Copyright 1999 Federal News Service, Inc.
Federal News Service
JANUARY 20, 1999, WEDNESDAY
SECTION: IN THE NEWS
HEADLINE: PREPARED STATEMENT BY
EXECUTIVE VICE PRESIDENT, HUMAN RESOURCES AND
BEFORE THE SENATE
COMMITTEE ON LABOR AND HUMAN RESOURCES
SUBJECT - GROUP HEALTH PLAN
AND COVERAGE DETERMINATION STANDARDS
Chairman Jeffords and members of the
Committee, my name is J. Randall MacDonald. I am Executive Vice President-Human
Resources and Administration for GTE Corporation. We at GTE share your
commitment and interest in ensuring access to quality healthcare. Thank you for
the opportunity to speak about the importance GTE places on quality healthcare
and the benefits to our 91,000 U.S. employees, more than 60,000 retirees, and
With 1997 revenues of more than $23 billion, GTE is one of
the world's largest telecommunications companies and a leading provider of
integrated telecommunications services. In the United States, GTE provides local
service in 28 states and wireless service in 17 states; nationwide long-distance
and internetworking services ranging from dial-up Internet access for
residential and small-business consumers to Web-based applications for Fortune
500 companies; as well as video service in selected markets.
United States, the company serves more than 9 million telecommunications
customers. GTE is also a leader in government and defense communications systems
and equipment, directories and telecommunications-based information services,
and aircraft-passenger telecommunications.
GTE has employees and retirees in
every state. We offer healthcare benefits to our employees and retirees
I appreciate the opportunity to present how GTE provides health
benefits to our employees and their families, the information that we have found
helpful to consumers, and the steps that we and other employers take to ensure
that coverage decisions are made accurately and fairly.
I am appearing
before you today on behalf of the Association of Private Pension and Welfare
Plans (APPWP-The Benefits Association), a national trade association of
companies concerned about the employee benefits system. APPWP's members include
Fortune 500 companies and other organizations that provide benefit services to
employees. Collectively, APPWP's members either sponsor or administer health and
retirement plans covering more than 100 million Americans.
But I don't just
represent employers. I'm also here on behalf of the 350,000 healthcare consumers
covered by GTE's health plans in all fifty states. We believe we run these plans
on behalf of our employees and plan participants. We do not represent health
plans, providers, regulators, or attorneys. Our focus is on healthcare
We also know that our effort on behalf GTE's employees and their
families have a much broader, positive impact on the quality of health care in
the communities where our employees and customers live. We believe that when we
do it right, health care can be a win-win situation. Employers can assert their
market clout on behalf of their employees, and reshape the entire health care
system for the better in the process. At GTE, we have never shied away from
trying to do both.
GTE's Perspective on Healthcare Benefits GTE's approach
to consumer- responsive healthcare begins with selecting health plan partners
committed to operating in the best interests of our employees and our
expectation of fair and consistent coverage determinations.
GTE will spend
more than $600 million in 1999 direct health costs. We estimate that we incur a
similar additional cost in lost time from work because of health problems of
employees or their family members. It is in our own enlightened self-interest to
have healthy employees at work and not away from their work site because the
health care delivery system failed them. We take seriously our efforts to
provide employees with a range of health plan choices to meet their personal
needs and we work hard at seeing that these plans are managed well. GTE believes
that the objectives of controlling cost and improving quality are linked - not
mutually exclusive. For us, good health care is good for business.
keenly aware that we must compete for one of our most valuable assets: a skilled
and committed workforce. GTE, and other employers like us, provide health
benefit plans to employees as part of overall compensation designed to attract
and retain talented employees. But it also goes much further than that. We also
share with our employees a strong and mutual interest in maintaining a high
quality, affordable set of benefits that are administered consistently and
fairly for all plan participants. We are committed to selecting the best
possible health benefit plans, with proven records of performance, and we work
closely with our health plan partners to resolve problems when they occur and to
reduce administrative errors for the benefit of our plan participants.
full-time and eligible part-time GTE employee may choose a healthcare plan that
meets their family's needs including either a traditional fee-for-service plan
or a point-of-service plan, except one specific labor agreement that provides
otherwise. This means that almost every one of our employees can select a plan
that will allow him or her to see the doctor of their choice. Additionally, we
offer more than 100 quality managed healthcare plans throughout the country -
including both staff and Individual Practice Association (IPA) model HMOs.
In this voluntary environment, more than seventy percent (70%) of GTE's
employees voluntarily chose managed healthcare plans for 1999, and an additional
sixteen percent (16%) selected a network based "Preferred Provider Plan". Less
than ten percent (10%) selected a traditional indemnity plan. We believe that
GTE employee elections reflect the quality of care, higher level of benefits,
satisfaction, service, and overall value that managed healthcare plans offer. We
are also actively involved in setting tough, meaningful standards for the health
plans that we offer to our employees and we continuously monitor and evaluate
these plans to ensure they maintain high performance levels.
strongly believe in the value of informed choices and we work closely with our
health plan partners to provide clear, reliable information to guide employees
in making decisions about how the different health plans operate and their
responsibilities as plan participants.
In short, GTE's primary healthcare
objective is to ensure that our beneficiaries have access to the best healthcare
resources available and we are receiving superior value for the money we are
At GTE, we work to establish long-term partnerships with the plans
we select and we believe in continuous quality improvement. Long-term
relationships with health plans promote stable enrollee relationships with the
plans of their choice, with the provider networks, and ultimately pay off by
placing a greater focus on improved healthcare status of our employees and the
larger community where our employees and customers live. We view these
partnerships as a process where all parties learn from each other and drive
toward higher levels of performance with appropriate economic and market share
rewards for their innovation and success.
We also work to correct
problems if a plan fails to perform at or above our performance standards, first
by sharing our findings directly with the plan and soliciting their review and
commitment to take corrective action. Additional steps include notifying
employees of the particular problems and, if not corrected, "freezing" any
additional enrollment. The final step of discontinuing the offering of a plan is
only considered when problems persist.
Informed Consumers The critical link
in successful health plan management is giving consumers the information they
need to make appropriate decisions and then paying careful attention to the
results from satisfaction surveys. We are convinced that a large part of the
reason that so many of our employees voluntarily elect managed healthcare plans,
and report high satisfaction for whatever plan they select, is because of the
information provided during the annual enrollment period, and more importantly,
continuously available when the consumer needs it.
Each year, we conduct
extensive mailings to employees summarizing the health plan options available to
them and giving them information on each option that is based on the type of
information that they have told us helps them to make informed decisions. In
addition to basic information about the size of the plan's membership, how long
it has been in business, and any differentiating attributes, we highlight those
plans that meet GTE's "Benchmark" status as one of the best in terms of
combining access, quality of care, service, satisfaction, and overall
cost-effectiveness. We also actively promote plans that meet GTE's highest
rating, "Exceptional Quality Designation", which is reserved for those plans
that have been rated by us as having the very best overall quality of all of the
plans offered by GTE throughout the country. These are the select group of plans
that, in our evaluation, offer the highest combination of healthcare quality and
These designations do not come easily in a competitive
marketplace and, I can assure you, our health plan partners work very hard to
We added an additional designation for our 1999 enrollment. We
prominently identified the more than 80% of the health plans we offer that have
agreed to work with us toward voluntary implementation of the principles in the
Patient's Bill of Rights proposed by the President's
Informed consumers comparing plan options based on quality,
cost, and consumer support.
We want our employees to have a choice of high
quality health plans that are committed to working closely with us over the long
term to deliver high levels of service at a fair price. We try to foster a sense
of customer focus in how health plans meet our needs, and those of our
We have been providing consumer-focused information annually
since 1992. I acknowledge it still might not be perfect, but we improve it each
year based on consumer feedback - what they want to know. Not based on a formula
or a regulation.
We recognize that one-size-fit-all standards will not allow
for differences among health maintenance organizations, preferred provider
organizations, and indemnity plans. Non-network and PPO plans are designed to be
fundamentally different from HMOs. HMOs strive to establish clinical
accountability for a defined population - for example, by assigning members to
primary care physicians or care "facilitators" who are responsible for the
patient's overall health status. PPOs or non-network plans strive to give
members the widest possible choice of providers with the fewest possible limits
on access. The challenge in establishing standards for the very different types
of health plans that exist in today's marketplace is that they must be flexible
enough to accommodate the real differences between network and non-network plans
while still consistent enough to give consumers the baseline information that
they need to make well- informed decisions.
The key for us at GTE is to have
appropriate standards for both network and non-network based health plans. We
have tailored the specific standards we expect from our health plans to the
services they provide in the marketplace. While GTE provides a wide range of
health plan choices, we identify the "best practices" used in managed care plans
to drive quality throughout the healthcare delivery system, and thereby increase
the quality of health care for people in all types of health plans. We urge that
you not preempt this voluntary process by mandating identical quality indicator
and health outcomes measures on every type of health plan. As I mentioned at the
outset of my statement, our experience shows that employees are enrolling in
large number in managed care plans that based on the value offered: access,
services covered, quality, and price. We are convinced that consumers make
informed decisions about health plans if we give them the information they need,
at the time they need it, in the form that makes sense.
Finally, we need to
keep in mind that more information, by volume, is not necessarily 'better' from
the consumer's perspective unless it is (a) information that they want, (b)
targeted to those who need it, and (c) presented concisely. Unwanted information
that distracts or is poorly presented is simply not useful and makes consumers
less engaged - rather than better informed.
We have learned that no
individual or organization has "an exclusive" on information consumers want or
need. Proposals on consumer information should be encouraging rather than
Making the Right Decisions on Coverage Healthcare options have
changed dramatically in recent years. Like most companies, for many years GTE
primarily provided health benefits through traditional, comprehensive,
indemnity-type plans where benefits for all "medically necessary and appropriate
care" were explicitly and discretely defined in the plan documents.
the most common misperceptions is that managed healthcare plans are more
restrictive than the typical indemnity plans of the past. The reality is that
managed healthcare improves access to more extensive healthcare services
including (a) coverage for preventive health services which indemnity plans
usually restrict or exclude altogether, and (b) elimination of the economic
barriers to healthcare access. Managed healthcare plans use modest fixed-dollar
co-payments in lieu of large annual deductibles and additional co-insurance.
This allows consumers to know their out-of-pocket costs before seeking
In addition, most managed healthcare plans are rapidly
engaging in sophisticated, value-added pharmaceutical benefit strategies
designed to provide highly effective programs to combat and proactively manage
complex diseases. Finally, managed healthcare has significantly improved the
integration of information available to practicing healthcare providers to
evaluate the wide range of treatment options for a particular condition and
allows for much better decisions to be made about which of the options are most
likely to lead to improved, patient-specific healthcare.
The one thing that
distinguishes managed healthcare from the indemnity plans that preceded them is
that more decisions about what is considered "medically necessary and
appropriate" are made up-front, rather than after the service has already been
provided. In the past, when these types of decisions were made, they largely
affected the issue of whether a payment would be made by the plan for a service
that had already been provided. Now, under managed healthcare, the healthcare
provider and the patient often know the plan's decision before the service has
actually been provided. This means that everyone involved - the patient, the
provider, the plan, and the employer - has a stake in making sure that the right
decisions are made in the first place, and that decisions are made consistently
At GTE, we strongly subscribe to the concepts of evidence-based
medicine and standards for coverage of medical services. This means defining
benefits in terms of the treatment that is most suitable for the patient, based
on proven medical technologies and practice. GTE holds health plans accountable
for making sure that medical practitioners have the flexibility to do what is
required for their patients. But we also believe that it is not enough to simply
cover whatever a treating physician prescribes. Not every treating physician is
always right. We want plans to bring individual physician decision making into a
system of accountability, to ensure that the treatment proposed is consistent
with the latest and accepted medical knowledge.
Many in the healthcare field
seem to consistently believe that "more is better". We believe that only "better
is better", and "better" may be more - or fewer medical services. We believe our
employees deserve protection against non-evidenced based medical services and
have encouraged others to support this basic consumer protection.
For example, removal of cataracts once required a minimum hospital
stay of five to seven days. These are now routinely done on an out- patient
basis for most patients. The point here is evidenced-based medical services
should be based on the patient's needs and not on out dated historical practices
or the convenience of healthcare providers. Given the high cost and quality
risks of healthcare, non-evidenced based services can no longer be the
responsibility of plan sponsors.
Medicine is not yet - and may never be -
entirely science-based. There continue to be significant areas where there is
not yet medical consensus. Where disagreements occur - as they inevitably will -
we want these to be resolved fairly and quickly, and when additional medical
judgment is needed, we want final decisions to be made that keep pace with
constantly emerging medical technology and advances.
I can assure you from
my own experience that nothing we do in our health benefits program is more
important, or more difficult, than ensuring that the best decision is made for
an employee or a member of their family in difficult coverage cases. And, we
have an even higher obligation required by law to act dispassionately,
consistently, and in the interest of all plan participants. In practice, that
means it is just as important to ensure that we are covering appropriate and
needed care as it is to ensure that we are not paying for inappropriate or
unnecessary services. In either case, once the decision is made for a single
individual, it then must be our policy to act consistently in all future cases,
knowing that coverage interpretations must change based on emerging medical
When our employees have questions or concerns about the decisions
made about their health benefits, the first step is to make sure all parties
have complete information to make sure that the correct decision was made. Most
are relatively straight forward coverage decisions and are quickly resolved.
Where questions continue, we ask that both the guidelines involved in these
cases and the specific clinical cases in question be reviewed by independent
medical practitioners including the best medical providers available anywhere in
the country to provide the patient with specific clinical findings regarding the
proposed treatment, including whether the proposed treatment is within the
medically appropriate coverage provided by their plan. The point that I want to
underscore is that we do not attempt to substitute our judgment for the judgment
of medical professionals. Our job - and legal responsibility - is to make sure
that our healthcare plans are administered properly and consistently. We rely on
medical professionals to make medical judgments. In fact, we strongly believe
that medical decision making must remain in the medical arena. Where
disagreements over medical issues occur, we seek independent medical judgment so
that the best decision possible can be made about the services provided to our
employees. And where there is reasonable doubt, we want these decisions made in
the employees favor, consistent with our interest in having a health plan that
is both perceived, and truly is acting, in their interests.
By moving toward
"evidence-based medicine", we can subject both coverage decisions and medical
treatment decisions to an objective test of what has been shown to work best and
is in the patient's best interest. Evidence-based medicine is the best hope we
have for seeing that patients with chronic, rare, or difficult conditions get
the best treatment available, based on the best medical knowledge, and actually
improve their condition.
Making informed, consistent decisions about what is
covered under a health benefit plan is a serious responsibility to be undertaken
by those with a commitment to making the best decisions possible. If we are
honest with ourselves, we must also recognize that in many cases, the job of
making health benefit coverage decisions involves difficult judgment calls based
on the best available information at the time. It is extremely important that
public policy recognize our common interests in seeing that these difficult but
essential decisions are made properly so that we do not end up with a system
that encourages or requires coverage for services that are excessive, unproven,
inappropriately delivered, simply unnecessary, and perhaps even dangerous to the
The best procedural protections are ones that are
structured to make the right decisions at the earliest possible stage
believe the current framework established by ERISA has balanced the needs of
consumers with the responsibilities of employers. While current regulations are
burdensome, the uniformity of federal, well defined regulations has enabled
thousands of employers to offer employee benefit programs offering coverage that
would otherwise not be available.
Toward the end of 1998, the Department of
Labor proposed first comprehensive revision of the claims procedure requirements
under ERISA since implementing regulations were first issued in this area in
1977. The Department of Labor's proposed revision would significantly increase
the compliance responsibilities of plan sponsors and their contractual partners
including: * significantly shorter time frames for making decisions on benefit
claims, * a broad-based redefinition of what actions constitute an "adverse
benefit determination," * expedited consideration of claims that are determined
to be "urgent" by a physician or other health professional, and * extensive
access to plan records for individuals who appeal claims determinations.
recognizes the need for modification of the claims review procedures under
ERISA, primarily to shorten the regulatory timeframes in line with changes in
claim processing practices and capabilities, as well as the emergence of the
"non-indemnity" healthcare system, most often referred to as "managed care".
However, in some instances, the changes proposed by the Department of Labor in
the Fall of 1998 would significantly expand and extend the scope of claim
determinations beyond the statutory authority granted under section 503 of
ERISA. We believe that the Congress must first resolve a number of the issues
addressed in these rules.
The proposed changes also create new questions for
interpretation and problems for implementation. For example, it is of
fundamental importance for plans sponsors and their contractual partners to
understand how the requirements of the proposed rules relate to state laws that,
in many cases, address similar or even identical issues. In addition, there are
also many questions about the consistency of the requirements and their
enforcement across the healthcare and benefits spectrum, including state and
local plans, federally-sponsored plans, and the individual market. One of the
key objectives of the President's Advisory Commission on Consumer Protection and
Quality in the Health Insurance Industry was to recommend a uniform approach to
the implementation of consumer protection standards, rather than one based on
plan type or sponsorship.
Finally, the proposed rules would add a
substantial administrative burden and cost to employer-sponsorship of health
benefits. We have recommended that the Department evaluate the administrative
complications if federal employees were extended these same protections as one
method to consider the administrative impact of the proposed changes.
Independent studies have consistently warned of the impact of cost on (a)
employee participation in plans, and (b) employer decisions to offer or maintain
plans. The admonition of "first due no harm" seems appropriate for any potential
changes that could reduce or eliminate coverage due to unnecessarily onerous or
burdensome regulations. We continue to believe that coverage is the fundamental
patient protection - and any proposal that might substantially reduce coverage
should be scrutinized and exchanged for effective alternatives.
urged the Department of Labor to work closely with employers and health plans to
substantially revise their proposed regulations in crafting a more workable
framework. We have also asked the Department of Labor to reissue a subsequent
draft or drafts for public comment. We are committed to working to get it right
and will roll up our shirtsleeves to do so. I have included a copy of the points
we submitted to the Department of Labor summarizing the proposals that would
adversely impact employer- sponsored plans and plan participants as Appendix 1
to this statement. These comments were presented as examples, and do not
represent the full spectrum of our concerns. We have also worked with several
employer groups that have submitted more detailed comments. These groups have
broader experience, expertise, and resources than any individual employer has
Finally, it is important to point out that the Department of
Labor's proposed change in regulations goes well beyond healthcare benefits.
There are serious problems that need to be addressed and worked out for
how the same procedures would apply to pension plans. Employers and plan
administrators have noted this concern in their comments to the Department. We
are prepared to provide advice on the serious implications for pension plans if
rules similar to those proposed in the Department's September notice were
We need to consider methods to protect consumers without adding
unnecessarily burdensome or complicated regulations. If the Department's
regulations are done collaboratively, with the full participation of the
professionals in the field who both sponsor and administer health benefit plans,
we have no doubt that many of the issues that have been the subject of far too
much rancorous legislative debate could be mitigated or resolved entirely.
Cost Matters - and Coverage is Directly Related to Cost
It is also
extremely important that we recognize that when it comes to healthcare, cost is
not simply an important issue, it's the issue.
According to published
reports, the average premium for the federal employee health benefit plan will
increase 10.2% this year - the plan that covers you and your staff and all other
federal employees. The federal government may have dismissed that as a "cost of
doing business". However, this increase is well above:
* the increase in
federal revenue (the government's income); * the federal pay increase for 1999;
* the reported increase in the Consumer Price Index of 1.6%; and * wage
increases reported by the Department of Labor of just over 4%
competitive telecommunications business, GTE can't accept a 10.2% increase in
healthcare costs. And, like other private employers without a printing press, if
we continue to face numbers like these, one of two things has to happen. We
would either redesign our benefit package, or ask our employees to shoulder more
of the costs. Or, we may have to do both.
If a struggling company with 5,
25, or 250 employees gets a 10.2% health insurance increase, their options are
even simpler: reduce wages, reduce the workforce through lay-offs, or drop all
healthcare coverage. I was struck by an in the Wall Street Journal last week by
United HealthCare's chief medical officer, Dr. Lee Newcomer: "Paperwork Is Bad
For Your Health". I have included a copy as Appendix 2 to this statement. Let me
illustrate just one of Dr. Newcomer's key points.
Despite the prosperity of
the U.S. economy, the number of Americans without health insurance increased by
4% from 1996 to 1997. The primary reason is that, once again, health insurance
costs are rising faster than incomes. And, perhaps most importantly, the rate of
uninsurance is increasing the fastest in the states with the most regulations
and mandates. It's clear that employers and employees are both impacted by
increases in healthcare costs.
Dr. Lee Newcomer's article includes
additional illustrations of how well intended ideas detract precious resources
from healthcare services.
Market-based Reform is Happening Every Day At GTE,
we work hard to give our employees the information they need to make informed
decisions about their health plans. And, we require that the health plans that
do business with GTE make evidence-based decisions about the healthcare services
for our employees.
I know from my experience on the Commission that the
details matter - a lot. I strongly favor working out the details of patient
information and claims adjudication directly with the health plans we offer. But
if you believe you must go further, send a working group over to the Department
of Labor. Ask experts to develop the standards reflecting both the ideal and the
We do not have to "pass a law". If Congress starts down the path
of micromanaging health plan operations, it will take another act of Congress to
correct the inevitable mistakes. 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 fixing it when we get it wrong.
Let me point out
the obvious about market-based reform. When health plans agree to provide
consumer protections for GTE employees, they do the same for all their
customers. Everyone benefits, quickly and efficiently. Innovation needs
encouragement, not penalties.
The Cost of Compliance
The real outrage is
that the cost of compliance with unnecessary and encumbering regulations diverts
money from medical care. Legislators and regulators don't fully understand the
cost of their rules. We need to use our limited resources for healthcare, not
for compliance with regulations.
We must be stewards of healthcare resources
and make fair decisions on how these resources are equitably used. More
regulations mean fewer resources for coverage of participants. Senators, there
is no pot of gold out there.
I don't question the intent of those who
advocate for "more" or "different". It is simply impossible to cover every
medical service available in unlimited quantity and keep the cost within the
reach of many Americans.
It's very simple. As costs go up, fewer people are
covered. Studies report that for every 1% increase in healthcare costs, about
300,000 Americans loose health coverage.
Coverage As Our First Priority
The United States has a healthcare system that is the envy of the world. As
we all try to improve the delivery, let's make sure we don't ruin the model. Our
first priority must be to ensure that the greatest number of Americans possible
can enjoy the advantages of the system that most of us never have to give a
I'm not smart enough to give you the "silver bullet" answer
as to how I would reform the healthcare system. But I will leave you with what I
hope you find to be some helpful advice.
First, employers and health plans
should be challenged to do better. Not by more regulations or legislation, but
by an empowered marketplace offering rewards and sanctions. We have tried this
and it works. If I have to choose between a health plan that is fighting to earn
my business and one that is fighting with state regulators, I'll take the former
any day of the week.
Second, this is one example where less is more. Fewer
inappropriate laws and regulations will result in more and better employer based
coverage. Proposals should not change the process (e.g., accelerate claims
procedures beyond reason) simply for the sake of change. There must be some
ultimate benefit derived by participants. Do not give us more regulations and
paperwork that will benefit only lawyers and consultants.
Third, 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 face
devastating legal and financial consequences. No employer can risk that
consequence if we go down that road.
Fourth and finally, we need to get
beyond the debate over how many bells and whistles to add to the health coverage
of those who are fortunate enough to have it and start to address the needs of
the 43 million Americans who have no coverage at all. I ask you to carefully
consider what you do: coverage is consumer Protection #1.
availability of coverage is where the real work remains to be done, and what all
of us need to resolve. But, we also need to focus the resources available on the
most practical and cost-effective solutions in order to secure the greatest good
for the greatest number.
Thank you for the opportunity to meet with you and
share our views.
Summary Comments to the Department of Labor on Proposed Benefits Claims
Regulation and SPD Content Regulations
Scope of the Department's Regulatory
Authority Proposed Rules: Several of the proposed benefit claim rules appear to
be outside the scope of authority granted to the Secretary of Labor under ERISA
section 503. These would:
* bring new plan actions under section 503 review
that are not claims denials; * grant authority for claims decisions to persons
who are not fiduciaries; * introduce new parties to the claims process who are
not mentioned in section 503; * limit the plan's ability to provide what it
considers to be a "full and fair review;" and * dictate procedures for an
alternative to judicial review after the exhaustion of administrative remedies
under section 503.
Further, the proposed rules suggest the Department may be
reaching beyond claim reviews to establish rules for discovery in litigation.
Impact to Patients:
Many of the proposed changes benefit providers
rather than consumers and could have a negative impact on plan participants as
plan sponsors reconsider new approaches to "facilitation" rather than
"sponsorship" and the overall availability of coverage.
proposals seem detrimental to public policy. To the extent these changes are
considered, they should be made by Congress and not by regulation.
Plan Description Content Regulations Proposed Rules: the Department proposes
requiring new information be included in the Summary Plan Description (SPD) on:
* premiums, * cost-sharing provisions, * network providers, and * specific
plan coverage features.
Impact to Patients:
* Much of this information
is currently provided to participants directly by health plans or by employers,
more often electronically, and especially during annual enrollment periods. *
Plan sponsors are continuously working to extend the "shelf life" of SPDs as one
method to manage administrative costs.
The SPD is an awkward mechanism for
providing timely information to participants on frequently changing plan
features including, but not limited to, premiums, cost-sharing provisions, and
providers that join or leave networks via relocation, retirement, death,
* The Department should focus on the
intended purpose for information availability and disclosure and not dictate the
format or method that information is available. The Department has not provided
any support that broad based disclosure requirements would benefit patients. *
Specific requirements on premium information (either on average or individually)
exceed the Department's statutory authority and do not meet the needs or
concerns of plan participants. * The most reasonable alternative is to provide
this information upon request, similar to plan participant requests for review
of plan documents. * If a plan sponsor conveys this information effectively and
promptly, that communication should be deemed to meet appropriate disclosure
Definition of "Adverse Benefit Determination" Proposed Rules:
Would open the internal review process to any "adverse benefit
determination" - defined in the rules to include plan actions other than the
claims denials for which ERISA section 503 now provides internal review.
Impact to Patients:
* The proposed rules would create a right of review
and appeal for relatively routine decisions about the manner and setting of care
or adjustments in the treatment plan, unnecessarily encumbering and delaying
medical treatment in the emerging "non-indemnity" healthcare system. Summary:
* Patients who wish to challenge a decision about a treatment plan should
have the opportunity to do so through the plan's grievance mechanism. * No plan
could afford to operate in an environment where every action of every provider
or plan could be contested through two levels of review.
Definition of a
Claim Involving Urgent Care Proposed Rule:
Would add a new "claim involving
urgent care" category with the requirement that such claims be processed within
72 hours (rather than the 15 days for a claim involving non-urgent care). The
rules would require plans process these claims rapidly when, "in the opinion of
a physician with knowledge of the claimant's medical condition," failure to make
a prompt determination would harm the patient.
Impact to Patients:
test the Department has proposed for claims involving urgent care - including
that care is needed quickly to enable maximum function - is so broad that most
medical procedures could be considered "urgent." Thus, rather than enhancing
services to those with time-sensitive needs, the proposal could disrupt the
process for all, resulting in a dramatic increase of "denials" just to meet the
proposed time requirements. * This proposal would inappropriately turn over the
means to make coverage decisions to the treating physician or any physician, and
thereby force immediate payment from the plan. * It would place physicians who
are not plan fiduciaries in the position of making coverage decisions and
directing expenditures from the plan. This would inappropriately subject
providers to many of the responsibilities of plan fiduciaries including
liability for protection of plan assets and actions by uninvolved plan
participants. This may lead plan administrators to "rubber stamp" treatment
proposals by physicians without regard to their fiduciary responsibilities.
* Rapid determination of a claim should be reserved to
treatments requiring prior approval where a delay in determination could
seriously jeopardize the life or health of the participant. Treating physicians
should advise the plan when a decision is urgently needed. The decision to
process the claim quickly should remain the plan's responsibility, with
penalties for slow or inappropriate action.
Timeframes for Initial
Determination and Review Proposed Rule:
New timeframes for initial
determination and review that are greatly shortened compared to the current
regulatory requirements. In addition to the 72 hour timeframes for urgent care
determination and review, the proposal would require that non-urgent claims be
processed within 15 days of receipt (unless additional information was required)
and reviewed within 30 days. The proposed timeframes would begin from the
receipt of the benefit request by any person employed in the employee benefit
unit or "any officer of the employer."
Impact to Patients:
* Some of the
proposed timeframes are unrealistic and would not only unnecessarily raise plan
costs, but compromise the quality of benefit determinations.
proposed rules do not distinguish between prior authorizations for medical
treatment (where care may await the claim determination) and retrospective claim
determinations where care has already been rendered.
officer or benefits employee of the company cannot be prepared to promptly
process benefit requests, particularly given the short timeframes in the
proposed rules. The Department should consider the impact if a similar
requirement covered federal employees or military personnel to illustrates the
complexity, impracticality, and lack of necessity for such a requirement. * The
proposed rules appear to include oral statements (dissatisfaction, grievances,
complaints, or appeals) as triggering a 15 or 30 day period for response. The
Department should affirm that benefit appeals covered by the proposed rules
should be in writing unless (a) the claimant or their representative is somehow
unable to do so, and/or (b) the oral appeal is accepted and acknowledged in
writing by the Plan Administrator or a designated representative. * Participants
are clearly advised in the SPD and insurance cards to direct benefit or appeals
requests to the identified plan administrator. Timeframes should begin when
requests are received by the individual identified for this purpose. * Urgent
care timeframes should apply only to a requests for prior approval of medical
care or treatment and not for plan reimbursement for services already provided.
* The 15-day timeframe for review should not be applied to all non- urgent care
claims. The increased volume of claims for rapid determinations that would
result would (a) lower the quality of determinations, (b) compromise the speed
and quality of the most time- sensitive determinations, and (c) contribute to an
often inappropriate claim denial just to satisfy the time requirements.
Inappropriate denials create duplicate handling that would further impair
Review of Appealed Claims Denial Proposed Rule:
require that the review of a denied claim not afford deference to the initial
determination, and take into account information submitted by the claimant after
the initial decision. The rules also would require that a claimant be provided
access to all records or information relevant to the claim for benefits,
regardless of whether the information was relied upon in making the
determination. Finally, the Department is considering proposing a rule that
after an adverse review decision, claimants would have access to records of
previous claims involving the same diagnosis and treatment within the previous
Impact to Patients:
* These rules would, in effect, provide
for a de novo consideration of the original benefit claim rather than a review
of the initial decision. * This will (a) unnecessarily delay decisions, (b)
create an incentive for an extensive and expensive discovery process during the
review and prior to appeal of the review decision, (c) encourage withholding of
information by participants, and (d) minimize the need for care by the plan in
making the original decision.
* An alternative would require
plans to provide claimants a more extensive written description of the basis on
which a decision was rendered and/or a more extensive statement of the medical
basis for the decision, and an extended time period during which a claimant
could submit additional or clarifying information or file appeals. * Access to
records regarding coverage decisions for the previous five (5) years would
require plans to adopt complex categorizing systems and would encourage a
wide-open search for evidence and the possibility of endless debate and
considerable litigation over case- by-case variations in medical treatment. The
Department has not presented evidence that ERISA's current requirements that
fiduciaries handle claims consistently and within the terms of the plan require
revision to correct abuses.
Prohibition on More than One Level of Appeal or
Mandatory ADR Proposed Rules:
The proposed rules would prevent plans from:
* providing more than one level of review of a claim, or * requiring
arbitration for an appeal of an adverse benefit determination.
* As the plan fiduciary, plan administrators reserve the authority
to review an HMO's or other plan's internal review of a benefit denial, and
reverse it if appropriate to do so. * Plans may also use arbitration as a
faster, less expensive, and more flexible alternative to litigation of claims
Summary: Eliminating the option for multiple reviews and enabling
* require more extensive initial reviews for a larger
number of cases - when an extensive review may only be necessary for the very
small number of cases that are unfavorably reviewed by the plan, and * remove
the ability of patients and plan sponsors to avoid the expense and delay of
judicial appeal. These proposed rules seem contrary to public policy and reduce
patient protections. These proposals should be withdrawn.
Department's proposed rules would exceed their statutory authority and extend
procedures that apply to claims denials to a host of other decisions. The rules
will require extensive and costly modifications to claims procedures, plan
documents, beneficiary materials, and contracts. And, the proposed regulations
have the potential to complicate and delay, rather than facilitate and expedite
the claim review process.
We recommend the Department of Labor:
conduct meetings with prominent employers, industry representatives, and other
interested parties to supplement written comments and facilitate a dialogue for
implementation; 2. conduct agency hearings to allow interested parties to fully
present their comments, concerns, and suggestions; 3. provide a substantial
revision on the proposed regulations based on the input received from written
comments and meetings with interested parties; and 4. subject the amended
proposed regulations to an additional comment period.
December 9, 1998
Journal: Paperwork Is Bad for Your Health, by Lee Newcomer
The Wall Street
Journal January 11, 1999
This holiday season the government required me to
write a letter to my four-year-old son, Michael. I awkwardly informed Michael
that any woman in his health plan who undergoes breast cancer surgery is also
covered for breast reconstruction surgery, plastic surgery for the unaffected
breast to make it symmetrical, and devices that prevent swelling in the arm. You
see, in addition to being Michael's father, I also am the medical director of
his health plan.
Our health plan had covered all of these treatments since
1994. But under the Women's Health and Cancer Rights Act of 1998, even health
plans already covering these newly mandated benefits must send a notification to
every man, woman and child on its mailing list. United HealthCare, the sponsor
of Michael's plan, covers more than six million members. Sending bulk mail
letters to those members, including Michael, could cost the company enough to
pay for about 40 breast reconstruction surgeries.
Mike and I face other new
paperwork, thanks to government mandates. When Mike wedged a calculator battery
in his nose last fall, I paid a $50 co-payment for emergency room care, the
physician removed the battery, and our encounter with the health system was
over. The Department of Labor intends to change that scenario.
their recently proposed regulations, the department will require the health plan
to send Michael an explanation of benefits - a summary of what was paid and what
is owed for the visit - even if the bill is paid in full. One of the joys of
prepaid health plans is the elimination of confusing bills to members. Now, as
part of the Labor Department's interpretation of the patient bill of
rights, the paper blizzard will resume.
It gets worse. If visiting
the emergency room called for an authorization from the health plan, the new
regulations require the plan to send a notice of coverage to the member and
healthcare provider even if there is no dispute about the coverage. At United
HealthCare, roughly 95% of all requests are approved and paid without
disagreement. We pay some 85 million claims per year. If each mandated letter is
mailed for the bulk rate of 17 cents, our company will spend $13.7 million for
postage alone to comply with the regulations.
The real outrage is that these
regulations divert money from medical care payments. Each year I attempt to
balance providing the maximum amount of healthcare coverage with keeping
insurance costs affordable. It is simply impossible to cover every medical
service available in unlimited quantities and keep the cost within the reach of
The physician side of me wants to spend every available
dollar providing medical care. I am angry about the millions of dollars I must
waste on mandated paperwork that will not improve the health of a single
patient. With every new mandate I have two choices - raise premiums or cut
coverage for another service from the plan.
Legislators and regulators don't
fully understand the price of their rules. Despite the prosperity of the U.S.
economy, the Health Insurance Association of America reported a 4% increase in
our uninsured population from 1996 to 1997. The primary reason for this tragic
increase is that insurance costs are rising faster than incomes. The same report
noted the highest uninsured rates occurred in states with the most regulations
Medicare offers another vivid illustration. The Balanced
Budget Act requires all Medicare beneficiaries to receive a brochure describing
all of their coverage options, including Medigap insurance, HMO health plans and
the standard fee-for-service program. The Health Care Financing Administration
assessed the cost of the entire program to Medicare HMOs, even though they cover
only 15% of all Medicare beneficiaries. My company paid approximately $9 million
for this camouflaged tax. The fee-for-service plan's fund paid nothing.
January 1, I closed Medicare health plans in 86 counties across the nation
because healthcare costs and administrative expenses exceeded the premium paid
by the government in those counties. Many of the seniors served by these plans
lost coverage for prescription drugs upon returning to the fee-for-service plan.
The $9 million spent on the informational brochure (a piece most seniors did not
want and may not understand) would have allowed my company to continue
operations in approximately 10 counties. The same $9 million could have provided
9,000 Medicare members with $1,000 each in prescription coverage.
federal commission is considering new reform proposals for Medicare. Here's an
idea: Give beneficiaries less paper - and more care.
Dr. Newcomer is chief
medical officer of UnitedHealth Group.
LOAD-DATE: January 27, 1999