By J.J. Conway
Healthcare holds a unique position in the American economy. Few areas of the economy are as personal, complex, and even emotionally charged. Most Americans working private sector jobs are insured through federally-regulated employer-provided healthcare plans. While the benefits are delivered through the employee's benefit plan, the traditional healthcare insurance arrangement works the same as if a consumer purchased a contract from an agent or a healthcare exchange. That is, a policyholder walks into a medical facility, completes some paperwork, receives medical treatment, and binds an insurer to pay for the charges. In its simplest form, in exchange for the payment of premiums, a patient can seek care and someone else pays the bill.
For decades, health insurers have found new and different ways to limit an insured's ability to use that spending power. For example, insurers often require written preauthorization before a patient may undergo a certain treatment. Insurers impose other financial costs hoping to limit healthcare expenses. Such imposed costs include increased annual deductible amounts and cost-sharing obligations (i.e., co-pays), and maximum payment amounts for certain treatments.
One area where this traditional arrangement is increasingly being tested is in the treatment of longer-term medical care needs, such as admission to a residential treatment or skilled nursing facility. These facilities offer private or semi-private rooms, meals, onsite medical staff, medication management, routine examinations, and supervision. For these lengthier treatments, the costs are high, so insurers impose greater proof requirements upon their insureds to ensure the care is actually necessary.
Enter the "treatment guideline." A treatment guideline is an insurance company's statement of admission criteria that is used to determine whether a requested treatment is "medically necessary." Sometimes called a "managed care guideline" or a "level of care guideline," these documents are often attached to denial letters received by patients wishing to receive treatment. The guidelines list different treatment options for various medical conditions, with options for higher levels of care tied to the severity of a patient's condition. A patient suffering from mild depression, for example, may be safely treated in an outpatient setting according to the guideline. A patient likely to cause self-injury, on the other hand, may require treatment with round-the-clock supervision.
While treatment guidelines are designed for generic application, they are often applied to cases which are not appropriate for a "one-size-fits-all" determination. Unsurprisingly, huge battles have erupted over whether these care guidelines actually comport with generally accepted medical care practices. Mostly, the disputes center on the question of whether the treatment guidelines are overly restrictive and, thus, create improper barriers to care.
An area of considerable litigation is in the case of residential stays for mental health and substance abuse treatment. An average admission may cost upward of $1,000 per day. Sometimes, there are other associated costs, like prescription drugs or specialized therapy sessions. A patient seeking this type of care must typically seek a preauthorization before admission, and if denied, proceed through multiple levels of appeal. If the denials persist, an insured may have an opportunity to resubmit the claims on a post-service basis.
Under both scenarios, the patient (or the patient's parent for minors) is likely to encounter a determination based on some version of the "level of care" guideline. The dispute will also likely center on whether the care at a less expensive facility can provide the same treatment outcome as the more intensive service. Patients and their guardians can be overwhelmed by these guidelines since they give the appearance of well-founded medical policy statements supported by lengthy bibliographies with citations to medical journals and studies. They are highly technical and appear authoritative.
But these generic treatment guidelines have come under increasing scrutiny because they often fail to comply with generally accepted medical standards and may have been established using significant input from non-medical employees. In a far-reaching decision, Wit v. United Behavioral Health, 2019 WL 1033730 (N.D. Cal. Mar. 5, 2019), a federal court found evidence that the insurer's "Level of Care Guidelines" were worthy of "significant skepticism" and may have been drafted with a "financial incentive" to "keep benefit expenses down." In February, a federal district court in the Eastern District of New York refused to dismiss a putative class action making the same type of arguments against Anthem, Inc., another major U.S. insurer. In Collins v. Anthem, Inc., 2022 WL 580988 (E.D.N.Y. Feb. 24, 2022), the court held that it was plausible that the company's treatment guidelines were "impermissibly restrictive" and inconsistent with "medical necessity."
Cases like Wit and Collins are raising similar issues, namely that an insurance company's generic guidelines do not comport with Generally Accepted Medical Practices. Courts are becoming more receptive to these arguments. They are finding that the treatment guidelines are overly restrictive and do not permit treatment beyond stabilizing a critical situation. From the perspective of the plaintiffs and their medical experts, this is at odds with the purpose of inpatient treatment.
With residential treatment claims increasing, the prevalence of treatment guidelines to manage healthcare costs is increasing as well. Health plan members who are having their claims denied, in whole or in part, may wish to scrutinize not only the reason for the denial but also the foundation upon which that denial is based.
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John Joseph (J.J.) Conway is an employee benefits and ERISA attorney and founder of J.J. Conway Law in Royal Oak.
