HLT-35-08-00010-P External Appeals of Adverse Determinations

8/27/08 N.Y. St. Reg. HLT-35-08-00010-P

NEW YORK STATE REGISTER

VOLUME XXX, ISSUE 35

August 27, 2008

RULE MAKING ACTIVITIES

DEPARTMENT OF HEALTH

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. HLT-35-08-00010-P

External Appeals of Adverse Determinations

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of sections 98-2.2, 98-2.6 and 98-2.10 of Title 10 NYCRR.

Statutory authority:

Public Health Law, sections 4910 - 4916

Subject:

External Appeals of Adverse Determinations.

Purpose:

Provides that external appeal agents shall not be subject to legal proceedings to review their determinations.

Text of proposed rule:

Pursuant to the authority vested in the Commissioner of Health by Chapter 586 of the Laws of 1998, Subpart 98-2 of Title 10 (Health) of the Official Compilation of Codes, Rules and Regulations of the State of New York is amended, to be effective upon publication of a Notice of Adoption in the New York State Register, to read as follows:

Subdivision (c) of Section 98-2.2 is hereby repealed.

Subdivisions (d), (e), (f), (g), (h) and (i) of Section 98-2.2 are relettered (c), (d), (e), (f), (g) and (h).

Paragraph (1) of subdivision (b) of Section 98-2.6 is amended to read as follows:

(1) has no material familial, financial or professional affiliation, as those terms are defined in subdivisions [(e) through (g)] (d) through (f) of section 98-2.2 of this Subpart, with any person or entity listed in subparagraphs (i) through (v) of paragraph (2) of this subdivision; or

A new subdivision (l) is added to Section 98-2.10 to read as follows:

(l)(1) Upon requesting an external appeal, the enrollee, the enrollee's designee or the enrollee's health care provider shall acknowledge that the determination of the external appeal is binding on the plan and the enrollee, and shall agree not to commence any legal proceeding against an external appeal agent or clinical peer reviewer to review a determination made by such external appeal agent or clinical peer reviewer pursuant to Article 49 of the Public Health Law or Article 49 of the Insurance Law; provided, however, that the foregoing shall not limit any rights the enrollee, the enrollee's designee or the enrollee's health care provider may have with respect to bringing an action for damages for bad faith or gross negligence or with respect to bringing an action against the enrollee's health care plan.

(2) As specified in Public Health Law section 4914(3) and Insurance Law section 4914(c), no external appeal agent or clinical peer reviewer conducting an external appeal shall be liable in damages to any person for any opinions rendered by such external appeal agent or clinical peer reviewer upon completion of an external appeal conducted pursuant to Article 49 of the Public Health Law or Article 49 of the Insurance Law, unless such opinion was rendered in bad faith or involved gross negligence.

Text of proposed rule and any required statements and analyses may be obtained from:

Katherine Ceroalo, DOH, Bureau of House Counsel, Regulatory Affairs Unit, Room 2438, ESP, Tower Building, Albany, NY 12237, [phone]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

Statutory Authority:

The Commissioner's authority for this amendment to Subpart 98-2 of Title 10 NYCRR is derived from Sections 4910 - 4916 of the Public Health Law and Chapter 586 of the Laws of 1998.

Article 49 of the Public Health Law establishes utilization review and external review requirements for enrollees subject to Article 44 of the Public Health Law.

Chapter 586 of the Laws of 1998 amended the Public Health Law and Insurance Law in relation to authorizing external appeals of adverse determinations relating to health care services and Section 45 of Chapter 586 provides that the Commissioner may promulgate regulations to implement the external appeal program.

Legislative Objectives:

Article 49 of the Public Health Law and Article 49 of the Insurance Law, the external appeal law, provide an enrollee with the right to obtain an independent medical review by an external appeal agent when the enrollee's health plan denies a health care service as not medically necessary, experimental or investigational. Section 4914(c) of the Public Health Law and Section 4914(c) of the Insurance Law state that an external appeal agent and the agent's clinical peer reviewers shall not be held liable in damages for any opinions rendered pursuant to an external appeal unless such opinion was rendered in bad faith or involved gross negligence. The law neither permits nor contemplates that external appeal agents would otherwise be subject to court proceedings to defend their determinations. This amendment to Subpart 98-2 reiterates the statutory provisions of the Public Health Law and Insurance Law that the law does not permit an action against the external appeal agent or clinical peer reviewer on the merits of the determination. This is consistent with the legislative goal of having a meaningful and cost efficient external appeals process available to enrollees in New York State. The amendment furthers the legislative intent by also providing that upon requesting an external appeal, the enrollee shall acknowledge that the determination of the external appeal is binding on the plan and the enrollee, and shall agree not to commence any legal proceeding against an external appeal agent or clinical peer reviewer to review a determination made by such external appeal agent or clinical peer reviewer, other than an action for damages pursuant to Article 49 of the Public Health Law or Article 49 of the Insurance Law. Moreover, this amendment makes a technical correction to Subpart 98-2 by removing the definition of "designee" to conform with the decision rendered in Healthcare Association of New York State et al. v. Serio (Albany County 2002). The Healthcare Association case was an Article 78 proceeding against the Insurance Department and the Health Department challenging the external appeal regulations (11 NYCRR 410 and 10 NYCRR 98-2) on several grounds. The Court found in favor of the Departments on all grounds with the exception of the definition of "designee" set forth in Section 98-2.2(c) of Subpart 98-2, and declared the definition null and void.

Needs and Benefits:

The role of the external appeal agent is to provide a clinical opinion as to whether the medical treatment requested by the enrollee and denied by the health plan is medically necessary, experimental, or investigational. Recently, a number of lawsuits have been brought against external appeal agents either because the enrollee, or in one case the hospital that provided treatment to the enrollee, disagreed with the external appeal agent's decision. The purpose of the lawsuits is to require a health plan to pay for treatment pursuant to the enrollee's covered benefits, regardless of the external appeal agent's finding regarding the medical necessity of the treatment.

The external appeal legislation never intended that external appeal agents would have to defend their decisions in court proceedings. An external appeal agent does not have a particular interest to protect by defending its decisions, nor is the external appeal agent the appropriate party to determine how the enrollee's health plan benefits, or the Public Health Law or Insurance Law should be interpreted in a court proceeding. In addition, regardless of what a court decides with respect to the external appeal agent's decision, an enrollee will still have to file a lawsuit against his or her health plan in order to compel the health plan to pay for the health care service.

Subjecting external appeal agents to court proceedings for all decisions will increase health plan and consumer costs and threaten the viability of the external appeal program. The external appeal fees charged by agents are approved by the Health Department and the Insurance Department and do not include court costs. All three New York State certified external appeal agents have requested a fee increase to cover litigation expenses. Current approved fees range from several hundred to several thousand dollars per appeal, depending on whether the appeal is standard or expedited and how many clinical peer reviewers are assigned. Health plans are statutorily required to pay the fees, regardless of the outcome. If external appeal agent fees increase, health plan costs will also increase, and consumers could be adversely impacted if health plans pass the increased costs on to consumers in the form of premium rate increases. As an alternative to increased fees, external appeal agents have requested that a fund be set up to reimburse them for court costs relating to the defense of their external appeal decisions. However, an assessment on health plans to establish the fund is not authorized or contemplated by the external appeal law. The Department is very concerned that if external appeal agents continue to be subject to court proceedings, the agents may find the cost of doing business in New York to be prohibitive and withdraw from the external appeal program.

This amendment does not affect the rights of an enrollee to bring a legal action against the health plan who issued an adverse determination if the enrollee continues to disagree with the factual basis or clinical rationale for the health plan's adverse determination that has been reviewed by the external appeal agent. In addition, the amendment does not affect any remedy the enrollee may have with respect to the Health Department and Insurance Department regarding the Departments' oversight of the external appeal program. The amendment is also consistent with the language in Article 49 of the Public Health Law and Article 49 of the Insurance Law as it does not preclude an enrollee from seeking damages for an opinion rendered in bad faith or involving gross negligence. The amendment merely provides that upon requesting an external appeal, the enrollee shall acknowledge that the determination of the external appeal is binding on the plan and the enrollee, and shall agree not to commence any legal proceeding against an external appeal agent or clinical peer reviewer to review a determination made by such external appeal or clinical peer reviewer, other than an action for damages pursuant to Article 49 of the Public Health Law or Article 49 of the Insurance Law.

Striving to minimize the costs of health insurance and protecting the interests of consumers are important functions of the Commissioner. This amendment both minimizes costs and ensures the continued viability of the external appeal program, an important consumer protection.

Costs:

There should be no costs to insurers, managed care organizations, or individuals in order to comply with this amendment, nor should there be costs associated with this amendment to the Health Department, the Insurance Department, or state or local government. This amendment should serve to keep insurance costs from rising, which may be the case if lawsuits against external appeal agents or clinical peer reviewers continue to arise.

Local Government Mandates:

The amendment imposes no new programs, services, duties or responsibilities on any county, city, town, village, school district or fire district.

Paperwork:

The amendment does not impose any additional paperwork requirements on insurers, managed care organizations, or individuals, other than an acknowledgment by the enrollee.

Duplication:

The amendment does not duplicate standards of either the federal or other state governments. This amendment to Subpart 98-2 is a collaborative effort between the New York State Department of Health and the New York State Insurance Department. The New York State Insurance Department will also be filing an amendment to Regulation 166 of Title 11 of NYCRR that will apply to insurers.

Alternatives:

This amendment was developed through meetings with the New York State Insurance Department and interested parties, including the three New York certified external appeal agents. The three external appeal agents approached the Insurance Department to discuss the rising costs of legal fees associated with enrollees challenging external appeal decisions. The agents proposed a fee increase and/or a litigation fund, in the form of an escrow account. These alternatives were considered by the Health Department and Insurance Department, but it was determined that this amendment to Subpart 98-2 would be the best option, because it is the most cost-effective, and the most consistent with statutory intent not to permit an action against the external appeal agent or clinical peer reviewer on the merits of the determination.

Federal Standards:

There are no minimum standards of the federal government for the same or similar subject areas.

Compliance Schedule:

The provisions of this amendment will take effect upon publication of a Notice of Adoption in the New York State Register, and regulated parties should be able comply with the amendment immediately. Regulated parties will not need to submit revised filings to the Health Department or to the Insurance Department.

Regulatory Flexibility Analysis

As fully discussed in the Regulatory Impact Statement, this amendment implements the Department’s position with regard to relevant provisions of the New York State Public Health and Insurance Law. The amendment will not have any adverse economic impact and does not impose reporting, recordkeeping or other compliance requirements on small businesses or local governments.

Rural Area Flexibility Analysis

The amendment implements the Department’s position with regard to relevant provisions of the New York State Public Health and Insurance Law. The amendment will not have any adverse impact on rural areas and does not impose reporting, recordkeeping or other compliance requirements on public or private entities in rural areas; except that it requires the enrollee to acknowledge that the determination of the external appeal is binding on the plan and the enrollee, and to agree not to commence any legal proceeding against an external appeal agent or clinical peer reviewer to review a determination made by such external appeal agent or clinical peer reviewer, other than an action for damages pursuant to Article 49 of the Public Health Law or Article 49 of the Insurance Law. Enrollees and managed care organizations to which the amendment applies do business in, and enrollees are located in, all counties of the state, including rural areas as defined under State Administrative Procedure Act Section 102(13). The amendment applies equally to rural and urban areas.

Job Impact Statement

This proposed amendment to Subpart 98-2 will not adversely impact job or employment opportunities in New York. The amendment implements the Department’s position with regard to relevant provisions of the New York State Public Health Law and Insurance Law, and thus will have no job impact in New York.