ARIZONA STATE SENATE
Phoenix, Arizona
FINAL
REVISED
unemployment insurance;
amount of benefits
(NOW: healthcare plans; oversight)
Purpose
Transfers, from the
Department of Health Services (DHS) to the Department of Insurance (DOI) as of
July 1, 2001, certain regulatory oversight functions relating to health care
services organizations and makes numerous changes to the health care appeals
process as of March 1, 2001, including replacing the utilization review agent’s
responsibility to select an independent reviewer with the Director of the
Department of Insurance’s authority to select an independent review
organization (IRO). Contains a $500,000
appropriation and a proposition 108 clause.
Background
Transfer of Regulatory Oversight of HCSOs
Currently, DHS is required
to determine if a health care services organization (HCSO, commonly known as a
health maintenance organization or HMO) applying to DOI for a certificate of authority in Arizona meets prescribed minimum health care
services necessary to maintain its enrollees in good health.
Under this bifurcated
regulatory system, DHS reviews applications to ensure the HCSO includes
adequate basic health care services by analyzing the proposed or actual
enrollment, physician staffing for enrollees, medical support staff, specialty
medical services, geographic service areas and a quality assurance plan. As prescribed by DHS, “basic health care
services” establishes standards for emergency care, inpatient general hospital
care, physician care, outpatient care, health maintenance care, ambulance
services and out-of-state emergency care.
DHS is also responsible for reviewing this information when an HCSO
wishes to expand its operations. In addition,
DHS rules prescribe minimum qualifications for HCSO chief executive officers
and requirements relating to medical directors, medical record systems and
quality assurance plans.
On review, DHS submits its
findings to the HCSO and DOI. If the
findings indicate the applicant or HCSO does not have an adequate health care
plan in accordance with rules, DOI cannot issue a certificate of
authority. In addition to reviewing
HCSO applications, DHS is also authorized to review an HCSO’s basic health care
services during annual DOI market conduct examinations and site visits of
HCSOs.
S.B. 1330 establishes a
consolidated regulatory structure for the oversight of HCSOs by transferring
certain regulatory responsibilities relating to HCSOs from DHS to DOI. This
legislation also appropriates $500,000 in FY 2000-2001 from the state general
fund to DOI to enforce the new regulatory responsibilities.
Health Care Appeals Reform
Laws 1993, Chapter 159
defined utilization review as a system for reviewing the appropriate and
efficient allocation of inpatient hospital resources, inpatient medical
services and outpatient surgery services that are covered by a health care plan
and established certification requirements for utilization review agents. In 1997, the Legislature amended the
utilization review statutes, establishing a standardized process for the appeal
of a direct or indirect denial by a health insurer of a requested medical or
health care service or claim (Laws 1997, Chapter 100).
The health care appeals
process applies to all health insurance plans – managed care, indemnity,
dental, prepaid dental and vision C that may deny claims or
services covered by the plan. The process consists of four levels of review: an
expedited medical review, an informal reconsideration, a formal appeal and an
external independent review. In
accordance with A.R.S. §20-2537, requests for external independent reviews
involving issues of coverage are reviewed by DOI for a decision; cases
involving issues of medical necessity are reviewed by an independent reviewer
who is selected by the plan’s utilization review agent for a decision.
A.R.S. §20-2538 requires the
Director to compile a master list of independent reviewers from lists provided
by health insurers and medical professional associations in this state. Although the Director is authorized to
modify this master list, concern has been raised that the current process,
which requires a plan’s utilization review agent to select an independent
reviewer from the master list, may lead to possible conflicts of interest and
creates the appearance of bias.
According to the National
Academy for State Health Policy, several other states have enacted health care
appeals processes that rely on Medicare Peer Review Organizations to perform
external independent reviews. This
system eliminates the need to compile a list of reviewers. S.B. 1330 adopts a
similar approach to reviewing external appeals by eliminating the utilization
review agent’s responsibility to select an independent reviewer and requires
the Director to select an IRO to conduct external independent reviews that
involve issues of medical necessity.
There is no cost to the
state general fund relating to this legislation.
Provisions
Transfer of Regulatory Oversight of HCSOs
1. Transfers, from DHS to DOI as of July 1, 2001, the responsibility of:
a.
determining
the “basic health care services” required to maintain an HCSO’s enrollees in
good health.
b.
approving
the portions of an application for a certificate of authority that relate to a
general statement about the HCSO and its plans, facilities, personnel and
geographic service area.
c.
adopting
rules relating to effective health care plans.
2. Requires the Director of DHS to advise the Director of DOI in the determination of “basic health care services.”
3. Eliminates the authority of the Director of DHS to conduct an examination of an HCSO but preserves the Director’s authority to participate in examinations to review an HCSO’s health care service delivery system.
4. Eliminates the requirement of an HCSO to send a copy of an annual report of its activities to the Director of DHS.
5. Exempts DOI from the formal rule making process for 18 months from the general effective date to adopt temporary rules relating to its new regulatory responsibilities.
6. Requires DOI to initiate the formal rule making process by the effective date of the temporary rules.
7. Appropriates $500,000 in FY 2000-2001 from the state general fund to DOI to comply with the additional regulatory responsibilities relating to HCSOs. Exempts the appropriation from lapsing.
Health Care Appeals Reform
8. Exempts from the health care appeals process long-term care insurance policies, Medicare supplement policies and union health plans.
9. Replaces the requirement that a utilization review agent send an information packet regarding the health care appeals process to a member at each phase of the process, with a requirement that the insurer provide the information packet within five business days after a member or provider initiates an expedited medical review, informal reconsideration or formal appeal.
10. Includes as part of the existing information packet:
a.
a
statement that the member is not responsible for the costs of the external
independent appeal.
b.
a
standardized form prescribed by DOI for requesting an appeal.
c.
the
number of the DOI consumer assistance office for answering consumer questions
regarding the health care appeals process.
11. Requires the insurer to notify, at the time of denial through reasonable means, members of their right to appeal.
12. Stipulates an explanation of a member’s right to appeal in the explanation of benefits satisfies the notification requirement.
13. Requires a health care provider to notify members of their right to appeal when the insurer has notified the provider of the member’s right to appeal.
14. Allows a member to pursue an expedited medical review if the time period for the formal appeal, in addition to the informal reconsideration, is likely to cause a significant negative change to the member’s medical condition.
15. Stipulates the treating provider’s certification relating to a request for expedited medical review is not challengeable.
16. Requires, in addition to the existing written notification requirement, a utilization review agent to notify by phone a member and the treating provider of a denial of service at the expedited medical review level.
17. Authorizes, on denial of a service at the expedited medical review level, a member to proceed directly to the expedited appeal process.
18. Allows the utilization review agent to bypass the expedited medical review and request an expedited external independent review.
19. Requires, on request of the member, the member’s treating provider to send a written appeal of the denied service to the utilization review agent.
20. Requires, within three days of a request for an expedited appeal, the utilization review agent to select a health care professional to review the expedited appeals and render a decision based on the agent’s utilization review plan.
21. Requires, on the denial of an expedited appeal, the utilization review agent to provide oral and written notice of the denial and of the member’s right to proceed directly to the external independent review level.
22. Eliminates the authority of utilization review agents to send requests for external independent reviews relating to issues of medical necessity to an independent reviewer and requires the utilization review agent to forward these requests for review to the Director.
23. Includes, as part of the external independent review packet that the utilization review agent forwards to the Director, the name and credentials of the licensed health care provider who reviewed the appeal under any level of the process.
24. Requires, within five days of receiving a request that involves an issue of medical necessity, the Director to refer the case to an IRO.
25. Requires, within 21 days after receiving a case that involves an issue of medical necessity, the IRO to review the case, make a decision and forward its decision to the Director.
26. Requires an IRO to render each decision based on the information in the external independent review packet and consistent with the utilization review plan.
27. Requires, within five days after receiving the IRO’s decision, the Director to send written notice of the decision to the member, treating provider, insurer and utilization review agent.
28. Maintains the current stipulation that a decision on a case involving an issue of medical necessity is a final administrative decision that is subject to judicial review.
29. Stipulates a health care insurer is only responsible for services determined to be medically necessary by an IRO that are also covered services.
30. Increases, from five to 15 business days, the amount of time the Director must render a decision on a case involving an issue of coverage.
31. Changes, from the utilization review agent to the Director, the responsibility for sending written notice of the Director’s decision to the member, treating provider and insurer.
32. Clarifies the Director must refer to an IRO a case that involves an issue of coverage if it is found to also involve an issue of medical necessity.
33. Includes IROs among those who are authorized to request an extension of the review period up to an additional 30 days.
34. Eliminates the prohibition to introduce evidence related to a health care appeal in court for any purpose and stipulates a decision by the Director or an IRO is admissible in proceedings involving a health care insurer or utilization review agent.
35. Allows a member to request an expedited external independent review of an adverse decision at the expedited medical review.
36. Requires, within five business days of a denial from an expedited medical review, the member to send a request for an expedited external independent review to the utilization review agent.
37. Requires, within one business day of receiving a request for an expedited external independent review, the utilization review agent to forward the request, with specified information, to the Director.
38. Requires, within two business days of receiving the information packet for an expedited external independent review, the Director to forward a case involving an issue of medical necessity to an IRO.
39. Requires, within five business days of receiving the expedited external independent review case, the IRO to render a decision that is consistent with the utilization review plan and send the decision to the Director.
40. Requires, within one business day of receiving the decision, the Director to notify the utilization review agent, insurer, member and member’s provider of the decision.
41. Stipulates the decision of the IRO is a final administrative decision and is subject to judicial review.
42. Requires an insurer to cover any service or claim that is determined by an IRO to be covered and medically necessary.
43. Requires, within two days of receiving the information packet for an expedited external independent review that involves an issue of coverage, the Director to determine if the service or claim is covered and notify the utilization review agent, insurer, member and member’s provider of the decision.
44. Prohibits the IRO, Director and the Office of Administrative Hearings (OAH) from requiring a health care insurer to provide an excluded service.
45. Requires an insurer to cover any service or claim that is determined in a final administrative decision to be covered and medically necessary.
46. Requires any proceeding before OAH involving an expedited external independent review to be promptly completed.
47. Replaces the responsibility of the Director to compile a list of independent reviewers with a requirement to procure IROs to conduct external independent reviews of cases involving issues of medical necessity.
48. Requires the IRO to use licensed health care professionals. Specifies conditions if the IRO uses providers who are not licensed in Arizona.
49. Prohibits an IRO and its individual reviewers from having a substantial interest in the member, provider or health care insurer involved in a care under review.
50. Prohibits an independent reviewer of an IRO from being a member of the health care insurers whose care is under review.
51. Establishes a health care appeals fund in DOI consisting of monies collected by the Director from health care insurers to compensate IROs for performing external independent reviews and DOI for performing the responsibilities relating to IROs.
52. Specifies monies in the fund do not revert to the state general fund, are not lapsing and are continuously appropriated.
53. Authorizes the Director to assess each health care insurer:
a. a one-time fee not to exceed $200 for start up funds relating to IROs.
b. up to $200 for the costs of performing the responsibilities
relating to procuring IROs and for implementing and maintaining the external
independent review process.
54. Authorizes DOI one FTE to perform the responsibilities relating to IROs.
55. Requires, for compensation, an IRO to submit a detailed invoice to the Director.
Miscellaneous
56. Eliminates the requirement of medical directors to make indirect denials of preauthorization requests in writing.
57. Eliminates the responsibility of medical directors for indirect denials.
58. Eliminates the prohibition of hospital and medical service corporations from discriminating against any provider with respect to reimbursement for covered services.
59. Contains numerous conforming and technical changes.
60. Contains a Proposition 108 clause requiring a two-thirds vote for passage.
61. Becomes effective on signature of the Governor except for provisions relating to the transfer of regulatory authority, which are effective on July 1, 2001, and provisions relating to the health care appeals process, which are effective on March 1, 2001.
Amendments
Adopted by the House of Representatives
1.
Adds
provisions of S.B. 1138 (insurance department; health plans oversight) and S.B.
1061 (health care appeals; independent reviews).
Amendments
Adopted by the Free Conference Committee
1.
Exempts
from the health care appeals process long-term care insurance policies,
Medicare supplement policies and union health plans.
2. Eliminates the requirement of medical directors to make indirect denials of preauthorization requests in writing.
3. Eliminates the responsibility of medical directors for indirect denials.
4. Eliminates the prohibition of hospital and medical service corporations from discriminating against any provider with respect to reimbursement for covered services.
5.
Makes
technical changes.
House
Action Senate
Action
COM 3/20/00 DPA/SE 5-1-0-3 Final
Read 4/18/00 30-0-0-0
APPROP 3/14/00 DPA/SE 9-2-0-2
3rd
Read 4/11/00 49-8-3-0
Final
Read 4/18/00 48-9-3-0
Signed
by Governor 4/24/00
Chapter
355
Prepared
by Senate Staff
May
2, 2000