OHA Letter re Reversing Burden of Proof for Medical Necessity Denials

May 19, 2021

Hon. Matt Ritter, Speaker of the House
Hon. Jason Rojas, Majority Leader
Legislative Office Building
Hartford, CT 06106

Sent Electronically

Dear Mr. Speaker and Mr. Majority Leader:

I write today regarding the letter you received from Anthem and ConnectiCare dated May 14, 2021 and discussing certain bills before the House. Let me first take a moment to recognize, as my office has done in public many times, both of those companies for standing with the people of Connecticut by participating on the ACA exchange. Like them or not, the ACA exchanges for the past decade have been this nation’s key solution to providing individual health coverage. In that context, a health insurance carrier’s striving to extend individual coverage to the residents of the state in which they are headquartered or have significant operations is a necessary part of basic corporate good citizenship and civic-mindedness. For this reason, my office again salutes the teams at Anthem and ConnectiCare for their continuing service in providing individual exchange-based coverage to our mutual friends, neighbors and colleagues in communities all over Connecticut.

As you know, Connecticut is often referred to as “The Insurance Capital.” Part of this well-deserved historical status is a call for our state to be the cradle of innovation and consumer-centered progress in health coverage, rather than to sit on accomplishments from the past and defend the status quo.

That is what makes S.B. 1045 so appropriate for our state and our time — in fact one deceptively simple and brief part of the bill makes it the most exciting and transformational bill for health insurance consumers to come before the General Assembly in decades — more important in my judgment than other bills that have received much more public attention. I am referring to S.B. Sec. 1045(a)(2)(D), which simply requires health insurers to prove that a duly prescribed treatment or drug is not medically necessary before the carrier can deny the claim. This is a reversal of the current burden of proof, which requires the usually medically unsophisticated patient to prove that the prescribed treatment is medically necessary.

One of the most frustrating (and as we mention below systemically inefficient and expensive) aspects of American health insurance is that health insurance carriers need not defer to the medical judgment of our own well-qualified treating physicians or other healthcare providers, especially when those providers are duly licensed and presumably well-vetted in-network providers. As we discuss further below, changing this dynamic will if properly implemented, result in administrative cost savings for both the carriers and healthcare providers.

It does not make sense to allow an insurance company doctor or other professional staring at a computer screen in a far-off state, who has never seen or laid hands on us, and who has no history with us or context about our personal medical history, to override the medical judgment of our personal treating physicians or providers. Yet for decades, this misguided and economically inefficient approach has been a cornerstone of American health insurance operations. Placing medical treatment veto power in the hands of far-off, disconnected, and financially conflicted insurance company doctors and other professionals is not only bizarre and unfair to patients, it also adds greatly to the internationally abnormal cost of medical care in America and Connecticut.

On one side of the equation, the insurance companies over the past several decades have built up their so-called “utilization review” (UR) capabilities to second-guess our treating doctors, often from offices far across the county from Connecticut; meanwhile, on the other side, the hospitals and other treating providers have had to counter with their own enormously expensive administrative and appeal apparatuses to fight against the insurance companies’ utilization review teams. The upshot: healthcare economists estimate that the uniquely American medical necessity review bureaucracies on both the carrier and provider sides contributes strongly to America’s swollen, globally unique administrative costs, which when the bureaucracies on both the carrier and provider side are taken into account, composes as much as 34 percent of healthcare costs in our country — costs that are ultimately borne by American businesses and families. [1]

The vast bulk of this unnecessary UR administrative expense on both the carrier and the provider sides could be saved by the simple, common-sense measure of reversing the burden of proof so that the medical judgment of presumably trusted, well-vetted in-network providers would stand unless and until the carrier (not the patient, as now) successfully appeals to an independent third party. Right now, claims denial is a high-volume, no-lose proposition for the carriers — there is no financial downside to denying claims, especially when the carriers know that up to 99 percent of denials are never appealed, no doubt in part because a patient facing a high-dollar denial is by definition either sick or badly injured, or caring for a loved one who is. [2]

Flipping the paradigm to honor the medical necessity judgment of treating physicians as the default over the judgment of distant, disconnected insurance company employees who are necessarily less well-informed about the medical situation of the particular patient will cause the carriers to be much more selective and judicious in determining which claims to challenge. The carriers will need to limit their challenges only to truly unreasonable claims. If the carriers can be freed from what they currently regard as their patriotic duty to flyspeck each individual claim looking for any minor error or inconsistency, they likely will find it is much more efficient for them to instead look for inappropriate patterns of practice by providers. It is fine to deny a $100 claim, but the real efficiencies lie in determining which provider is generating hundreds of questionable claims. Where a carrier sees a doctor or other provider repeatedly putting in questionable claims, the carrier can then educate that provider, and if the inappropriate behavior does not change, the carrier should have substantial discretion to remove the provider from its network, or move the provider to a less-favored tier. In addition to enabling the carriers to be far more efficient in their utilization review programs, reversing the burden of proof is much more fair to individual health insurance buyers, who thought they were paying for claims to be processed, not denied.

The May 14 letter has it exactly wrong — it is the current system that has caused increased administrative expense and burden on both the carrier and healthcare provider sides, and has contributed significantly to the internationally abnormal medical expenditures that American businesses and families must shoulder. SB 1045 if properly implemented can be a win-win-win, for Connecticut businesses, families, and insurance carriers.

Reversing the burden of proof for medical necessity denials by in-network providers can lower administrative burden and expenses, and can generate substantial administrative savings and efficiencies throughout our state’s healthcare economy — medical providers will no longer need so many resources to fight indiscriminate denials, and the carriers for their part should also be able to considerably downsize their current laborious claim-by-claim utilization review apparatus, and instead more efficiently target their review and education activities towards identifying, educating and terminating or otherwise managing the relatively few outlier providers.

That concludes my comment on the most important part by far of the bills referenced in the May 14 letter — the section of S.B. 1045 that establishes a common-sense presumption that treatment decisions by well-vetted, duly licensed physicians (and other providers) should be honored unless proven to be medically unnecessary. Simply put, the burden should be on the carriers to prove that services ordered by the treating provider are not medically necessary. But for the sake of completeness, we turn now to several other matters raised in the May 14 letter that also require clarification:

Ø The portion of S.B. 1045 that requires AccessHealth CT (AHCT) plans to cover children up to age 26 even when that child also has their own job-based insurance coverage will have minimal if any financial impact on exchange plans. Under common industry coordination-of-benefit principles, when a person is covered under two plans, the one that they personally subscribe to is primary over plans where they are a covered dependent; thus typically the covered child’s own job-based plan will cover most medical expenses, and the AHCT plan will seldom if ever be touched.

Ø Moreover, the same portion of S.B. 1045 that requires AHCT coverage for children under 26 does not create any actually new requirements; rather the proposed statute simply clarifies that Connecticut law is in conformance with federal regulations that in unequivocal language extend ACA coverage to all children until 26. See 29 C.F.R. Sec. 2590.715–2714; 45 C.F.R. Sec. 147.120. It is worth noting that this issue was nowhere mentioned in the health plans’ otherwise comprehensive legislative testimony listing many other objections to S.B. 1045.

Ø Regarding S.B. 1003 re Co-Pay Accumulator programs, the May 14 letter is moot as regards the Connecticut House of Representatives, since it has been passed, but for the record, it is not accurate to state that the exchange plans will bear the full cost of these brand name drugs, at least to the extent that this suggests that Connecticut’s insurance companies themselves will bear any iota of this cost; as this office stated in our own legislative testimony on S.B. 1003, the plans themselves will be held financially completely harmless, as is perhaps too often the case in American healthcare policy; rather, to the extent there is any cost to the measure, the plans will not eat this cost, but simply will increase premiums to account for it. (And it is worth noting that the new increased federal subsidies under the American Rescue Plan for some families will increase correspondingly, holding some Connecticut families wholly or partially harmless as well.) The policy trade-off at issue in S.B. 1003 does not involve any financial burden to the carriers; rather, the trade-off is between imposing out-of-pocket costs on individual families afflicted by chronic conditions, or imposing those costs on the entire community of covered individuals by raising premiums slightly. Whenever there is a choice between imposing huge costs directly on individual families with chronic conditions, and spreading the exact same costs over a wider group (for instance all covered individuals, or all U.S. or state taxpayers), OHA in its role representing the interests of Connecticut health insurance consumers as a whole will typically recommend the choice that spreads the costs for sick individuals over the widest possible class. Thus, while S.B. 1003 is not a perfect piece of legislation, it nevertheless is worthy of support because it protects our individual brother and sister families who are dealing with sometimes serious medical issues from financial devastation due to America’s often exorbitant and internationally abnormal pharmaceutical prices.

Ø Similarly, the May 14 letter’s treatment of H.B. 6622 may leave the mis-impression that the insurance plans themselves will bear some costs if they are not allowed to yank high-priced drugs off the formularies mid-year; the real situation is that the expense of H.B. 6622 (similar to S.B. 1003, discussed above) will be spread across all residents covered by Connecticut health insurance plans. Moreover, OHA anticipates that any costs of H.B. 6622 will be minimal, since after all the legislation does not prevent the plans from pulling drugs off their formularies forever, but rather simply makes them wait until the end of the plan year to do so. As explained in our testimony on H.B. 6622, any premium increase is vastly outweighed by the brutal unfairness of taking drugs away from plan

subscribers mid-year, especially given that families often select plans based specifically on drug formularies. It is hard enough that families will have to shop for a new plan that covers their needed medications for the new plan year, without taking away access to a critical drug two months into a one-year plan, which as noted in our testimony can have dire medical consequences if a family fails to fill prescriptions for financial reasons.

I appreciate the opportunity to submit this letter, and OHA is happy to work with you or your staffs on these important issues.

Sincerely,

Ted Doolittle

State Healthcare Advocate

cc:
Jonny Dach
Andrew Mais
Victoria Veltri
James Michel
Charles H. Klippel
Matt Lesser
Kerry Wood
Eric Galvin
Louis Gianquinto

[1] See https://pubmed.ncbi.nlm.nih.gov/31905376/ (Himmelstein, et al., Health Care Administrative Costs in the United States and Canada, 2017, Ann. Intern. Med. 2020 Jan. 21).

[2] See, e.g., https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans/ (Pollitz, et. al. Claims Denials and Appeals in ACA Marketplace Plans, Kaiser Family Foundation Feb. 2019); https://oig.hhs.gov/oei/reports/oei-09-16-00410.asp (Levinson, Medicare Advantage Appeal Outcomes, HHS-OIG Sept. 2018).