National Association of Insurance Commissioners - …One of the most valuable services that state insurance departments perform is the handling of consumer complaints. It is important

Issues Involving External GrievanceReview Procedures

NationalAssociation ofInsuranceCommissioners

© Copyright 1998, 2003 by National Association of Insurance Commissioners All rights reserved.

Revised Edition

ISBN 0-89382-021-0

National Association of Insurance Commissioners Insurance Products & Services Division

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ISSUES INVOLVING EXTERNAL REVIEW PROCEDURES

Adopted by the NAIC June 7, 1999

Updated November 2000

Updated and Adopted by the NAIC December 7, 2003

TABLE OF CONTENTS I. Introduction.................................................................................................................1 II. Entities That Are Subject to External Review.............................................................2 III. Requests for External Review.....................................................................................3 IV. Decisions that are Eligible for External Review.........................................................4 V. Dollar Threshold for External Review........................................................................6 VI. Cost-Sharing Requirements ........................................................................................7 VII. Exhaustion of Internal Grievance Review Procedures ...............................................8 VIII. Notice of Right to External Review............................................................................9 IX. Filing Requirements and Choice of External Reviewer ...........................................11 X. Qualifications of External Reviewer.........................................................................13 XI. Conflicts of Interest...................................................................................................14 XII. Standard of Review...................................................................................................16 XIII. Defining “Medical Necessity” ..................................................................................19 XIV. Time Frames .............................................................................................................20 XV. Binding Nature of Decision ......................................................................................22 XVI. Attorney Involvement; Right to Appear Before External Reviewer ........................24 XVII. Medical Record Confidentiality Requirements ........................................................25 XVIII. Liability of External Reviewer..................................................................................26 XIX. Liability of Managed Care Entity .............................................................................27 XX. Data Reporting and Disposition of External Reviews...............................................27 XXI. Funding .....................................................................................................................29 State External Review Procedures (43 State Laws Addressing External Review): Attachment One State External Review Laws – Statutory and Regulatory Citations: Attachment Two

© 2003 National Association of Insurance Commissioners

ISSUES INVOLVING EXTERNAL REVIEW PROCEDURES

I. Introduction On March 26, 1997, President Clinton appointed the Advisory Commission on Consumer Protection and Quality in the Health Care Industry (President’s Advisory Commission) to “advise the President on changes occurring in the health care system and recommend such measures as may be necessary to promote and assure health care quality and value, and protect consumers and workers in the health care system.”1 One of the key recommendations in the Consumer Bill of Rights and Responsibilities that was developed by the President’s Advisory Commission was that an external review process be available to consumers with regard to grievances and health plans. The NAIC Health Carrier Grievance Procedure Model Act establishes two levels of internal grievance review to be performed by health carriers, but does not contain a requirement for an external, independent review. In 1998, the Health Insurance and Managed Care (B) Committee, formerly the Accident and Health Insurance (B) Committee, directed the Regulatory Framework (B) Task Force to study state laws relating to external review procedures and develop a model act establishing an outside appeal mechanism. The External Grievance Review (B) Working Group was created to undertake this task.2 One of the most valuable services that state insurance departments perform is the handling of consumer complaints. It is important to note that all state insurance departments, regardless of the existence of a law establishing an external review process, have staff dedicated to the fair resolution of questions and complaints from consumers about insurance. This paper outlines some of the major issues that have been addressed in state laws regarding external review procedures and highlights some of the responses to those issues. The purpose of this paper is to provide information about specific laws in states that have chosen to institute a more formal process for the resolution of certain health care complaints, namely by establishing an external review process for those complaints. A chart has been attached to illustrate the various state approaches to the issues discussed in this paper (Attachment One). In total, 43 states3, including the District of Columbia, have enacted laws or regulations addressing external review. A chart that lists the citations for these laws and regulations has been attached (Attachment Two).

A critical aspect of any external review process is the independent nature of the reviewer. An effective external review process must be external from, and independent of, an enrollee’s health carrier. The possibility of undue influence must be removed. The states with external review processes in place have ensured this independence in a number of ways.

1 Executive Order 13017. Advisory Commission on Consumer Protection and Quality in the Health Care Industry. 2 The NAIC Health Carrier External Review Model Act was adopted by the NAIC in 1999. In 2000, the NAIC adopted amendments to this model act establishing a separate external review process for experimental or investigational treatment denials. 3 Vermont has two laws on external review: one law addresses mental health and substance abuse care decisions and is referred to throughout this paper as Vermont’s mental health law and another law that addresses all other medical adverse decisions of health benefit plans and is referred to throughout this paper as Vermont’s health benefit plan law. California and Ohio also have two types of external review laws: one for external review requests involving experimental or investigational treatment adverse determinations and the other for external review requests involving medical necessity adverse determinations. The following states have not enacted an external review law: Alabama, Idaho, Mississippi, Nebraska, Nevada, North Dakota, South Dakota and Wyoming.

© 2003 National Association of Insurance Commissioners 1

One way states have sought to assure the independence of the external review process is through the involvement of a state regulator in the process to varying degrees. Of the 43 states, including the District of Columbia, which have enacted external review laws, about 30, have the Insurance Commissioner as the predominant regulator involved in the process. At least six states - Massachusetts, Montana, New Jersey, Oklahoma, Pennsylvania and Rhode Island - and the District of Columbia have the Department of Health as the predominant regulator involved. Delaware involves the Department of Health & Social Services. California involves both the Department of Insurance and the Department of Managed Care. In Florida, the external review process is administered through an independent panel, the Statewide Providers and Subscriber Assistance Panel, composed of staff from the Agency for Health Care Administration and the Insurance Department. Minnesota has both the Department of Commerce and the Department of Health involved in administering the external review process. States also address the issue of the independence of the external reviewer through specific conflict of interest provisions. Section XI discusses some additional ways that states seek to avoid conflicts of interest between the external reviewer, the enrollee, the enrollee’s health carrier and the enrollee’s provider. II. Entities That Are Subject to External Review An issue to address in an external review process is whether consumers should be able to obtain external review of the decisions of all health carriers or only health carriers offering managed care plans. This issue is linked to what types of decisions are eligible for review. The external review laws in Arkansas, Colorado, Delaware, District of Columbia, Illinois, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New York, Oklahoma, Rhode Island, South Carolina, Texas, Utah, Vermont and Washington apply broadly to health insurers or health benefit plans requiring that decisions made by these entities be eligible for external review. However, both Maryland and Oklahoma have included a provision in their laws that exempt health benefit plans offered by insurers for which payment of benefits is not conditioned on a determination of medical necessity from having to comply with the external review law. In addition, in Maryland, its external review not only applies to health benefit plans that are delivered or issued in the state, but also applies to a health benefit plan that covers individuals who reside or work in the state if the health benefit plan delivered or issued in a state that the commissioner determines does not have an external review process that is comparable to Maryland’s external review process. Fourteen states - Alaska, California, Connecticut, Florida, Georgia, Hawaii, Indiana, Michigan, New Jersey, New Mexico, Ohio, Pennsylvania, Tennessee, and West Virginia - limit external review to decisions made by managed care type plans, such as health care service plans, managed care organizations or entities, health insuring corporations, and health maintenance organizations. In Missouri, only health carriers and designee utilization review organizations for those health plans, whether offered by an insurer or an HMO, that have restrictions on or provide financial incentives for using a provider network are required to comply with the external review law. As such, indemnity plans with no network restrictions or incentives do not fall within the scope of the law. Montana’s external review law applies to both health carriers and managed care entities. Under West Virginia’s law, however, a managed care plan may be exempted from the requirements of external review if the plan can show that it already has an external review process in place and that process has been approved by a nationally recognized accreditation and review organization approved by the insurance commissioner. Vermont’s mental health law addresses decisions made by business entities that provide or administer mental health benefits.


Arizona and Iowa specifically limit external review to those decisions made by a health care plan provided by health care insurers or carriers that provide or perform utilization review. North Carolina’s law has a similar application provision. Connecticut’s law limits external review to decisions made by entities that have a network and perform utilization review. As a result, a utilization review decision made by an indemnity carrier that does not have a network is not eligible for external review. In Louisiana, covered persons may request an external review of second level appeal adverse determinations made by medical necessity review organizations (MNRO). A MNRO is a health insurance issuer or other entity licensed or authorized to make medical necessity determinations for purposes other than the diagnosis and treatment of a medical condition. III. Requests for External Review One issue to consider in developing an external review law is how a consumer may request external review. Should the request be required to be in writing for both standard and expedited external review requests? Should an oral request be permitted in a situation requiring expedited external review? Most states’ external review laws do not explicitly state the manner in which an external review request must be made. Alaska, Arizona, Connecticut, District of Columbia, Michigan, New Jersey, New Mexico, New York, Ohio, Rhode Island, and both of Vermont’s laws, however, explicitly require that a request for external review be in writing. Some states, Missouri, North Carolina, Ohio and Texas, for example, specifically allow oral requests for external review for cases involving an emergency medical condition. Another issue to consider is whether only the enrollee or an enrollee’s representative, such as the enrollee’s provider, should be able to request an external review or whether a provider should be able to request an external review on behalf of the enrollee. One rationale for allowing providers to request external review on behalf of their patients is that providers possess the technical expertise to effectively articulate a medical situation. Especially in situations where patients are ill, providers are in a much better position to pursue an external review of a denial of requested services. In the case of mental health denials, some point out that a provider may be the only person with the requisite knowledge to request an external review. If a provider is able to file a request for external review on behalf of an enrollee, another issue to consider is whether any provider should be able to make such a request, or should only the enrollee’s treating provider be able to do so? Additionally, should providers be able to request external review on their own behalf for payment for services already provided, or would that transform what is intended to be a vehicle for consumers to resolve complaints into a forum to resolve provider payment disputes? At least, 20 states - Arizona, California’s external review law involving medical necessity determinations, Colorado, Connecticut, Hawaii, Illinois, Indiana, Kansas, Kentucky, Massachusetts, Missouri, New Hampshire, New York, North Carolina, Oklahoma, South Carolina, Texas, Utah, Vermont’s mental health law, and Wisconsin and the District of Columbia - explicitly allow designated representatives, which may include the enrollee’s treating health care provider or any other person the enrollee designates, to request external review on behalf of the enrollee. Some states, such as Alaska, Arizona, and Missouri, allow a health carrier to request external review under certain circumstances.3 Generally, 20 states specifically authorize a provider, in various circumstances, to file an external review request on an enrollee’s behalf. California’s external review law for medical necessity determinations allows a provider to join with or otherwise assist an enrollee in seeking an independent medical review, and may advocate on behalf of the enrollee. Florida allows a provider to request external review on behalf of a member. Arizona, Hawaii and Maryland allow the treating health care provider to make such requests; and Texas allows the enrollee’s physician or provider to request external review on behalf of a

3 See also the discussion in Section VII. Exhaustion of Internal Grievance Review Procedures.


member. Connecticut, Kansas, Kentucky, New Jersey, New Mexico, Pennsylvania and Virginia allow any provider acting on behalf of an enrollee to request external review with the enrollee’s consent. New York and Texas allow a health care provider to request external review in cases involving retrospective denials. Louisiana’s external review law requires a covered person to have their treating health care provider’s concurrence in order to file a request for external review. IV. Decisions that are Eligible for External Review Another issue to consider is the types of decisions that should be eligible for external review. The options range from allowing external review of all complaints and issues relating to an enrollee’s health benefit plan to allowing external review only of decisions to deny an experimental or investigational treatment for a terminally ill patient. Some suggest that decisions to deny covered services based on medical necessity and decisions to deny experimental or investigational treatments are both legitimate subjects for external review, but caution against having the same process for both because they require different standards or levels of expertise. Ohio and California both initially established an external review process only for decisions to deny experimental or investigational treatment for a terminally ill patient, but both states later established a separate external review process for the review of decisions to deny covered services based on medical necessity. Most states, however, have chosen not to establish a separate external review process for denials based on a determination by a health plan that a requested or recommended health care service experimental or investigational treatment.4 Most states’ external review laws fall between the range of options, and allow for the external review of decisions to deny covered services based on “medical necessity.”5 Alaska, Arizona, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Vermont’s health benefit plan law, Virginia and West Virginia are among those states with such external review laws. Arkansas’, Connecticut’s, Georgia’s, Maine’s, New York’s, Ohio’s, Oregon’s, South Carolina’s, West Virginia’s and Wisconsin’s external review law and Vermont’s health benefit plan external review law specifically provide that experimental or investigational treatment determinations are eligible for external review. In North Carolina, decision that a requested health care service is experimental or investigational is eligible for external review if the decision is based on medical necessity with respect to a specific patient. However, if the sole basis for the decision is because the patient’s health benefit plan does not provide benefits for the health care service in question and this exclusion is clearly stated in the evidence of coverage, the decision is not eligible for external review. Vermont’s health benefit plan external review law also permits a consumer to request external review for two additional reasons: a plan decision resulting from a limitation placed on the selection of a health care provider that the consumer claims to be inconsistent with limits imposed by the plan and any law and a plan medically-based decision that a condition that is the subject of the requested health care service is preexisting. Arizona is one state that permits a member to request external review of an adverse decision that involves an issue of coverage in addition to external review requests involving an issue of medical necessity. In some states, a preliminary review is conducted after external review has been requested, but before the full external review commences. The process of preliminary review has been compared to triage: the process for sorting injured people into groups based on their need for immediate medical treatment. It is argued that the process of preliminary review ensures that only legitimate requests actually initiate the external review process and that individuals in need of expedited review receive immediate attention. 4 In 2000, the NAIC adopted amendments to the NAIC Health Carrier External Review Model Act establishing a separate external review process for experimental or investigational treatment denials. 5 See also the discussion in Section XIII. Defining “Medical Necessity”


Generally, a preliminary review is conducted primarily to determine whether the individual making the request is actually an enrollee in the health benefit plan that is involved in the request, whether the health care service or item in dispute is a covered benefit under that plan and whether the enrollee has satisfied all other requirements for the request to be eligible for external review. At least 16 states – Arkansas, California, Connecticut, Florida, Iowa, Kansas, Michigan, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Vermont and Virginia – and the District of Columbia specifically require that a preliminary review be conducted on all external review requests. Of these states, 11 states and the District of Columbia require the insurance commissioner or some other state agency to conduct the preliminary review and four states require independent review organizations to conduct the preliminary review. At least one state – South Carolina – permits the health carrier or its designee to conduct the preliminary review. If the health carrier or its designee determines that the request is not eligible for external review, then the health carrier must inform the covered person in writing of this determination and include a written explanation regarding the non-acceptance and inform the covered person of the right to contact the Director of Insurance for assistance. Although not considered to be a preliminary review, as that concept is generally construed, as described above, under Hawaii’s external review law, the commissioner considers the enrollee’s complaint, the plan’s response and any affidavits filed by the parties and, after consideration of all of this information, may dismiss the appeal if it is determined that the request is frivolous or without merit. V. Dollar Threshold for External Review

Some states require that, in order to be eligible for external review, the health care service or treatment that is the subject of the dispute must involve a threshold dollar amount. It has been suggested that the dollar amount could be established at a level that reflects the costs incurred in providing the external review. Some persons assert that a dollar threshold for disputes that are eligible for external review would give added assurance that only legitimate appeals are eligible for review and that the external review process could not be used by providers to harass the plans involved. Others argue that a dollar threshold requirement is not the most effective means of ensuring that only meritorious claims are eligible for external review, citing that the cost of an item, such as a wheelchair, does not necessarily reflect its level of importance to a consumer or its legitimacy as a subject for external review. Of the 43 states, including the District of Columbia, that have enacted an external review law, only 12 have included a dollar threshold requirement: Arkansas, Georgia, Kentucky, New Hampshire, Ohio, Oklahoma, South Carolina, Tennessee, Vermont, Virginia, West Virginia and Wisconsin. The actual dollar threshold amount required to be satisfied for an individual to be eligible to file a request for external review, however, varies greatly ranging from $1,000 in Oklahoma and West Virginia to $100 in Kentucky and Vermont. In Tennessee, the dollar threshold amount is $500. Under Arkansas,’ Georgia’s and South Carolina’s external review laws to be eligible for external review, the cost of the proposed treatment in dispute must be at least $500. Ohio’s external review law for disputes involving medical necessity determinations also has the same $500 dollar threshold, but specifically states that this requirement does not apply to expedited external review requests. New Hampshire’s law requires that the covered person’s actual cost for the health care service in dispute be, or that it is anticipated that over a 12-month period the cost of the health care service will be, equal to or in excess of $400. Virginia’s external review law requires that the dispute must concern a health service for which the actual cost to the covered person would exceed $300 if the health carrier’s decision is not reversed. Wisconsin’s


external review law requires that the cost or expected cost of the denied treatment or payment exceeds, or will exceed $250 during the course of treatment. Hawaii’s external review law does not include a dollar threshold amount requirement that must be met in order to file an external review request. Under the law, an individual may file a request for external review regardless of the amount in dispute. However, if the dispute involves less than $500, the commissioner is allowed to conduct an external review hearing without appointing an external review panel. VI. Cost-Sharing Requirements In addition to any dollar threshold requirements, some states also require the consumer to contribute to the cost of the external review. This can be done by imposing a filing fee that must accompany each request or by requiring the consumer to pay a set dollar amount before pursuing an external review. Another option would be to require the consumer to contribute a percentage of the cost of the external review. The fee could be waived upon a showing of undue hardship. A cost-sharing requirement also could be constructed so that a consumer would be required to share in the cost of the external review if the external review proceeding was decided in favor of the health carrier.6 Those that favor a filing fee requirement argue that a filing fee ensures a level of commitment on the part of the individual seeking the review, helps guard against the filing of frivolous appeals and does not present a barrier to the external review of legitimate issues. Others see a cost-sharing or filing fee requirement as an unnecessary burden and an attempt to discourage individuals from seeking external review. Sixteen states - Arkansas, Connecticut, Indiana, Iowa, Kentucky, Massachusetts, Minnesota, New Jersey, New York, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia and Wisconsin - have a cost-sharing requirement. Except in New York, Oklahoma, Pennsylvania, Rhode Island, Tennessee, and Virginia, enrollees filing a request for external review are required to pay a $25 filing fee. New York and Pennsylvania both allow a plan to charge a filing fee, but do not specify the exact amount of that fee. New York’s law, however, does provide that health plans may charge a filing fee of up to $50 per request. The fee is refundable if the consumer prevails. Both Arkansas’ and Pennsylvania’s law cap the filing fee at $25 or less. Under Vermont’s external review law concerning medical necessity determinations, an insured must pay a filing fee that reflects the administrative costs of processing a request for review. The fee may not be more than $25. Tennessee’s and Virginia’s filing fee is $50. In Oklahoma, the insured must pay $100 toward the cost of external review. Like New York, if the insured prevails at the completion of the review, the payment is to be refunded. Rhode Island’s law makes the enrollee responsible for paying one half of a predetermined fee to the external reviewer. Arkansas, Connecticut, Iowa, Kentucky, Massachusetts, Minnesota, New Jersey, New York, Vermont, and Virginia all specifically provide for exceptions to the payment of the filing fee in cases of financial hardship. VII. Exhaustion of Internal Grievance Review Procedures Should consumers be required to exhaust all internal grievance review procedures before an external review can be pursued? Many believe that requiring exhaustion of the internal grievance review process affords an opportunity to achieve an early and efficient resolution of disputes before resorting to a more costly, and administratively burdensome, external review. In theory, fewer consumers will require external review after exhausting internal grievance review procedures. To some extent, this rationale is

6 See also Section XXI, Funding, for a discussion of the mechanisms, including cost-sharing, used to fund external review.


dependent on health carriers having efficient and fair internal grievance review procedures in place. It is also argued that just having the option for external review will improve the quality of the internal grievance reviews performed, making external review necessary in fewer circumstances. Others emphasize that it is to everyone’s benefit to minimize the number of decisions that proceed to external review because the cost of external reviews are ultimately reflected in the premiums policyholders pay. In deciding whether to require exhaustion, the time frames for internal grievance review should be carefully considered. The consumer should be able to complete both the internal grievance review and external review in a timely fashion. California’s external review law for experimental or investigational procedures and Missouri’s external review law do not require exhaustion of internal grievance review procedures prior to requesting an external review. Those that argue against requiring the exhaustion of internal grievance review processes assert that the public’s support for external, independent review stems from the public’s mistrust of health carriers’ decisions. They argue that requiring a consumer to endure additional frustration pursuing a claim internally before becoming eligible for external review is counterproductive. In response to those that support requiring the exhaustion of the health carrier’s internal grievance review procedures to reduce the number of cases that will be eligible for external review, some argue that there is no need for such a reduction because states with external review laws have not experienced a high volume of external review requests. Those favoring access to external review prior to exhausting internal grievance review procedures also base their position, in part, on a judgment that the administrative cost of external review is not so great as to justify such a barrier to external review. Connecticut, Delaware, Hawaii, Indiana, Iowa, Massachusetts, Pennsylvania, Rhode Island, Tennessee, and both of Vermont’s external review laws, all require exhaustion of the health carrier’s internal grievance review procedures prior to making an external review request without any stated exceptions. Alaska, Arizona, Arkansas, District of Columbia, Florida, Georgia, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, South Carolina, Texas, Utah, Virginia, Washington, Wisconsin and West Virginia also require exhaustion, but provide exceptions to this requirement. Generally, the exceptions to requiring exhaustion of a health carrier’s internal grievance review process fall into three areas: (1) the request involves a life-threatening condition or emergency situation; (2) the health carrier has not made a decision on the internal grievance review request within the required time frames; or (3) the health carrier agrees to waive the requirement. Some states permit an enrollee to bypass a health carrier’s internal grievance review process under more than one of these exceptions. Kansas, Kentucky, Michigan, New Jersey, South Carolina and Wisconsin are examples of such states. In addition, external review laws in Kentucky, New Hampshire, New Jersey, New York, North Carolina and Oregon, all allow the enrollee to bypass exhaustion for any reason whenever the health carrier agrees to waive the requirement. Virginia permits an exception to the exhaustion requirement for appeals accepted for an expedited external review. Some argue that a health carrier also should be able to bypass the internal grievance review process in order to reach final resolution on an issue when the carrier has determined that proceeding directly to external review would be the most expeditious way to handle an emergency situation, or is the most direct means of obtaining appropriate medical expertise7. Arizona allows the utilization review agent, at any time during a formal appeal process, to request an external independent review. Missouri’s law, which does not require exhaustion of a carrier’s internal grievance review procedures, also allows a health carrier or health plan sponsor to request external review.

7 See also the discussion in Section III. Requests for External Review.


VIII. Notice of Right to External Review Another issue to consider is how to ensure that consumers are aware of their right to external review. Consumers need notice of this right and how to request such a review, including any procedures, costs and other requirements involved. Some states’ laws explicitly address how consumers are to be notified of the right to external review. At least 23 states - Alaska, Arkansas, California, Connecticut, Hawaii, Indiana, Iowa, Kansas, Maine, Maryland, Michigan, Minnesota, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont and Wisconsin – specifically address how notice of the right to an external review is to be provided. These states require health carriers to provide this notice and other information related to the external review process in various ways. Maryland requires a carrier, within five working days after an adverse decision has been made (within 24 hours in the case of an emergency), to inform the enrollee or the enrollee’s provider in writing of the right to file a complaint with the commissioner requesting an external review of the decision. California’s, Maryland’s, Minnesota’s, New Hampshire’s Ohio’s, Oregon’s and South Carolina’s laws all also require health carriers to have written policies describing the external review process. In addition, the availability of external review must be disclosed in the evidence of coverage and in disclosure forms provided to enrollees. Alaska requires group managed care plans to include in contract provisions a provision that discloses the covered person’s right to an external review of a utilization review decision made by a managed care entity. Under Indiana’s law, HMOs are required to provide to each enrollee and subscriber information on the enrollee’s or subscriber’s right to an external review by an IRO and information on how to file a request for external review. In addition, HMOs must provide timely, adequate and appropriate notice to each enrollee or subscriber of external review procedures. Iowa’s law requires the carrier or the organized delivery system, at the time of a coverage decision, to notify the enrollee in writing of the right to have the coverage decision reviewed under the external review process. Under Kansas’ law, the insurer or health insurance plan is required to provide written notice to the insured of a final adverse decision and the opportunity for requesting an external review. Minnesota’s law requires health plan companies to provide notice to enrollees of their right to external review and a description of when and how that right may be exercised. New Hampshire law requires the review panel making the second level grievance determination to include in its written decision a statement of the covered person’s right to file an external review request. This statement of appeal rights must include a description of the process for obtaining external review of the determination, a copy of the written procedures governing external review, including the required time frames for requesting external review, and notice of the conditions under which expedited external review is available. In Pennsylvania, a plan must automatically supply information about appeals procedures to enrollees and prospective enrollees and, upon request, to health care providers. Pennsylvania’s law also requires that a second level review include notice of the right to external review. Rhode Island’s law requires that a reviewer, within 21 days of a second level appeal determination, provide notice to the patient and provider of the right to an external review, including the procedures and fee involved. In South Carolina, whenever the health carrier makes an adverse determination or final adverse determination, the health carrier must include in the notice information concerning the covered person’s right to request an external review and provide a description of both the standard and expedited external review procedures. Arkansas’ external review regulation and North Carolina’s external review law both include similar requirements. Tennessee’s law provides that the plan notify all eligible enrollees, in writing, at the time of a final appeals decision to deny coverage, of the opportunity to request an external review. Vermont’s health benefit plan law includes a similar requirement. In addition, the law specifies that the notice of


the plan’s final decision include a Division-approved description of other processes available for the consumer to request further review of the decision. Texas’ law requires the HMO, insurer or utilization review agent, in conjunction with an adverse decision, to notify the enrollee of the right to appeal to an external reviewer and of the procedures for doing so. Wisconsin’s law requires an insurer, whenever it makes an adverse determination or an experimental treatment determination, to provide notice to the insured of the insured’s right to obtain independent review, how to request the review, and the time within which the review must be requested. Another issue to consider is whether, after receiving notice of an adverse internal grievance review decision and, in some states, as described above, specific notice of the right to request external review of that decision, the consumer or person filing an external review request on behalf of the consumer should be required to file such a request within a specified time frame. Some suggest that imposing a filing deadline – the time within which a request for external review must be filed following the exhaustion of a health carrier’s internal grievance review process – creates an unnecessary barrier to external review programs. Others suggest that having such a requirement is not burdensome because consumers will in most cases immediately file a request for external review and, as such, filing deadlines are not really a cause for concern. Whether or not a filing deadline is a cause for concern will depend on the length of that filing deadline, which varies greatly from state-to-state. At least 28 states – Arizona, Arkansas, California, Colorado, Delaware, Florida, Hawaii, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, New Hampshire, New Jersey, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Utah, Vermont, Virginia, West Virginia and Wisconsin – and the District of Columbia have specific filing deadlines. Most of the states that have specific filing deadlines give consumers 60 days within which to file an external review request. Arkansas, Colorado, Delaware, Hawaii, Iowa, Kentucky, Louisiana, Michigan, New Jersey, North Carolina and South Carolina are examples of such states. An enrollee has 30 days to make such a request in Arizona, Illinois, Oklahoma and Virginia. The District of Columbia’s filing deadline is 30 business days. Two states – New Hampshire and West Virginia – permit a consumer to file a request for external review from date of the internal review decision was made or the date on which the internal review decision should have been made if the decision was made in a timely manner. The specific filing deadlines connected with those dates are 180 days under both New Hampshire’s law and 60 days under West Virginia’s law. Maine’s external review law allows for one of the longest filing deadlines – 12 months. The filing deadline for the remaining states that have a specific filing deadline are as follows: Indiana and Massachusetts – 45 days; Kansas and Vermont (for its health benefit plan external review law) – 90 days; Oregon and Utah – 180 days; and Wisconsin – 4 months. IX. Filing Requirements and Choice of External Reviewer States have taken several approaches in structuring their external review processes. One way in which states differ is to whom the consumer files a request for external review. Eighteen states - Alaska, Arizona, Arkansas, California (external review law for experimental treatment determinations), Colorado, Illinois, Indiana, Louisiana, Montana, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah and Wisconsin - require enrollees to file requests for external review with the health carrier or the utilization review organization if used by the carrier to provide the internal grievance review. Under California’s external review for medical necessity determinations, Connecticut’s, District of Columbia’s, Delaware’s, Florida’s, Georgia’s, Hawaii’s, Iowa’s, Kansas’, Maine’s, Maryland’s, Massachusetts’, Michigan’s, Minnesota’s, Missouri’s, New Hampshire’s, New Jersey’s, New Mexico’s, New York’s, North Carolina’s, Ohio’s, Virginia’s and Washington’s laws and Vermont’s health benefit plan law, enrollees file requests for external review with the insurance


commissioner or another state agency charged with administering the review process. With respect to adverse decisions involving mental health benefits, to start the procedure to reconsider the adverse decision of the review agent, Vermont’s mental health law requires the client/patient, mental health care provider or representative of the client/patient, acting with the consent of the client/patient to file a written appeal with the Chairperson of the independent panel and the review agent who made the decision. Kentucky’s external review law requires covered persons to file a request for external review with the insurer. However, prior to initiating an external review, a covered person may file a request for review of a coverage denial with the insurance department. For the purpose of a departmental review, a coverage denial does not include an adverse determination. Under West Virginia’s external review law, the consumer files a request for external review in writing with both the insurance commissioner and the managed care plan. The manner in which external reviewers are chosen also differs from state-to-state. In Arizona, in cases involving medical necessity, in accordance with the state procurement process, the director creates a list of external reviewers who are eligible to review such cases. Iowa’s external review law is similar to Arizona’s law. In Iowa, the commissioner solicits names of independent review entities from carriers, organized delivery systems, and medical and health care professional societies. Alaska determines an external appeal agency to be qualified to consider external appeals if, with respect to a group health plan, the external appeal agency is certified by a qualified private standard-setting organization approved by the director or by a health insurer operating in the state as meeting specified requirements. In Connecticut, Missouri and North Carolina and under Vermont’s health benefit plan law, the insurance commissioner sends out a request for proposal (RFP) for entities to perform external review services. The RFP sets out specific qualifications that an entity must satisfy in order to be approved to perform external reviews. In California, for its external review law for medical necessity determinations, and in Maryland, Kansas, Massachusetts, Oregon, Vermont and Virginia, the insurance commissioner or some other state entity enters into contracts with entities to perform independent reviews. In New Mexico, the insurance superintendent compiles a list of physicians and attorneys who have agreed to serve as external reviewers without compensation. In Arkansas, Colorado, District of Columbia, Delaware, Georgia, Indiana, Kentucky, Maine, Michigan, New York, New Jersey, Pennsylvania, Wisconsin and West Virginia, the insurance commissioner or some other state agency certifies or approves independent review organizations (IROs) as meeting all of the qualifications necessary to perform external reviews. Under Arkansas’ external review regulation, the insurance commissioner may deem an IRO that is certified by URAC to conduct external reviews as certified to conduct external reviews in that state. North Carolina’s external review law includes a similar provision. In Texas, the insurance commissioner not only certifies external review organizations that are eligible to perform external reviews, but also designates annually those external review organizations that are eligible to perform external reviews. In Tennessee, the health carrier contracts with external review organizations that have already been certified by the insurance commissioner to perform external reviews. In California, for its external review law for experimental or investigational treatment determinations, and in Ohio, the health carrier contracts with independent review entities that select a panel of expert reviewers for particular cases. In California, for its external review law for medical necessity determinations, the Department of Managed Care contracts with one or more independent medical review organizations. In Vermont, for its mental health external review law, the insurance commissioner annually appoints a standing external review panel to review all external review requests made during that year. In Florida, a standing external review panel is made up of individuals from the Agency for Healthcare Administration and the Department of Insurance. The Agency may contract with a medical director, who is employed by a HMO that has a certificate of authority to operate in Florida, and a primary care physician who can provide additional technical medical expertise


to the panel. In South Carolina, the Director of Insurance must approve an IRO before it can conduct external reviews. The manner in which an external reviewer is assigned to particular cases also differs between states. In Arizona, in cases involving medical necessity, the director chooses who performs a particular review. In cases involving coverage decisions, the director either decides the case or refers it for external review if the director finds that the case involves a medical issue or the director is unable to determine issues of coverage. In Tennessee, the plan assigns the external review organization to perform a particular review. In Connecticut, Missouri, New Mexico, and Texas and under Vermont’s health benefit plan law, the insurance commissioner assigns particular cases to an external review entity. In Vermont, this assignment is made on a rotating basis. Assignments are made on an alphabetical rotating basis in North Carolina. In Maryland, the insurance commissioner decides the case and may consult with an independent entity with which it has a contract regarding cases involving medical necessity. In New York, New Jersey and Pennsylvania, the state agency randomly assigns cases to external reviewers. In California and Ohio, the plan contracts with independent review entities that select a panel of expert reviewers for particular cases. Under Illinois’ law, the external independent reviewer is jointly selected by the enrollee, the enrollee’s physician, or other health care provider, and the health care plan. In Wisconsin, the insured is required to select the external review entity. Another important difference between state external review processes is the type of entity that performs the external review. Section X. Qualifications of External Reviewer contains a discussion of the eligibility requirements for external review entities. X. Qualifications of Reviewer The qualifications of the external reviewer to perform the external review is another issue to be carefully considered. All 43 states’ external review laws, including the District of Columbia, require that the external review involve a physician or other appropriate health care provider and that the physician or other appropriate health care provider satisfy minimum qualifications to be eligible to conduct such reviews. Those qualifications include: (1) holding a non-restricted license to practice in a state of the United States and, for physicians, a current certification by a recognized American medical specialty board in the area or areas appropriate to the subject of the external review; and (2) having no history of disciplinary action or sanctions, including loss of staff privileges or participation restrictions taken or pending by any hospital, governmental or regulatory body. Many of the 43 state external review laws also specifically require the reviewer to have expertise relevant to the subject matter under review. Colorado requires expert reviewers performing the review to be knowledgeable about the recommended treatment or service through the expert reviewer’s actual, current clinical experience and to have appropriate expertise in the same or similar specialties that would typically manage the case being reviewed. Delaware, Georgia and Indiana have a similar requirement. Connecticut requires external reviews to be performed by a provider who is a specialist in the field related to the condition that is the subject of the review. Louisiana has a similar requirement. Maryland, South Carolina, Tennessee and Wisconsin require external reviewers to be physicians or other appropriate providers who are experts in the treatment of the enrollee’s medical condition and knowledgeable about the recommended service or treatment through clinical experience. Michigan requires that an clinical peer reviewer assigned by an IRO to conduct an external review of a specific case be an expert in the treatment of the covered person’s medical condition and be knowledgeable about the recommended health care service because the reviewer devoted, in the immediately preceding


year, a majority of his or her time in an active clinical practice within the medical specialty most relevant to the subject of the review. Both North Carolina and Washington have similar requirements. Similarly, Pennsylvania requires an external review decision to be made by one or more licensed physicians or approved licensed psychologists in active clinical practice in the same or similar specialty that typically manages or recommends treatment for the health care service being reviewed; or by one or more physicians currently certified by a board approved by the American Board of Medical Specialists or the American Board of Osteopathic Specialties, in the same or similar specialty that typically manages or recommends treatment for the health care service being reviewed. In Missouri, the RFP requirements for IROs desiring to contract with the state to perform external review state that the independent review must be performed by licensed, accredited or certified clinical peers. The IRO must include at least two health care professionals from a list of specialties. New Jersey requires physician reviewers to be experienced in managed care utilization review. Massachusetts similarly requires that external review panels include qualified clinical decision makers experienced in the determination of medical necessity, utilization review protocols and grievance resolution. Vermont’s mental health law requires that at least one member of the independent panel reviewing the case must have training and expertise comparable to or exceeding that of the treating clinician involved. Vermont’s health benefit plan law provides that the reviewers assigned to conduct the external review must include health care providers credentialed with respect to the health care service under review. New York’s law requires the external reviewer to be impartial and be qualified to render a determination relating to the health care service at issue. The review of decisions to deny investigational or experimental procedures under California’s and Ohio’s laws require that the review panel be comprised of physicians or other providers who are experts in the treatment of the enrollee’s condition and knowledgeable about the recommended therapy. XI. Conflicts of Interest Conflicts of interest can arise in many different contexts. Some of the most obvious conflicts of interest occur when an external reviewer has a financial or familial affiliation with one of the parties in the case. Conflicts of interest also can arise because of how the external review process is funded. Some have asserted that, if the external reviewer is paid directly by the health carrier, there may be the perception that the reviewer will be unduly influenced by that fact, especially if the external reviewer is a provider that also treats patients insured by that carrier.8 State external review laws address the issue of conflicts of interest in a number of ways. Some argue that an effective way to avoid conflicts of interest and ensure that qualified reviewers are conducting the reviews is by having external reviewers that are nationally licensed or accredited or are organizations that are licensed or certified by the insurance commissioner or some other state agency. Most of them specifically prohibit an external reviewer from having any material professional, familial or financial conflict of interest with: (1) the carrier or an officer, director or employee of the carrier; (2) any provider involved in the treatment of the covered person; or (3) the developer or manufacturer of the principal drug, device, procedure, or other therapy proposed for the covered person whose treatment is under review. At least 26 states - Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, New Hampshire, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas Virginia, Washington and Wisconsin - and the District of Columbia have laws that contain such prohibitions against affiliations between reviewers and involved parties. Alaska’s conflict of interest provisions differ slightly. Under

8 See also Section XXI. Funding, for a discussion of the different states’ mechanisms for funding external review.


Alaska’s law, a clinical peer or other entity meets the independence requirements if: (1) the peer or entity does not have a familial, financial or professional relationship with a related party; (2) compensation received by the peer or entity in connection with the external review is reasonable and not contingent on any decision rendered by the peer or entity; (3) the plan or issuer have no recourse against the peer or entity in connection with the external review; and (4) the peer or entity does not otherwise have a conflict of interest with a related party. “Related party” is defined in the law. New Jersey and Rhode Island do not include specific provisions in their external review laws with respect to conflict of interest requirements as described above. However, both states have provisions in their laws that require contracts entered into by state regulators with external reviewers to provide the regulator the right to deny an assignment to the reviewer if there is a determination that there would be a conflict of interest created or the appearance of impropriety by the assignment. Rhode Island’s law includes a provision that allows the Department of Health, which administers the external review process, to revoke an appeal agency’s designation authorizing it to perform external reviews if the continued designation could result in unfair, biased or unreliable determinations that pose a threat to public health. The Department of Health also is provided specific authority to review written complaints against external appeal agencies. Three states also have sought to address potential conflicts of interest by protecting the anonymity of the parties involved in an external review. Arizona protects the anonymity of the member and the member’s treating provider. California law states that the external reviewer is not required to disclose the names of the individual expert reviewers to the plan or the enrollee’s physician except in cases where the reviewer is called to testify and in response to a court order. Missouri specifically keeps the names of reviewers anonymous by contract. Another issue to consider is whether certain organizations should be prohibited from being external review organizations, such as: (1) professional or trade associations of health care providers and their subsidiaries or affiliates; and (2) health carrier or health plan associations and their subsidiaries or affiliates. At least 18 states - Arkansas, California, Colorado, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, New Hampshire, New York, North Carolina, South Carolina, Tennessee, Texas, Utah and Virginia - and the District of Columbia prohibit the reviewing entity from being a subsidiary of or owned or controlled by a health plan, a trade association of health plans or a professional association of health care providers. The Texas law prohibits the reviewing entity from being a subsidiary of, or in any way controlled by, a payor or a trade or professional association of payors. In contrast to these conflict of interest provisions in these states’ external review laws, under Arizona’s law, the director is required to compile a list of independent reviewers that may be eligible to perform external reviews from lists provided by insurers and any state and county medical professional associations. Exceptions to any list of prohibited organizations also should be considered for entities such as academic medical centers. California, Ohio and Tennessee contain exceptions to the conflict of interest provisions for academic medical centers under certain circumstances. Indiana includes an exception that permits a medical reviewer to perform an external review even if the medical reviewer provides services to the HMO that is involved in the review if the affiliation is disclosed and neither the enrollee nor the HMO objects. Depending on the structure of the external review process and the extent of regulator involvement in the administration of the process, a state agency could be required to evaluate and make a determination on whether an actual or perceived conflict of interest exists between an IRO or an individual expert reviewer and the parties involved in a particular external review case. For example, under Arkansas’ external review regulation, potential conflicts of interest are to be referred to the commissioner, who


shall determine whether an actual conflict of interest exists. In making this determination, the commissioner must consider a relationship or connection with persons involved in an external review is a material conflict of interest such that the objectivity of the IRO or any clinical reviewer to be assigned by the IRO to conduct the review may actually be or perceived to be negatively impacted. North Carolina’s external review law has a similar provision. At least 23 states’ laws - California for its medical necessity external review law, Colorado, Connecticut, Delaware, Georgia, Hawaii, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Vermont’s health benefit plan law, and Virginia – and the District of Columbia have the appropriate state agency select the external review entity to review a particular external review case.9 Seven states - Arizona, Connecticut, New Mexico, New Jersey, New York, North Carolina and Rhode Island – specifically allow the involved state agency to add or remove an external reviewing entity or an individual external reviewer from performing the external review of a particular case due to conflicts of interest and other similar concerns. Under Iowa’s external review law, the enrollee, or the enrollee’s treating health care provider acting on behalf of the enrollee, may object to the independent review entity selected by the carrier to the perform the review or to the person selected by the independent review entity to perform a particular review by notifying the commissioner. XII. Standard of Review Another issue to address is what standard of review should be used for an external review. From a legal perspective, there is a range of options. On one end of the spectrum, the review could be confined to the written record that was before the entity that made the internal grievance review decision that is the subject of the external review. On the other end on the spectrum, there could be a de novo review10 of the matter in dispute. In practice, most states’ external review laws allow the external reviewer to consider all information available as well as allow the covered person and the health carrier to submit new information. This is the case in Alaska, Arizona, California, Connecticut, District of Columbia, Florida, Georgia, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Vermont, West Virginia and Wisconsin. Except for three states – Iowa, Missouri and Oklahoma – states seem to have stayed away from providing either a strict de novo review, where the previous decisions of the internal reviewer are not considered, or providing an external review that is strictly limited to the written record. Iowa’s external review law specifically requires independent reviewers to conduct a de novo review of the external review case; and Missouri’s and Oklahoma’s external review laws both require that the IRO’s determination in an external review case be based on a review of the written record. Missouri’s law, however, does permit the enrollee, the enrollee’s representative and the health carrier to submit additional information. The IRO conducting the external review also may request additional information. Another issue to consider is whether the external reviewer should be limited to upholding or reversing the decision being reviewed or whether the reviewer should be free to reach a different conclusion or something in-between. Most states’ external review laws do not specifically prescribe any restrictions on the parameters of an IRO’s or individual external reviewer’s decision. Both are free to use their discretion in reaching a decision. A few states, however, do specify the parameters of the decision. For 9 See also Section IX. Filing Requirements and Choice of Reviewer, for a discussion of the manner in which external reviewers are chosen. 10 A de novo review is a review of the issue as if it had not been heard before, requiring the submission of records and other evidence. On de novo review, the reviewer does not have access to the record created from the original decision.


example, Hawaii’s law provides for review by a three-member review panel and allows the commissioner, upon a majority vote of the panel, to issue an order affirming, modifying, or reversing the decision of the plan. Virginia’s law provides a similar option for the insurance commissioner. After receiving the recommendation of the impartial review entity, the insurance commissioner may issue a written ruling affirming, modifying or reversing the final adverse decision. Most states’ external review laws prohibit the external reviewer from reaching a decision that is inconsistent with the terms of the enrollee’s policy. Some states’ external review laws specifically require the external reviewer to consider the terms and covered benefits of the enrollee’s policy or contract in reaching a decision in order to prevent, or at least, lessen the likelihood of such an occurrence. This is the case for external review laws in Arizona, Arkansas, Alaska, Indiana, Iowa, Kansas, Kentucky, Massachusetts, Michigan, New York, North Carolina, Oklahoma, Oregon, Tennessee, Virginia, Washington, West Virginia and Wisconsin. New York’s law states that the external reviewer’s decision is subject to the terms and conditions generally applicable to benefits under the evidence of coverage of the health care plan. Oregon’s law also requires the IRO to make its decision in accordance with the coverage described in the health benefit plan. However, the IRO may override the insurer’s standards for medically necessary or experimental or investigational treatment if the IRO determines that the standards of the insurer are unreasonable or are inconsistent with sound medical practice. Washington has a similar provision. Tennessee’s law also states that the reviewer is to make determinations based on the applicable coverage documents, including any defined terms that are provided therein, such as “medically necessary”, and may not expand the contractually agreed upon coverage. Other states’ laws condition the eligibility for external review on whether the issue involves a covered service. Usually, such a determination is made either by the state regulator involved in the external review process or an IRO designated to conduct the external review as part of a preliminary review of an external review request prior to any full external review of the case. Under the District of Columbia’s external review law, the purpose of a full external review is for the IRO to determine whether, as a result of the insurer’s decision, the member was deprived of any service covered by the member’s health benefits plan. Tennessee’s law limits external review to decisions to deny coverage where the proposed service or treatment would be a covered benefit except for the plan’s determination that the service or treatment does not meet the definition of medical necessity. Kansas has a similar provision concerning external reviews of denials based on a determination that a recommended or requested health care service is experimental or investigational. Vermont’s health benefit plan law explicitly states that the right to review shall not be construed to change the terms of coverage under a health benefit plan. The external review laws in California, Connecticut, District of Columbia, Florida, Iowa, Kansas, Michigan, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oregon, South Carolina, Vermont and Virginia all specifically provide for a preliminary review to determine that the subject matter of the external review request is reasonably considered to be a covered service and satisfies other specified criteria.11 Some examples of the different review standards in state external review laws follow:

Alaska’s law requires the external appeal agency to determine during its review whether the managed care entity’s decision that is the subject of the review was: (1) in accordance with the medical needs of the patient involved, as determined by the managed care entity, taking into account, as of the time of the managed care entity’s decision, the patient’s

11 See also the discussion in Section IV. Decisions that are Eligible for External Review.


medical needs and any relevant and reliable evidence the agency must consider or considers appropriate to consider; and (2) in accordance with the scope of the covered benefits of the plan. If the agency determines the decision complied with these requirements, the agency must affirm the decision and, to the extent that the agency determines the decision was not in accordance with these requirements, the agency must reverse or modify the decision.

Connecticut’s law states that the review may consider the following in making its decision: pertinent medical records; consulting physician reports; practice guidelines developed by the federal government, national, state or local medical societies, boards or associations; and clinical protocols or practice guidelines developed by the utilization review company or managed care organization. Maryland’s law states that the carrier has the burden of persuasion that its decision is correct and cannot rely on a basis not documented in the earlier decision. The commissioner may consider new information submitted by the carrier at the commissioner’s request.

New Hampshire’s law permits the selected IRO to review all of available information and any testimony. In addition, the IRO may consider any applicable, generally accepted clinical practice guidelines, studies or research, including those developed or conducted by the federal government, national or professional medical societies, boards and associations. The IRO must consider anew all previously determined facts, allow the introduction of new information and make a decision that is not bound by decisions or conclusions made by the health carrier during the internal review. Rhode Island’s law provides that the review by an external appeal agency shall be based on “the review criteria utilized by the review agent to make the denial; the medical necessity for the care, treatment or service which was denied; and the appropriateness of the service delivery which was denied.” New York’s law, for adverse determinations based on medical necessity, provides that the external reviewer shall review the utilization review agent’s final adverse determination to determine whether the plan acted reasonably and with sound medical judgment. The reviewer shall consider the clinical standards of the plan, the information provided, the attending physician’s recommendations and generally accepted practice guidelines. Vermont’s health benefit plan law states that the “independent external review shall be conducted in accordance with standards of decision-making based on objective clinical evidence and shall resolve all issues in a timely manner.” An insured has the right to use outside assistance during the review process and to submit evidence relating to the health care service. The independent review organization shall issue to both parties a written review decision that is evidence based.


XIII. Defining “Medical Necessity” As discussed above12, many states specifically provide in their external review laws that only adverse decisions based on “medical necessity” are eligible for external review. As such, what is meant by the term “medical necessity” is critical to the operation of the process. Most state external review laws do not explicitly define the term “medical necessity” and differ in the extent to which they include language that clarifies what is meant by that term. At least 13 states – Arkansas, Connecticut, Delaware, Georgia, Massachusetts, Maine, Minnesota, Montana, New Mexico, North Carolina, Utah, Vermont and West Virginia – do define the term “medical necessity,” or some closely related term, in their external review laws or regulations or general utilization review statutes, however. Some states’ definitions and other approaches to clarify the meaning of the term “medical necessity” are discussed below. New Mexico defines the term “medical necessity” by regulation. As defined by regulation, “medical necessity” or “medically necessary” means health care services required, according to any applicable generally accepted practice guidelines developed by the federal government, national or professional medical societies, boards and associations, and any applicable clinical protocols and/or practice guidelines developed by the health care insurer, for the diagnosis or direct care and treatment of a health condition, illness, injury or disease. Maine defines the term “medically appropriate care” as care that meets the standard of care for health care services as determined by health care providers in accordance with the prevailing practices and standards of the medical profession and medical community. Delaware’s definition of “medical necessity” is similar. “Medical necessity” is defined to mean, at a minimum, the providing of health care services or products that a prudent physician would provide to a patient for the purpose of preventing, diagnosing or treating an illness, injury, disease, or its symptoms in a manner that is: (1) in accordance with generally accepted standards of medical practice; (2) clinically appropriate in terms of type, frequency, extent, site and duration; and (3) not primarily for the convenience of the patient, physician or other health care provider. Florida’s law refers to a coverage determination that an admission, availability of care, continued stay, or other health care service has been reviewed and does not meet the requirements for medical necessity, appropriateness, health care setting, level of care or effectiveness, and coverage for the requested service is therefore denied, reduced or terminated. Also, the organization is required to provide, upon request, a detailed description of the process used to determine whether health care services are medically necessary. The term “medically necessary” is not defined. Hawaii’s external review law does not specifically define the “medical necessity” as a defined term. Instead, its law provides that a health intervention will be determined as “medically necessary” if it is recommended by the treating physician or treating licensed health care provider, is approved by the health plan’s medical director or physician designee, and is: (1) for the purpose of treating a medical condition; (2) the most appropriate delivery or level of service, considering potential benefits and harms to the patient; (3) known to be effective in improving health outcomes; provided that: (a) effectiveness is determined first by scientific evidence; (b) if no scientific evidence exists, then by professional standards of care; and (c) if no professional standards of care exist or if they exist but are outdated or contradictory, then by expert opinion; and (4) cost-effective for the medical condition being treated compared to alternative health interventions, including no intervention. Tennessee’s law also does not define the term “medical necessity.” External reviewers are required to make external review determinations based on applicable coverage documents, including the definition of “medical necessity” in the enrollee’s evidence of coverage. Arkansas’ external review regulation contains a similar provision.

12 See also the discussion in Section IV. Decisions that are Eligible for External Review.


XIV. Time Frames The time frames for the external review process should take into account several factors, including the time it takes an enrollee to exhaust the internal grievance review process. The time frames could be different depending on what type of dispute is the subject of the external review. Some states differentiate between situations involving a denial of payment for services already received and situations involving an enrollee who has not received the disputed treatment. Another situation to consider occurs when an enrollee is seeking external review of a decision to reduce or terminate services and is required to exhaust the carrier’s internal grievance review process prior to requesting external review. In this situation, states may want to consider specifically providing for the continuation of benefits pending the outcome of the external review. To date, only one state, Massachusetts, has addressed the issue of continuation of benefits in its external review law. Massachusetts’ law provides that if the grievance that is the subject of the external review concerns the termination of ongoing coverage or treatment, the insured may apply to the external review panel to seek the continuation of the disputed coverage or treatment during the course of the review upon a showing of substantial harm to the insured’s health absent such continuation, or other good cause as determined by the panel. States differ in the amount of time allotted an external reviewer to reach a decision once a completed request for external review has been received. The following states require the external reviewer to make and issue a decision within 30 days: California, Iowa, Maine, New York, Ohio, Oklahoma, Oregon, Tennessee and Vermont. Connecticut and New Jersey give the external reviewer 30 business days to reach a decision. In Connecticut, the deadline within which a decision must be reached starts from the date the preliminary review of the external review request is completed. Alaska’s external review law requires the external appeal agency to make a decision within 21 working days after the appeal is filed. Arizona, for cases involving an issue of medical necessity, and Kentucky require the independent review entity to make a determination within 21 calendar days of receipt of the external review request. An extension of up to 14 days may be allowed if the enrollee and the insurer agree. In New Mexico, the external reviewer must make a decision as soon as possible in accordance with the exigencies of the case, but in no event exceeding 30 days. The District of Columbia’s law is similar, but permits the IRO no more than 30 business days to issue a decision. In Maryland, the commissioner must make a final decision for pending services within 30 working days after a complaint is filed and within 45 working days for retrospective denials of services. Colorado and Virginia allow 30 working days. Under Colorado’s external review law, at the request of the expert reviewer, the 30-working day deadline may be extended by up to 10 working days for the consideration of additional information. Kansas gives the external review agency 30 business days to issue a decision from the date it was selected by the insurance commissioner to conduct the review. In Minnesota, an external review decision must be made as soon as practical, but in no case no later than 40 days after receiving the external review request.

Arkansas, Delaware, North Carolina and South Carolina allow 45 days. Massachusetts gives the reviewer 60 business days. Georgia’s law requires the expert reviewer to make a determination within 15 business days after the expiration of all of the time limits specified for submitting information. This deadline may be extended or shortened by mutual agreement between the enrollee and the managed care entity. Hawaii’s law permits an enrollee to request a review hearing. If a hearing is requested, then the hearing must be held within 60 days of the request and the commissioner, based on the majority vote of the panel, must issue an order affirming, denying or reversing the final internal determination within 30 days of the hearing. In Rhode Island, the external reviewer has 10 business days to complete its review. Under Vermont’s mental health law, the external reviewer has 15 business days to make its decision. Indiana’s requirements are the same. Michigan gives the reviewer 14 days after the date the external review request was accepted for it to make a recommendation to the commissioner. In Texas, the


external reviewer’s determination must be made the earlier of 15 days after the IRO receives the information necessary to make a determination or 20 days after the IRO receives the request for review. Washington’s law includes similar requirements. Missouri’s law provides that, within 20 calendar days of receiving all material, the external reviewer shall submit its decision to the department. Louisiana’s and Wisconsin’s laws include similar provisions, but allow 30 days. In Pennsylvania, the external reviewer must issue its written decision to the health care plan within 60 days. Florida’s law requires that the review panel hold a hearing on the external review request within 120 days after the date the grievance is filed. The panel must issue a written decision within 15 working days after the date of the hearing.

The expedited external review time frames also differ from state-to-state. Most states’ laws, however, require that a decision be reached as soon as possible given the medical exigencies of the case, but in no event no later than 72 hours after the appeal is filed. This is the case in Alaska, Arkansas, California, for medical necessity external reviews, Delaware, District of Columbia, Georgia, Hawaii, Indiana, Iowa, Louisiana, Maine, New Hampshire, and Oklahoma. Florida, Illinois, Maryland and Vermont’s mental health law require that expedited reviews be completed within 24 hours. Illinois’ law specifies that the decision must be made no more than 24 hours after the receipt of all necessary information. Kentucky’s law also requires that an independent review entity make a decision within 24 hours from the date of its receipt of notice of the adverse determination from the insurer. An extension of up to 24 hours may be allowed if the covered person and the insurer, or its designee, agree. New Jersey and New Mexico require that decisions be made in accordance with the exigencies of the case, but in no event longer than 30 days. New York and Oregon require a decision to be made within three days. Rhode Island requires an expedited decision in two business days. In South Carolina, a decision must be reached as expeditiously as possible, but in no event more than three business days. California, with respect to external review requests involving experimental or investigational treatment denials, Ohio and Tennessee require a decision within seven days. West Virginia also requires that a decision be made within seven days, but the insurance commissioner may, by rule, shorten this time frame. Kansas requires expedited external review decisions to be made in seven business days. Colorado also requires that a decision be made within seven working days, but permits this deadline to be extended for up to five working days at the request of the reviewer in order for the reviewer to consider additional information. For requests determined to be eligible for expedited review, North Carolina’s law requires a decision on the request within four days after the date the request was made. Texas requires a decision the earlier of five days after the external reviewer has received all necessary information or eight days after the request for review. Vermont’s health benefit plan law requires a decision to be made as soon as possible consistent with the medical exigencies of the case, but in no event shall a decision be made more than 5 days after receipt of the appeal unless it is determined upon further review that the appeal does not involve emergency or urgently-needed services, in which case the standard 30-day deadline would apply. Michigan allows the IRO no more than 36 hours after the date the insurance commissioner received the request to make a decision. Washington’s law provides that an IRO must make a determination in cases involving a condition that could seriously jeopardize the enrollee’s health or ability to regain maximum function not later than the earlier of: (1) 72 hours after the date the IRO receives the information necessary to make a determination; or (2) the 8th day after the date the IRO receives the expedited external review request. Wisconsin’s law provides the following specific time frames with respect to making an expedited review decision: (1) the insurer must submit information concerning the request within one day after receiving notice of the request; (2) the IRO must request any additional information within two business days after receiving the initial information; (3)


the insured or the insurer shall, within two days after receiving the request for additional information, submit the requested information or an explanation on why the information is not being submitted; and (4) the IRO shall make a decision within 72 hours after the expiration of all of the applicable time limits. XV. Binding Nature of Decision Another issue to address is whether an external review decision should be binding and, if so, upon whom. There are several possible options. The external review decision could be binding on the enrollee or the health carrier or both. Another option would be a quasi-binding system where the review results in a recommendation to the health carrier and the commissioner is able to sanction the health carrier if it exhibits a pattern of noncompliance with the recommendations and findings of the external review. Also to be considered in setting up an external review process is whether to make the non-binding external review decision a final agency action, thereby eliminating the potential for multiple external reviews of the same dispute. Other issues include whether the health carrier or the enrollee should be able to pursue a claim in a court of law or whether an enrollee should be required to waive his or her right to file suit in exchange for entering the external review process. The states have taken various approaches. For those states that have included a provision in their laws addressing the binding nature of the external review decision, most seem to provide that the decision be binding on the health carrier and non-binding on the enrollee. Delaware, Indiana, Kentucky, Minnesota, Vermont and California’s medical necessity external review law are examples of those states with such a provision. Louisiana’s, New Hampshire’s, New Mexico’s, Virginia’s and Wisconsin’s laws all provide that the decision of the IRO is binding on both the enrollee and the health carrier. North Carolina’s law provides that the decision is binding on the health carrier. The decision is binding on the covered person except to the extent the covered person has other remedies available under applicable federal or state law. Arkansas’ external review regulation also provides that the decision is binding on both the enrollee and the health carrier, but only to the extent that the enrollee or the health carrier may have other remedies availab

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National Association of Insurance Commissioners - …One of the most valuable services that state insurance departments perform is the handling of consumer complaints. It is important