Maryland Insurance Commissioner Steven B. Larsen said his office will continue to process consumer appeals when HMOs deny care, despite a recent court ruling that leaves the future of the appeals process in doubt.
"We'll continue to enforce the law," Larsen said, despite a decision in Baltimore Circuit Court that found part of the appeal process in conflict with federal law.
David M. Funk, who represented the insurer, Connecticut General Life Insurance Co., in the court case, said, "We are treating the decision as a precedent the commissioner must follow."
The case is being appealed by both sides, and a clarification seems a long way off. Funk said in Baltimore Circuit Court last month, "We are on course for the Supreme Court."
Under state legislation passed in 1998, patients can appeal to Larsen when they have a dispute over whether care is medically necessary. Larsen then refers the case to independent medical specialists, and, based on their reports, can order the insurer to pay for care. That's what Larsen did last year in two cases involving Connecticut General.
In one, he ordered hospital rehabilitation treatment for a 32-year-old woman who underwent brain surgery; Connecticut General argued that the patient could receive needed rehabilitation in a nursing home. He fined Connecticut General $125,000 - the largest fine he ever imposed in this type of case - for a variety of procedural violations, such as not informing the patient about the right of appeal.
In a second case, Connecticut General denied payment for one day of a hospital stay that had included a hysterectomy and other procedures, arguing that the medical record showed the patient was healthy enough to have been discharged a day earlier. A medical reviewer disagreed. Larsen ordered the insurer to pay the claim and to pay a fine of $2,500.
Connecticut General took the cases to court, arguing that state attempts at that type of regulation conflicted with federal law governing employee benefits.
On Oct. 12, Judge John C. Themelis in Baltimore Circuit Court told the two sides, "I'm going to make both of you unhappy."
Themelis ruled that under federal law, Larsen could not order an insurer to pay claims, but could fine the insurer.
Both sides have appealed - Larsen because he wants to be able to order claims paid and Connecticut General because the insurer says Larsen shouldn't be able to order fines. The appeal may go directly to the state's highest court, the Court of Appeals.
The sides do agree on one point: The dispute turns on interpretation of the federal Employee Retirement Income Security Act of 1974 - known as ERISA - that governs a variety of employer-provided benefits. ERISA contains, in the words of one of Larsen's Connecticut General rulings, "a particularly complex statutory structure for determining whether the federal regulatory scheme would prevail over state law."
It's clear that sometimes states can regulate insurance themselves. And sometimes federal law under ERISA trumps the state's powers. According to Funk, 18 "ERISA pre-emption" cases already have been decided by the U.S. Supreme Court, with more on the way. Funk said that if Connecticut General prevails, patients will not be left without recourse. But instead of appealing insurers' denials to Larsen, they'd have to sue under federal law.
Larsen, however, said the insurance administration needs regulatory power to protect patients. Connecticut General's reading of the law, Larsen wrote in one of his decisions in the case, "would seem to prohibit the commissioner from issuing any order requiring ... the HMO or insurer pay or provide a benefit or coverage that was mandated by law but that the insurer or HMO sought to avoid."
Larsen said he has not decided any appeals since the Themelis ruling and isn't sure how insurers other than Connecticut General will react.
During the last calendar year, the insurance administration received 1,526 complaints. Some were not covered by the law or were resolved during review, but the agency heard 137 appeals, upholding the insurer 69 times and ordering the insurer to pay benefits 68 times. The administration imposed $180,750 in fines.