Maryland supports appeals of health plan decisions

Physicians applaud a court ruling that the state insurance commissioner can impose fines and order plans to pay for improperly denied treatments.

By Tanya Albert, AMNews staff. Dec. 2, 2002. Additional information

External appeal laws that many say strengthen the physician-patient relationship got another boost from the courts.

The highest court in Maryland has upheld a law that gives health plan subscribers the right to independent, external reviews when HMOs deny treatments that their doctors say are medically necessary.

The Maryland Court of Appeals in November ruled that the Employee Retirement Income Security Act of 1974 does not preempt the 1998 Maryland statute.

The law gives the Maryland insurance commissioner -- after he or an independent medical expert reviews the facts -- the right to order a health plan to pay for medically necessary services it originally denied, as well as the right to fine a plan for denying the treatment.

Victory for physicians

"We regard it as a huge win," said T. Michael Preston, executive director of the Maryland State Medical Society, which pushed for the initial legislation. "It is a useful process for physicians and patients. It requires a physician and patient to fight together for what they believe they need and what they feel is right."

The Maryland decision comes on the heels of a U.S. Supreme Court ruling that ERISA, a federal law that health plans have successfully used to defend themselves for years, did not preempt an Illinois law that required health plans to abide by external reviewers' decisions.

The court said external review in Illinois was an insurance regulation and that insurance oversight has traditionally rested with the states.

But the Supreme Court ruling in the Illinois case, Rush Prudential HMO v. Moran, was not an instant guarantee that other courts would rule that external appeal laws are not preempted by ERISA. State laws are worded differently, and the facts in cases going before courts vary.

"When the Supreme Court decided the Moran case, that was great," said Maryland Insurance Administration Commissioner Steven B. Larsen. "But there was some question about whether our law might still be subject to attack."

Larsen said the Maryland law is more elaborate than the one in Illinois. In Maryland, the state plays a more significant role in the review process. It accepts the initial complaint, selects the reviewer and issues the decision.

Maryland is among more than 40 states and the District of Columbia that have independent appeals laws. The 5th U.S. Circuit Court of Appeals is reviewing the Texas independent review law. The appeals court originally struck down the law, saying that ERISA preempted it. But the U.S. Supreme Court asked the lower court to look at the case again in light of the Moran decision.

The Maryland high court, however, found that independent review laws regulate insurance. The court rejected the insurance company's argument that the state law would "frustrate the purposes of ERISA."

"These state laws do not directly conflict with the provisions of ERISA or the associated federal regulation," the Maryland Court of Appeals said in its ruling in Connecticut General Life Insurance Co. v. Insurance Commissioner for the State of Maryland. "[The laws] were enacted with the goal of correcting perceived problems within the insurance industry regarding denial of benefits by insurers based on utilization reviews."

The Maryland court's decision stemmed from two cases in which the insurance commissioner fined Connecticut General Life and ordered the company to pay for treatments it initially denied.

The first involved a woman who underwent a right and left frontal craniotomy for a brain tumor. About seven weeks after surgery, she was transferred to a nursing home that did not offer acute rehabilitative services. The insurer denied a request for continued inpatient rehabilitation care, according to court documents. The woman requested an internal review from the insurer, lost that, then went to Larsen's office.

The commissioner ordered the health plan to pay for the medical services and fined the company $125,000, according to court records.

In the second case, Connecticut General refused to pay for a one-day inpatient hospital stay after a woman had a hysterectomy and a related surgical procedure.

The health plan, which had a pediatrician review the case, said the hospital stay wasn't medically necessary, according to court documents. The woman appealed to Larsen's office. A gynecologist on an independent review organization's panel reviewed the case and said the hospitalization was indeed necessary, court documents say.

Larsen ordered the health plan to pay for the services and to pay a $2,500 penalty, court records show.

"The external review laws are one of the most important patient protections," Larsen said.

Connecticut General could still appeal the decision to a federal court. A spokesman for the company, Wendell Potter, said company executives are still reviewing the decision.

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 ADDITIONAL INFORMATION: 

Connecticut General Life Insurance Co. v. Insurance Commissioner for the State of Maryland

Venue: Maryland Court of Appeals, the state's highest court
At issue: Whether the state insurance commissioner has the right to enforce a state law that guarantees health plan subscribers external reviews when their health plans deny treatments their doctors say are medically necessary. The court said yes.
Potential impact: Doctors say the decision reinforces the physician-patient relationship and helps ensure that patients get the care they need.

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Maryland Court of Appeals decision in Connecticut General Life Insurance Co. v. Insurance Commissioner for the State of Maryland, in pdf (http://www.courts.state.md.us/opinions/coa/2002/98a01.pdf)

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Copyright 2002 American Medical Association. All rights reserved.