Linnaean Regulation in Health Insurance and Information Technology, Part II

[Ed. note: This is the second part (perhaps evident from the title) of a two part post. Though each could well stand on its own, the first part can be found here.]

Insurance Reporting and Classification

Reporting requirements may not seem like a notable accomplishment. Nevertheless, the trend toward monitoring the products and services offered by insurance companies is an important step toward accountability. HHS needs to impose some order, some translatable logic, on fields that have threatened to become enormously parasitic and unproductive by or masking the true nature of their commitments.

Consider the practical illegibility of the average insurance plan. A vanishingly small number of subscribers actually read such plans. A plan may have complex cost-sharing requirements that vary among in-network and out-of-network primary care doctors, specialists, surgeons, hospitals, and procedures. While a “great risk shift” makes consumers all the more responsible for their choices in health care, it’s hard to imagine anyone accurately mapping the true fiscal consequences of given disease episodes in an aggressively complex plan.

By setting “a minimum level of health benefits, called the essential health benefits, that must be offered by certain health plans.” As Jessica Mantel explains, the term “‘essential health benefits package’ means coverage that not only provides for the essential health benefits defined by the secretary, but also limits cost-sharing for coverage of the essential health benefits in accordance with the parameters specified in the statute.” The Cancer Action Network has applauded the ACA for promoting “more standardization in the scope and value of private health insurance coverage available.”

Similarly, setting a “medical loss ratio” involves a careful delineation of insurer payments and functions that actually contribute to care. As Tim Jost explained in Health Affairs:

Medical loss ratios have long been of interest primarily to investors. An insurer that could achieve a low MLR by holding down expenditures on health care for its enrollees was a good investment. . . . On November 22, 2010, the Department of Health and Human Services released its interim final rule implementing the requirements of the new section 2718 of the Public Health Services Act (added by section 10101 of the Affordable Care Act), entitled, “Bringing Down the Cost of Health Care Coverage.” This provision is usually referred to as the “medical loss ratio” (or MLR) requirement . . .

Section 2718 requires health insurers (including grandfathered but not self-insured plans) to report to HHS each year, the percentage of their premium revenue that the insurer spends on 1) clinical services for enrollees, 2) “activities that improve health care quality,” and 3) all other non-claims costs, excluding federal and state taxes and licensing or regulatory fees. . . .

Jost describes in details how the classification works, and how it is designed to encourage more responsible insurer behavior.

Setting a Standard for Electronic Medical Records

Electronic health records systems will also need to develop shared data management standards. EMR vendors long argued that they needed flexibility to innovate in order to best reflect doctors’ practices and improve the capture of medical information. However, there is a tension between untrammeled innovation by vendors at any given time and later, predictable needs of patients, doctors, insurers, and hospitals to compare their records and to transport information from one filing system to another.

One system may be able to understand “C,” “cgh,” or “koff” as “cough,” and may well code it in any way it chooses. But to integrate and to port data, all systems need to be able to translate a symptom into a commonly recognized code. Health care providers can only avoid getting “locked into” a system if they can transport their records from one vendor to another. Patients want their providers to seamlessly integrate records.

HHS rulemaking has lain a groundwork for this type of common language of medical recordkeeping. As Sharona Hoffman and Andy Podgurski explain,

To address this problem, it is necessary for all vendors to support what we will call a “common exchange representation” (“CER”) for EHRs. A CER is an artificial language for representing the information in EHRs, which has well defined syntax and semantics and is capable of unambiguously representing the information in any EHR from a typical EHR system. EHRs using the CER should be readily transmittable between EHR systems of different vendors. The CER should make it easy for vendors of EHR systems to implement a mechanism for translating accurately and efficiently between the CER and the system’s internal EHR format.

There are also important opportunities for standardization in the security field:

As is true for a common exchange format, standardized security policies and mechanisms are unlikely to be adopted by vendors and providers without a regulatory mandate. In order to facilitate compliance and provide vendors with clear guidance, the regulatory mandate might incorporate, by explicit reference, some established and emerging security standards, such as the Internet Engineering Task Force’s Transport Layer Security (“TLS”) standard or its Public-Key Infrastructure (X.509) standard.

The discussion can quickly become technical, and it is difficult to explore all the ins and outs of the process. But the underlying purpose is clear: to develop some standard forms of interacting in a realm where “spontaneous order” is unlikely to arise and “network power” could lead to lock-in.

Of course, there are important differences between the EHR and health insurance landscapes. Symptoms refer to conditions that are, by and large, objective. (One can even imagine ubiquitous video cameras and sensors creating something like a complete patient record (or medical life log) for patients who consent to that type of monitoring.) Insurance contracts, by contrast, do not have the same “ontological firmness.” They must contemplate vague and open-ended spells of illness.

Nevertheless, a process similar to common exchange representation is now going on in the consumer affairs office of HHS. As the Office of Consumer Information and Insurance Oversight lays ground rules for ACA implementation, it must decide on some basic questions: what counts as insurance? What is a deductible? The ultimate goal is to require insurers to convey with far more precision what services they truly cover. The health insurance and health IT landscapes will only become governable when practices are nameable, classifiable, and comparable.

X-Posted: Concurring Opinions.

Linnaean Regulation in Health Insurance and Information Technology, Part I

I was recently listening to Health Affairs’s “Newsmaker Breakfast with Karen Pollitz.” She gave a fascinating presentation on the challenges she faces as she develops HealthCare.Gov as a portal for information about health insurance. As I noted a few years ago, health insurers can easily mislead consumers about the nature of their coverage, and disclosure charts can be very helpful.

But even disclosure charts run up against the slipperiness of language. Pollitz noted that for some plans, a “deductible” was not really a deductible; you could easily spend much more out-of-pocket on health care than the stated “deductible level” before coverage kicked in.

How can an individual make an informed choice when words lose their meaning in a tangle of qualifications and conditions? At what point does a deductible cease being a deductible? While this might seem like a relatively technical question of insurance regulation, it is reflects a more general information-gathering problem that will confront regulators in coming years. Scientists could only predict and control aspects of the natural world when they could be named and classified. Any successful regime of healthcare reform will depend, at a bare minimum, on a flexible yet standardized classification system that can map what health insurers are doing. Like Linnaeus patiently organizing a welter of living forms, regulators will need to taxonomize pullulating permutations of insurer practices.

The Rise of Health Care’s Middlemen

The United States leads the world in payments to private insurance providers. The industry has extraordinary power over access to health care. In 2010, long-standing dissatisfaction with the sector culminated in the Patient Protection and Affordable Care Act (ACA). Congress rejected changes like a public option in healthcare, in favor of a complex and reticulated statutory scheme to better regulate insurers. There have not been dramatic changes in the way that health insurance companies are run, and their stock prices tended to rise as reform became more certain.

The ACA has set in motion dozens of regulatory proceedings. The government also allocated $20 billion toward equipping all medical offices with electronic health records in the 2009 stimulus bill, the American Reinvestment and Recovery Act. Health regulators must now try to catch up with technologically advanced intermediaries in insurance and IT fields.

Immediately after the ACA passed, naysayers on both left and right complained that divisions like OCCIO were unprepared for their new regulatory roles. Perhaps the most compelling case for repealing the ACA is a belief that regulatory agencies will inevitably be captured, or overwhelmed with information from far far better funded attorneys and lobbyists representing insurance and IT firms.*

Nevertheless, the ACA has catalyzed one very important process: the development of an infrastructure of monitoring and reporting that will be necessary for any future informed regulation. It’s shocking to consider how inadequate past reviews were here. As of 1997, the “US Department of Labor had resources to review each employer-sponsored group health plan under its jurisdiction once every 300 years.” The Bush years did not significantly address that shortage. Moreover, “state insurance department staff levels declined 11% in 2007 while premium volume increased 12%.” The personnel simply haven’t been around.

Starting essentially from scratch, Pollitz and her fellow regulators are engaging in a painstaking rebuilding of the foundations necessary for substantial regulation. Having long neglected even to closely monitor the sharp practices of health insurers, federal regulators are now beginning new programs of surveillance.**

*The latter point does appear to be valid with respect to the public record now being compiled in dozens of rulemaking processes. In rule after rule, industry comments overwhelmingly dominate public interest or academic contributions. It’s sad to think that groups like Campaign for America’s Future, or labor unions, having spent so much time getting the ACA passed, are now ceding much of the regulatory field to insurers. On the other hand, given the Administration’s recent appointments, and recent McSurance waivers, who knows whether good comments would have an impact.

**For more on the importance of ongoing surveillance in complex business environments, see Larry Cata Backer on SarBox, and the last part of my earlier post on high finance.

Part II

X-Posted: Concurring Opinions.

New Rules for Insurance Appeals Under PPACA

On July 22, the Obama Administration released interim final rules that allow patient appeals of health insurance coverage decisions as required under the Patient Protection and Affordable Care Act (”PPACA”) and Health Care and Education Reconciliation Act (”Reconciliation Act”).  Published by the departments of Health and Human Services, Treasury, and Labor, these rules create standards for the internal and external processes by which patients can appeal adverse benefits decisions.

Prior to these rules, coverage appeals were governed by contract and State law.  Forty-four States have created some form of external appeal process for insurance coverage decisions; however, their coverage is limited and the processes vary greatly.  Effective January 1, 2003, changes to the Employee Retirement Income Security Act of 1976 (”ERISA”) regulations provided standards for internal appeals processes.  However, these standards only apply to employer-sponsored group health insurance.

As stated in the Obama Administration fact sheet entitled, “Appealing Health Plan Decisions,”

Today, if your health plan tells you it won’t cover a treatment your doctor recommends, or it refuses to pay the bill for your child’s last trip to the emergency room, you may not know where to turn. Most health plans have a process that lets you appeal the decision within the plan through an “internal appeal” — but depending on your State’s laws and your type of coverage, there’s no guarantee that the process will be swift and objective. Moreover, if you lose your internal appeal, you may not be able to ask for an “external appeal” to an independent reviewer.

Internal Appeals Process

Under the rules, new health plans beginning on or after Sept. 23, 2010, must have an internal appeals process for beneficiaries to challenge “adverse benefits decisions” — a “denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.”  Such adverse benefits decisions may be based on individual eligibility, benefit coverage, limitations on otherwise covered benefits (such as preexisting condition exclusions, source-of-injury exclusions, and network exclusions), and a determination that a benefit is experimental or not medically necessary.

In addition, health plans must do the following:

• Notify a claimant of a benefit determination as soon as possible;
• Provide claimants, free of charge, with the evidence relied upon and the rationale for the decision;
• Avoid conflicts of interest by making decisions regarding hiring, compensation, termination, and promotion independent of a claims adjustor or medical experts record of denial of benefits; and
• Meet additional requirements for notice, including information on internal appeals and external review processes.

However, these requirements do not pertain to so-called “grandfathered health plans” — those health plans that were in existence before March 23, 2010 when PPACA was enacted.  In the individual market, health insurance providers must meet the foregoing requirements as well as the following three:

• Applicants for individual insurance must be allowed to appeal initial eligibility determinations;
• Internal review must be limited to a single level, allowing claimants to appeal to external or judicial review immediately; and
• Insurers must maintain all claims and notices for a minimum of six years, which is already required of employer-sponsored health plans under ERISA.

External Appeals Process

If the internal appeal is denied, patients may choose to have the claim reviewed by an independent reviewer.   According to Appealing Health Plan Decisions, States are encouraged to adopt the National Association of Insurance Commissioners (NAIC) standards in “their external appeals laws to adopt these standards before July 1, 2011.”

The NAIC standards call for:

• External review of plan decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.
• Clear information for consumers about their right to both internal and external appeals — both in the standard plan materials, and at the time the company denies a claim.
• Expedited access to external review in some cases — including emergency situations, or cases where their health plan did not follow the rules in the internal appeal.
• Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.
• Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflicts of interest.
• Emergency processes for urgent claims, and a process for experimental or investigational treatment.
• Final decisions must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.

If State laws don’t meet these standards, consumers in those States will be protected by comparable Federal external appeals standards.

As Kaiser Health News reported, “This is a regulation that benefits everyone — consumers get protections, business and providers get more certainty in the rules and the need for litigation to settle these issues should be dramatically minimized,” Phyllis Borzi, assistant secretary of the Department of Labor, said at a briefing for reporters Thursday.

Consumer Assistance Grants

However, procedural rights for consumers are not sufficient to ensure proper appeals.  “Not enough consumers know this is an option that they have,” said Angel Robinson, the consumer advocate in the Iowa Insurance Division, according to Kaiser Health News.

In addition to the new requirements for internal and external appeals processes under the interim final rules, the federal government is offering nearly $30 million in resources to States and Territories to strengthen and establish consumer assistance programs.  Specifically, these programs are charged with:

• Helping consumers enroll in health coverage;
• Helping consumers file complaints and appeals against health plans;
• Educating consumers about their rights and empowering them to take action; and
• Tracking consumer complaints to help identify problems and strengthen enforcement.

Image Credit: Appeal to the Great Spirit, Cyrus Edwin Dallin (1909) Photo by Toni To via Flickr

Why Angela Braly, CEO of WellPoint Insurance, May Not Deserve a Raise After All

Photo by iampeas via Flickr

Earlier this year we discussed why Angela Braly, the CEO of WellPoint Insurance, deserved a raise. WellPoint, by number insured, is the nation’s largest health insurer.  Ms. Braly had been forced to make ends meet in 2008 with total compensation which amounted to $189,311.76 per week. This of course is less than half of what Aetna’s CEO, Ronald A. Williams, made that same year ($467,309.85 per week). For those of you keeping score at home, Ms. Braly commanded $9,844,212 in 2008. Mr. Williams made $24,300,112.

Considering this disparity, we wrote

So why does Angela Braly deserve a raise? …. Because WellPoint subsidiary Anthem Blue Cross of California has found the audacity to raise individual insurance premiums in that state 39%. That’s right, 39%. This, according to Secretary of Health and Human Services Kathleen Sebelius, “as WellPoint Incorporated has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.”

Profits “soar,” raise rates. What more could Wall Street want?

The answer to that question, apparently, is both math skills and a public relations strategy.

In April, Wellpoint was forced to withdraw its California rate hike of 39%  because of math errors in the submission. Yes, math errors.

According to the Wall Street Journal, “WellPoint’s stock fell almost 10% on April 30, the day after the company disclosed mathematical errors in its California rate filing, and it hasn’t rebounded.”

As such, Ms. Braly is said to have faced staunch criticism as of late at WellPoint’s annual shareholder’s meeting and at meetings with the company’s managers and top brokers prior. The shareholder’s meeting, described as “testy” by the Associated Press, was cut short when William H.T. Bush, the brother of former President George H. W. Bush, and a member of WellPoint’s board of directors, collapsed. Although no one is said to have collapsed at her other meetings, no one has described them as cordial either.

Wellpoint faced criticism from the Obama administration in light of its noteworthy proposed rate hikes in California, including, but not limited to, the scathing letter quoted above from Secretary of Health and Human Services Kathleen Sebelius. The level of acrimony recently escalated when, according to the Wall St. Journal

A week ago, President Obama said his administration had recently asked an insurer to stop systematically dropping coverage of women with breast cancer. The president didn’t name the insurer, but WellPoint has been fending off accusations that it targets such women.

Ms. Braly denied the allegations and shot back at Mr. Obama for spreading “false information.” Health and Human Services Secretary Kathleen Sebelius has called on states to investigate WellPoint’s pricing practices. And last Thursday, the Senate Finance Committee asked Ms. Braly for a detailed account of how the errors occurred.

Perhaps the lady doth protest too much?

Either way, Ms. Braly is said to have later offered that: “The goal is to have a positive relationship with the government at all times.”

It is good to have goals.

The Wall Street Journal notes that

Jay Nogueira, vice president at one of the company’s top 10 shareholders, T. Rowe Price, said the stock won’t bounce back until investors were convinced that there isn’t another chapter in the hostility with the government. “These guys are not dealing well with the public limelight,” said Mr. Noguiera.

Betting on Health Care Reform

At least investors think health care reform will be happening some time soon.  The Wall Street Journal reported that managed care stocks fell after Obama asked Congress to take an up or down vote Wednesday afternoon.  It might be wishful thinking (or dreadful, depending on which way you look at it) for the investors who are moving their investments from managed care plans.  With Congress members still treating health care reform as a game of cat and mouse, whether a vote will happen and whether the vote will be for reform is yet to be determined.

Take for instance Nathan Deal, a Republican from Georgia, who is purposely postponing his resignation from the House until a vote on health care happens so that he can get his nay vote in.  Then, there is the promise from Senate Republican leader Mitch McConnell to repeal health care reform before it has even been passed.  And despite Wall St. estimations to the contrary,  with the complications of reconciliation, the prospect of getting a bill that actually creates a mass exodus out of managed care seems at least somewhat iffy.

Interestingly, as the Washington Post revealed on Wednesday, private insurance companies, such as the infamous WellPoint, will be the primary beneficiaries of a failed health care reform attempt.  As Ezra Klien stated:

The argument is simple: Wellpoint’s business model is uncommonly concentrated in the individual and small-group markets. Those are the exact markets that health-care reform will drastically change. Those are the markets where people get rejected for preexisting conditions, where insurers spend 30 cents of every premium dollar on administration and where rate hikes are volatile and constant. Health-care reform wants to change all of that, and if it does, Wellpoint’s business model will be changed, too.

It would seem, then, that health care reform would not be difficult to carry through in considering who stands to win and who stands to lose if reform is not passed.  One of the major barriers is the Republicans’ animosity towards using reconciliation to pass a final health care bill, an idea they consider foreign to the democratic process.  However, as NPR just reported this past week, reconciliation is not “unprecedented,” and in fact, it has been used many times in the course of our country’s history to pass similar bills.  COBRA, Children’s Health Insurance Program (CHIP), and changes to Medicare have all happened through reconciliation.  Moreover, between 1981 and 2008, 16 out of 21 reconciliation bills were Republican initiatives.

Without a final vote on health care soon, many worry that the momentum will be lost.  Many members of Congress, steadfast in their platform promises, are not helping the process move any quicker.  In the meantime, insurance companies continue to prosper; Americans continue to pay the price.