Iowa Medical Society
www.iowamedical.org

Private Sector Advocacy

UnitedHealthcare agrees to pay a fine,
change claims processes and make restitution [+/-]

UnitedHealthcare (UHC) has agreed with 37 insurance commissioners to pay an up-front fine of $13 million, to make changes to claims processing platforms to assure compliance with laws and regulations, and to make restitution through reprocessing of erroneous claims.

Iowa's Insurance Commissioner Susan Voss played a lead role in this first of its kind settlement, along with commissioners from Arkansas, Connecticut, Florida and New York.

UHC is subject to a total of $20 million in up-front fines if all states join the settlement and as well as fines of up to another $20 million if UHC fails to comply with settlement terms.

Read an IMS-prepared summary (PDF 24KB) of the settlement. To read the settlement agreement, go to the Iowa Insurance Division's Web site at http://www.iid.state.ia.us.

AMA releases new marketplace study [+/-]

The AMA's report, Competition in Health Insurance - A Comprehensive Study of U. S. Markets (2007), shows Wellmark's continued growth in dominating the Iowa PPO/HMO marketplace dominance, particularly in the PPO market.

The 2007 report utilizes January 2005 data and, as in the past, references the federal antitrust HHI (Herfindahl-Hirschman Index) measure of marketplace concentration to assess competition or lack thereof in our nation's health insurance industry. An HHI score exceeding 1800 indicates a highly concentrated market. Iowa statewide data shows the following:

PPO/HMO Market  PPO Market  HMO Market  
HHI = 5170  HHI = 6133  HHI = 3394  
Dominant insurer:  Dominant insurer:  Dominant insurer: 
Wellmark (71%)   Wellmark: 78%  Wellmark: 49% 

Iowa's HHI score for the state's PPO/HMO market in the 2005 report was 3898 and Wellmark's dominance at that time was 60%. The 2007 report also includes HHI scoring information for seven Iowa metropolitan statistical areas (MSAs): Ames, Cedar Rapids, Davenport-Moline-Rock Island, Des Moines, Iowa City, Sioux City, and Waterloo-Cedar Falls (see link below).

The AMA study helps to identify problem markets where competition is diminished, to prompt discussion about the long-term impact of consolidated health insurance markets, and to find solutions. The majority of the nation's MSAs are dominated by a single health insurer. Large health insurers are getting bigger. In 2000, the two largest insurers, Aetna and United, had a combined membership of 32 million lives; at the time of this report, the two top insurers were Wellpoint covering 34 million lives and United covering 33 million lives, together controlling 36% of the national health insurance market.

Click here (PDF 11KB) to access Iowa statewide and MSA data findings. Click here (PDF 115KB) to view a chart summary of Iowa statewide comparative data for each of the six reports (2001-2007). Click here to access the AMA's 2007 report.

AMA Antitrust link

IMS seeks clarification from UnitedHealthcare [+/-]

UnitedHealthcare has adopted a sanctioning policy for physician referral of lab work to labs outside their network. The protocol first requires physicians to use United participating labs unless otherwise authorized. IMS has asked United to reconfirm that its LabCorp exclusive applies in Iowa only to national referrals and not local lab use.

The United protocol further provides that beginning March 1, 2007, a physician who uses a non-network lab is subject to sanctions, including a financial penalty of $50, and/or a change in eligibility for United's Premium Designation Program, and/or a decreased fee schedule, and/or termination from network participation. IMS has raised several questions with United in a letter (PDF 27KB) that was sent to United this month.

Other News

UnitedHealthcare enters national lab exclusive [+/-]

UnitedHealthcare has entered into a new, 10-year exclusive arrangement with Laboratory Corporation of America, a move that LabCorp believes will net it an excess of $3 billion from United and associated business over the life of the agreement. United clarified that in Iowa, this arrangement will affect only national lab services, which now will be reimbursed only if received through LabCorp; this national exclusive will not affect lab services received by United insureds through regional or local laboratories.

According to LabCorp's press release, "LabCorp will become UnitedHealthcare's exclusive national laboratory offering a comprehensive suite of services, and will also work with other regional and local laboratory providers to selectively develop, implement and manage for UnitedHealthcare a series of laboratory networks in selected regions across the United States."

Watch denials for radiology procedures [+/-]

Wellmark has notified the Iowa Medical Society that they are receiving a number of calls regarding payment denials for failure to secure an authorization code prior to the performance of certain high-end radiology procedures. Wellmark currently is gathering data about the types of denials they are issuing and they will look into solutions if necessary. Contact Wellmark if you have any questions.

HMO Liability Supreme Court Decision [+/-]

On June 21, the United States Supreme Court issued a unanimous opinion in Davila v. Aetna/Calad v. Cigna holding that the Texas HMO liability law is preempted by federal ERISA laws. This is an important case and a disappointing decision. The AMA is right on target when it says: "This is a sad day for America's patients and the physicians who care for them."

Shortly after the ruling, AMA President John Nelson said: "By reserving the right to decide what is - and what is not - medically necessary, managed care plans can now practice medicine without a license, and without the same accountability that physicians face every day. While the AMA appreciates those managed care plans that put patients ahead of profits, this Supreme Court action significantly erodes patients' ability to obtain medically necessary care by placing patients at the mercy of managed care plans that play doctor."

Bear in mind that the case involved self-insured health plans subject to ERISA. The Supreme Court's decision did not address non-ERISA commercial health plans. It is generally said that in Iowa roughly 50% of all insured lives are covered by government insurers, 25% are covered by self-insured plans subject to ERISA, and 25% are covered by non-ERISA commercial health plans.

While all Justices joined the majority in finding preemption, two Justices (Justice Ginsburg writing, Justice Breyer joining) issued a concurring opinion that offers a ray of hope. Below are excerpts: "I join the Court's opinion. But, with greater enthusiasm... I also join the rising judicial chorus urging that Congress and [this] Court revisit what is an unjust and increasingly tangled ERISA regime. Because the Court has coupled an encompassing interpretation of ERISA's preemptive force with a cramped construction of the equitable relief allowed under [ERISA}, a regulatory vacuum exits. Virtually all state law remedies are preempted but very few federal substitutes are provided. A series of the Court's decisions has yielded a host of situations in which persons adversely affected by ERISA-proscribed wrongdoing cannot gain make-whole relief. ...As the array of lower court cases and opinions documents, a fresh consideration of the availability of consequential damages under [ERISA} is plainly in order."

Background Facts
Davila's case against Aetna and Calad's case against Cigna were consolidated. The facts were very similar and the legal issues presented were essentially the same.

Juan Davila's treating physician prescribed Vioxx for Davila's arthritis. Aetna, the administrator for Davila's self-insured plan, denied coverage. Davila did not appeal but, rather, took an alternative medication, Naprosyn. He alleged that he suffered a severe reaction to Naprosyn leading to extensive treatment and hospitalization.

Ruby Calad had surgery. Cigna, as an administrator for Calad's plan, determined that Calad's condition did not meet her plan's criteria for extended hospital stay and denied coverage for it. After leaving the hospital, Calad experienced post-surgical complications for which she was again hospitalized. Both Davila and Calad sued, claiming that Aetna and Cigna, respectively, violated their duty to exercise ordinary care when making health care treatment decisions and that their decisions to deny coverage for the recommended treatment on medical necessity grounds proximately caused their injuries for which the health plans are liable under Texas law. Both plaintiffs filed their respective actions in state court. The health plans answered by saying that these two patients had benefits through ERISA plans and, as such, ERISA was the exclusive mechanism for remedy and state law was preempted. The Supreme Court agreed.

About ERISA
Remedy for an inappropriate coverage decision under ERISA is limited to the value of the benefit the claimant would have had if the correct coverage decision had been made. ERISA precludes recovery of damages for injuries suffered as a result of an inappropriate coverage decision. ERISA claims must be battled in federal court. Not all commercial insurance coverage is subject to ERISA; generally, ERISA applies to self-insured health plans, even if those plans are administered by a commercial carrier like Aetna or Cigna or Wellmark.

Both Davila and Calad had health care benefits through an ERISA plan. If the issue had been a denial of coverage because their contracts for benefits did not include these benefits, clearly ERISA would have prevailed. The long-standing debate that was brought to the forefront in this case was whether ERISA controlled in cases where an ERISA health plan denies coverage on the ground that the otherwise covered benefits were not medically necessary.

The guts of the debate on the patient/physician side goes something like this: Once a health plan elects to condition benefit coverage based on medical necessity, the health plan is no longer making a contract coverage decision governed by ERISA but, rather, the plan makes a coverage decision based on medical decision making subject to standards of medical care; if the plan errs, the plan should be subject to actions in negligence in the same way that doctors are. ERISA was never intended to address medical decision making. Liability lawsuits are matters of state law.

The guts of the debate on the health plan side goes something like this: Contract benefits (i.e., coverage), by terms of the contract itself, must meet the plan's criteria for medical necessity in order to be covered under the contract. Hence medically necessary determinations by ERISA health plans are controlled by ERISA. If a medically necessary decision is made in error, the patient can recover nothing more than the value of the benefit itself and litigation, if any, must be brought in federal court. When a health plan makes a medical necessity determination, it is not telling the patient or the patient's physician that recommended care cannot be received, rather the plan is merely saying that it will not pay for that care because it is not a contractually covered benefit.

Legislative history on ERISA was central to the Supreme Court's decision. The Court emphasized that ERISA was intended to ensure that employee benefit plan regulation would be uniform and exclusively a federal concern. "Therefore, any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore preempted."

Texas Law
Texas law specifically requires that managed care health plans exercise ordinary care when making health care treatment decisions; health plans are liable for damages proximately caused by a failure to abide by that duty. The Texas law, however, excepts from its reach contract benefit determinations. Even though the Texas law, in all likelihood, meant to say that a medical necessity determination is different from a determination that a certain benefit is not covered by contract, the Supreme Court did not see it that way.

Issue before the Court
Whether the causes of action brought by Davila and Calad against their respective health plans under state law were preempted by ERISA?

Decision of the Court
The Court saw these cases simply as a benefit coverage issues. "The fact that a benefits determination is infused with medical judgments does not alter this result." Even though Davila and Calad sought remedies under the state's liability statute, the bottom line decision of each of the ERISA health plans in this case was a coverage decision. "Administrators making benefits determinations, even determinations based extensively on medical judgments, are ordinarily acting as plan fiduciaries." The Court found preemption. "Respondents bring suit only to rectify a wrongful denial of benefits promised under ERISA-regulated plans and do not attempt to remedy any violation of a legal duty independent of ERISA. We hold that respondents' state causes of action fall "within the scope of" ERISA and are therefore completely preempted by ERISA and removable to federal court."

Wellmark Fraud and Abuse Program [+/-]

Wellmark announced in a news release that it has saved or recovered nearly $2.8 million in 2003 through aggressive health insurance fraud investigations. This news release occurred at the same time that the Blue Cross Blue Shield Association revealed that it has established a "strike force" to work more closely with the FBI, OIG (Office of Inspector General), and other law enforcement agencies to combat healthcare fraud. IMS has corresponded (PDF 28KB) twice with Wellmark and at Wellmark's invitation, will meet with representatives of its Special Investigations Unit to address IMS concerns on behalf of its physician members. For more information about BCBSA's antifraud efforts, go to http://www.bcbsa.com/antifraud/.

For copies of Wellmark's response please contact .

WebMD [+/-]

WebMD Update on HIPAA TCS Compliance/Customer Support
WebMD announced that all Medicare claims and electronic remittance advise (ERA) transactions it conducts are in HIPAA format and that more than 90% of claims WebMD sends to Blue Cross Blue Shield, Medicare and Medicaid payers combined are now in HIPAA standard format. WebMD further states that it continuously tracks provider transactions, detecting within 24 hours if Medicare, Medicaid, or BCBS professional claims, reports, or ERA transactions are not delivered; providers are notified of unresolved problems through Customer Service Alerts.

WebMD Update on HIPAA TCS Compliance/Customer Support
WebMD announced that all Medicare claims and electronic remittance advise (ERA) transactions it conducts are in HIPAA format and that more than 90% of claims WebMD sends to Blue Cross Blue Shield, Medicare and Medicaid payers combined are now in HIPAA standard format. WebMD states that it continuously tracks provider transactions, detecting within 24 hours if Medicare, Medicaid, or BCBS professional claims, reports, or ERA transactions are not delivered; providers are notified of unresolved problems through Customer Service Alerts.

WebMD has issued releases on its Customer First (PDF 63KB) and Medical Association and Society Escalation Support Protocol (PDF 32KB) programs. Practices having ongoing, unresolved issues with WebMD or any other payer or clearinghouse may contact at IMS or file a HIPAA complaint with the AMA.