Fall 1998 Human Rights Magazine

Managed healthcare is here to stay. In fact, managed care has enhanced prevention and treatment of chronic disease. While anecdotes abound, there is no conclusive proof that managed care has lowered the quality of healthcare generally. Yet, because managers of care sometimes deny or limit treatment or coverage, consumer skepticism persists.

An important issue is the willingness of managed care organizations to resolve treatment and coverage disputes on a level playing field. One of the most highly contested issues in the current public policy debate is whether a patient should be able to challenge limitations or denials of treatment or coverage through remedies outside of the managed care organization. The pending debate does not exist in a vacuum; it is well under way in Congress and in various state legislatures.

Yet, managed care organizations have available a well-established and proven effective process for such solutions: Alternate Dispute Resolution (ADR). With few notable exceptions, ADR is little known or used in managed healthcare. The advantages of ADR compared to litigation are persuasive: ADR offers speed and efficiency, low cost, privacy and confidentiality, and nonprecedent-setting solutions, through the use of neutral, nonpartisan, skilled third-party facilitators. Managed care organizations would be smart to embrace ADR in response to continuing consumer skepticism and as an alternative to remedies imposed by the political process in the current policy debate.

The Status of Managed Care Dispute Remedies

The Employee Retirement Investment Security Act (ERISA) was enacted to regulate benefit plans including self-funded health benefit plans, and provides remedies that are exclusive. The effect is to preempt traditional tort and contract state law remedies. While alternative state law remedies are evolving through litigation, a patient’s remedies are limited by ERISA to those provided in the managed care contract—typically a progression of internal reviews, including an expedited process. Consumer organizations are often joined by healthcare providers in pushing for resolution of treatment or coverage disputes by means independent of the managed care organization. The response has been a patchwork quilt of statutory and regulatory adjustments to the balance of power among patients, providers, and managed care organizations through legislation, from state to state. Now Congress is engaged in the debate.

The Department of Labor (DOL) is responsible for the remedies available to participants in benefit plans, including managed healthcare, because ERISA preempts the traditional state law remedies. While the DOL supports improved remedies for ERISA plan beneficiaries, it has only recently taken the initiative by drafting revisions to existing remedies regulations.

Oklahoma is engaged in a two-year experiment with the DOL that gives the Oklahoma Department of Insurance first crack at resolving managed care complaints. The effect appears to be that the Oklahoma regulators now have more input into the health plan’s claims decisions. Oklahoma will seek an indefinite extension of the arrangement, and California has expressed interest in the program. The advantage is that such agreements do not affect ERISA preemption of state law, but give the state some oversight by dealing with consumer complaints first.

Neither the grievance procedures required of federally qualified HMOs nor the fairness

standards of the Blue Cross/Blue Shield (BCBS) Association provide for external independent appeals. Federally qualified Health Maintenance Organizations (HMOs) are required only to provide a grievance procedure "organized in such a manner that provides meaningful procedures for hearing and resolving grievances." The BCBS Association’s standards do not go beyond the suggestion that disputes be resolved by "interactive process involving qualified physicians and knowledgeable patients."

The standards of the National Committee for Quality Assurance (NCQA), the principal private certifier of managed care companies, and the Model HealthcareGrievance Procedure Act of the National Association of Insurance Commissioners (NAIC) do not provide for external independent appeals either, except that the NAIC model requires that the reviewing healthcare professional "may not be a provider on the person’s health benefit plan and may not have a financial interest in the outcome of the review," unless such a reviewer is not readily available.

Congress Is Considering Statutory Standards for Resolving Managed Care Disputes

Proposed legislation would establish national standards for relationships among managed care organizations, healthcare providers, and patients.

On June 24, 1998, the House Republican Working Group on Healthcare Quality (Working Group)—established at the direction of House Speaker Newt Gingrich—unveiled its election year proposal that purports to solve consumer problems with managed care without costly government mandates. House Democrats quickly denounced the proposal as little more than a payoff to the Republicans’ allies.

The Working Group’s H.R. 4250 passed the House on July 24 by a vote of 216-210, despite opposition by twelve Republicans and with the support of three Democrats.

Other pending proposals include H.R. 1415, which was introduced by Congressman Norwood (R-Ga.) with 230 cosponsors and its companion, S. 644, which was introduced in the Senate by Senator D’Amato (R-N.Y.). The bills provide for grievance and appeals procedures and allow patients who have been denied treatment or coverage to appeal the decisions to a third party. Both bills have been the subject of House and Senate subcommittee deliberations but high ranking House Republicans, including House Majority Leader Armey (R-Tex.) and Chair of the House Education Sub-Committee on Employer-Employee Relations, Representative Fawell (R-Ill.) are opposed to H.R. 1415. Also, a coalition of House and Senate Democrats introduced S. 1890 (Senator Daschle, D-S.D.) and H.R. 3605 (Representative Dingell, D-Mich.) that deal with a host of issues in managed care, including grievance and appeal procedures.

Notwithstanding those several initiatives, the Senate voted 50-47 on October 9, 1998 against Senator Daschle's motion to bring H.R. 4250 before the Senate, thus ending the "patients' rights" debate in this session of Congress. Members of both parties hold out that "patients' rights" will have renewed life in the 106th Congress. The gulf between Republican and Democrat principles of patients' rights remains broad and deep.

Playing loud and clear in the background of the debate in Congress is the report of the President’s Commission on Consumer Protection and Quality in Healthcare that includes language supporting the right of a health plan enrollee to an independent system of external review when services or payments are denied because the plan determines that a procedure is not medically necessary or is experimental or when the enrollee’s life or health is jeopardized.

In the meantime, the New York (S. 7838), Pennsylvania (S. 891), and Hawaii (S. 2297) legislators have enacted bills providing patients’ rights to external review from adverse coverage decisions.

On September 9, 1998, the DOL issued draft regulations that comprise proposed revisions to ERISA claims resolution procedures for healthcare benefit plans, including many of the features of both the President's Commission and the Report of the Joint National Commission on Healthcare ADR (see below), such as representation for claimants and a prohibition against predispute agreements for binding arbitration.

Accordingly, it appears that the leading edge issue in the public policy debate is whether appeals external to the managed care organization should be a matter of national managed care healthcare policy.

The Joint National Commission on Healthcare Alternate Dispute Resolution; Why Healthcare ADR?

Coincidentally, the three major medical, legal, and alternate dispute resolution organizations in the world—the American Medical Association, the American Bar Association, and the American Arbitration Association—have joined forces to develop models for alternate means of resolving managed healthcare disputes. While taking no position on the debate about whether or not appeals external to managed care organizations should be a right as a matter of public policy, the Joint Commission proposes model ADR techniques as an additional or alternative means for healthcare dispute resolution. At the same time, the Joint Commission ADR models would readily accommodate external independent appeals of managed care decisions, if necessary.

The advantages of ADR are particularly compelling in the managed healthcare context. In addition to speed and efficiency, low cost, privacy/confidentiality, and nonprecedential resolution, other compelling considerations include: avoiding the win/lose confrontation of the courtroom and maintaining the possibility of continued business or personal relationships; ready accessibility; and enhanced perception of fairness through the use of independent, neutral facilitators.

Conclusion

Managed healthcare ADR as an additional or alternative means of resolving healthcare disputes will decrease public skepticism about the willingness of managed care companies to resolve disputes on a level playing field; enhance public trust in the managed care process and outcomes; and demonstrate in the pending public debate that healthcare managers have joined in the search for a more efficient, consumer-friendly means of resolving managed healthcare disputes.

Roderick B. Mathews practices healthcare law, ADR, and law/regulation/politics (policy management) with the law firm of Hazel & Thomas, in Richmond, Virginia. He was one of four ABA representatives on a twelve-person ABA/AMA/AAA Joint National Commission on Healthcare Alternate Dispute Resolution.

As published in Human Rights, Fall 1998, Vol. 25, No. 4, p.21-22.