum allowable time of 5 working days from the days expedited review was requested to the time second level review is complete. The decision as to whether expedited review is needed is not left to the plan. If a health care provider, including one outside the health plan, who is familiar with the covered person's medical conditions requests it or says it is necessary, expedited review must be provided. In other cases, the issue is decided by the entity described above which provides independent medical reviewers.

The managed care plan must continue to provide or pay for services pending completion of second level review in cases where it proposes to terminate or reduce services already being provided and paid for, and it may not seek repayment from the covered person even if the decision is in favor of the health plan. The health plan can reduce or eliminate its financial exposure by resolving such cases rapidly, and the health plan may invoke expedited review in order to do so. However, the covered person must have a reasonable opportunity to prepare and present his/her side of the case.

The second level review is binding on the managed care plan. A covered person who is dissatisfied with the result of second level review may appeal to the state. The state must provide for a hearing before an independent administrative law judge in all cases involving a denial, reduction or termination of services or payment for services. In cases where the covered person has not received the services in question, or is faced with a termination or reduction of services already being provided, or complains of an action, practice or policy which hinders receipt of covered services, the administrative hearing must be held within 20 days of the request, and a written decision must be provided within five working days after the hearing. Expedited appeals are also available.

At the hearing, the covered person may present evidence and call and cross-examine witnesses, and may be assisted or represented by a person of his/her choice. The review shall be de novo, and shall include the information and decisions resulting from first and second level review by the plan. In cases involving denial, termination or reduction of services payment from services, the plan must produce sufficient evidence to justify its decision in order to prevail. The administrative law judge's decision is binding on the health plan.

The model legislation also sets the rules for resolving disputes over coverage for emergency and related services. The "prudent lay person" standard is adopted for determining whether seeking emergency care was justified. A heath plan is solely responsible for charges, other than a reasonable copayment, for emergency health services (treatment up to the point when the patient is stabilized, with stabilized broadly defined) furnished by a provider not affiliated with the health plan. The health plan is deemed to have approved a request by a treating physician or other emergency department personnel for other urgently needed services when the health plan does not provide access to the individual authorized to approve such requests or if that individual after receiving the request, has not denied it within 30 minutes.

Health plans are required to create and maintain a register with specified information about each complaint. Plans are directed to report certain complaint and appeal results to the state licensing entity and the state managed care information agency for inclusion in the annual consumer guide of plan performance.

Consumer Coalition for Quality Health Care


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