Copyright 1999 Federal News Service, Inc.
Federal News Service
JANUARY 20, 1999, WEDNESDAY
SECTION: CAPITOL HILL HEARING
LENGTH: 18714 words
HEARING OF THE SENATE HEALTH, EDUCATION, LABOR AND PENSIONS
SUBJECT: GROUP HEALTH PLANS
CHAIRED BY: SENATOR JAMES JEFFORDS
WITNESSES: LESLIE KRAMERICH, DEPUTY ASSISTANT SECRETARY OF LABOR FOR
POLICY, PENSION AND WELFARE BENEFITS ADMINISTRATION
KANSAS STATE INSURANCE DEPARTMENT
J. RANDALL MCDONALD,
EXECUTIVE VICE PRESIDENT, HUMAN RESOURCES AND
ADMINISTRATION, GTE CORP.
RAND E. ROSENBLATT, PROFESSOR,
RUTGERS UNIVERSITY LAW SCHOOL
J. DEMONTMOLLIN, VICE PRESIDENT AND GENERAL COUNSEL
AVMED HEALTH PLAN
BOHN ALLEN, GENERAL AND VASCULAR SURGEON
DIRKSEN SENATE OFFICE BUILDING
REP. JAMES JEFFORDS, (R-VT): Mr.
Kramerich, pleased to have you with us.
Good morning to everyone.
have a good participation from the public's perspective as I see as I look out
and they're all now familiar that we are now the committee on health education.
Labor and pensions are the health committee. So, you are the first witnesses on
the health committee. So, I anticipate the committee with its jurisdiction of
private health insurance and public health programs will have an active health
agenda during the Congress. And one of the committee's top priorities will be
the early consideration of consumer protection legislation.
on group health plan cooperative information and coverage determination
standards will focus on legislation and proposed rules that would establish new
information requirements and claims procedures under the Employee Retirement and
Income Security Act fondly referred to as ERISA. Perhaps another title for the
hearing would describe our efforts to give consumers a roadmap in order to help
them navigate the health care maze.
People need to know what the plan will
cover and how they will get their health care. They also need to know how
adverse decisions by the plan can be appealed both internally and externally to
an independent reviewer.
Last year, the President's Advisory Commission on
Consumer Protection and Quality in the Health Care Industry, which tools today's
witnesses have served, drafted a consumer bill of rights. Included in that bill
was the right for the following statement. All consumers have the right to a
fair and efficient process for resolving differences with their health plan,
health care providers, and the institutions that serve them including a rigorous
system internal review and an independent system of external review.
with this statement, giving consumers a new right under ERISA to an external
grievance appeals process is a right that I believe to be particularly
important. This right forms a cornerstone of S 1712, the Heath Care Quest Act,
which Senator Lieberman and I introduced during the last Congress. The limited
set of ERISA standards may have worked well for the simple payment of health
insurance claims out of the Fee for Service Systems in 1974. However, today our
system is much more complex and there are many types of decisions being made,
the routine reimbursements to pre authorizations for hospital stays. And it is
in the context of these changes, particularly, the evolution of managed care
that ERISA needs to be amended in order to give participants and beneficiaries
the right to appeal adverse coverage and medical necessity decisions to an
independent medical expert.
Today's hearing is intended to provide committee
members with an opportunity to hear testimony on two areas that were common in
both S 2330, the Senate Leadership Patients Bill of Rights and S 1890, the
Senate Democratic Patients Bill of Rights, both introduced during the 105th
Congress. Our witnesses have been asked to comment on the provisions of 1890 and
2330, which relate to these issues, especially the establishment of a new
independent external appeal process under ERISA. In addition, the hearing will
allow the committee's oversight of the Department of Labor, DOL's proposed rules
on claims, procedures, and content of summary plan descriptions, which were
published, in the federal register on September 9, 1998.
First, we will hear
from the Department of Labor and Pension and Welfare Benefits Administration
about the proposed regulations on internal claims and appeals procedures and the
information disclosure requirements for ERISA plan. The DOL proposed regulations
deal with some of the same issues addressed by proposed legislation 2330 and
1890. For instance, proposed legislation and the DOL regulation, which shorten
timeframe for making claims and appeals decisions and would create new standards
for how those decisions are made.
I intend to explore with the department
their rationale for adding the new standard such as the requirement for a
medical consultation to the eternal appeals process in light of the fact that
such a requirement is part of the external review process and proposed
legislation. In addition, I will ask the department about ERISA to preemption
and explore concerns about the extent to what DOL's proposed regulation would
preempt state laws, particularly laws governing utilization review and grievance
and appeals procedures.
Our next panel will also help us answer those and
other important questions regarding information requirements and grievance
procedures. We will hear from the National Association of Insurance
Commissioners about state efforts to regulate in these areas and we will also
hear from business purchasers of health care, consumers' health plans and
providers. These representatives will discuss problems associated with the
information requirements and grievance procedures and how the proposed rules and
various legislative proposals would address these issues.
Our goal is to
give Americans the protection they want and need in a package that can afford
and that we can enact. As the Health Education Labor Pensions Committee works on
health care quality legislation I will keep in mind these three goals. First to
give families the protections they want and need. Second, to ensure that the
medical decisions are made by physicians in consultation with their patient. And
finally, to keep the cost of this legislation low so that it displaces no one
from getting health care coverage.
The hearing follow the
committee's usual format. Each of the witnesses will speak five minutes and each
member will have up to five minutes per round for questioning.
hearing record will remain open for two weeks and any written statements and
questions for the record should be submitted within that time. I welcome all our
guests and Senator Kennedy.
SEN. TED KENNEDY (D MA): Thank you, Mr.
Chairman. I'll just take a moment, I'd like to ask my complete statement be put
in the record. And I just want to underscore some of the points that you've
mentioned and raise very, very briefly some others. One the great desire that
all of us have in terms of health care and protecting consumers as the
information, the importance of information and the availability and
accessibility in this. We're interested in seeing how this works. And then
secondly, I think all of us understand that you don't have a right unless you
have a remedy. And we are interested in these internal kinds of procedure s and
how they work.
We're all interested in procedures that are going to be
expeditious, work rapidly in a timely way that are going to be simple, that are
going to be fair and are not going to be costly or bureaucratic. And I think all
of us are looking at those. And I think we can all benefit from looking as we
address one of the major areas that there has been some differences on in terms
of the other issue in terms of Patients Bill of Rights. We can look at what is
out there in the country, because we have different formulations and different
constructs in a number of different situations. And I think it's very valuable
for us as we're looking at how we're going to address this issue.
my own views about this, but we all are trying to sort of find ways of moving
this process forward and we ought to be in the situation where we're glad to
listen and to learn, I certainly am. So, we want to be able to benefit from
what's happening in the department. And we're very, very grateful for your
I just mention that finally, Mr. Chairman as I mentioned at
the outset, we are in a situation because of the particular schedule in the
Senate where we have a Caucus today. Generally, those are done during the
lunchtime, but because of the other kinds of matters that are before the Senate
we had to one this morning. So our side is unnecessarily absent, but we'll
certainly review the material carefully and we're very glad that we started off
with these hearings. We want to indicate to all of our witness our desire to
work with them and we will study closely their recommendations. SEN. JEFFORDS:
As I also mentioned earlier, also of course your members I understand their
absence we will be allowed to provide questions to the witnesses so that in
accordance with the time schedule of two weeks so that they will have an
opportunity to participate under the circumstances.
LESLIE KRAMERICH: Thank you, Mr. Chairman. Mr. Chairman, Senator Kennedy and
members of the committee, I want to thank you for inviting me to speak with you
this morning --
SEN. JEFFORDS: Excuse me a minute. I didn't mean to ignore,
but do either of you have a moment, would you like to comment or --?
SUSAN COLLINS (R-ME): I don't, Mr. Chairman.
I look forward to the witness'
SEN. JEFFORDS: Fine. Thank you very much.
MS. KRAMERICH: I want to thank you all for inviting me to speak with you
this morning about the Department of Labor's role in the administration's effort
to ensure that American workers and families receive full and fair protections
when their claims for benefits are denied.
The administration remains
committed to the enactment of a strong and enforceable Patients Bill of Rights.
We, like you, believe that American workers need and deserve nothing less. Now,
as the President said just last evening in his State of the Union Address, we
must not miss this opportunity to act. For the sake of our families, we must
join together and pass a strong and enforceable Patients Bill of Rights.
Secretary Herman and I welcome the opportunity to work with you, Mr.
Chairman, and the members of our authorizing committee to develop that
legislation. We also welcome the opportunity to share with you what the
Department is doing through the regulatory process to enhance the protections of
American workers covered by ERISA plans.
As you know, we have proposed
changing the current regulations that govern the processing of health and other
benefit claims by ERISA plans. For us, the proposed regulation is a patient's
right. It is a way of strengthening a very fundamental right, the right to a
fair process for resolving problems when you feel you've been denied a promised
The regulation currently governing ERISA benefit claim
determinations was adopted in 1977, but that was over 20 years ago. Since that
time, there's been tremendous change in the practice of medicine and in the ways
of designing health care and other benefit plans and containing cost increases
and promoting quality. There have also been dramatic changes in the way request
for benefit coverage are handled by employee benefit plans. Many plans have
changed with the times and adopted better practices. But those changes have not
been incorporated into our procedures and replicated throughout ERISA plans. For
those plans who haven't adopted more appropriate safeguards, our procedure must
be strengthened to ensure that they do so.
In 1997, with the report of the
bipartisan Presidential Advisory Commission on Consumer Protections and Quality
in the Health Care Industry, we began highlighting the ways in which patients'
rights to full and fair review of benefit denials needed strengthening. We
elaborated on that in subsequent commission reports, then put out a request for
information on how to achieve that strengthening and studied the more than 90
replies we received.
Finally, last September, we published a proposed
regulation detailing a new patient's rights claims process. We've proposed that
the full and fair process to which ERISA participants are entitled should mean
giving people faster responses when they need an answer about their health care
coverage, giving people better information about why their claims are denied and
how they can appeal, ensuring that people have a meaningful time in which to
appeal, that their appeal is heard by someone other than the original reviewer,
that it includes consultation with an appropriate health care professional if a
medical judgement is involved and that it gets a timely response. And finally,
making sure that internal reviews can't be used to deprive an individual of a
meaningful external review.
This is a proposed regulation in which we, of
course, invited comments on the variety of issues raised by the proposal and we
got them. We've currently received almost 700 comments on this regulation and
we'll hear more at our hearing that the Department will have on February 17 and
18 and 19, if necessary. That hearing won't be the first time that we meet with
employers and plans and patient advocates and disability groups and participants
to talk about this proposal and it won't be the last time.
We've tackled a
lot of tough issues in the proposal and there are still a lot more that can only
be done through legislation, problems that we can't resolve in this regulatory
procedure. For example, several witnesses on your next panel have very valuable
ideas and successes in implementing external review mechanisms as a check on the
plan's internal process. A strong external review mechanism is something the
administration considers vital to an appeals process that provides full and fair
protection of the patient's rights. But that kind of mechanism is beyond the
scope of what we can propose without legislative action.
heard from the National Association of Insurance Commissioners on this point and
from several state insurance commissioners, including Vermont. And a real
solution is going to require that we work together on a legislative solution. We
welcome the opportunity to talk more about that and to work with you on the
options that we see. We know that measures like our proposal can add cost and
that it is important to balance the cost and complexity imposed on sponsors in
what is a voluntary employee benefit system.
We also believe that there
is room for us to modify the proposal to improve it's workability and to work
together with employers, plans, practitioners and participants to make sure that
all benefit from a procedure that promotes fair and appropriate answers up front
and minimizes the harm to be remedied later. There are significant benefits here
that are hard to quantify, but are very important. Trust in your managed care
provider, more fair, impartial and informed decision making that is able to
consider a broader array of medical evidence and fewer costs for plans and
patents in litigation. This proposal is sometimes described as permitting
litigation. ERISA itself already provides access to court. It always has and
participants are suing and plans are defending, but not on the human issues at
We don't approach this assuming that plans are out to harm
participants. On the contrary, they are voluntarily established to help
participants. We do believe though that things don't always go right and we
believe that when things go wrong, the right safety net needs to be in place.
Our proposed regulation is one important piece of that safety net and we welcome
the opportunity to work with you, with the other witnesses here today and with
all who are interested in developing the best contribution we can to our shared
efforts to improve patients' rights.
In considering how to shape our
starting point proposal, we looked closely at the bills introduced in the last
Congress by members in both Houses and on both sides of the aisles, including,
of course, S 1890 and S 2330. And we looked at the model standards developed by
the NAIC as well as alternatives proposed by employers and others in the private
sector and that's a partnership we plan to continue.
I want to thank the
committee for the opportunity to appear here today and to express our desire to
work with you on, both the legislative and regulatory improvements, that will
promote patients rights for all. I'm happy to try to answer any questions you
have and I'm honored to be the first witness before the Health Committee.
SEN. JEFFORDS: Well, thank you. SEN. TIM HUTCHINSON (R-AR):
Mr. Chairman, I'm going to have to excuse myself. I have another commitment and
I do have several questions I'd like to submit for the record for this panel.
SEN. JEFFORDS: They certainly will be answered.
SEN. HUTCHINSON: And
thank you for calling the hearing today and I regret I'm going to have to excuse
SEN. JEFFORDS: I know this is a busy time for everyone and you have
been one of my most loyal attendees, so I, certainly, excuse you.
HUTCHINSON: Thank you.
SEN. JEFFORDS: In your testimony, you cite comments
that indicate many plans currently fail to provide claims processing that meets
the standards of the 1977 regulations and that claimants are not well informed
about their rights. Since your proposed regulations are much more detailed than
the 1977 regulations, what additional enforcement and educational activities do
you anticipate the Department will be engaged in after you issue the final
MS. KRAMERICH: Senator, once we've had our hearing and
considered all the comments, we would hope that in the final regulation what
we've designed is really a procedure that in most cases enforces itself. We will
have the authority to step in and take a plan to court, if necessary, and get an
order directing that they conform their practice to the final process. But what
we would hope is the process itself that we all agree to is something where the
participant gets more information on what they need to do to supplement their
own claim submission and get a different decision if they think that's
SEN. JEFFORDS: Just reminiscing, I think for the 20 odd years
that ERISAs been in, I think finally people may understand what it is and
hopefully everyone does. Right now everybody glazes over when you mention ERISA,
but I think more and more people are beginning to understand what it does or
doesn't do. So, we appreciate your help in that regard. What data and or studies
did the department use to arrive at the cost impact assumptions in the proposed
MS. KRAMERICH: We commissioned several reports by outside
groups. We looked at BLS data. We looked at some of our own data on plans and
practices. We looked at comments that were filed in response to our request for
information last year. But it's something that we're hoping to develop much more
fully with the comments that we have received as a result of our September
proposal too. I mean, this is our best effort on the state of what we now have
beginning with the Advisory Commission in '97 and every thing we can develop to
come up with a cost estimated. So, I don't expect that it's our final cost
estimate on this. And we're very open to other data sources that can be
suggested. SEN. JEFFORDS: Did the primary cost benefit analysis include a survey
of plans, employers, and service providers process plans?
MS. KRAMERICH: A
survey? Excuse me one second, let me just consult on this. No, I don't think
that we've done a survey where we literally designed a questionnaire and
submitted it to everyone. I think, probably, the better source of how our data
began was with the Advisory Commission and with other bodies like it. And it's
subsequent reports that attempted to gather, not only anecdotal evidence, but
sort of the other ERISA cases and specific factual situations where it's been
brought to our attention of examples where the process didn't work. And that's
something that we're clearly open to developing and trying to do right now.
SEN. JEFFORDS: It's going to be important for us to fully understand the
implications of one of the big problems we're going to have is what costs are
involved here so we can better understand what we can and should do as far as
the legislation goes. Last month my staff gave you a copy of a letter dated
December 2, 1998 from Elizabeth Costal (sp), Vermont's Commissioner of
Insurance. In her letter, Commissioner Costal recommended that the Department of
Labor's proposed rules only apply to self-insured group health plans and that
they not apply to insured group health plans. You understand this is a
relatively important issue for the states. Have you a comment to make on that?
MS. KRAMERICH: Yes, we did look at that letter. And I appreciate your
calling it to our attention. And we've gotten several others like it. And it's a
big problem for us that we want to work with the Vermont Insurance Commissioner
and you and the NAIC and others on, because here's the problem that we're
having. Ideally, we would like to be able to say that with ERISA we can help
design an internal claims process, patients rights process that's going to help
participants, but not be outrageously unworkable for plans. And we'd like to be
able to say that we can design or facilitate an external process. And that we
can make meaningful remedies available at the Hill under that. We can't.
Under ERISA what we can do is say for the ERISA universe insured and
self-insured plans we can design a minimum standard that's a good internal
claims review process. There's no legislative language there that let's us
design an external review process. And we know that a lot of the states are
experimenting with different ways of doing that. I think I've had at least six
different models called to my attention. And those are wonderful successes. We'd
like to learn from that. We don't have the authority to come up with a federal
external claims review process with the state of the federal law that exists
now, we'd need to work together on that.
The problem is we also have a
Supreme Court decision that's 12 years old that interprets ERISA as saying that
ERISAs remediesclusive and many have said that what that means is for an ERISA
plan the state external review mechanism is going to be preempted, wiped out. We
don't want to see external review mechanisms not made available to ERISA plan
participants. But that's one of the things where we will have to work together
in a legislative solution to make that happen.
SEN. JEFFORDS: That's good.
As you know Senator Collins is extremely interested in these issues having been
commission in the state of Maine.
MS. KRAMERICH: I understand.
JEFFORDS: So, I can assure you, you will have a rather active member of this
committee with respect to that aspect.
The department's proposed
regulations establish different timeframes and some of the timeframes in the
proposed legislation and in regulations governing Medicare. How did the
department arrive at the decision to use these timeframes, for instance 15 days
for a retrospective determination? Did the department consider the timeframes in
S 2330, which allow 30 days for initial determinations?
MS. KRAMERICH: We
did. We looked at S 2330, S 1890, S 1712 many, many other bills. Medicare, FEHB,
CHAMPUS, as many things as we could find. And I can't tell you that there's a
particular mechanical science to 15 versus 16 versus 14 as some plans use,
versus 30 as someone else uses. We're very open to continuing to talk to people
about that. We're different too in that we talk about urgent claims where most
other programs talk about pre-authorization or concurrent review or
retrospective review. That's a change that we're open to, too and we've invited
We tried to make a cut at figuring out what kinds of things need
the fastest response. Because I think we're all trying to prioritize who needs a
quick answer and how do we target resources to that truly needy population,
needy in terms of a medical timely response. To us one important population is,
of course, urgent care. If someone's life or health is hanging in the balance
then that would seem to be the population you'd have to focus on. Also, if
somebody has submitted a claim that the plan considers incomplete and they need
to submit more information before the clock starts running then we would hope
they get that word that they need to do something else. There's no reason that
the other ways of making a cut at this aren't appropriate and we would hope to
talk about that more with you and with the other designers of other systems.
SEN. JEFFORDS: You mentioned an area that's of concern to me, what about
MS. KRAMERICH: Emergency situations are -- I know that
a number of the bills include a 24-hour turn around time on emergency situations
and while we are less explicit, our regulation currently and our proposal
doesn't use things like 15 days and 30 days as a general rule. That is the
outside. The required turnaround time is still what's appropriate to the facts
of the individual patient's needs. So, I would think that our rule could
accommodate that, but it's something where we could be more explicit. SEN.
JEFFORDS: Senator Brownback.
SEN. SAM BROWNBACK (R-KS): I don't have any
questions of the witness. I thank you very much.
SEN. JEFFORDS: I want to
thank you and I can assure you that we're going to have some active
conversations as we go forward, because this is, the one thing everybody agrees
is that something's wrong, it should be fixed. And thus, it's incumbent upon all
of us that are working on this to find a solution as soon as possible.
we'll be in contact, and welcome. We look forward to working with you.
KRAMERICH: Thank you, Mr. Chairman.
SEN. JEFFORDS: I would ask the next
panel to please come up and be seated, and we'll get the name cards up, so I
know who I'm talking to. I would like to ask you to introduce the good Kansas
commissioner, and --
SEN. SAM BROWNBACK (R-KS): Thank you.
JEFFORDS: --we'll start with Kathleen as soon as we're arranged here. You can go
right ahead, Senator Brownback, with the introduction.
SEN. SAM BROWNBACK:
Thank you, Mr. Chairman. I appreciate the opportunity to do this during my first
meeting. The leadoff witness on the second panel is the commissioner of
insurance for Kansas, which is Kathleen Sebelius. She just was reelected to a
second four-year term on that job. She brings a wealth of experience to the
first term and through legislation, as a role as a legislator in the state
legislature in Kansas. I think she's going to present very well, and I believe
also serving today as the national spokesperson for the Insurance Commissioners
Nationwide, State Insurance Commissioners Nationwide. So, Kathleen, I want to
welcome you to the panel, and welcome you to the committee.
I'd also note, I have another committee that's going on at the present time, the
Commerce Committee is hearing the reauthorization for FAA, so I will have to
slip out during the middle of this panel, because the FAA reauthorization is a
critical issue to us nationwide and in my state of Kansas, (especially ?)
Wichita, which manufactures more airplanes, civil aviation, small aircraft, than
anywhere else in the country. And this is a very important issue. So, my
apologies to the panel, but I will have to slip out in the middle of this.
SEN. JEFFORDS: Well, Senator, if you do have a question that you would like
to ask of her, I will ask her to give her testimony, and then start questioning
on that. Or if you have to leave now, that's fine. SEN. BROWNBACK: I'm going to
have to leave probably in the next five to ten minutes. I think it's best
probably to go ahead with all the presentations, would be the best route to go.
SEN. JEFFORDS: Thank you very much.
SEBELIUS: Thank you, Senator Jeffords, and thank you, Senator Brownback. I hope
you do go take care of the aviation industry for Kansas. I was telling Senator
Brownback, sitting here, that I didn't realize he was a recent addition to the
committee. I had the opportunity, I think a couple times last year, to testify.
And I didn't realize until I read the new committee membership on the plane that
we now have, again, a Kansas member. So, it's a nice coincidence.
Kathleen Sebelius. I'm the elected insurance commissioner of Kansas, I'm also
the secretary treasurer of the National Association of Insurance Commissioners.
And testifying today on behalf of NAICs special committee on health insurance. I
really want to talk about three main things, the relationship between states and
the federal government concerning the regulation of health insurance. Then the
federal external grievance proposals that appeared in legislation before
Congress. And the DOL regulations regarding claims handling.
And I want to
say at the outset, Mr. Chairman, that, while we appreciate the Department of
Labor and congressional efforts to provide protections for consumers, currently
with limited recourse, those in self-funded ERISA plans, we're concerned about
the preemption of state laws. If Congress or the Department of Labor ends up
preempting state laws, millions of Americans who now rely on the states to
handle health complaints and to resolve grievances, will find those protections
have suddenly disappeared.
We recognize that the passage of ERISA over 20
years ago created a dual regulatory structure in the country for health
insurance and health benefits. And we said in the past that if it weren't for
the dual structure, we might question any federal role in setting quality
standards, including grievances. But because we recognize that states lack
jurisdiction over self-funded ERISA plans, our position remains that Congress
should provide consumers in self-funded plans with the same level of protections
they would receive if they were under state authority.
We continue to
believe that states are better able to determine what works best in the market
places. The delivery of health care continues to be a very localized activity,
and a single federal standard may be difficult to apply nationwide. States have
long recognized the importance of providing all consumers with the ability to
appeal an unfavorable determination. Seventeen states currently have laws
mandating the external grievance process, and 22 additional states, including
our state of Kansas, have external grievance legislation pending in the current
NAIC has had a grievance model in place for a number of
years, and we're currently developing the external focus of that grievance
model. The issues are contentious, without a proper dialogue between the federal
government and the states, new federal laws or regulation could actually leave
consumers with fewer protections rather than more. We've looked, Mr. Chairman,
at the external grievance mechanisms in last year's bills, Senate Bill 1890 and
Senate Bill 2330, and compared them to the NAIC model. And the written testimony
details several areas where we feel that the federal law is weaker than the
model, and would urge Congress to look at them, such as the establishment of a
If Congress decides to adopt these protections for
the self- funded ERISA plan, we would highly recommend that some of the
provisions that are in the current model be added to the congressional
legislation. We've also spent a good deal of time, and you've heard the
assistant deputy secretary from the Department of Labor testify, working on the
Department of Labor proposed regulations. And we're very concerned about the
potential preemption of this issue.
We currently have 50 states with
internal grievance processes, 17 and another 22 pending with external processes
that are in place. And the mechanism is there to respond to consumers. Although
the assistant secretary mentioned a 12-year-old Supreme Court case, the current
court is looking again at ERISA jurisdiction. And we're very pleased with the
solicitor general's position on this issue, which we think is very strong, and
support the view that the Department of Labor regulation would not interfere
with a state's ability to regulate the business of insurance. They advocate a
common sense interpretation of the savings clause, and specifically recognize
the legitimate role of dual federal and state regulation of the insurance
industry as set forth by ERISA. We've also, our organization, has filed an
amicus in this very important case, the (UNIM ?) Life Insurance Company v. Ward
Case, which is currently pending in the court.
Mr. Chairman, Congress
expressly allowed for federal and state regulation of ARISA planned by virtue of
the savings clause. It was to preserve the state's traditional regulation of
insurance, including regulation of insurance policies purchased by ARISA plan.
The members of our special health committee are interested in preserving the
distinction between self-funded ARISA plans, which clearly are under
congressional exemption and outside the purview of state law and insured plans,
which Congress specifically intended for states to regulate.
members want to insure that citizens in our state, who are covered by ARISA
insured plans, have the abilities to have their claims and grievances addressed.
States should be given the flexibility to continue the development of innovative
solutions to complex problems, including the development of independent external
grievance procedures for health plans. Thank you very much for your time.
SEN. JEFFORDS: Thank you for a very helpful and very excellent statement
from an area that's of deep concern to us.
Our next witness is Mr. J.
Randall MacDonald, who is testifying on behalf of the Association of Private
Pension and Welfare Plans -- APPWP. Mr. MacDonald is executive vice president of
human relations and administration for GTE in Irving, Texas. Mr. MacDonald
directs GTE's world wide human resources administration activities, which
include overseeing the company's benefits and compensation program.
MacDonald received a presidential nomination to serve on the advisory commission
of the Consumer Protection Quality and Health Care Industry. He serves on a
number of executive boards, including ARISA Industry Committee and its board of
directors and is chairman of the executive committee of the Business Round
Tables Employees Relations Committee.
Welcome and we look forward to your
MR. J. RANDALL MACDONALD: Thank you, Chairman Jeffords and members
of the committee.
As stated, I am here today on behalf of the Association of
Private Pension and Welfare Plans. Its members provide benefit services for more
than 100 million Americans, but I just don't represent employers. I'm here on
behalf of 350,000 health care consumers, including myself and my family, covered
by GTE's health care plans.
The message that many of us have been trying to
deliver from outside the beltway on employer sponsored health care plans is
simply put, in my mind, not getting through. Our nation's health care system is
sending us a wake up call and in our mind we better start listening. In fact,
the biggest wake up call recently that I received is when I've learned that
despite the prosperity of the United States economy, the number of Americans
without health insurance increased by 4 percent from 1996 to 1997 because costs
are rising again.
Well, that's alarming. What's even more alarming is the
un- insurance rate is increasing the fastest in states with most regulations and
most mandates. At a 4 percent increase may not sound like much, but its more
than that. It's 43 million Americans, who don't have health care coverage versus
32 million Americans just 10 years ago.
Let me be clear. Consumers lose when
health care costs rise. Yet, we seem hell bent, if you will, on regulating those
that have, while forgetting the growing number of those who have not. According
to published reports, the average health care premium for federal employee
health benefit plans will increase 10.2 percent, an increase well above the
increase in the federal revenue, as well as the overall percentage increase of
In a competitive telecommunication business, GTE cannot and more
importantly will not accept a 10.2 percent increase on health care costs. If we
face numbers like that, frankly, one of two things will happen. We either
redesign or, if you will, downsize the plan or we ask our employees to cover
more of the cost or we do both. We're the lucky ones. For a struggling small
company, the option is more simple -- drop the health care coverage.
add to this a steady drum beat of managed care scare stories, constant bashing
of employers and health plans by the press, and the prospects of a heavy dose of
legislation and regulation for those who over health care coverage, and,
frankly, you've created a recipe to get out, employers to get out quickly.
Simply put, why offer something on a voluntary basis, when it's constantly
attacked, adds to our cost position, and, frankly, and if some have their way,
get us sued.
And, oh, by the way, we offer coverage voluntarily and yet some
of our company competitors don't even offer it. One major non-union long
distance competitor doesn't offer medical coverage for retirees. Penalizing us
with regulations gives them a competitive advantage. We should focus with people
who don't have the coverage and stop demonizing employers who give it to them
To those who continue to say that the problem is managed care,
I'm here to tell you that I believe they have it wrong. Employers have abandoned
the unsustainable strategy of providing increasingly more costly benefits
through the unmanaged indemnity plans of the past. The only reason that GTE and
thousands of other employers do not have $250 deductibles and 50 percent co pays
or fixed fee schedules like Medicare is because we are managing health care.
We've moved away from the health care that's rewarded more volume and more
payment to one that is focused totally on performance. Is managed care perfect?
No. Far from it. Ask many of the 100 plans that do business with us now, but
more importantly ask the 30 or 40 plans that no longer meet our standards that
we've dropped because of it. But if we continually tie up the health plans in
regulatory knots and threaten them and the employers that sponsor the coverage
voluntarily with strict and unlimited legal liability, I ask you where do we
The irony is that employers that provide coverage are under
attack for what we do voluntarily and how we do it and how we provide it. One
hot issue for debate right now is the patient bill of rights, as was discussed
last night in the state of the union. My colleague, who just testified, and I
were on the President's Commission. I believe that we know what the words say
and what they mean. I also know that why a number of ideas were not included.
The one reason that the commission's form at work is because we
started with one very basic principal. The most common consumer protection is
having health care coverage. We're not looking for mandated popular benefits or
any willing provider provisions or unlimited liability.
Mr. Chairman, you
have asked for views on the extensive information that would be required by
regulation. We are very strong in our support of that, but we believe that it
must be balanced.
Regulations just won't do it. Simply, we need to
understand that we have to commit dollars to quality health care, not to the
bureaucracy that supports it.
At GTE we work hard to give our employees the
information they need to make informed decisions about their health care plans
by providing quality report cards, similar to what the President suggested last
night for education. We're already there. We're doing it without regulation. And
we require that health care plans that do business with GTE make evidence based
decisions about health care services for our employees.
I strongly favor
working out the details of patient information and claims adjudication directly
with the healthcare plans that offer them. But if you believe we must go
further, then we'll send the working group of interested parties to the
Department of Labor to work with them; because as they are proposed now, they
are unworkable and far from pragmatic.
Market-based reform is happening
every single day. Not because of laws and regulations but because a small group
of advocates are making it happen. And we're fixing it when we see it's broken.
Innovation needs encouragement, not penalties.
Finally, the real outrage is
that the cost of compliance with unnecessary and encumbering regulations diverts
money from quality medical care. We must be stewards of healthcare resources and
make fair decisions on how those resources are equitably used.
healthcare, not for compliance with regulations. There is no pot of gold out
there. There is no silver bullet. We need to empower, encourage and enable those
who are trying to do the right thing; not encumber them with the fear that if
they make a single mistake, they will be facing debit saving, legal and
financial consequences. No employer, no consumer can risk that consequence if we
go down that road.
Thank you for inviting me.
SEN. JEFFORDS: Thank, you.
Certainly a stimulating conversation will be created by your remarks. But
anyway, I'd like to interrupt, just briefly, for Senator Collins who has been
extremely valuable to this committee and also serves with me on the leadership
healthcare committee as well. She would like to ask Ms. Sebelius a question.
SEN. COLLINS: Thank you very much, Mr. Chairman. I, very much, appreciate
your accommodating my schedule.
Commissioner Sebelius, I, once again,
appreciate the opportunity to have you come testify before the committee. As I
mentioned to you at a previous time, I spent five years as commissioner of a
department in the state of Maine that included the Bureau of Insurance. And I'm
very concerned about federal preemption of state insurance laws unless there's a
very good reason to do so.
I also know from personal experience that the
states do an excellent job of protecting consumers in that consumers would much
rather deal with state governments than with the federal government to resolve
Having said that, let me ask your opinion on an issue that
is slightly outside the scope of this hearing. But it has to do with the various
patient protections that have been included in state laws. For example, it's my
understanding that some 44 states have enacted legislation to prohibit gag
rules. My question to you is should the federal government preempt state patient
protections? Or would it be better for the federal government to only provide
the kinds of patient protections that are in state laws to those ERISA plans,
which the states cannot regulate?
MS. KATHLEEN SEBELIUS: Senator Collins, I
think that in the past and we continue to believe that the focus, hopefully, of
Congress will be on those consumers who really for the last 24 years have been
under congressional jurisdiction that we often get calls from and cannot help
other than by attempting to negotiate with human resources directors like
probably the ones at GTE. Sometimes, we are able to prevail just on a
So, our preference would be not to wipe out the state
protections that are in place; which often again are, I think, sensitive to the
marketplace features. I mean, Kansas does not have a large penetration of
managed care that's very different from California or some East Coast states. So
what we may see coming through our consumer division or the legislator see as
good public policy for Kansas is probably very different from what might be
required in some other states.
So while there may be some uniform standards
that states already have that Congress should look at. But with the protections,
I think there also needs to be some marketplace flexibility. And that often
comes through that state system. So, we would urge you not to preempt state law.
Consumers comes to us, and if anything, it would be very helpful to have a
mechanism whereby the enforcing mechanism for what was put in states could maybe
be funneled through the state departments because the infrastructure is already
there. Although my colleagues, if they heard me say that out loud, would
probably shoot me with a large gun. So --
SEN. COLLINS: I appreciate your
comment in that regard and I agree with them as well. I think that is a message
that I would strongly encourage the National Association of Insurance
Commissioners to get out to Congress. I think there is a lack of understanding
of the good work that the states have done in this area. And the fact that a
patient protection in one state may not be needed in another state, which I
think is your point.
A good example of that is it is my understanding that
Florida law mandates direct access to a dermatologist in cases for suspected
skin cancer. That may well be a needed mandate in Florida. Unfortunately, it's
not a needed mandate in Maine. We don't have that much sun --
We'll just have to mandate the sun and then mandate the dermatologist.
COLLINS: Right, exactly.
But my point is that conditions do differ and I
think a one-size fits all approach is not necessarily the right way to go and
could be harmful.
The final question I have, which I would ask, all of the
panel to provide information for the record, since I do, unfortunately, have to
go, concerns the point that Mr. MacDonald just raised. I am very concerned that
as Congress attempts to respond to very real concerns about consumers' ability
to access the care that they need in a managed care environment that we not so
over burden the system that we drive up the cost of healthcare and cause some
people to lose their insurance altogether. That's certainly the worst of all
I would be interested in and ask each of you, to address for the
record; whether you or the organizations you're involved with have done any
analysis of the cost of adding various mandates. For example, whether it's the
mandates in Senator Kennedy's bill or in the Republican's bill, which is the
Republican bill obviously tries to avoid that problem and strike the right
But, we desperately need from you hard data on which we can base
our decision. And if, for example, state governments have some evidence looking
at their rate filings of what the impact of adding certain mandates has been,
that would be very helpful to this Congress and this Senate in making sure that
we do strike the right balance.
So, again, Mr. Chairman, thank you very
SEN. JEFFORDS: You're welcome. Our next distinguished panelist is
Professor Rand E. Rosenblatt, profess of law and associate dean for academic
affairs at Rutgers University Law School in Camden, New Jersey where he teaches
courses in health law, managed care, constitutional law, and law, justice and
society. That's a great combination for us here today.
has written and spoken extensively on heath law. He is the lead author of the
Case Book Law and the American Health Care System, and co-author of American
Health Law. Professor Rosenblatt, it's a pleasure to have you here, and we look
forward to leaning you at times here for your expertise.
ROSENBLATT: Thank you, Senator Jeffords. I agree with the previous witnesses
that market-based health care changes have accomplished some remarkably good
But they've also created some remarkable dangers that fully
justify regulatory change and initiatives. I think one example speaks very
In 1997, the state of Texas enacted legislation that, among
other things, prohibited health insurers and other managed care entities from
removing or refusing to renew a physician or other health care provider from its
plan for advocating on behalf of enrollees for appropriate and
medically-necessary health care. In other words, we're talking about a situation
where a physician is advocating, not deciding, he doesn't have the power to
decide, but is simply trying to bring a perspective or persuade an insurer or an
HMO that a certain kind of care is necessary.
This, by the way, is really an
essential counterpoint to the cost containment pressures of managed care. The
Institute of Medicine recognized this in its early studies of managed care many
years ago. Now, it's troubling enough that the Texas Legislature thought it was
necessary to pass such a law in response to apparently market-driven forces that
were removing or penalizing physicians for doing this kind of advocacy.
However, the insurance companies, lead by the Etna Insurance Company, it's
concept of what Mr. MacDonald called stewardship of health care was to go into
federal court and seek an injunction against this law and many other aspects of
the Texas legislation on the grounds that it was preempted by ERISA, and
preempted not only with respect to self-insured plans, but with respect to all
insured plans that were serving ERISA-based employees.
And a visibly
uncomfortable federal district judge, Judge Vanessa Gilmore, who admitted that
this law would clearly serve to enhance the quality of care that could be
provided, felt constrained by Fifth Circuit precedent to rule that such a law
found employers to purchase health plans of a certain structure, the structure,
that is, that couldn't fire doctors for advocating for their patients, and that
that, therefore, was preempted by ERISA Section 514. Thus, the Texas law will
not go into effect for more than half the population of Texas who have their
health insurance from private employment. That's the corporate health insurance
Now, when I teach these cases to my law students and to lawyers, and
even to federal and state judges, they're frankly horrified that this state of
the law and of the health care marketplace. I teach at a state university where
my students represent a cross section of Middle America, and they can't believe
that this is the current law.
Last October, I had the privilege of actually
going to the Kansas State Judicial Conference and addressing the Kansas State
judges, who like most of whom, I think, probably identify themselves as
conservatives. They were quite shocked at this and many other ERISA preemption
cases. And as you are probably aware, there are many, there are a number of
federal judges who are writing opinions now expressing great discomfort at the
opinions, the judgments they're being forced to render by current ERISA law and
doctrine in terms that I don't think have been used in American law since the
fugitive slave cases before the Civil War when the northern judges had to
enforce that law.
These questions bear, as my written testimony indicates,
the problem goes much deeper than one or two discrete problems such as gag rules
or punishing doctors for advocating on behalf of their patients. The Bedrick
(sp) versus Traveler's Insurance Case, which I appended to my written testimony,
shows that the systematic, corporate operating procedures of insurance companies
are often not in line, even with the current, rather modest protections of
ERISA, let alone, the Department of Labor enhanced regulations.
Let me make
a comment on the discussion we've been having here about the role of the states
versus the federal government. It relates directly to that Texas case I was just
talking about. I agree with Commissioner Sebelius. I think many states are doing
an excellent job of consumer protection, and I would like to see the state role
enhanced. Unfortunately, the current state of ERISA doctrine is not clear that
the states are going to be able to protect even private employees who's plans
are insured, and who, in theory, should be under state regulation because of the
insurance savings clause. The reason is there is a split in the circuits. A
number of the Circuit Courts of Appeals, notably, the Fifth Circuit, which
covers Texas, take a very restrictive view of the insurance savings clause, and
actually, courts in that circuit have been striking down state consumer
protection laws that apply to insured plans.
Some of the other circuits, the
Ninth Circuit, for example takes a different view. So, it's critical that
Congress clarify the issue here. Either the authority should be with the states
for the insured plans or the authority should be with the federal government,
but it shouldn't be nowhere, which is the real danger that a number of these
decisions and doctrines are going to lead to. I would just add a similar issue
with respect to the one of the issues I addressed in my written testimony about
the definition of an appealable decision or an adverse benefit determination in
the DOL regs.
Again, much of industry is saying that should be narrowed, and
so forth. At the same time, they run into federal court and preempt state claims
based on these same issues. A manner in setting a decision and so forth, when
they are in litigation, they say, oh yes, that's an ERISA claim. You can't go
into state court on that. When DOL tries to regulate it, they say it's not an
ERISA claim, and it can't be regulated. You can't have it both ways. And if you
do, you create this zone where there's no regulation at all.
Thank you very
SEN. JEFFORDS: Well, thank you.
Our next witness is Dr. Stephen J.
MR. STEPHEN DEMONTMOLLIN: deMontmollin. Just Stephen, it's not
SEN. JEFFORDS: All right. Well, you can be for a while here.
Speaking today on behalf of the American Association of Health Plans, we welcome
back Mr. deMontmollin, who returns to testify before the committee as he has
done in the past. He is vice-president and general counsel of the AvMed Health
Plan in Gainesville, Florida. He was appointed by the late Governor Lawton
Chiles, as Florida's first chief inspector general to combat fraud, waste, and
mismanagement in state government. Wow. I'm pleased to have you have you here,
and tell us how to do it.
MR. DEMONTMOLLIN: Thank you, Mr. Chairman and
members of the committee.
AVMed Health Plan is Florida's oldest and largest
not for profit HMO, and it serves about 375,000 members, including federal
employees, as well as approximately 75,000 Medicare members. Today, I'm
testifying on behalf of the American Association of Health Plans, or AAHP, which
represents approximately 1000 HMOs, PPOs, and similar network plans, providing
care to more than 140 million Americans.
AVMed, like AAHPs other member
plans, strongly supports plan processes that address enrollees coverage needs
and concerns in a timely fashion, and that ensure that consumers have the
information they need to understand the terms of their plans and make affective
choices. However, we are concerned that the proposed DOL regulations, as well as
legislation from 105th Congress falls short in achieving those important goals.
I would like to focus my initial remarks on the DOL regulations and then
briefly discuss key issues and external review and information disclosure. AAHPs
members support the DOLs goal of enhancing ERISA claims procedures.
Unfortunately, as proposed, the regulation is contrary to the interest of
enrollees and raises serious concerns for health plans. First, the proposed
regulations force state licensed health plans into a needlessly complex and
oftentimes conflicting regulatory matrix. And I believe the colloquy between
Senator Collins and Commissioner Sebelius is to this point. Health plans
providing services to ERISA plans under an insured arranged must comply with
state law requirements and many health plans contracting with self-insured plans
utilize state mandated grievance and appeal procedures.
And I will hasten to
say that we are privileged to operate medical offices on behalf of GTE in the
Tampa, Florida area. And when we get an RFP from GTE, even for their
self-insured plans, I can assure you that it has the same kinds of mandated
requirements that the states have routinely adopted. As well, I might say, as
the National Committee on Quality Assurance, the National Association of
Insurance Commissioners, and the JCAHC, Joint Commission on Accreditation of
Health Care Organizations, as external private accreditation agencies.
Second, the proposed regulation has a significant cost impact. This
inevitably will result in more employers offering less comprehensive health
benefits and increasing the share of premiums paid by employees. Third, the
proposed regulation directs claimants to federal court. Judicial review should
not drive the entire claims process. And I might say that our first speaker
today, Ms. Kramerich, talked about this process as being a safety net. What our
concern is that it not become a straightjacket for both employers and health
Fourth, the proposed regulation's timeframes do not provide enough
flexibility to ensure optimal decision-making. The proposal applies the same
restrictive timeframes to both request for pre- authorization of services, and
claims for payment of services already provided. Greater flexibility is needed
to account for these differences and for the need to obtain information from
both health care providers and claimants when making benefit determinations.
There's even a five day period in there where you've got to make a decision
within five days of whether or not there's additional information that's needed.
There are any number of things that fly in the face of prudent regulations in
the various states. The ability to do fraud and abuse investigations on claims,
the ability to do coordination of benefits and subrogation, all of these are
things that the rules would make it virtually impossible at the health plans.
Fifth, the process designed by the proposed regulation leave little room for
the use of innovative methods of resolving claims. The proposal implies,
erroneously, that multiple levels of review are detrimental to claimant's
interests and fails to account for some state grievance and appeals procedures
that require more than one level of review or independent external review. The
prohibition against mandatory binding arbitration also is an inflexible and
narrow approach. In light of these and other serious issues, AAHP has urged DOL
to withdraw the proposed regulation and allow a second period of public comment
on a new proposed regulation that addresses the issues raised.
to external review proposals, whether public or private, state or federal, they
should be examined with respect to the following critical issues. First, the
external review process should be limited to coverage determinations involving
medical necessity issues and experimental treatments. Allowing virtually any
plan decision to be appealed externally makes the external review panel arbiters
of insurance law and dictators of plan design and operation. Second, health
plans internal procedure should be allowed to work. Often, disagreements about
such determinations can be resolved immediately and with minimal cost.
Exhaustion of plans internal processes should be required.
review entities should make coverage recommendations in accordance with the
terms and conditions of health plans benefit contracts with purchasers. Doing
otherwise essentially allows external review entities to make decisions contrary
to the terms of the health plan contract, and could result in expansion of
contractually agreed upon coverage. Fourth, there should be only one external
review available for each set of facts that produce a claim.
With respect to
information, recognizing that information is the underpinning of an affective
market, AAHP believes that health plans should provide consumers with
information so they can understand their health plans and make affective choices
both within and among health plans. There are three key issues in particular
that deserve emphasis. First, quantity of information does not equal quality of
information. A recent GAO report supported this in its finding that too much
information becomes overwhelming. Second, plan and provider level information
are needed if the information is only provided on plans but not doctors and
hospitals, then consumers will be making choices based on incomplete
information. Third, comparison across plans promotes informed choice. If
information is only provided on some types of health plans but not others,
consumers will be making choices based on incomplete information.
for the opportunity to testify today.
SEN. JEFFORDS: Well, thank you. It's
Our final panelist is Dr. Bohn V. Allen of Arlington, Texas,
who is a practicing physician in general and vascular surgery. Dr. Allen will be
testifying today on behalf of the Texas Medical Association. Dr. Allen has held
numerous professional posts, including the chief of surgery, chief of staff, and
chairman of the board at Arlington Community Hospital, and chief department of
surgery at Arlington Memorial Hospital. He has been an active member of the
county, state, and national levels of a variety of advisory committees, boards
of trustees, and boards of directors. He is the author of papers and essays on
various clinical matters. Dr. Allen, it's a pleasure to have you with us, and
look forward to your testimony.
DR. BOHN ALLEN: Good
morning, Senator. Thank you
My name is Bohn Allen. I am an
actively, practicing general surgeon from Arlington, Texas. I have been a
practicing physician for 32 years. I want to thank this Senate committee for the
privilege to testify. I chair the counsel on social economics, Texas Medical
Association, where I hear the concerns and complaints of Texas physicians every
day. I meet several times monthly with health plans in an attempt to resolve
these disputes for patients and physicians in Texas. I am down in the trenches
daily dealing with these problems.
Over the past year you've heard many
so-called horror stories of patients who died or were horribly injured as the
result of health plan policies and practices. I have examples of these, I have
recently had experience with a 56 year old woman with pancreatic cancer that it
took three months, from the time she saw her primary care physician, to work her
through the system of pre-authorization to get her operated on and cared for.
These abuses take place daily in the offices of practicing physicians all across
the country as health plans disregard the medical record, disregard the
scientific, clinical opinion of the doctors at the bedside, and in some cases
disregard generally accepted standards of medical practice.
the physicians the Texas Medical Association surveyed last month reported that
managed care plans practices continue to adversely impact the quality of patient
care. Doctors number one complaint is the plans' use of improperly qualified
reviewers working from a computer screen with guidelines that have nothing to do
with the individual patient's problem. Our patients need a documented,
understood and observed stepwise system of appealing health plan decisions on
The process starts when I've seen the patient and done a
history and physical examination, and reviewed the pertinent laboratory and x-
ray information and reviewed any other extenuating circumstances. Then, I give
the patient my best clinical and treatment opinion and recommendation. If the
managed care organization or health plan denies it, they have effectively
destroyed the patient/physician relationship, which we, as physicians hold
sacred. Medical ethics, commonsense and human dignity demand that these private
and personal decisions, be made solely by the patient with his or her physician.
There is no place in the examining room for an insurance company, or government
Plans should overturn a physician's treatment plan only, if they
can show that it would be dangerous to the patient's health or if they have a
scientific proof that it violates generally accepted standards of prudent
medical care. To go beyond these bounds destroys the patient/physician
relationship. Health plans need strong and clear timelines to respond to claims
through their internal appeals process. The patient needs ongoing education so
they're aware of their rights and responsibilities. The plans must explain
completely and accurately their reasons for denials. A two paragraph form letter
that says simply, not medically necessary, will neither educate physicians nor
provide the patients with information they need to understand or appeal the
process. Even with the strong and observed internal grievance procedure, the
plans inherit conflict of interest requires a completely independent objective
and fair external review system in which the decision-makers have absolutely no
financial stake in the outcome. Unfortunately, neither the Department of Labor
nor state legislators can accomplish this without changes in ERISA.
independent review system recently adopted in Texas is working well. During it's
first year and half of operation about half of the cases were decided for the
patient, half upheld the health plans positions. This shows that the reviews are
objective and the health plans are making inappropriate medical necessity
This independent review program was included in our 1997
patient protection legislation by mutual agreement of all parties. Shortly after
those bills passed Aetna US Health Care sued Texas alleging that ERISA plans
were exempt from the liability provisions of the law. In September, the federal
judge upheld the liability section, but said the ERISA preempts the independent
review program, both sides have appealed the judge's rulings. But, it would be
truly unfortunate if the external appeals process was permanently eliminated.
In most cases, an independent external review system obviates the need for
lawsuits that's exactly why the Texas legislature enacted it. You cannot address
appeals of health plan decisions without including the issue of liability,
without meaning accountability there's no incentive for the health plans to
comply with the internal and external review process, no matter how well they're
corrected. The Texas law holding health plans accountable for their negligent
medical necessity decisions has been in effect for a year and a half. Exactly
one law suit has been filed, the case involves a suicidal man discharged from
the hospital against his psychiatrist's strong advice when the health plan
decided he no longer needed care to be in there and denied payment for further
care. He was home less than 24 hours when he drank a half-gallon of antifreeze
and subsequently died. Sadly, this life could have been saved if the plan had
complied with Texas internal and external review procedures.
Senator, for your attention.
SEN. JEFFORDS: Well, thank you, doctor, a very
helpful testimony, and I want to thank all of you. This is obviously a very
difficult area as move into it.
I was around when ERISA was created and on
one of the committees that had jurisdiction, had nothing to do with health care
at the time, it all had to do with Employer Retirement Income Security Act. And
at the end of the conference committee, as they were about to go out the door,
somebody said, oh, shouldn't we cover health as well, and so they added a few
words in. And it didn't cause much problems for a while, but all of the sudden
we have such controversy and conflicts between the states and all, it depends on
where the plans are, who they cover and all this. It's now up to us to try and
figure out what a rational system is to ensure that we can take care of the
differences between those plans that only under state and those they are only
under ERISA and how we try to work out the solution. So, I'm one of the few that
does not pile over or wonder what ERISA is and why in the world we're in this
mess. Knowing that we're in this mess or why we're in this mess does not create
necessarily the solutions, so that's why you're here today.
Ms. Sebelius, if
DOL's regulations are applied only to self- funded group health plans, will
multi-state employers that offer a range of coverage options, including HMOs, be
required to comply with both federal and state requirements pertaining to claims
and appeals procedures.
MS. SEBELIUS: If the DOL regs apply to self-funded
plans, then they would apply to those areas in a state or in a multi-state
arrangement that is organized under ERISA protection.
The fully insured
plans, whether it's a single employer or a multi-state employer, would comply
with state laws the way they do now. So there would not be two levels of
regulations, because either it would be a self-insured plan or a fully insured
plan, and either state or federal law would apply.
SEN. JEFFORDS: Is there
MS. SEBELIUS: Pardon me.
SEN. JEFFORDS: Is there clarity
needed in the law?
MS. SEBELIUS: Well, I think the current dispute is really
those fully funded plans that are organized under ERISA. There is the Pilot Life
decision, which suggests, which seems to suggest, that even if you are a fully
insured plan, that there may be some ERISA preemption.
We feel, as members
of the National Association of Insurance Commissioners and their subsequent
state law, and again the issue is pending currently before the Supreme Court,
that the distinction is fairly clear that if the plan is fully insured, it falls
under the savings clause and is under state jurisdiction. If it's self-insured,
self-funded, it falls under the congressional exemption.
I think, depending
on the Supreme Court ruling it may be an area that Congress would like to,
should clarify again. We would certainly urge you to clarify it and reinforce, I
think, the savings clause that has been there and has been part of the
congressional structure for a long time, contemplating those two sets of
REP. JEFFORDS: Obviously, the problems created by
those that are self-insured and all are having to deal in different states.
Isn't there some strong argument for at least pretty close to uniformity and how
we handle all these different situations
MS. SEBELIUS: Well, Senator
Jeffords, we've testified in the past that we think it's quite appropriate for
Congress to look at to direct their efforts in patient protection, external
grievances, a whole gamut of issues toward those plans which are in the
self-insured marketplace, which are under an ERISA exemption, which cannot be
legislated or regulated at the state level, so we think that is an appropriate
area. Congress created that exemption to allow multi- state employers to have
one set of regulations. In the patient protection area or in the health plan
area there really haven't been specific protections or remedies ever put in
place. So we've always thought that that was an appropriate area of
Our plea to Congress is, in doing that, don't preempt the
system, the framework, the infrastructure, the complaint handling system that's
in place and really working very well for the fully insured market.
JEFFORDS: The NAIC, I'm not familiar with what they've done, have they tried to
promote uniformity or do they recognize the state's need to do different ways?
MS. SEBELIUS: Senator, we as you know, the NAIC organization, does not have
lawmaking authority in and of ourselves. Individual commissioners take model
laws back to the states and promote them. But in the area of patient protection,
we have five model laws which many states have adopted in whole or part and
that's really our attempt to carve out some uniform standards, developing the
models with a great deal of input from consumers, from insurers, from providers,
from regulators. And then those models are taken into various legislators.
As you well know, it's very difficult to say to any group of lawmakers,
here's the model, don't touch it, don't amend it, don't discuss it, just pass
it. The likelihood of that happening is quite slim, but I would say certainly
the framework for the models is very similar from state to state and the same
kinds of issues are network adequacy, grievance procedures. The variety of
issues are now appearing all over the country in state laws. Fifty states now
have grievance mechanisms, mandated for fully insured plans.
You said DOL regulations should apply only to the self-funded plan, in your
testimony. How does the NAIC distinguish its self-funded group health plan from
an insured group health plan under ERISA?
MS. SEBELIUS: If a plan is buying
an insured product in the marketplace, we would argue that they fall under state
jurisdiction as opposed to the employer really bearing the fiduciary duty to pay
the claims and using often an insurance company for a third party administrator
for claims handling and paper processing. That would be the distinction that we
would see. If they're purchasing plans in the marketplace, then we think they
fall under state jurisdiction and have maintained that position pretty
consistently, both in court briefs and congressional testimony.
SEN. JEFFORDS: What information does NAIC Model Act require that is not
included in S2330 or 1890?
MS. SEBELIUS: Mr. Chairman, on page 11 of the
written testimony, there are a couple of issues that are outlined. First of all
the reporting requirements are different. In the NAIC model, the carriers must
submit grievance procedures including all forms to the insurance commissioners
along with future modifications. Neither Senate bill contains the requirement.
We also, and we feel this is a very important distinction, establish a
grievance register requiring a health carrier to maintain records that are
accessible to the commissioner as a way of tracking performance.
2330 requires a plan to maintain grievance records, but doesn't require access
to data by the regulators. So there is an enforcement issue, I think, that maybe
distinction, and Senate Bill 1890 doesn't have a provision at all requiring the
register. And there's also a different, in reporting requirements when an appeal
is decided. We require that plans provide, and you've heard Dr. Allen testify,
that consumers need complete information. If you deny a claim, it doesn't really
help very much to just have a form I'll quote the doctor checking off a form
saying, "It's not medically necessary." That doesn't give much information to
either the provider or the consumer to use in an appeal, so our Model Act
requires a good deal more information to the complainant than either of the
Senate bills. Those are really the three primary areas of difference.
JEFFORDS: Generally speaking what have the state insurance commissioners gleaned
from state grievance registers and annual reports filed by the plan?
Specifically, do these registers track the number of grievances resolved on
behalf of the consumer versus the carrier? And have any states used this
information to improve their law?
MS. SEBELIUS: I can certainly tell you how
we use it in Kansas, Senator. I'm not sure I can speak for my colleagues, but I
would assume it's somewhat similar. We use it in a variety of ways. We publish a
complaint record every year by insurance company, by line of insurance that's
available as one of our consumer publications. We sort of see it as our consumer
reports on insurance companies. You get a price comparison but you also get a
complaint listing, and we track the information from year-to-year so people can
get a sense. Consumers can get a sense if plans cost approximately the same and
the provisions are about the same, but one company may have four times as many
complaints as another company. We think that's a potential indicator that the
consumer wants to be cautious about entering that plan.
use it for our market conduct studies. As you know, insurance regulators have
the authority to send teams in both to monitor solvency, but also to look at
claims handling, to look at whether the advertisements in the marketplace match
what's actually being sold, to look at the timeliness of claims procedures. So,
our complaint register is used as a trigger for those market conduct. We can
find things suddenly showing up at the marketplace, a rash of complaints that
may be an indication of consumer dissatisfaction. It may also be indication of
some solvency problems. So, it's used as an internal and external model. And
most of the issues that I take to the legislature come directly from our
consumer division, calls that come to our department and highlight problems in
the marketplace, whether health or otherwise are the kind of pulse-point that I
use to analyze every year in terms of what to take into the Kansas Legislature.
We were one of the states that did not pass an external mechanism last year. It
is one of my proposals this year. And we felt that there were a number of
situations in our department where there's a clear medical dispute.
Dr. Allen on one side treating a patient, we have a medical director of a health
plan on another side. There are two sets of medical information. We neither
have, we don't have the expertise frankly in our department to wade into that
situation very competently. We want an independent panel of health providers
with no financial tie to the plan to make a timely and appropriate decision. So,
that that's also one of the triggers that we can look at the complaint register
SEN. JEFFORDS: What percentage of the states have adopted the NAIC
Utilization Review Model Act and the Health Carrier Grievance Procedure Model
MS. SEBELIUS: I can't give you that off the top of my head. We'd be
glad to provide that --
SEN. JEFFORDS: Could you provide it for us?
SEN. JEFFORDS: Thank you very much. Didn't mean to
pick on you so much.
MS. SEBELIUS: Sure, thank you.
SEN: JEFFORDS: But
you have an important area that we are very interested and obviously --
MacDonald, you make the point that health care plan information standards need
to be flexible enough to accommodate the differences between network managed
care plans and non-network plans, such as Preferred Provider Plans, while being
consistent enough to give consumers the information they need to make well
informed choices. Do you have any additional recommendations that would assist
us in solving this problem? MR. MACDONALD: Well, first my parents are very proud
of what you read earlier and now the fact that you just acknowledged me as a
doctor. They're really proud.
SEN. JEFFORDS: That's all right.
MACDONALD: I didn't even have to go medical school.
You know, I think --
MS. SEBELIUS: I said, I don't want you treating me.
MR. MACDONALD: I'm not going there.
You know, I think
the issue of adaptability and flexibility is what the primary statement that we
were trying to make, is that we believe within GTE at least that we have varying
designs that we have for our employees. And the key is that we want to make sure
that we're providing them information that is relevant. One of our biggest fears
is that we're going to go on information overload. It's the quality of the
information that's provided so that people can make an informed decision and
that's what we're ultimately trying to create for them. And so the only other
quote, "advice", that I would provide is, is that in concept of flexibility is
that we need to make sure that the information is relevant. Because too many of
us in this day and age are getting information that is put before and we don't
SEN. JEFFORDS: As a member of the President's Advisory
Commission on Consumer Protection and Quality, you supported the right of all
consumers to have access of fair and efficient process for resolving differences
with their health plan, including a rigorous system of internal review and an
independent system of external review. What design elements do you feel should
be included in the independent external appeals process?
Well, I want to make sure that it is understood and that support was in the
concept of the Patient Bill of Rights. But the position has always been from the
outset that this is a voluntary compliance approach, is that the feeling is that
that represented a framework for employers like myself to evaluate and use
within our own system. With respect to GTE is that we have already even prior to
the Patient Bill of Rights, to be candid with you, already had a view of
external appeals. We think again the marketplace demands the ability for the
employer, who again I emphasize voluntarily offers these coverages to kind of
design what's appropriate that fits their particular needs, their particular
sets of employees. I think that what we have done in the past where internal
review has indicated that we needed to go out, we go out and find the experts
and ask for opinions on that basis. It is an independent view. We take that
input and make those decisions.
To give you some sense of that, Senator,
last year we only had eight cases where we had to go for external review.
SEN. JEFFORDS: Okay. That's excellent.
In your testimony you provide
evidence based medicine and you recommend that I work in conjunction with the
Department of Labor to develop the details of patient information and claims
Please expand on this suggestion, please?
MR. MACDONALD: Well, one of the things that I think is particularly
troubling is you look at the regulations that are at least being discussed right
now. You sit here and one of the things that Senator Collins raised is the whole
issue of costs. What does it mean incrementally? Well, the problem with these
arguments is that incrementally something that cost a penny doesn't sound like a
lot. But if you do that 10 times suddenly it's 10 cents, you do it a hundred
times it's a dollar. And you know with all due respect, I understand how people
feel that well, it's only a penny; it's only two cents. But that cost has to go
somewhere. We just don't have the ability to pass it on. We can pass it on to
the employee, but then we may actually be hurting ourselves in that respect
because those employees are going to drop out of the plan. They can opt out.
Some of the regulations that we're looking at right now, one that in my mind
that is just particularly mind boggling is that if one of the regulations goes
through is that I will have to be able to retain records for a period of five
years. So, if there is an appeal, I have to go back five years ago to decide how
I have consistently applied it in 50 cases in order to uphold it. Now you begin
to think about that if you have 100,000 people, you have turnover, say it's
120,000. You begin to put the dependent care on all that; we're talking about
500,000 cases over a period of five years. I have to maintain records to decide
if I've maintained a consistent pattern.
That's a cost. Somebody's got to do
that. Somebody pays for that. And when you're running a business, which you're
trying to be competitive, you say to yourself why do I want to be in this
business because when I look at my competitor, my competitor doesn't offer the
plan. So why do I want to be regulated? Why do I want to absorb that cost? Now I
think it's practical to say that we think we attract quality people and one of
the ways we do it is through competitive benefits and compensation. So we would
like to keep that.
So if we have to work with the DOL, our view is bring
some of the experts in that work with this day in and day out so that we can
have pragmatic approaches to solving the problem. We just don't want to say no
to everything. What we're really saying is that if it is necessary, let's step
back and say how does business work and how does it make it happen? Make it
practical in its application so that if indeed it is a cost let's make it a half
a cent instead of a penny. SEN. JEFFORDS: Please expand on this statement. You
indicated that the proposed rules issued by the Department of Labor
significantly expand and extend the scope of claim determination beyond their
statutory authority. Please expand on this statement and indicate those areas
where you feel the Department's proposed rules exceed their authority.
MACDONALD: Well, I think that one area that I could focus on would be as I
understand it, is before, after the first determination of whether or not it was
accepted or not, assuming that it was not and it has to go on for appeal, before
the second determination is made, is that I understand the regulations they are
saying, they are suggesting, that they are requiring an outside opinion. And in
our opinion that is not within the jurisdiction of those regulations.
JEFFORDS: Well, thank you. You've been most helpful, Mr. MacDonald.
MACDONALD: Thank you, Senator.
SEN. JEFFORDS: I'm not degrading you now or -
Professor Rosenblatt, in your testimony you said that it would be nearly
impossible to distinguish between coverage decisions involving medical necessity
and coverage decisions involving contract interpretation. How would you design
an external review process that applies to all types of decisions, as you seem
to suggest, and not result in a plan having to cover benefits and services that
are specifically excluded in the plan contract?
MR. ROSENBLATT: Well I don't
think the plan should have to cover benefits and services that are explicitly
excluded in the contract. And presumably that should be an issue that would be
part of the appeals process as it is today. Today ERISA beneficiaries can
eventually get into federal court where they can, if they've gone through
whatever internal processes there are in the plan and sometimes these issues are
medical necessity and sometimes they're issues of contract interpretation and
very often they're intertwined. And the decision-makers at various levels have
to deal with that mixture.
SEN. JEFFORDS: Some have suggested DOL proposed
regulations would encourage litigation and increase costs. Do you agree with
MR. ROSENBLATT: Well I think it's hard to say, but I think
there's a good chance that it would decrease litigation. As I suggested in my
written testimony, the Bedrick (sp) case is a great example. Here you have a
situation where a physician utiliiewer makes a couple of telephone calls to two
treating physicians. This is all based, of course, on the record as exerted in
the Fourth Circuit opinion. The quotes from the doctors are rather ambiguous.
The physician makes a decision to drastically reduce benefits and from them on
it's appeals and litigation, whereas a more dialogic process where, as Dr. Allen
was suggesting, where the docd actually interact with the plan the utilization
reviewer through some sort of process, which is what I think the DOL regs are
trying to set up, would actually decrease the amount of litigation because
presumably if the doctors had a strong case the plan would agree.
JEFFORDS: The Department of Labor's proposed rules on claims procedure provide
that the review upon appeal be conducted de novo. How important do you feel this
MR. ROSENBLATT: I think that's very important. Again, the
Bedrick case is a great example. The quality of the records, so to speak, made
initially is often very thin and often may be dependent on what that initial
reviewer asked, the questions they asked and how people responded. If that
record is frozen, if that then becomes the only the record, you're likely not to
get good quality decisions. It's actually only when the case becomes appealed,
so to speak, often that the doctors and others start focusing on it and start
building a proper record. And the decision-maker should, of course, be able to
consider a well-constructed record rather than something that just by
happenstance you know happened originally.
SEN. JEFFORDS: We have heard
concerns from the National Association of Insurance Commissioners that the
proposed regulations would undermine the progress already made by the states.
How do you view the impact of the proposed regs on employers that fully insure?
MR. ROSENBLATT: I think that is, it's a very important issue. And there
ought to be a way of integrating these two systems so that they work together
rather than across purposes. But I think it's very dangerous to try to set up
these different categories, you know fully insured versus self insured with
markedly different systems of regulation because as we know already from our
experience, and as Mr. MacDonald, I think, would agree with, when you set up
basically different cost structures for different types of plans, you're going
to start influencing the market. And plans will start going either self insured
or fully insured depending on the economic incentives and plus you'll get very
complex marginal intermediate forms that aren't clear what they are and there
are a number of new forms as Commissioner Sebelius, I'm sure knows very well,
and new forms of networks and delivery systems that have escaped state
regulation altogether because they don't fall into the classic licensed HMOs or
So it seems like what we need is a system that perhaps where there
is a some sort of federal floor that applies to everybody and then allow the
states to do more and indeed to be the implementers of the regulation, much like
we have in other statutory areas, such as HIPA and some of the environmental
areas where the states and the federal government work together and the states
are the frontline regulators. But there's a kind of national uniform floor so
that nobody can escape completely.
SEN. JEFFORDS: Ms. Sebelius, what do
you think about that?
MS. SEBELIUS: I don't know that the HIPAA model can
work as effectively in the patient rights area. I mean part of, I think, what
was able to be determined pretty clearly in the HIPAA framework is do you have
guarantee issue or not? Do you offer what portability or not? When you move
into, I think these more subjective areas making a determination of what is
floor and what's a ceiling is the state law, in compliance, out of compliance,
more consumer friendly, less consumer friendly, if they use an entity like
Florida has, which is a state agency to do independent review does that meet a
I am concerned that a lot of what's in place right now in
the states reflects individual marketplaces and it becomes very difficult to
translate into a uniform federal kind of approach that may or may not recognize
those differences. I think having consumer protections for all consumers in the
country is certainly an area that I would strongly support what Professor
Rosenblatt has suggested. I don't know that the distinctions are that difficult
to reach. They've been in place for some period of time. I think that those
jurisdictional issues can be reclarified. Our problem is that they've gotten
somewhat fuzzy in the lasts number of years with some conflicting court cases
where there has been a suggestion than ERISA of preemption even applies to those
fully insured plans that may be under some sort of ERISA organization. That's
really where I think the conflict comes.
SEN. JEFFORDS: Professor, do you
have any other comments?
MR. ROSENBLATT: Well, I agree with Commissioner
Sebelius that actually working this out might be quite a challenge. But I think
whether you go with a sort of somewhat separate systems or some kind of
integrated system, I think the important thing is not to create radically
different incentives so that the market get driven toward. Basically more and
more people get pulled into the less well-protected system or out of the system
MS. SEBELIUS: Senator, if I might back that up. We see that
right now with sort of a no specific protections issues rules on the ERISA side
and state legislators moving in the patient protection arena fairly
aggressively. I mean what we see currently is exactly the situation that
Professor Rosenblatt has subscribed where they are and certainly employers
opting into the self-insured market to escape following certain rules and
procedures. So having some floor directed toward the plans that are under ERISA
jurisdiction, I think would in fact correct the situation, which has been
escalating in the past couple of years. I don't think it would enhance it. I
think it would help to make a more level playing field because one of the cost
complaints that we hear from employers in our states who are under state law is
that they are being competitively disadvantaged by the fact that they follow
what Kansas lawmakers think is good public policy and other self-insured plans
primarily large employers, may not have those same rules and regulations to
follow. So they're currently is a competitive issue in the marketplace that may
in fact help be corrected, not escalated by the protections contemplated in
SEN. JEFFORDS: Mr. Montmollin, regarding the proposed Department
of Labor regulations, your testimony predicts that complex and potentially
conflicting regulatory structure for state license insurance companies that
provides service to induce ERISA plan. Please expand on those potential
MR. DEMONTMOLLIN: I think that we've discussed a lot of them
today. AvMed my particular health plan, in the state of Florida requires
external accreditation by an agency like the national committee on quality
assurance or the joint commission on accreditation of health organizations. They
both have proposed guidelines for internal appeals and how information should be
decimated and the come in and take your plan apart and put it back together
based on those standards. Certainly the state of Florida has been a leader in
this area of requiring health plans to have standards of information, internal
appeals, as well as external appeals, the regulations that have been proposed by
the Department of Labor. And this is consistent with their previous testimony to
this committee about a year ago where they were in favor of civil liability
against health plans. Yet it appears that there is an opportunity to go in with
these internal rules and regulations and do your discovery. If you look at the
detailed information and the manner in which it's supposed to be provided to the
member or to the recipient, it's clear that he would have or she would have to
have an attorney to accomplish that.
In the preamble to the proposed rule,
the department talks about providing reasonable access to and copies of all
documents and records relating to previous claims involving the same diagnosis
and treatment. And under this proposal plans and insurers would be required to
provide information on up to 50 claims in the past, things that you would more
likely find in the litigation arena.
In the rules that require the
information that you have to give to the member on the adverse determination,
what kind of language should you use and what backup to that should you provide
them. And in Florida again, one of the states as Mr. Commissioner Sebelius has
already talked about has strict criteria about what information is provided when
this adverse determination is made. But in the rule, it talks about requiring
reference in your letter to internal rules, guidelines, protocols, criteria and
for the first time in any reg. I've seen before et cetera. So I guess you're
supposed to say and you know stuff like that, just get it all together and ship
it over to them in boxes and their attorneys will break it down, then determine
that the utility of profiling a lawsuit because that seems to be the train that
this rule is clearly on.
SEN. JEFFORDS: You stated in your testimony that
information is the underpinning of an effective market. Given that many
beneficiaries do not read, let alone comprehend the information distributed to
them by the health plan, what other steps should plans take to educate
participants about their rights?
MR. DEMONTMOLLIN: Let me just take it in
the Medicare context, cause GAO was very concerned about the amount of materials
that were provided. Congress passed the Balance Budget Act in '97, issued 850
pages of regulations among other things, how we're going to educate seniors to
the Medicare plus choice plans that are available.
Seventeen percent of all
seniors in Medicare eligibles are in HMOs. Yet the Congress imposed through
HCFA, the cost of that entire $95 million education program on the health plans.
Only 17 percent of the members, but pay the 100 percent of it, so that when
there was a 2 percent increase in the amount that was made available to the
plans, immediately a half of that percent was taken back for the education
program. But at the same time no effort was made to include the plans and how
should that educational program be carried on.
In my plan and in a number of
plans, it is our desire to help seniors understand that the managed care arena
is different for them. Younger people coming up can adjust themselves and get
used to having someone coordinating their health care. They can read a little
better. The print doesn't need to be quite as large.
Those are things that
health plans because they care about patient satisfaction. And there seems to be
a suggestion by many that the only industry in the entire world that doesn't
care about patient satisfaction or improving the quality of its product are
making sure that the customer is satisfied or delighted, seems to be for some
reason the belief that it's the managed care industry. And that's simply
My point simply is we have a number of programs where
there are one on one opportunities for our Medicare members to come in. We do
the same thing with our commercial members, giving them an opportunity to
understand the plan one on one, make sure that it's easy reader materials that
are provided to them. NAIC has been a leader in this area as well.
SEN. JEFFORDS: You state in your testimony that the proposed Department of
Labor regulation limits innovative approaches and unnecessarily inflexible.
Please elaborate on how proposed legislation could build on involuntary efforts
undertaken by group health plans to protect their participants, including
accreditation processes, quality assurance programs, and participant education.
MR. DEMONTMOLLIN: I think the Commissioner Sebelius has addressed a lot of
this, and I have already talked about external accreditation agencies like the
National Committee on Quality Assurance and JCAHO and others. And (clear hetus
?) is a perfect example in the outcome measures and trying to do things on
population based medicine.
Evidence based or scientifically based
medicine is what the health plans are trying to accomplish. If we can only move
the fee for service industry into practice medicine, into the idea of a
controlled managed health care based on outcome measures and based on evidence,
I think that the members are going to benefit.
SEN. JEFFORDS: You state in
your testimony that a patient's complaint may lead to improvements and quality
of care. How should outcomes of independent external reviews be utilized by
planned consumers to improve quality of care?
MR. DEMONTMOLLIN: We use them
on a regular basis. Every time and in Florida there is an external review system
called the State Wide Provider and Subscriber Assistance Panel -- three
representatives from the Department of Insurance, three employees from the
Agency for Health Care Administration, chaired by the Consumer Advocate in
Florida. They contract with a primary care physician to be at every one of the
meetings. They contract with a specialist in the particular area that involves
that particular member.
Constant review of those decisions back at my plans
through the corporate quality improvement committee, just as we take every
decision by the CHDR, which reviews Medicare decisions, just like we take
decisions that are approved or made by the Federal Employees Health Benefit
Program. We take those back, talk about issues like C- PAP (ph) machines or
Should we change our benefit with respect to DME and make this
available? We have a disease management program in my plan for congestive heart
failure because we know that if a patient goes into the hospital three times
with a diagnosis of congestive heart failure, their chances of living six months
is cut by 50 percent after that third admission.
That's just evidence based
medicine that we're talking about; therefore we say in this corporate quality
improvement committee, in the flexibility that the Senator has asked about, we
say what about those members that don't have pharmacy benefits or will exceed
their pharmacy benefits that they have under the plan.
We need to
make sure that she has access to Lasix or this disease management program isn't
going to work. We need to make sure that she has a scale, so that when the nurse
calls her up and says would you mind stepping on the scale for me -- it's
Tuesday -- and answers the questions about her daughter and all the other things
that go on when nurses and patients talk, she steps on the scale and she says,
Ms. Bradshaw, you've gained three pounds. Are you taking your Lasix? Yes, I am.
Are you eating pickles? Well, yeah, I have been eating some pickles. Well, you
know you need to stop doing that.
So, it gives an opportunity for that kind
of information to be shared. It gives the opportunity for paying for the scale
if she doesn't have one and to go outside of the contract for the Lasix. But the
only way to do that is to have flexibility in how your internal and external
appeals processes work and not that there is a rigid, formalized system that you
have to put the square peg in the round hole.
SEN. JEFFORDS: Dr. Allen, the
health care quality bills that I worked on in the last Congress proposed that
the right to independent external review of health plan coverage determination
to be extended to participants covered by ARISA health plan.
September 18th decision by the US District Court Judge Gilman to overturn the
Texas legislation that created an independent review process, do you support
amending ARISA to extend the right through independent external review for
DR. ALLEN: Yes, sir, Senator, as I think I said earlier in my
testimony, in Texas we established the external review process called the
Independent Review Organization. This was done in an attempt to bring an
unbiased, independent view with review to controversies that constantly arise
between health plans, providers, and the patients.
This process lends
fairness to the program, so that we have an external review organization, which
can look at all the parameters. A lot of times, the problem is that information
is not gathered on one side or the other to make the appropriate determination
and that leads to part of the problems.
With the Independent review
organization that we have set up in Texas, where full information can be
obtained, where the facts can be determined, then this independent body can make
a reasonable determination as to what was necessary or is necessary. We have
found this to be extremely helpful in eliminating controversy between the
providers, between consumers, and sheds light to the whole process. And in our
experience, it has dramatically cut the problem of having to go to the
courthouse to try and resolve this problem.
So, yes, we strongly support an
external review program in a form that does not necessarily have to be the
independent review organization that we have in Texas, but some type of external
review program, which gives an unbiased opinion. SEN. JEFFORDS: Your testimony
states that the independent review system of health plans decisions recently
adopted in Texas in working extremely well. How can the outcomes of the reviews
be utilized by plans, physicians, patients, to improve the quality of health
care provided to patients?
DR. ALLEN: Well, all of these I think can be
incorporated in evidence based studies. In Texas, we have established what's
called the Texas Health Quality Institute where we are looking at practice
parameters, outcomes data, to determine best practices. And whenever we
accumulate information, such as from the independent review organization, we
begin to see outcomes and things that can be applied to improving the quality of
care for the individual patient, which is the focus of what we're really after.
Its great to talk about treating large numbers of patients and doing broad
based studies, but where the rubber meets the road is the individual patient and
his needs. That's what the physician and what our organization is all about. And
that's why we need to preserve that.
SEN. JEFFORDS: I agree with the
statements in your testimony that we need strong and clear timelines for health
plans to respond to complaints through the internal appeals process and that the
external review process must be expedient.
I am particularly interested in
your comments regarding the importance of expedited review in certain cases.
What timeframes do you consider appropriate for an effective review system?
DR. ALLEN: Well certainly, for emergency situations and in patients who are
hospitalized or patients who are in urgent medical situations, it has to be
expedited in a rapid manner; i.e., in the emergency room, we frequently see
patients that are there because of their plan. They have an emergency situation.
You need a one-hour turn around time on authorization to do whatever it is you
need to do with the patient because it may be a lifesaving situation.
there are situations that come up with continuation of care, further
authorization of hospitalized patients where it's critical that you get the
information and the authorization done in a timely manner. And frequently,
because of other extenuating circumstances, it needs to be done within 24 hours.
Then, there are other circumstances where patients are hospitalized where it's
not critical, where it may be three to five days that you need that type of
authorization or review.
For the majority of cases that probably do not
threaten a patient's life or limb, we think that 15 days to 30 days is a
reasonable period of time for the process to work itself out, to get the
information and make the determination.
SEN. JEFFORDS: Thank you
all. If anyone has a parting comment they would like to make, that is of
positive nature --
DR. ALLEN: I would like to, Senator if
you will allow me, to address one thing about what Mr. MacDonald said with
regard to the liability situation.
In Texas, our law, as we passed
it, exempts the employer from liability unless the employer is the one actually
managing the program and make the medical necessity decision. And in looking at
what has happened in Texas, so far, the additional cost of this liability to the
plans has been about 32 cents per member per month to give protection to those
So, we only had one case filed. We've adjudicated most of them in
the IRO process so that we don't perceive this liability issue being a big
problem or a big money driver for the employer.
SEN. JEFFORDS: Mr.
MacDonald, do you agree with that?
MR. MACDONALD: Well, I think that my
answer is relatively consistent. You know if you take things incrementally, 32
cents here, six cents here, it all adds up.
I mean at some point, we have to
look at how we manage our cost. And the problem with it is, is that I sit here
and I listen. We are fundamentally doing this for competitive reasons to offer
these benefit plans. But we're at a point now where people just want to continue
to regulate and legislate what we need to do, add cost to our overall total cost
in pack to the corporation.
You say to yourself, why do I want to be in the
business. Yes, if I step back as just an average citizen, it doesn't sound like
a lot of money to me. I agree with that. But the reality of it is, is that when
you start multiplying it by 350,000 people and it's more incremental cost each
and every time, ultimately, somebody has to pay. That's what it all comes down
to is somebody pays. And we have to find ways of doing that. And one of the ways
we're doing it is constantly redesigning it.
One of my fears is, is that we
may go back to a fixed fee system before it's all over, because then it'll be
real clear. This is what we cover and this is what we pay, period, paragraph,
sentence. And everybody understands that. And I think that's what we have to be
careful when we -- I think employers, generally, want to play in the debate and
they want to work in the debate. But I think there's a level at which we just
can't arbitrarily say the costs are immaterial. MR. MACDONALD: I want to just
add a comment about the concern about the cost of these kinds of regulations.
There are actually fairly large numbers of people in the United States whoa re
not now covered by ERISA, namely the state and local government employees,
school teachers, public school teachers, federal employees and so forth; many of
whom are under the kind of regulatory and patient protection that we've been
talking about today that are somewhat similar to the DOL system.
As far as I
know, the health insurance market has not dropped below the floor for these
people. There are still insurance companies in there selling health insurance to
these people and so forth. It seems like it would be possible to do some studies
about the cost of different kinds of regulatory arrangements based on our actual
experience to see and make some estimates about this.
Senator, if I could
just tell you that Governor Pete Wilson wrote to the California legislature
after his reform commission met and said, quote, "Any managed care
reform measure worthy of your vote and my signature must meet the
following three criteria. One, it must safeguard or improve high quality of
care. Two, it must not diminish access to care. Three, it must make the cut as a
competing component of the cumulative cost of added benefits so that we do not
enact dozens of legislative mandates, that however well intended, end up
bankrupting our healthcare system and punishing the very people we seek to help
by making healthcare unaffordable and inaccessible. This would produce a bitter
irony. It is a major trap we must avoid." And I believe that those are wise
SEN. JEFFORDS: Anyone else?
I want to thank you and I don't want
to leave you scared either. We have, as you know, I think, 17 other members of
this committee who will have the right to send you questions. But I wouldn't
wait by your mailbox necessarily.
But, they do have that
right. We have such terrible conflicts now that we're in the middle of the
impeachment process, that it compacts our time so tremendously. It is very
difficult to get to everything you'd like to. But, I want to apologize on behalf
of the members that couldn't be here, because this has been an extremely
worthwhile hearing. And I appreciate it very, very, much all the effort you have
put in through your work and your efforts for being here today. You have been a
big help. Thanks.
LOAD-DATE: January 23,