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Copyright 1999 Federal News Service, Inc.  
Federal News Service



LENGTH: 8417 words



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 their dependents.
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.
Outside the 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 nationwide.
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 consumers.
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.
GTE is 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.
Every 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.
Finally, we 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 spending.
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 member satisfaction.
These designations do not come easily in a competitive marketplace and, I can assure you, our health plan partners work very hard to earn them.
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 Commission.
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 employees.
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 prescriptive.
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.
One of 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 healthcare services.
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 and fairly.
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 science.
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 patient's health.
The best procedural protections are ones that are structured to make the right decisions at the earliest possible stage
We 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.
GTE 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.
We have 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 available.
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 adopted.
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%
In the 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 practical.
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 second thought.
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.
Expanding the 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.

Appendix #1
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.
These proposals seem detrimental to public policy. To the extent these changes are considered, they should be made by Congress and not by regulation.
Summary 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, re-contracting, etc.
* 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 requirements.
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:
* The 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.

* The 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.
* Every 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 limited resources.
Review of Appealed Claims Denial Proposed Rule:
Would 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 five years.
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.
Impact to Patients:
* 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 denials.
Summary: Eliminating the option for multiple reviews and enabling arbitration would:
* 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.
The 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:
1. 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.
GTE Corporation December 9, 1998
Appendix #2
Manager's 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.

Under 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 average Americans.
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 and mandates.
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.
On 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.
Now a 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

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