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San Diego Union-Tribune
Oct 31, 1999
by Tony Fong
State Law Gives Consumers Leverage When HMOs Say, No!Kent Manthorne's troubles began with the discovery of a strange little blotch on his right ear. Years before, he had skin cancer on the same ear, and a dermatologist was telling him that surgery was necessary.
But FHP International, his health maintenance organization at the time, told Manthorne the doctor was not in its network of providers. Manthorne would have to choose between two skin doctors who were in the network if he wanted FHP to pay for the procedure.
Unfortunately, Manthorne had bad experiences with both of the FHP doctors. He wanted his own doctor and he wanted the surgery.
For the next three months, he wrote lengthy letters to FHP and pursued his case with everyone from telephone customer representatives up to FHP executives.
And all this time, Manthorne said, "I didn't know if I had cancer."
Manthorne's case of three years ago is among those that pushed the state Legislature to pass a package of health-care reform bills. They were signed into law by Gov. Gray Davis last month, and on Jan. 1, 2001, stories like Manthorne's should be relegated to the past.
At the heart of the reform effort are laws giving HMO members the right to pursue grievances against their health plans.
The centerpiece -- AB 55 -- creates an external review system, and if all else fails, consumers will have the right to file suit against their HMOs.
External -- or independent -- reviews will evaluate a health plan's decision to deny coverage.
California is one of about 30 states that have either implemented an independent review system or have passed legislation creating one. Medicare, the federal health plan for the elderly, also has an external review process.
"It's become motherhood and apple pie," says Geraldine Dallek, project director at the Institute for Healthcare Research and Policy at Georgetown University, referring to a nationwide call for external reviews.
Even before AB 55 was signed into law by Gov. Davis, many plans were in the process of creating an independent review system. For example, the California Association of Health Plans and the American Association of Health Plans had recommended that its members support independent reviews.
"It was one of those things you could see coming down the pike," says Bobby Pena, a western region spokesman for Aetna US Health Care.
Bill Branch, health information officer for the California Public Employees' Retirement System, says the system had asked for -- and received -- the right to independent reviews during negotiations with its 10 contracted HMOs earlier this year.
In March, the National Committee on Quality Assurance, the nation's largest accrediting agency of HMOs, announced it would require plans seeking accreditation to implement an external review process.
That requirement cast a wide net because NCQA-accredited HMOs cover about 75 percent of the 80 million-plus Americans enrolled in HMOs and because many large employers, as well as state agencies and employee-benefit coalitions, will not contract with an HMO that is not accredited.
There's a reason for the popularity of external reviews: They seem to work.
In a study released in November by the Kaiser Family Foundation and Medicare, Dallek and other researchers concluded that an external review system serves two main purposes.
For consumers, it presents an opportunity to have grievances heard by an outside party. And, because the reviewer is not supposed to have a relationship with either the health plan or the patient, decisions at least appear to be objective.
In California, the reviews will be done by independent panels, usually made up of physicians. In the Kaiser study, disputes that reached the external review stage were settled in favor of the patient about half of the time.
Manthorne, who lives in the Golden Hills neighborhood in San Diego, won his appeal, and FHP relented. The growth on his ear was not cancerous.
PacifiCare which merged with FHP in 1997 declined to comment on Manthorne's case, saying it could not find any record of his dispute with FHP.
It's unclear, of course, whether an independent review would have sided with Manthorne, but had external appeals existed, the dispute would have been resolved within a month rather than the three.
The process, Manthorne says, will empower consumers. "The question is how (far) are consumers willing to go and how many consumers are going to go (as far as I did)?" he asks.
AB 55 prohibits appeals agents from having any financial relationship with the review agent, health plan or consumer.
Specific guidelines to ensure the independence of the reviewers are left to independent review organizations, or IROs, which are to be contracted by the state.
Members of the IROs must submit information annually about stockholdings, companies with which they have affiliations, a description of the review process, how they recruit physicians to do the reviews and how they ensure conflict-of-issue compliance.
Most other states work under similar standards, though Michigan and Arizona allow reviewers to have business relationships with the plan being reviewed. In Florida and Pennsylvania, the reviews are done by a state regulatory agency.
Nationally, there have been few requests for external reviews. Experts say that's because of improved internal reviews, poor publicity by state agencies about the availability of external reviews and reluctance on the part of some consumers to pursue them.
In Florida, where there were 4.4 million members in managed-care plans at the end of 1998 -- that figure includes 400,000 in Medicaid managed care -- there were just 403 external reviews undertaken from 1993 through 1998.
In Pennsylvania, which had 5 million managed-care enrollees, there were 729 cases from 1991 through June 1998.
The most requests for external reviews were in the Medicare system, with 40, 000 cases out of 5.2 million enrollees from 1989 through 1998.
While consumer groups and physicians have long advocated external reviews, health plans traditionally objected to opening the appeals process to outsiders.
But, as AB 55 waited for the governor's signature, the California Association of Health Plans came out in support of the measure.
"It is vitally important that the legislature pass strong external review legislation this year," said Walter Zelman, president of the association, to " reassure consumers that they will receive the health care that they need, when they need it."
Why the change of heart? The Kaiser study says external reviews can provide feedback and suggestions for improving the decision-making processes, but a consumer advocate says the reviews protect HMOs. "It's a way of saving themselves from being sued," says Jamie Court, director of Consumers for Quality Care.
Health plans have long said that giving consumers the right to sue HMOs would open the floodgates, but in Texas, where the right to sue has existed for two years, just five suits have been filed.
Nationally, though, there are reports that trial lawyers who participated in litigation against the tobacco industry are setting their sights on managed-care organizations, and earlier this month, three national class- action suits were filed against HMOs.
What the right to sue an HMO in California will mean is unclear. Before a patient can sue a health plan, both the internal and external review process must be exhausted, which would seem to limit the number of disputes reaching the litigation stage.
Additionally, a loophole in the liability legislation was discovered after Davis signed it.
In California, it is common practice for health plans to require members to sign binding arbitration clauses to settle disagreements. The clauses, in effect, prevent the members suing the HMOs.
Assemblyman Martin Gallegos, D-El Monte, has said he will introduce legislation in January to ban that practice.
When Gallegos introduced similar legislation last year, it never got out of the Assembly, and the California Association of Health Plans has said it will vigorously oppose any new legislation Gallegos might introduce.
As long as health plans can write binding arbitration clauses into contracts, external reviews take on even greater significance, though no one is saying they will eliminate disputes between consumers and HMOs.
For the past three years, some Californians have had an independent review mechanism in place through the Friedman-Knowles Experimental Treatment Act of 1996. Under the act, patients who have been denied coverage because the procedure is experimental could appeal the HMO's decision if conventional therapies did not work.
From the start, the law stumbled, and three years passed before a single agency was accredited to undertake a review. Other potential review agents either chose not to contract with the state or could not prove their independent status or ability to perform their duties.
In 1998, when Barbara Brown became the first patient to request an external review under the Friedman-Knowles Act, no accredited agent existed, and her own health plan created the panel that undertook her external review. The panel denied her appeal.
Bill Wehrle, a consultant who helped write AB 55, says the new legislation was crafted to counter the weaknesses in the Friedman-Knowles Act, and he cites one significant change: AB 55 precludes health plans themselves from choosing the independent review panel.
And while AB 55 does have the effect of limiting the number of disputes that might reach litigation, it does not prevent consumers from suing their health plans, Wehrle says.
The decisions of a review panel are binding on the health plan, but not with the patients who can still sue the plan if they dispute the panel's decision -- as long as they have not waived that right by signing a binding arbitration clause.
"It is an attempt to resolve conflicts with outside physicians (as arbitrators) before it gets to the litigation stage," Wehrle says.
Wehrle concedes the state had trouble finding an agency to do reviews under the Friedman-Knowles Act, but he says the scope of AB 55 should make it more attractive to review agents.
Brian Schilling, a spokesman at NCQA, says his organization is requiring external reviews for accreditation, but that is not a replacement for state laws requiring such reviews because many HMOs are unaccredited.
In particular, he says, employees of smaller companies will benefit from state mandates because non-NCQA-accredited health plans tend to be the smaller ones that contract with small businesses.
Dallek, meanwhile, says legislation on the state level serves to push along similar legislation on the federal level.
Currently, 48 million Americans covered under self-insured health plans are exempt from state laws. Health care bills being considered in Congress contain provisions for external reviews.
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