MD and CA work 'the system' to redress flaws in prudent layperson statutes
Frustrated by health plans that fail to comply with recently enacted state prudent layperson laws, some physicians are resorting to the political process in an effort to put teeth into the standard. The effort could be well timed. With Congress mulling passage of a series of patients' rights measures aimed at curbing socially harmful managed care practices, emergency providers may find willing allies in pressing their cases among state courts, regulatory agencies, and legislatures.
Two states that have taken decisive action against health plans for non-compliance in recent months are Maryland and California:
Maryland
Despite the health insurance industry's public support of a prudent layperson standard, individual insurers have disregarded the rule and have openly violated Maryland law, says Larry Linder, MD, assistant director of the emergency department at 350-bed North Arundel Hospital in Glen Burnie, MD.
In May, physicians from 13 Maryland hospitals formally complained to the state insurance commissioner about health maintenance organizations (HMOs) engaged in a pattern of payment denials that violated the state's 1993 prudent layperson law.
"The law is a good law. But there are managed care companies in the state that are regularly denying payments for visits by patients whose presenting complaints meet Maryland's definition of a medical emergency," Linder states.
The complaint alleges that some HMOs are routinely denying patient claims on the basis of the submitted diagnosis codes and the level of documented evaluation and management coding on the claims. They are also denying claims on patients who did not obtain prior consent from the plan to visit the emergency department (ED) and who did not get pre-authorization for treatment once they arrived at the ED. Singled out in the complaint was Mid-Atlantic Medical Services, a large regional HMO.
Health plans have reportedly responded to the charges by citing insufficient information on the claims for their denials and no intentional violations of prudent layperson statutes. Meanwhile, the Maryland Insurance Commission has undertaken a study of the charges in the complaints and is reviewing each reported instance of violation.
The situation is being closely watched by other ACEP chapters because of the penalties that may accrue based on the insurance commission's findings. The department can fine violators up to $5,000 for each infraction. HMOs can also face loss of their license if a pattern of deliberate violations is found.
California
If Maryland officials want to hold insurers to the classic definition of a prudent layperson standard, California providers have gone beyond the conventional. According to the law in California, HMOs are required to cover all visits unless there is sufficient evidence that the patient "should have known the visit wasn't a true medical emergency."
The distinction is important because it avoids the question of whether a patient can actually determine the existence of a medical emergency, says Loren A. Johnson, MD, a managed care consultant in private practice and director of the ED at 49-bed Sutter Davis Hospital in Davis, CA.
According to Johnson, phrasing the standard in this fashion assumes the existence of an emergency in all cases unless the patient knows that it isn't one. Furthermore, the language comes much closer to focusing on the patient's individual judgment, which Johnson believes was the original intent of the prudent laypersons standard.
But a quirk in the 1995 law has given many insurers a license to evade the whole issue. That's because the standard does not apply to contracting providers or those that have written, in-contract exceptions. Also exempt are plans chartered under the Employee Retirement Income Security Act, which regulates most employer-sponsored benefit plans. The law only applies to future contracts.
In effect, hospitals and physicians that contract with any managed care organization aren't protected at all by the standard. Payers have also thwarted the standard by stalling on payments and downcoding claims based on their interpretations of medical emergency.
Lawmakers have introduced measures that correct these deficiencies and impose penalties on violators. But despite these efforts, Johnson believes that insurers will continue to find ways to evade appropriate payments. Like many colleagues, he looks to federal patient protection rules that impose a framework for enforcement as a solution for states.
He also sees the development of a separate class of coding classifications in the place of the existing evaluation and management system to better reflect the range of presenting problems instead of the physician's diagnosis.
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