California expands HMO liability, external review coverage mandates
California expands HMO liability, external review coverage mandates
New laws are pushing envelope for national reforms in liability, access
Unprecedented managed care reforms in California are raising the bar for state and federal lawmakers considering expansions of rights of health care consumers.
"The work we’ve done here is driving the train in Washington. I don’t think there’s any question about it," says Marjorie Swartz, a legislative advocate with the Western Center on Law and Poverty in Sacramento.
Gov. Gray Davis in late September signed bills that expand access to independent review of HMO coverage denials, as well as expand and reorganize the regulation of managed care plans. New legislation also makes California the third state in the country, behind Texas and Georgia, to allow enrollees to bring a suit against their health plans for negligence.
California’s expansion of liability doesn’t become effective until Jan. 1, 2001. In the meantime, the HMO industry is steadfast in maintaining that increased plan liability poses a threat to both the quality and affordability of care. "Twenty-eight state legislatures considered liability, and all but two others rejected it," noted Susan Pisano, spokeswoman for the American Association of Health Plans in Washington, DC. If anything, what this does is to intensify our resolve to talk about what is at stake here."
A host of benefit mandates also became California law with the governor’s signature. Effective July 1, 2000, health plans will have to provide coverage and terms for mental health conditions comparable to those for physical conditions.
The coverage extends to children with "severe emotional disturbances" and adults with "severe mental illness," the latter defined as schizophrenia, schizoaffective disorder, bipolar disorder (manic-depressive illness), major depressive disorders, panic disorder, obsessive-compulsive disorder, pervasive developmental disorder or autism, anorexia nervosa, or bulimia nervosa. The mandate for children covers all conditions except substance abuse and developmental disorders.
Effective Jan. 1, plans also will have to provide coverage for "a variety of Food and Drug Administration [FDA] approved prescription contraceptive methods." The coverage is very broad, as the plan can be required to approve an alternative FDA-sanctioned method if a physician determines that none of the plan’s original choices are medically appropriate for a given patient.
Religious employers are eligible for an exemption to the contraceptive coverage mandate.
Medi-Cal gets invited
Consumer advocates pushed back attempts to exclude Medicaid beneficiaries from access to the external review process, in which medical experts examine instances in which care is "delayed, denied, or modified" based on a determination of medical necessity. The argument in favor of excluding enrollees in Medi-Cal, California’s Medicaid program, was that existing appeals in Medicaid processes were adequate.
"We don’t think there will be that much redundancy, but if it is a medical necessity issue, a Medicaid beneficiary ought to have the benefit of this new expert panel," says Ms. Swartz.
Significantly, both California and Texas allow enrollees to sue for punitive as well as actual damages. Georgia legislation passed in the most recent session mandates the right to external review and gives enrollees the right to sue their health plans for damages for lack of "ordinary diligence," but blocks any rights to punitive damages.
In approving the expansion of liability, California legislators appeared savvy about federal law and case law interpreting it would allow state intervention, says Patricia Butler, JD, DrPH. Ms. Butler, a health care analyst in Boulder, CO, says the Employee Retirement Income Security Act of 1974 and subsequent case law draw the distinction between disputes about "whether or not to pay" — where state intervention is limited or blocked — and disputes about the "care delivery process" — where states have more latitude. "That’s a fuzzy line, obviously," she says.
California advocates were disappointed in — and hope to reverse — their failure to secure funding for an external ombudsman, specifically one empowered to act as a legislative advocate and represent clients in disputes with health plans.
"It doesn’t matter what rights you give people; if they don’t know about them and they don’t have help asserting them, forget it," says Ms. Swartz.
Lack of agreement
At press time, the U.S. Senate and House of Representatives were wrangling over their respective versions of managed care reforms. Debate on the right to sue, a key feature of the House version but not the Senate’s, threatened passage of any managed care reforms at all.
Regardless of what happens in Congress, at least one health policy veteran expects the action to be at the state level. "What the states are doing is not paying attention to Congress," says Ms. Butler. "Most of them are doing what they feel they need to do."
Contact Ms. Swartz at (916) 552-5830, Ms. Butler at (303) 440-0586, and Ms. Pisano at (202) 778-3200.
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