September 16th, 2011
One of the great advances for people with disabilities under the Patient Protection and Affordable Care Act is its coverage standards for the individual and small group markets. To be sure, the Act’s best known provisions where disability is concerned are those that bar insurers from totally denying access for people with higher health care needs. Insurer practices either prohibited or heavily regulated include refusing outright to sell or renew a policy, applying pre-existing condition exclusions, charging people who need care more for coverage, imposing excessive waiting periods before coverage begins, and placing arbitrary annual and lifetime caps on the overall dollar value of coverage. See 42 U.S.C. §§300gg – 300gg-5, 300gg-7, and 300gg-11, added by PPACA §§1001 and 1201.
But the Act goes beyond threshold matters, by establishing fairness and non-discrimination as basic tenets of coverage in the individual and small group market. This important advance is embodied in the Act’s “essential health benefit” provisions, see 2 U.S.C. §300gg-6, which set standards for individual and small group market insurance products. Among its reforms, the essential benefit statute lists certain benefit classes that must be covered, see 42 U.S.C. §18022 (b)(1), along with basic rules about when cost-sharing can be applied. See 42 U.S.C. §18022(c). The essential benefit statute also takes aim at longstanding discriminatory insurer practices by prohibiting an implementation approach that allows coverage decisions or benefit designs that “that discriminate against individuals because of their age, disability, or expected length of life. . .” and by requiring that the Secretary of HHS ensure that essential health benefits are not denied “on the basis of . . . present or predicted disability. . .” See (42 U.S.C. §18022(b)(4).
In setting non-discrimination in coverage as the basic operating rule for insurance products sold to individuals and small groups, the essential benefit statute represent a breakthrough in U.S. disability policy. Even the Americans with Disabilities Act, a watershed in federal civil rights law, has been interpreted by the courts not to reach the content or design of health insurance. (See Note 1 below.) The non-discrimination coverage standard established as a dimension of the essential benefit statute seeks to create a level playing field in which, regardless of condition, covered individuals stand on equal footing where access to quality and efficient care is concerned.
Probably the best source of information on how insurers discriminate against persons with disabilities is the large body of legal challenges to the denial of coverage that have been brought over the years by children and adults with disabilities. These cases reveal the strategies employed by insurers to deny what appears to be covered treatment by cherry-picking the conditions that the insurer will cover. Common techniques designed to cherry-pick the types of patients who qualify for coverage include applying “educational” exclusions when clinical treatments are needed by children with disabilities, requiring that a patient be able to “recover” before treatment will be deemed covered, or confining coverage to “illnesses” and “injuries,” thereby excluding a wide array of physical, mental, and developmental conditions (e.g., spina bifida, cleft palates, congenital dento-facial deformities, cerebral palsy, autism) that benefit from clinical care but that are not either acute illnesses or injuries. It was exactly these types of patient cherry-picking practices that the essential benefit provision’s non-discrimination bar was designed to halt.
A Misguided Definition That Sanctions Discrimination
Imagine the shock, therefore, when, as part of proposed disclosure rules intended to aid consumers understand and use their coverage, see 76 Fed. Reg. 52475 (August 22, 2011), HHS, Treasury, and Labor proposed a medical necessity definition that is the absolute embodiment of the very types of discriminatory practices the Affordable Care Act is intended to stop. This de facto government sanction to discriminate based on patient condition is found in the glossary that accompanies the proposed rule establishing summaries of benefits and coverage (SBCs), which would define medically necessary as “[h]ealth care services or supplies needed to prevent, diagnose, or treat an illness, injury, disease or its symptoms and that meets accepted standards of medicine.” See 76 Fed. Reg. 52529.
This definition of medical necessity, omits any reference to the broad range of conditions that can give rise to the need for health care. Developed for the agencies by the National Association of Insurance Commissioners, the definition is not merely suggestive: the NPRM would bar insurers from making any modifications to the proposed glossary. See 76 Fed. Reg. 52479. Since a glossary is useful only if it tells patients what their coverage really means, inevitably the glossary can be expected to bind the terms of coverage themselves. After all, what good is a summary of benefits and coverage and glossary for a consumer if the actual terms of coverage can be completely different?
By excluding conditions from the types of health situations for which covered treatment is sought, the rule effectively sanctions the same patient cherry-picking that the ACA meant to halt. The exclusion of the term “conditions” from the list of situations in which medically necessary covered treatments and services must be furnished can have an enormous impact in the bizarre world of insurer parlance. Speech therapy for a stroke patient could well be medically necessary to treat an acute illness. The same clinically beneficial speech therapy, if provided for child born with cerebral palsy or a cleft palate or spina bifida would be excluded as not medically necessary if the situation giving rise to the treatment is deemed a condition rather than an illness or injury (Paradoxically, the essential benefit statute identifies habilitative services as a covered benefit class; it is not clear what would be left in this coverage class if only treatments for illnesses and injuries are covered).
The proposed medical necessity definition would not merely perpetuate but actually would bless the manipulation of coverage terms to downgrade the availability and value of coverage for children and adults with disabilities. Limiting the scope of coverage to illnesses and injuries has long been rejected by experts in the field of medical necessity such as Dr. David Eddy, who served for years as a senior advisor to many insurers and whose own work emphasizes medical necessity standards that measure the value of treatment for all conditions.
In finalizing the proposed rule, the agencies need to deal with the obvious and serious problem associated with having proposed a medical necessity definition that is a throwback to a time when children and adults were institutionalized and left untreated by private payers who deemed their conditions to be beyond the treatment norms of commercial insurance. A medical necessity standard that enables insurers to eliminate coverage based on the type of presenting condition inevitably will result in precisely the type of discriminatory “coverage decision” or “benefit design” that the essential health benefit statute was designed to prevent.
Note 1. Doe v Mutual of Omaha Ins. Co. 179 F. 3d 557 (7th Cir., 1999); cert. den. 528 U.S. 1106 (2000); see, generally, Sara Rosenbaum, Joel Teitelbaum and Katherine Hayes, The Essential Health Benefit Provisions of the Affordable Care Act: Implications for People with Disabilities, Commonwealth Fund, March, 2011; Sara Rosenbaum, Insurance Discrimination Based on Health Status: An Overview of Insurance Discrimination, Federal Law, and Federal Reform Options, (O’Neill Institute for National and Global Health Law, Legal Solutions in Health Reform)