Fast Facts:• Under the Patient Bill of

Rights, HMOs and insurersare required to establish internal formal enrollee grievance procedures.

• Michigan permits multiplelayers of review.

• Under PRIRA, covered persons or insureds must first exhaust the health carrier’s internal grievanceprocess before seeking external review.

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Has Michigan’s act changed after Rush Prudential HMO, Inc v Moran?By Eric J. Wexler

M ichigan is one of 42 states that has adopted an external review law as a remedy forinsureds when health insurance companies make adverse medical benefit determi-nations.1 External review withstood its first significant challenge on June 20, 2002,

when the United States Supreme Court ruled that it is saved from preemption under the Em-ployee Retirement and Income Security Act of 1974 (ERISA) as long as it is intended to regulateinsurance and ‘‘does not enlarge the claim beyond the benefits available in any action broughtunder [29 USC] 1132(a).’’2 Despite the decision, Michigan’s external review law remains vulner-able to a preemption challenge.

In the BeginningMichigan’s Patient’s Right to Independent Review Act (PRIRA) took effect on October 1,

2000, but consumers have had the right to pursue grievances against their health plans since1978.3 Prior to the repeal of the Michigan Health Maintenance Act on June 29, 2000, healthmaintenance organizations (HMOs) were required to maintain an internal appeal process thatallowed enrollees to file a grievance as to the operations of the organization.4 HMOs wererequired to establish and maintain reasonable procedures for receiving, processing, and resolv-ing enrollee complaints.5 If an enrollee exhausted a plan’s grievance process, the enrollee wasgiven the opportunity to pursue the grievance further with a three-person advisory commis-sion. Under the statute, the advisory commission was empowered to render determinations ofthe validity of the grievance and direct measures it considered appropriate under the circum-stances. The advisory commission reported to the Michigan Department of CommunityHealth (DCH).6

A Patient’s Right toIndependentReview

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matter ‘‘would seriously jeopardize the in-sured’s or enrollee’s ability to regain maxi-mum function.’’ An insured or enrollee hasten days from the date of the determinationto request that an independent review organ-ization (IRO) conduct an external review.12

PRIRAPRIRA allows insureds to challenge ad-

verse determinations made by a health carrieror its designee utilization review organiza-tion. Under PRIRA, covered persons or in-sureds must first exhaust the health carrier’sinternal grievance process before seeking ex-ternal review unless the basis for the requestis considered expedited.13 An expedited ex-ternal review request is defined as:

The adverse determination involves a medicalcondition of the covered person for which thetime frame for completion of an expedited in-ternal grievance would seriously jeopardize thelife or health of the covered person or wouldjeopardize the covered person’s ability to regainmaximum function as substantiated by aphysician either orally or in writing.14

PRIRA provides that upon receipt of arequest for an external review of an adversedetermination by a health carrier, the Insur-ance Commissioner ‘‘shall complete a pre-liminary review of the request and decide

Under PRIRA, covered persons or insureds must first exhaust the health carrier’s internal grievance process

before seeking external review

unless the basis for the request is

considered expedited.

Under PRIRA, covered persons or insureds must first exhaust the health carrier’s internal grievance process

before seeking external review

unless the basis for the request is

considered expedited.

whether or not to accept the request for ex-ternal review.’’15

Upon receipt of a request for an externalreview, the commissioner then must deter-mine whether to refer the request to an IRO.If an external review request ‘‘appears to in-volve issues of medical necessity or clinicalreview criteria,’’ the commissioner must de-cide the determination for review by an IRO.If the request ‘‘appears to only involve purelycontractual provisions of the health benefitplan,’’ the commissioner may conduct hisown external review or assign the review toan IRO.16

Under PRIRA, there is no specific right toan evidentiary hearing regarding the healthcarrier’s determination prior to the commis-sioner’s final determination. All reviews of ahealth carrier’s benefit determination are re-viewed de novo and ‘‘the reviewing entity isnot bound by any decisions or conclusionsreached during the health carrier’s utilizationreview process or the health carrier’s internalgrievance process.’’ MCLA 550.1911(a).17

Seven business days after the date of thenotice of the commissioner’s acceptance ofthe request for external review, the healthcarrier must provide to the reviewing entity‘‘the documents and any information consid-ered in making the adverse determination orthe final determination.’’18

Along with the evidence submitted by thehealth carrier and the covered person, theIRO must consider the following prior toreaching a recommendation:

(a) The covered person’s pertinent medicalrecords.

(b) The attending health care professional’srecommendation.

(c) Consulting reports from a health care pro-fessional and other documents submitted bythe health carrier, the covered person, thecovered person’s authorized representativeor the covered person’s treating provider.

(d) The terms of coverage under the coveredperson’s health benef it plan with thehealth carrier.

(e) The most appropriate practice guidelines,which may include generally acceptedpractice guidelines, evidence-based practiceguidelines, or any other practice guidelinesdeveloped by the federal government or na-tional or professional medical societies,boards, and associations.

The Patient Bill of Rights

The state’s grievance procedure landscapebegan to change in 1997 with the passage ofthe Michigan Bill of Patient’s Rights Act(PBR).7 Under the PBR, HMOs and insur-ers are required to establish internal formalenrollee grievance procedures. The PBR con-tains unique definitions, which determinewhether an insured has a basis to appeal abenefits determination.

Adverse Determination and Grievance

The terms adverse determination andgrievance were defined for the first time andcontinue to remain in effect under PRIRA.Under the PBR, adverse determination is de-fined as:

[A] determination that an admission, avail-ability of care, continued stay or otherhealth care services had been reviewed anddenied. Failure to respond in a timelymanner to request for determination con-stitutes an adverse determination.8

The term grievance is defined as:

[A] complaint on behalf of an enrollee submit-ted by an enrollee or a person, including,but not limited to, a physician authorizedin writing to act on behalf of the enrolleeregarding:

(i) the availability, delivery or quality ofhealth care services, including a com-plaint regarding an adverse determi-nation made pursuant to utilizationreview.

(ii) Benefits or claims payment, han-dling, or reimbursement for healthcare services.

(iii) Matter pertaining to the contractualrelationship between an enrollee andthe organization.9

Timeframes for submitting grievances orgrievances related to an adverse determina-tion were also established as a result of thelegislation. HMOs are required to make de-cisions within 35 calendar days of receipt of awritten grievance.10 Determinations of expe-dited grievances must be made within 72hours.11 An expedited grievance requires im-mediate attention in the event a physiciansubstantiates that the failure to address the

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uphold the denial of a benefit even if thecontract of insurance contained an expressexclusion of the medical procedure. Medicalnecessity dictated coverage of the benefit, hereasoned, because the definitions of basichealth services and health maintenance con-tract, as set forth in MCL 500.3501(b) and(f), must be read into the contract.26 Accord-ing to the commissioner, a plan ‘‘cannot in-terpret the provisions of the certificate todeny coverage for medically necessary basichealth services because such an interpreta-tion would conflict with the requirements ofMCL 500.3501.’’27

Recently, the commissioner has taken astrict construction approach in reviewing de-cisions recommended for acceptance by theIRO. Although medical necessity remainsrelevant, if a contract contains an express ex-clusion of coverage clause, the commissioneris inclined to adhere to the unambiguous,plain meaning of the certificate ‘‘to ensurethe recommendation is not contrary to theterms of coverage.’’28

PRIRA is Vulnerable to aPreemption ChallengeUnder Section 1132(a)of ERISA

Prior to Rush, the Supreme Court made itclear that any state law cause of action thatamounts to such an alternative enforcementaction is preempted by ERISA because Con-

Since PRIRA took effect on October 1,

2000, approximately550 cases have been

presented for external review with

about 47 percent of the decisions

resulting in the covered

person’s favor.

Since PRIRA took effect on October 1,

2000, approximately550 cases have been

presented for external review with

about 47 percent of the decisions

resulting in the covered

person’s favor.

gress clearly intended for the remedies setforth in ERISA to be exclusive:

The six carefully integrated civil enforcementprovisions found in subsection 502(a) of thestatute provide strong evidence that Congressdid not intend to authorize other remediesthat it simply forgot to incorporate expressly.Pilot Life Insurance Company v Dedeaux,481 US 41, 54 (1987).

Despite finding that the Illinois HMOAct did not conflict with Section 1132 (a) ofERISA, the Court in Rush recognized ‘‘that astate might enact an independent review re-quirement with procedures so elaborate andburdens so onerous, that they might under-mine Section 1132(a).’’29 PRIRA might beelaborate enough to be interpreted as astatute that involves the sort of additionalremedy the Court would prohibit.30

Unlike the Illinois law, Michigan permitsmultiple layers of review. An IRO conductsthe first level of review. After the IRO sub-mits its rationale for the decision, the com-missioner is required to review the rationaleand either accept or reject the recommenda-tion. If a covered person or carrier is not sat-isfied with the commissioner’s decision, an-other level of review can occur by pursuingthe matter in a state circuit court. In addi-tion, the statute permits the pursuit of otherremedies under applicable state or federallaw. Under the Illinois HMO Act, only onelevel of review is permitted, and the HMO isbound by the decision if the reviewing physi-cian concludes that the covered service ismedically necessary. According to the Court,the Illinois law is not an arbitration-like re-medial device because the reviewer is an in-dependent physician who determines if thebenefit is medically necessary.31

Michigan IROs, however, are constructeddifferently and, therefore, PRIRA might beviewed as a device that displaces judicialenforcement of ERISA contrary to Section1132(a). PRIRA, for example, requires theIRO to consider several factors including anyrelevant evidence submitted by the carrier orthe beneficiary.32 Not only are medical rec-ords and best practice standards fair game forpurposes of the review, but the health carrier’scertificate of coverage and utilization reviewcriteria must also be evaluated to develop arationale to support a recommendation to

(f ) Any applicable review criteria developedand used by the health carrier or its de-signee utilization review organization.19

The IRO must provide its recommenda-tion to the commissioner no later than 14days after the assignment of the request.20

The IRO’s recommendation is required to in-clude all of the following:

(a) A general description of the reason for therequest for external review.

(b) The date the independent review organi-zation received the assignment from thecommissioner to conduct the external re-view.

(c) The date the external review was con-ducted.

(d) The date of its recommendation.(e) The principal reason or reasons for its rec-

ommendation.(f ) The rationale for its recommendation.(g) References of the evidence or documenta-

tion, including the practice guidelines con-sidered in reaching its recommendation.

The commissioner is required to reviewthe recommendation to ensure that it is notcontrary to the terms of coverage.21

After the commissioner completes a re-view of the IRO’s recommendation, thecommissioner must then issue a notice of de-cision, which includes the ‘‘principal reasonor reasons for the decision.’’22

PRIRA further provides that ‘‘a personaggrieved by an external review decision mayseek judicial review within 60 days from thedate of the decision in state circuit court.’’23

Moreover, the statute does not preclude ahealth carrier or a covered person from seek-ing other remedies available under applicablefederal or state law.24

PRIRA’s EffectSince PRIRA took effect on October 1,

2000, approximately 550 cases have beenpresented for external review with about 47percent of the decisions resulting in the cov-ered person’s favor.25

The Insurance Commissioner’s standardfor accepting or rejecting the recommenda-tion of an IRO has evolved from a medicalnecessity approach to a plain and ordinarymeaning of the contract standard. In the earlystages of PRIRA, in some instances, the com-missioner rejected IRO recommendations to

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W the commissioner.33 Moreover, the exami-nation of an adverse determination is notlimited to a single physician. A professionalappeals staff that includes clinicians and li-censed attorneys conducts the reviews.34

PRIRA’s multiple review process, the varietyof evidence an IRO must evaluate, and thecomposition of the IRO fit within the con-text of the Court’s concern regarding bur-densome and arbitration-like independentreview requirements that may result in thelaw’s preemption.35

Portions of this article originally appearedin the 8th Annual Health Law Institute Semi-nar Sponsored by the Michigan Institute ofContinuing Legal Education and the HealthLaw Section of the State Bar of Michigan andhave been printed with permission. The authorextends his gratitude to Michael Shpiece andPaul Duguay for their advice. ♦

Eric Wexler is general counsel of Great Lakes HealthPlan where he oversees the company’s risk manage-ment, corporate and regulatory affairs. He serves assecretary to the plan and chairs the company’s Com-pliance Committee. Mr. Wexler has been practicing

health care law for 12 years, has appeared as aspeaker and panelist for the State Bar of Michigan’sHealth Law Section seminars, and has authoredarticles for various legal publications.

Footnotes1. American Association of Health Plans, Survey of

Independent Medical Review: State Laws andRegulations, November 15, 2001.

2. Rush Prudential HMO, Inc v Moran et al., 536US ___ (2002); 29 USC 1144(b)(2)(A).

3. MCL 500.2026(1)(b).4. MCL 333.21088, now repealed.5. Id.6. See, MCLA 333.21023, now repealed.7. MCL 333.21035, now repealed and replaced by

MCL 500.2213.8. MCL 500.2213(4)(a).9. MCL 500.2213(4)(b).

10. MCL 500.2213(1)(k).11. MCL 500.2213(1)(l).12. Id.13. MCL 550.1907(2) and 1913.14. MCL 550.1913(1)(a)–(b).15. MCL 550.1911.16. MCL 550.1911(6)–(7).17. The Supreme Court in Rush viewed de novo re-

view as a permissible standard because ‘‘[n]othingin ERISA, however, requires that these kinds ofdecisions be so ‘discretionary’ in the first place;whether they are is simply a matter of plan design

or the drafting of an HMO contract.’’ Rush, slipop at p 29.

18. MCL 550.1911(9).19. MCL 550.1911(13)(a)–(f ).20. MCL 550.1911(14).21. MCL 500.1911(15).22. MCL 550.1911(16).23. MCL 550.1915(1).24. MCL 550.1915(2)–(3).25. ‘‘Breakdown of PRIRA Cases as of July 2002,’’

OFIS (7/02).26. Order of the Commissioner, Petitioner John Doe v

Physicians Health Plan, Inc (3/2/01).27. Id.28. MCL 550.1915(15); See, Order of the Commis-

sioner, In the Matter of Petitioner v Priority Health(2/5/02).

29. Id. at 24 n 10.30. Id. at 23.31. Id. at 26.32. MCL 550.1911(9), (13).33. MCL 550.1911(13)(d), (f ).34. MCL 550.1919; and Letter from The Center For

Health Dispute Resolution to Michigan Divisionof Insurance explaining that ‘‘[t]his case has beenreviewed by a practicing physician who is boardcertified in internal medicine, a practicing physi-cian who board certified in general surgery and insurgery critical care and by a licensed attorney onCHDR’s professional appeals staff.’’ (12/31/01).

35. See, Joel L. Michaels and Robin J. Bowen,‘‘Rush To Judgment? An Analysis of Rush Pru-dential HMO, Inc v Moran,’’ AHLA Health LawAnalysis (August 2002).

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