A recent federal appeals court case, Killian v. Healthsource Provident Administrators, points out that health plans should have very specific policies for appeals, because of the conflict of interest inherent in a plan's review of its own coverage decisions.
Ms. Matkin, the health plan subscriber in the case, was initially diagnosed with, and treated for, breast cancer. When the disease spread to her skeletal system, her doctors recommended high-dose chemotherapy with peripheral stem cell rescue.
Two independent oncologists for the health plan reviewed the proposed treatment under the plan's "medically necessary" standard and denied coverage. Ms. Matkin disputed the determination with letters from her physicians within the 60-day appeal period.
The health plan's reviewing oncologists did not change their opinions. Ms. Matkin responded by submitting additional materials to support her request for coverage of the treatment. The health plan advised, however, that the additional materials would not be considered.
Ms. Matkin sued alleging breaches of various federal and state laws, including the Employee Retirement Income Security Act (ERISA).
The court determined that the health plan did not act arbitrarily or capriciously in initially denying the preauthorization request because the decision was based on the advice of two oncologists. However, the court also concluded that Healthsource's refusal, to consider the additional information submitted after Ms. Matkin's preauthorization request was denied, was arbitrary and capricious because Healthsource's appeals policies were silent in this regard.
The court was particularly troubled by what it perceived to be an inherent conflict of interest when the same party both funded and administered the plan. "Particularly where a claims administrator also funds the plan, there is a tension between the fiduciary duty to administer the plan for the benefit of the participants and the fiscal pressure to keep the cost down." The court suggested that this actual conflict of interest was the basis for the arbitrary and capricious action of the plan to refuse to consider the additional information.