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Appeals  for Commonly Seen Medical Claim Denials
with Superpower & Protections from
Compliance with Federal (ERISA) &
State Laws (Utilization & External Reviews)

Managed-Care Medical Necessity Denials? What Does an Unanimous US Supreme Court Say?

On June 21, 2004, an unanimous US Supreme Court ruled that claim processing (medical judgment &  benefits determination)  and denials of benefits under the employer-sponsored health plans, ERISA-regulated benefit plans, for both self-insured and fully-insured (through purchase of insurance) health plans, are completely governed by federal law ERISA, that supersedes and invalidates state laws.

ERISAclaim.com: "employer-sponsored group health plans" = "ERISA-regulated benefit plans", both self-insured and fully-insured (through purchase of insurance) health plans, (ERISA - Title 29, Chapter 18.  Sec. 1002.)

Health Benefits Laws By State (Interactive Tools From Insure.com) Kaiser statehealthfacts.org Health Insurance Mandates in the States, 2004: a State-by-State Breakdown ... (PDF) (Council for Affordable Health Insurance) Consumer Guides for Health Insurance in Every State and the District of Columbia (Georgetown University) Medicare Health Plan Tracker -- Interactive Online Tool for Information Retrieval (Kaiser Family Foundation)
	View a 5-minute clip Paper Chase
ERISAclaim.com - U.S. Health-care Crisis & ERISA Criminal Enforcement
		To Avoid "John Q. ERISA Enforcement"

Breaking News

950,000 MD's Settled With Aetna & Cigna on ERISA

Appeal Letter for Plan/Policy Exclusion,

Specific Procedure Exclusion

What You Should Know about Filing Your Health Benefits Claim

New Federal Claim Regulation, effective January 1, 2003, is the best and the most powerful protection for improper medical necessity denials:

1. "Plans must consult with appropriate health care professionals in deciding appealed claims involving medical judgment." [70268-70269, CFR § 2560.503-1(h)(3)(iii)]

2. "The term `health care professional' means a physician or other health care professional licensed, accredited, or certified to perform specified health services consistent with State law." [page 70271 CFR § 2560.503-1(m)(7)]  

3. A Full and Fair Review with new definitions and protection requires De Dovo reviews on two appeals by at least four (4) different people, two (2) different fiduciaries with ERISA plan, and two (2) different Health-care professionals independent to the ERISA plan. [Page 70252-70253, 70268-70269, CFR § 2560.503-1(h)(3)]

4. Plan must disclose all the "secrets" under new definitions of relevant documents with better disclosure obligations, no more medical necessity secrets, UCR fee schedules are no longer confidential. [Page 70252 & 70271, CFR § 2560.503-1(m)(8)  (DOL FAQ B-5, C17)]

"ERISA places the burden of proving an exclusion from coverage in an ERISA-regulated welfare plan on the plan administrator." Rosalyn Caffey v. Unum Life Insurance Co

Benefit Denial Overruled Because Plan Failed to Consult Medical Expert About Benefit Appeal (Employee Benefits Institute of America (EBIA))

Is Utilization Review Practice a Medical Decision-making?

Is Practice of Utilization Review Performed "Independently" or under Insurer/ERISA Plan's UR Registration or Legal Authority?

CICIO v VYTRA HEALTHCARE

LAND v CIGNA HEALTHCARE OF FLORIDA

Department of Law 120 Broadway New York, NY 10271   Department of Law The State Capitol Albany, NY 12224     For More Information: 518-473-5525 For Immediate Release  February 10, 2005 HEALTH PLANS AGREE TO PROVIDE REQUIRED COVERAGE INFORMATION "Attorney General Eliot Spitzer said today that 21 health plans operating in New York have agreed to take new steps to ensure that consumers have the information they need to intelligently shop for health coverage and obtain medically necessary care.   Under the agreements, the health plans have pledged to be more responsive to requests from consumers for so-called "clinical review criteria," which is used to determine whether health care claims will be covered. In the past, health plans have sometimes failed to disclose these criteria and other essential coverage information, discouraging access to needed care......   The clinical review criteria are extremely important to consumers with existing medical conditions because they contain the standards that the health plans use to determine whether a specific treatment is medically necessary; if not, coverage is denied and the consumer is left with the choice of either foregoing medical care or paying out-of-pocket. The State Managed Care Consumer Bill of Rights requires health plans to disclose these criteria to both current and prospective enrollees upon written request....."   02/10/05 Health Plans Agree to Provide Required Coverage Information (click for complete official press release)   NEW YORK HEALTH PLANS PARTICIPATING IN SETTLEMENT Aetna US Healthcare Atlantis Health Plan Capital District Physicians' Health Plan (CDPHP) CIGNA Healthcare of New York ConnectiCare of New York Empire HealthChoice Excellus Health Plan Group Health Inc. (GHI) HealthFirst New York Health Insurance Plan of Greater New York (HIP) Health Net of New York HealthNow New York Horizon Healthcare of New York Independent Health Association MDNY Healthcare MVP Health Plan Oxford Health Plans of New York Preferred Care United Healthcare of New York Vytra Health Plans WellCare of New York   Attachment: New York Managed Care Consumer Bill of Rights Compliance Survey

ERISA Failure Syndrome U.S. Healthcare Crisis Trilogy (Copyright © 2004 by Jin Zhou,  ERISAclaim.com)
ERISA Medical Killing		ERISA Medical Inflation		ERISA Insurance Robbery
	?   ?		?   ?		GAO-04-312 ? ?
American Job ExportING!		Mass layoffs up in January 2004		Weirton Steel cancels 10,000 GM: $67.5 billion in 2003
The Looming National Benefit Crisis (USATODAY.com) One Nation under Debt: U..S. economy threatened by aging of America NATIONAL DEBT COLLISION COURSE MEDICARE CALCULATOR METHODOLOGY ►HIDDEN COSTS ►DEMOGRAPHICS ►RISING COSTS ►YOUR SHARE ►EXPLAINOR   Healthcare Disaster at Fault Verdict Index: U.S. Government 30% U.S. Employers & Insurers 30% Healthcare Providers 30% Consumers 10% (ERISA Failure + Managed-Care) Destroyed US Healthcare (ERISA Failure + Managed-Care + HSA) Invite US Federal Budget Deficit & Social Security Disasters = 100X 9/11 Attacks   GAO: Current and Emerging Fiscal and Retirement Security Challenges, American Benefits Council/MetLife Conference, Washington, DC, on January 14, 2005 Rising Health care Costs Have Many Implications (Direct) Rising Healthcare Costs Have Many Implications (Indirect)   Rx-1  $$$$$$$$$ERISA$$$$$$$$$$  Rx-2

Appeal Letter for Plan/Policy Exclusion,

Specific Procedure Exclusion

There are two types of policy exclusion denial: specific policy/plan exclusion as named under exclusion provision of SPD and nonspecific by determination, such as medical necessity, maintenance care, experimental and investigational status, then classified as excluded coverage under very ambiguous policy/plan exclusion provisions. Either way, a plan administrator, a fiduciary or insurance company has to disclose specific reason and specific reference to pertinent plan provisions for specific exclusion denial and disclose clinical rationale or determination in accordance with plan provision by making such denials.  Any universal, automatic, blanket denial as "not covered, excluded", and then asking claimant to check insurance policy, benefits booklet for specific reasons of denial by a plan administrator, fiduciary or an insurance company will not satisfy burden of proof requirement, ERISA denial notice requirement, and more importantly, this will deprive the claimant of a full and fair review guaranteed by ERISA, therefore a breach of fiduciary duties.

This type of denial is most popular and frustrating to physicians and hospitals.  For 28 years, physicians and hospitals never understand ERISA mechanism for fiduciary obligations and burden of proof, never found a way out.

A simple solution is to timely file ERISA required appeals and ask the other side to prove otherwise.  Do not  submit medical records to argue medical merits because medical merits are not the reasons for denial.  Do not waste time on the phone arguing medical necessity because claim customer service representative will not have power to change a policy exclusion denial on the phone unless you simply want to ask for a slight clarification.

Make sure to file second level of appeal after 30 days to complete two levels of required appeal.  After 60 days you have legally completed your required administrative remedies and ready for lawsuit in federal court, which may not likely happen in every case but certainly will change your negotiation position from hopeless to very serious and powerful.

"ERISA places the burden of proving an exclusion from coverage in an ERISA-regulated welfare plan on the plan administrator."

For more specific information, please review or download a demo CD book or place an order for complete copy of ERISA for Physicians: Healthcare ERISA Claim Denials and Appeals

Appeal Letter for Medical Necessity Denial

 Level I

Medical necessity denial is probably the most common and popular denial reason for medical and health-care claims

Legal principle governing medical necessity determination under ERISA is quite different from that of traditional insurance coverage dispute.  Under ERISA, if a plan administrator is given discretionary authority to make benefits determination and such plan administrator's determination is reasonable, even though it may not be medically correct determined by the court at a later time, the court will give deference or significance to such determination and uphold denial decision.  However a plan administrator's decision has to be reasonable and consistent with plan document with specific terms and conditions of SPD and complied with ERISA disclosure requirements and afforded the claimant a full and fair review as discussed earlier in this book.  Otherwise a plan administrator's determination will be considered as abuse of discretion and possibly reversed by federal court. Therefore the strategy of necessity of appeal is disclosure, a full and fair review.  If two appeals have completed without any response or disclosure in 60 days, you have probably established that abuse of discretion.  This is different from traditional insurance coverage dispute in state court, where new testimony, new evidence and last minute expert testimony may change the entire outcome.

 It is also important to understand the principle of burden of proof, by the time you are filing an appeal, you must have received a denial, then it is insurance company or plan administrator's turn to prove and disclose relevant evidence supporting that initial denial decision.

For every type of physicians, medical necessity denial is very popular, therefore request for a copy of SPD that has the definition of medical necessity and maintenance care would be extremely helpful because a plan administrator's determination has to be consistent with written document rules, if any guidelines and definitions of medical necessity is not written into plan, it cannot be used to make any determination because ERISA plan can only operate upon written instrument.

The next thing is independent third party utilization review employed by a plan administrator or insurance company to make denial decisions.  They will be a special section for this situation in this chapter.

This may apply to different scenarios.

Very often, an insurance company will give you multiple-choice as reasons for denial, if you successfully challenged one of them, it will quickly change to another reason, so that you will never be able to challenge any definitive reason for denial, such as dancing between policy exclusion and medical necessity by asking for medical records repeatedly and request for your endless appeal indefinitely until you finally give up.

Level II

The most important part of any ERISA claim appeal is to complete at least two appeals to complete appeal process in order to enjoy the protection provided by ERISA. In addition, one more appeal is advised before taking disputes to federal court. The more likelihood of prevailing your claim in federal court, the more chances your appeal will result in reimbursement and less likely court action is necessary.

And an insurance company may use a very incredible medical expert but anonymous to deny your medical claim very "scientifically and medically", at least on paper.  This practice may successfully confuse judicial process due to its appearance of scientific and superior medical review documentation.  If a physician will sit down and combine medical and legal reasoning with ERISA principles to dissect this type of medical science review, you will see a complete different picture.

Level III

29 CFR 2560.503-1(c) (3)

29 CFR 2560.503-1(l)

Level III appeal is the "voluntary levels of appeal" as provided by ERISA, 29 CFR 2560.503-1(c) (3), in order to exhaust your administrative remedies and summarize, from A to Z and head to toes, the plan's failures in a full and fair review in handling your appeals in accordance with ERISA claim procedure to defeat plan's deferential judicial review privilege in federal court under 29 CFR 2560.503-1(l), in doing so, you will make one more last appeal and demand for your benefits payment. Most likely someone responsible for the plan, plan sponsor and administrator or named fiduciary of the plan, will communicate with you more fairly and more likely pay your benefits claims to avoid going to federal court for possible defeat.

For more specific information, please review or download a demo CD book or place an order for complete copy of ERISA for Physicians: Healthcare ERISA Claim Denials and Appeals

State Insurance Department in All 50 States

Promote & Coordinate with ERISA  NAIC ERISA Working Group Rx-1  $$$$$$$$$ERISA$$$$$$$$$$  Rx-2 Health Benefits Laws By State (Interactive Tools From Insure.com) Health Insurance Mandates in the States, 2004: a State-by-State Breakdown ... (PDF) (Council for Affordable Health Insurance) Kaiser statehealthfacts.org Consumer Guides for Health Insurance in Every State and the District of Columbia (Georgetown University) Medicare Health Plan Tracker -- Interactive Online Tool for Information Retrieval (Kaiser Family Foundation) Are All Consultants Corrupt? (Fast Company)   GAO: HRD-93-22FS Utilization Review:  Information on External Review Organizations

Appeal Letter for Utilization Review
&
Third Party Denial

A.   Third Party Review Not Liable under ERISA

(MERTENS v. HEWITT ASSOCS., 508 U.S. 248 (1993) - U.S. Supreme Court)

I.  ERISA Plan/TPA's Might be Medically Liable Depending on Supreme Court New Ruling (Docket for 02-1845 Aetna v. Davila)

II.  ERISA Does Not Pre-empt State Utilization Review & External Review Laws, 29CFR2560.503-1 (K) - Claims procedure.

Under ERISA, any third party utilization review entity or claim administrator will not be ultimately liable for any fiduciary breach so long as this third party individual or entity is not a named fiduciary or performing significant fiduciary functions with specific and explicit discretionary delegation from a plan administrator.  Therefore any appeal or communication to such third party individual or entity is not considered as a valid ERISA appeal, required for judicial review (lawsuit in federal court).  Although physicians are dealing with this type of third party practice on day-to-day basis, especially when most states do not have specific laws with sufficient regulation and practical remedies, the appeal strategy of this type of communication shall be focused on credibility dispute, instead of liability pursuing or expectation.  In another word, in physicians mind, always beware these type of third party individuals are not going to be held liable in federal court, as long as credibility and truthfulness of review opinions by these utilization review organizations or individuals can be proven, by your written communication, to be fatally flawed, your appeal is considered a success.

The third party reviewer is only a messenger not a plan administrator.

I. ERISA Plan/TPA's Might be Medically Liable Depending on Supreme Court New Ruling (Docket for 02-1845 Aetna v. Davila)

After decades of confusion and frustration, U.S. Supreme Court is expected to make a final ruling some time in June or July with oral argument scheduled on Mar 23, 2004. Pease check back on ERISAclaim.com - Managed Care Court Watch to see final score.

II.  ERISA Does Not Pre-empt State Utilization Review & External Review Laws, 29CFR2560.503-1 (K) - Claims procedure.

  

"(k) Preemption of State law. (1) Nothing in this section shall be construed to supersede any provision of State law that regulates insurance, except to the extent that such law prevents the application of a requirement of this section.
    (2) (i) For purposes of paragraph (k)(1) of this section, a State law regulating insurance shall not be considered to prevent the application of a requirement of this section merely because such State law establishes a review procedure to evaluate and resolve disputes involving adverse benefit determinations under group health plans so long as the review procedure is conducted by a person or entity other than the insurer, the plan, plan fiduciaries, the employer, or any employee or agent of any of the foregoing.
    (ii) The State law procedures described in paragraph (k)(2)(i) of this section are not part of the full and fair review required by section 503 of the Act. Claimants therefore need not exhaust such State law procedures prior to bringing suit under section 502(a) of the Act."

B.   National Review Guidelines

 In Illinois, a new state law has been enacted for more than two years, Managed Care Reform and Patient Rights Act, to regulate licensing and certification of medical utilization review business. 

Illinois Managed Care Reform and the Patient Rights Act mandates registration for utilization review (medical necessity review) and requires compliance with the Health Utilization Management Standards of the American Accreditation healthcare Commission (URAC), URAC Standards - version 4.2 (URAC DOL Memo - version 4.1, URAC FAQ - version 4.1,)

URAC AMENDS STANDARDS IN RESPONSE TO DEPARTMENT OF LABOR CLAIMS REGULATION (7/1/2002)

URAC AMENDS UTILIZATION MANAGEMENT STANDARDS TO ALIGN WITH FEDERAL REGULATION (4/15/2003)

As of Sept. 2003, 34 states and the District of Columbia have incorporated URAC's accreditation programs or standards into their health care regulatory process through statute, regulation, agency publication, or in some other manner. In addition, several federal agencies, including the Office of Personnel Management for purposes of the Federal Employees Health Benefits Program and the Department of Veterans Affairs, believe that URAC accreditation provides an important indication of quality for a variety of health care organizations. (URAC)

C.   Strategy

Because utilization review/medical necessity review opinions by third parties are legally advisory in nature, it's credibility and compliance with applicable state laws and industry guidelines are centerpiece of success, based on which a plan administrator can make decision to substantiate medical care reasonableness and appropriate utilization. If utilization review individual or entity fails to comply with applicable state laws and industry guidelines, its opinion will be useless and legally carries no weight.  Therefore appeal strategy is to seek for compliance and discover noncompliance.

Generally, URAC provide guidelines on definitions of terminologies, accreditation, disclosure of identities and credentials, disclosure of clinical rationale and explicit review guidelines from reviewers. One of the most significant protection is the following: 

"Peer-to-Peer Conversation

Standard UM 22

Health professionals that conduct peer clinical review are available, by telephone or in person, to discuss review determinations with attending physicians or  other ordering providers.

Standard UM 23

When a determination is made to issue a non-certification and no peer-to-peer conversation has occurred, the organization provides, within one business day of a request by the attending physician or ordering provider, the opportunity to discuss the non-certification decision with the clinical peer reviewer making the initial determination (or with a different clinical peer), if the original clinical peer reviewer cannot be available within one business day." (UM Standards, v. 4.1, page 15)

 

"Non-Certification: A determination by a utilization management organization that an admission, extension of stay, or other health care service has been reviewed and, based on the information provided, does not meet the clinical requirements for medical necessity, appropriateness, level of care, or effectiveness under the auspices of the applicable health benefit plan." (UM Standards, v. 4.1, page 25)

 

Non-Certification determination from URAC (denial, adverse medical necessity determination) can be made for ERISA pre-service claim, post-service claim, or pre-certification, Concurrent care decisions or retrospective claim review.

Utilization review is solely for medical necessity and utilization of certain health care service, not for billing and coding review.

Effective appeal practice should include two letters, one before review results but after review requests, one after review results received.  Before review results, request for disclosure for licensing, credential and explicit review guidelines from utilization review individual and organization.  After review results, appeal immediately and request for the above-mentioned and clinical rationale, and request for one business day telephone interview with clinical peer reviewer.  If utilization reviewer fails to or refuses to comply, its review is incomplete and prejudiced, cannot be and should not be used by plan administrator to make benefits denial decisions.

 One extremely important aspect of this type of third party utilization review and pre-certification practice is that reckless and fraudulent refusal of pre-certification for legitimate medical service by non-fiduciary third parties will significantly and effectively discourage both patients and physicians to incur necessary and reasonable medical expenses with fear of nonpayment by insurance companies or ERISA fiduciaries, thus there will be no "contractual damage" available to worry about if litigation is ever contemplated or pursued by patients and physicians, because ERISA only provides for “contractual damage” (medical bills) regardless what happens, this way any ERISA lawsuit will never be brought without financial rewards because there is no "contractual damage" ever incurred due to pre-certification denial by a non-fiduciary third party anonymous reviewer.  In the end, all a fiduciary or insurance company has to say is that no fiduciary has made that pre-certification denial, which was made by that  non-fiduciary anonymous individual, whom is nowhere to be found because such third party anonymous reviewer was never registered with any governmental agency but a P.O. Box identification only.

Two sample letters are also included in this book to appeal independent third party utilization review's negative determination or pre-certification.

Although self-insured ERISA plans and group health insurance plans in private sectors are subject to ERISA when disputes are "related to the employee benefits"/medical claims, any utilization review business performed by any independent, nonstatutory employees of ERISA plan are subject to state laws regulating business licensing, registration and managed care as well as patient rights.

Under ERISA regulation the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment. Under New ERISA regulation [Page 70271] the term ``health care professional'' means a physician or other health care professional licensed, accredited, or certified to perform specified health services consistent with State law.

For more specific information, please review or download a demo CD book or place an order for complete copy of ERISA for Physicians: Healthcare ERISA Claim Denials and Appeals

B. ERISA Plan/TPA's Might be Medically Liable Depending on Supreme Court New Ruling (Docket for 02-1845 Aetna v. Davila)

In general, state laws are preempted under ERISA for pure eligibility/coverage determination in self-insured ERISA plans. General state laws are preempted for pure eligibility/coverage determination in fully-insured ERISA plans (group health insurance plans) except for state laws regulating insurance business, and except for state laws regulating utilization review/medical necessity determination instead of pure eligibility determination/policy coverage in fully-insured ERISA plans and self-insured ERISA plans if such utilization review is performed by third parties.  State laws regulating independent/external medical reviews are NOT preempted by ERISA in mixed coverage and medical necessity dispute for fully-insured (group health insurance) ERISA plans according to the latest  U.S. Supreme Court ruling in RUSH PRUDENTIAL HMO, INC. v. MORAN.

In Illinois, the most powerful but easiest way to find out if utilization reviewer/peer reviewer/independent medical evaluation reviewer is your clinical peer as required by both federal Laws (Q-D8, Q-D9, Q-D10 & Q-D11) and state laws (215 ILCS 134/45d), is to do a professional license lookup from Illinois Department of Professional Regulation, then look up if this reviewer is registered with Illinois Department Of Insurance as required by Illinois Managed Care Reform and the Patient Rights Act.

For other states, similar state laws (External Review) and verifications of reviewer's licensing/registration are available under applicable State Agencies, although there is distinction between state laws designed to regulate pure policy coverage and utilization review/medical necessity review as well as state laws regulating mixed policy coverage disputes and medical necessity determination.

The following is the links to the web sites for Department Of Insurance in every state. Use the search words, "utilization review", "independent review", "external review", "medical necessity", "Peer Review" and "health care review", to locate specific state laws and regulations governing medical necessity determinations and disclosure requirements.

It is extremely important to verify if what so-called "independent" utilization review/medical necessity review is truly independent under third party utilization review registration and legal authority or under insurer/plan sponsor/TPA's Utilization Review Registration or legal authority.

More and more recent federal and state rulings clarified that the practice of utilization review might be medical decision-making/judgment subject to medical malpractice lawsuit, and utilization review performed under insurer, ERISA plan or TPA's legal and institutional authority by anyone would subject such insurer, plan sponsor or TPA to medical malpractice lawsuits.

In a recent federal appeals court ruling, CICIO v VYTRA HEALTHCARE, the court clarified the distinction between "pure eligibility and coverage decisionmaking" and "medical decision-making/judgment":

"A.The Practice of Utilization Review

The plaintiff's medical malpractice claims are based on Dr. Spears's denial of coverage for a double stem cell transplant for Mr. Cicio. Letter from Brent W. Spears to Edward T. Samuel dated February 23, 1998, at 1. Dr. Spears's decision occurred in the course of Dr. Samuel's attempt to obtain authorization for the double stem cell transplant from Vytra. Compl. ΆΆ 15, 19-21. The complaint then details a process of utilization review, and it is the nature of this procedure, and its relation to ERISA, upon which we now focus.

 

Utilization review usually involves "prospective review by a third party of the necessity of medical care." Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1326 (5th Cir.), cert. denied, 506 U.S. 1033 (1992); see also Pegram, 530 U.S. at 219.¹⁰ "[T]he typical prospective review system requires some form of pre-admission certification by a third party," Corcoran, 965 F.2d at 1327, such as Vytra's Medical Director, Dr. Spears. "Although prospective utilization review involves no traditional face-to- face clinical encounter, it is still quasi-medical in nature. It necessarily involves evaluation of data collected in such an encounter." Danca v. Private Health Care Sys., Inc., 185 F.3d 1, 5 n.5 (1st Cir. 1999); see also Corcoran, 965 F.2d at 1331 (characterizing utilization review as a medical decision); Note, Jonathan J. Frankel, Medical Malpractice Law and Health Care Cost Containment: Lessons for Reformers from the Clash of Cultures, 103 Yale. L.J. 1297, 1318 (1994) ("Cost-containment programs . . . redistribute what we normally consider 'medical authority' to nontraditional actors."). Prospective utilization review blurs boundaries between the traditionally "distinct sphere of professional dominance and autonomy" of the medical profession on the one hand, Paul Starr, The Social Transformation of American Medicine 27 (1982), and the managerial domain on the other. As such, it represents a development apparently unforeseen at the time of ERISA's enactment. See Jeffrey E. Shuren, Legal Accountability for Utilization Review in ERISA Health Plans, 77 N.C. L. Rev. 731, 733 (1999).

 

Moreover, as other courts have noted, "a system of prospective decisionmaking influences the beneficiary's choice among treatment options to a far greater degree than does the theoretical risk of disallowance of a claim facing a beneficiary in a retrospective system." Corcoran, 965 F.2d at 1332; accord Danca, 185 F.3d at 5 n.5. And, "[i]n many instances, a denial of coverage results in the patient forgoing the procedure altogether." J. Scott Andresen, Is Utilization Review the Practice of Medicine?, 19 J. Legal Med. 431, 432 (1998). Thus, decisions with a medical component -- i.e., involving the exercise of medical judgment in relation to a particular patient's symptoms -- are made in the course of utilization review by staff who are independent of and separate from the locus of traditional medical decision-making authority. These medical decisions have possibly dispositive consequences for the course of treatment that a patient ultimately follows."

An appeal strategy is to request by certified letter for the insurer/administrator or TPA to verify or to clarify if medical necessity review was performed under such legal entity's UR registration and legal or institutional authority.

For more information in recent Supreme Court and federal appeals court rulings in this regard, please visit Court Watch page, four appeal sample letters, please visit Appeal Book & System Page on this web site.

"Forty states required individuals to first exhaust their health policy’s internal appeals and grievance process before seeking external review." (GAO, September 2003, Page 46)  The health policy’s internal appeals and grievance process = ERISA appeals 80% of the time.

Medical Necessity Denials Must Be Appealed

In Accordance with ERISA Claim Regulations

The latest Harvard & RAND study for Congress and state legislative debate on Patients' Bills of Rights, conducted by David Studdert and Carole Roan Gresenz, study authors from the Harvard School of Public Health and RAND, funded by federal government, Department Of Labor, and Agency for Health Care Research and Quality, revealed that "little is publicly known about such appeals system", and concluded that "A majority of preservice appeals disputed choice of provider or contractual coverage issues, rather than medical necessity. Medical necessity disputes proliferate not around life-saving treatments but in areas of societal uncertainty about the legitimate boundaries of insurance coverage. Greater transparency about the coverage status of specific services, through more precise contractual language and consumer education about benefits limitations, may help to avoid a large proportion of disputes in managed care."

"......In this environment, contractual coverage and medical-necessity issues that persist are likely to be for services that enrollees feel especially strongly about. Such consumer concerns, together with ongoing consumer protection agendas that include reforms such as guaranteed external review and right-to-sue provisions, mean that the policy importance of UR denials in managed care is unlikely to wane in the foreseeable future."

The updated Harvard & RAND study, funded by the U.S. Department of Labor (DOL), published on June 18, 2003 through Health Affairs, examined the outcomes of nearly a half-million coverage requests in two large medical groups that contract with health plans to deliver care and conduct utilization review, and discovered the urgency and necessity of expertise of ERISA claim procedure specialists. The study concludes the following in its summary and policy implications: "....We found much higher denial rates than those previously reported.....Denials made on contractual grounds—the largest share of denials—may call for both clinical and contractual expertise. Hence, they should ideally be made by personnel who are versant in both areas. There was some evidence of this sort of dual expertise being brought to bear on coverage decisions at the two groups we studied."

However these best experts "hired" by Congress and federal government are one step away from the complete discovery and solution. Let us fill in the missing links and connect dots in order to save our health-care system from collapsing and crisis.

First, we identify the controlling force and power in contractual policy coverage denial. The majority of Americans are covered under the employer-sponsored health-care programs in private sectors under ERISA, 80% of the claims and 60% of health expenditures are regulated under ERISA. Each individual ERISA plan offers different coverage and benefits, either self-insured or fully-insured through purchase of insurance from an insurance company. The controlling and governing document for each ERISA plan is Summary Plan Description (SPD), the rule of the game for interpreting each SPD and resolving the disputes on contractual denials is ERISA claims procedure regulations. Therefore the experts from Harvard & Rand study group discovered the importance and necessity of "contractual expertise" but aborted the solution of "contractual expertise" due to "the reasons of size or financial stress, this may be beyond the reach of smaller medical groups that have assumed responsibility for UR".

Financial burden and unavailability of this contractual expertise could be the final resolution to their study group to determine if those contractual denials were made by the plan or TPA correctly.

Clinical knowledge and expertise from those medical groups are inherited, but "contractual expertise" is missing badly for policy coverage, Summary Plan Description (SPD) and ERISA Claims Procedure for 80% of health care claims, because such ERISA contractual expertise is nowhere to be found, even for those very experienced health care attorneys and insurance coverage experts, as state law governed insurance policy dispute resolution and ERISA governed claims procedure dispute resolution are quite different, and entire country has never put ERISA into health-care practice. This is why our health-care system failed.

90% Wrongful Denial?

Another 2004 new Rand/Harvard study published on February 2004 issue of Annals of Emergency Medicine, "Disputes over coverage of emergency department services: A study of two health maintenance organizations" discovered that 90% of denial in utilization reviews were overturned on appeals, from a stratified random sample of approximately 3,500 appeals of coverage denials lodged by privately insured enrollees between 1998 and 2000 at 2 of the nation's largest HMOs. This study concludes: "The prevalence of ED cases among all appeals reflects disagreement between lay and expert judgments about what constitutes emergency care under the prudent layperson standard. The high rate at which enrollees win these appeals highlights significant disagreement in interpretation of the standard among different adjudicators within managed care organizations (medical groups and health plans). When enrollees fail to challenge denials that would be reversed on appeal, they bear the financial brunt of ambiguities in interpretation of the prudent layperson standard."

This new Rand/Harvard study warns that "Although the end result for consumers is the same in each of these cases, the messages sent by plans to consumers and medical groups are not. Goodwill paym care organizations (medical groups and health plans). When enrollees fail to challenge denials that would be reversed on appeal, they bear the financial brunt of ambiguities in interpretation of the prudent layperson standard."

This new Rand/Harvard study warns that "Although the end result for consumers is the same in each of these cases, the messages sent by plans to consumers and medical groups are not. Goodwill payments imply inappropriate use of the ED (notwithstanding the fact that actual merit might not have been assessed). Merit-based overturns, on the other hand, signal an error in utilization review and instruct medical groups about the proper limits of coverage, instructions that medical groups cannot ignore because they must meet the cost of these claims. Hence, merit-based overturns perform a valuable signaling function, akin to the role of judicial precedent in the law. Unless plans invest additional effort in educating utilization reviewers about erroneous decisions for which they are not held financially accountable, goodwill payments of potentially meritorious cases limit opportunities to forge consensus about the limits of the prudent layperson standard and to disseminate accumulated knowledge about its meaning."

Importantly, ERISA claim regulation and definition of "claim involving urgent care", 29CFR2560.503-1 (m)(1) - Claims Procedure, has provided governing solutions to "disagreement between lay and expert judgments about what constitutes emergency care under the prudent layperson standard." for these privately insured enrollees. And "Unless plans invest additional effort in educating utilization reviewers about erroneous decisions for which they are not held financially accountable," and ERISA claim regulation and  definition of "claim involving urgent care'', goodwill solution will result in backslash for more disasters in Emergency Department across the country.

If 80% of the health-care claim and 60% of health expenditures are governed and regulated by ERISA, ERISA plan's "insurance policy" is controlled by each plan's Summary Plan Description (SPD), and each claim dispute is resolved under ERISA claims procedure regulations, such "contractual expertise", called for by our Rand/Harvard experts, must be from ERISA claim procedure specialists.

Therefore, it is absolutely clear that our nation must provide a solution to health-care crisis by urgently establishing an industry or profession that will possess not only clinical expertise but also, and more importantly, ERISA contractual expertise, ERISA claim procedure expertise.

These three valuable Harvard/Rand studies have pointed out the direction but failed to provide a turnkey practical solution.

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