Independence of External Reviewers Key Part of US Health Reform for Insurers

Posted on September 30, 2010.

Author: Frank N Darras

OLDWICK, N.J. September 27 (BestWire) — As new claim and appeal rules for plans take effect as part of U.S. health care reform, consumer advocates say the independence of health insurers' outside medical reviewers is key.

Starting Sept. 23, all non-grandfathered health plans must meet the new rules — including an external review requirement — for denied claims or adverse coverage determinations.

All such plans must comply with state external review processes that include consumer protections in the National Association of Insurance Commissioners' External Review Model Act 76, or with standards set by the secretary of the U.S. Department of Health & Human Services.

The plans, whether fully insured or self-insured employer-provided Employee Retirement Income Security Act plans, non-ERISA plans and individual policies, must comply with the external review requirements, said Edward C. Fensholt, senior vice president and director of compliance services for Lockton Benefit Group.

The requirement applies to individual policies issued or renewed on or after Sept. 23, he said.About half of employer plans will lose grandfathered status on the first day of their coming plan year, Fensholt said.

A grandfathered plan is any plan in which either a group or an individual was enrolled before President Barack Obama signed the law on March 23, and are exempt from most of its requirements. If a plan
greatly reduces benefits, raises deductibles or raises an employee's percentage of premium contributions, it will lose grandfathered protection.

The external appeals process is an important consumer protection, and "the independence of reviewers is key," said Carmen Balber, director of the Washington, D.C. office of Consumer Watchdog.

Kansas Insurance Commissioner Sandy Praeger, chair of the NAIC's health insurance and managed care committee, said the NAIC model requires an independent review organization be accredited by URAC — a national accrediting organization.

Nearly all states had an external-review law before the federal reform law, Praeger said. In Kansas, in 50% of cases, the reviewer has ruled for the company, and in the other 50%, it has ruled for the
policyholder.

HHS regulations and the NAIC model act set "strong criteria for reviewer independence," Balber said. But NAIC consumer representatives note the model act requires that independent review organizations be accredited by a private accrediting agency, she said. "Such organizations are commonly dominated by industry, with little or no regulator or consumer input."

The interim regulations issued by HHS in July identify parts of the NAIC model that states must comply with to avoid the federal external review process, Balber said. Elements include important independence provisions, such as that the IRO have no conflicts of interest, or ties between the insurer and reviewer.

An interesting issue is the extent to which the NAIC model differs from what the feds are poised to require, Fensholt said.

Both the Kansas regulations on external review and the NAIC model include conflict-of-interest standards, Praeger said.

Unlike an insurer's internal appeal process, the reviewer is not employed or retained by the insurer, she said. The review organization is selected by the Kansas Insurance Department, not by the insurer or
the patient, Praeger said. Also, the physician reviewer selected by the review organization is asked to disqualify themselves if there is a conflict of interest in a particular case.

Frank N. Darras, founding partner of DarrasLaw, said independent review organizations cannot have a financial stake in the outcome.

Some doctors contracting with IROs "have been crushed financially by managed care," he maintains. Most are seeing more patients for less money and "doing these so-called independent reviews to backfill their lost managed-care income."

These doctors "can capitalize financially by getting more reviews to do from the insurance industry," Darras said. With up to 10 a month at $1,500 to $2,500 per review, pretty soon it adds up to $250,000 a year, and "that's real money."

The feds are crafting the requirements for self-insured plans, and for insured plans operating in states where there is no state law, Fensholt said. For insured plans where there is a state law requiring external review, the state mechanism is adequate for plan years starting before July 1, 2011, he said. After that, the state mechanism must meet the minimum federal standards, or the carrier must comply with the federal rule.