Questions and Answers on Step Therapy Legislation (Chapter 512 of the Laws of 2016)

Q.1 When does the step therapy legislation become effective and applicable to health insurance policies?

The step therapy legislation was signed into law on December 31, 2016. It has an effective date of January 1, 2017 and applies to health insurance policies delivered, issued for delivery, or renewed after such date.

For any policy (including the Essential Plan) that was delivered, issued for delivery or renewed on January 1, 2017, the law is applicable on January 1, 2018. Note, individual policies renew on January 1st of each year, so the law is effective on January 1, 2018 for individual policies that are renewing.
For any policy (including the Essential Plan) that was delivered, issued for delivery or renewed after January 1, 2017, the law is applicable when the policy is delivered, issued for delivery or renewed. For example, if a policy is issued or renewed on March 1, 2017, it must comply with the step therapy legislation.
The New York State Department of Health ("DOH") will be working with stakeholders and issuing guidance on when the legislation is effective for Child Health Plus and Medicaid managed care plans consistent with § 13 of Chapter 512 of the Laws of 2016.

With respect to the health plans that must immediately comply with the law, the Department of Financial Services ("DFS") recognizes that health plans will need time to operationalize the requirements contained in the step therapy legislation. DFS will take a health plan's good faith efforts into consideration when reviewing a health plan's compliance with the law.

Q.2 Which health plans does the law apply to?

The law applies to insurers subject to Articles 32 or 43 of the Insurance Law, municipal cooperative health benefit plans certified pursuant to Article 47 of the Insurance Law, entities certified under Article 44 of the Public Health Law including health maintenance organizations, the Essential Plan, Medicaid managed care plans and Child Health Plus, and any independent utilization review agent performing utilization review under contract with these entities. The law does not apply to self-insured plans, Medicaid fee-for-service, and Medicare. See Insurance Law §§ 4900(g-8) and (i) and Public Health Law §§ 4900(7-f-2) and (9).

Q.3 What is a step therapy protocol?

Insurance Law § 4900(g-9) and Public Health Law § 4903(7-f-3) define a step therapy protocol as a policy, protocol or program established by a utilization review agent that establishes the specific sequence in which prescription drugs for a specified medical condition are approved for an insured.

Note, even prior to the passage of this legislation, it had been the position of DFS that a step therapy determination in relation to a drug on the health plan's formulary is a utilization review determination that is subject to the protections of Article 49 of the Insurance Law and Public Health Law.

Q.4 How should a health plan treat a step therapy protocol override determination request for a prescription drug on the health plan's formulary or for a non-formulary drug (when non-formulary drugs are covered)?

A step therapy protocol override determination request is the equivalent of an initial utilization review request under Insurance Law § 4903 or Public Health Law § 4903. A denial of a step therapy protocol override determination request may be appealed under Insurance Law § 4904 or Public Health Law § 4904, as applicable to the type of health plan involved. In addition, the U.S. Department of Labor Claims Payment Regulation 29 CFR 2560.503-1 is applicable to step therapy protocol override determinations of insurers subject to Articles 32 or 43 of the Insurance Law, municipal cooperative health benefit plans certified pursuant to Article 47 of the Insurance Law, and health maintenance organizations certified pursuant to Article 44 of the Public Health Law, unless the plan is a grandfathered non-ERISA group plan.

Q.5 What requirements apply if the insured requests coverage of a prescription drug that is not on the health plan's formulary?

45 CFR 156.122(c) requires non-grandfathered individual and small group coverage to provide a standard and expedited formulary exception process for the insured or the insured's designee and the insured's prescribing health care professional to request a formulary exception for a clinically-appropriate prescription drug that is not on the formulary. For standard formulary exception requests, the health plan is required to make an initial decision and notify the insured or the insured's designee and the prescribing health care professional no later than 72 hours after receipt of the request. For expedited requests, the health plan is required to make an initial decision and notify the insured or the insured's designee and the prescribing health care professional no later than 24 hours after receipt of the request. If the health plan requires an internal appeal, the appeal determination must be made within the same 72 or 24 hour timeframe. Otherwise, the insured must be permitted to request an external appeal after the initial internal denial.

With respect to large group coverage and grandfathered individual and small group coverage, the contract may limit coverage to formulary drugs. In such cases, utilization review requirements would not apply to a request for coverage of a prescription drug that is not on the health plan's formulary and grievance requirements would apply instead. If the contract does, however, cover non-formulary drugs when medically necessary, utilization review requirements would apply. If the health plan imposes step therapy protocols as defined in Insurance Law § 4900(g-9) and Public Health Law § 4903(7-f-3), the step therapy protocol override determination requirements would apply.

Q.6 Do the step therapy protocol override determination requirements in Insurance Law § 4903(c-1), (c-2) and (c-3) and Public Health Law § 4903(3-a), (3-b) and (3-c) apply if the health plan typically imposes a specific sequence in which prescription drugs for a specified medical condition are approved but in the case of a particular insured finds the insured's diagnosis does not warrant treatment with any prescription drug?

No, the step therapy protocol override determination requirements in Insurance Law § 4903(c-1), (c-2) and (c-3) and Public Health Law § 4903(3-a), (3-b) and (3-c) will not apply. Instead, the utilization review requirements of Insurance Law § 4903(b)(1), (c)(1) or (d) and Public Health Law § 4903(2), (3)(a) or (4) will apply depending on whether the utilization review is based on a preauthorization, concurrent or retrospective review.

Q.7 Do the step therapy protocol override determination requirements in Insurance Law § 4903(c-1), (c-2) and (c-3) and Public Health Law § 4903(3-a), (3-b) and (3-c) apply if the health plan does not impose a specific sequence in which prescription drugs for a specified medical condition are approved and instead just reviews a prescription drug for medical necessity?

Q.8 What is the timeframe for a health plan to make a step therapy protocol override determination?

A health plan must make a step therapy protocol override determination on a request submitted in conformance with Insurance Law § 4903(c-1) or Public Health Law § 4903(3-a) and provide notification to the insured or the insured's designee (and for a preauthorization request to the insured's health care professional) within 72 hours of receipt of information that includes supporting rationale and documentation from a health care professional that demonstrates one of the items in Q.10. If the insured has a medical condition that places the health of the insured in serious jeopardy without the prescription drug prescribed by the insured's health care professional, the health plan must make a determination and provide notification to the insured (or the insured's designee) and the insured's health care professional within 24 hours of the receipt of the information that includes supporting rationale and documentation from a health care professional that demonstrates one of the items in Q.10. (See Insurance Law § 4903(c-2) and Public Health Law § 4903(3-b)).

Q.9 How should a health plan determine whether a request for a prescription drug is urgent?

The health plan must consider whether the criteria in Insurance Law § 4903(c-2) and Public Health Law § 4903(3-b) are met which require the insured to have a medical condition that places the health of the insured in serious jeopardy without the prescription drug prescribed by the insured's health care professional. In addition, the Department of Labor Claims Payment Regulation 29 CFR 2560.503-1(m)(1) provides, for health plans that are subject to the regulation, that a claim involving urgent care is (1) any claim for medical care or treatment with respect to which the application of the time periods for making non-urgent care determinations could seriously jeopardize the life or health of the claimant to regain maximum function or; (2) in the opinion of a physician with knowledge of the claimant's medical condition, would subject the claimant to severe pain that cannot be adequately managed without the care or treatment that is the subject of the claim. The regulation further provides that whether a claim involves urgent care is to be determined by an individual acting on behalf of the health plan applying the judgment of a prudent layperson who possesses an average knowledge of health and medicine. However, if a physician with knowledge of the claimant's medical condition determines the claim involves urgent care, the health plan must process the claim as an urgent care claim.

Q.10 What supporting rationale and documentation must a health care professional submit for a step therapy protocol override determination?

Insurance Law § 4903(c-1), and Public Health Law § 4903(3-a) provide that a health care professional must submit supporting rationale and documentation which demonstrates one of the following:

The required prescription drug(s) is contraindicated or will likely cause an adverse reaction or physical or mental harm to the insured;
The required prescription drug(s) is expected to be ineffective based on the insured's known clinical history, condition, and prescription drug regimen;
The insured has tried the required prescription drug(s) under his or her current or previous health insurance coverage, or another prescription drug in the same pharmacologic class or with the same mechanism of action, and that prescription drug was discontinued due to lack of efficacy or effectiveness, diminished effect, or an adverse event;
The insured is stable on a prescription drug(s) selected by his or her health care professional for his or her medical condition, provided this does not prevent the health plan from requiring the insured to try an AB-rated generic equivalent; OR
The required prescription drug(s) is not in the insured's best interest because it will likely cause a significant barrier to the insured's adherence to or compliance with the insured's plan of care, will likely worsen a comorbid condition, or will likely decrease the insured's ability to achieve or maintain reasonable functional ability in performing daily activities.

Q.11 May a health plan request additional documentation if the health plan receives a step therapy protocol override request with both a supporting rationale and documentation?

Yes. If the health plan receives a step therapy protocol override request with both a supporting rationale and documentation as set forth in Insurance Law § 4903(c-1) and Public Health Law § 4903(3-a), the health plan may still request additional documentation within 72 hours of receipt of the step therapy protocol override request (or 24 hours if urgent).

However, Insurance Law § 4903(c-1) and (c-2) and Public Health Law § 4903(3-a) and (3-b) provide that the health plan must make a determination within 72 hours of receipt of information that includes supporting rationale and documentation (or within 24 hours for urgent requests).

Therefore, once a health plan receives the supporting rationale and documentation, it must make a determination with 72 hours (or 24 for urgent requests) regardless of whether additional information is needed or received. Failure to render a determination with the required timeframe will result in a deemed override pursuant to Insurance Law § 4903(g) and Public Health Law § 4903(7).

Q.12 How should a health plan process a step therapy protocol override request that is submitted without the supporting rationale and documentation specified in Insurance Law § 4903(c-1) and Public Health Law § 4903(3-a)?

If a health plan receives a step therapy protocol override request without the supporting rationale and documentation as set forth in Insurance Law § 4903(c-1) and Public Health Law § 4903(3-a), the health plan should look to the utilization review timeframes and requirements in Insurance Law § 4903 or Public Health Law § 4903. However, insurers subject to Articles 32 or 43 of the Insurance Law, municipal cooperative health benefit plans certified pursuant to Article 47 of the Insurance Law, and health maintenance organizations certified pursuant to Article 44 of the Public Health Law (unless the plan is a grandfathered non-ERISA group plan) must also apply the timeframes in the U.S. Department of Labor Claims Payment Regulation 29 CFR 2560.503-1 if those timeframes are shorter than the timeframes in the Insurance Law and Public Health Law. Note, the U.S. Department of Labor Claims Payment Regulation requires health plans to make a determination even when the requested information is not received and has timeframes for urgent claims, unlike the Insurance Law and Public Health Law. The following are examples of the how the Insurance Law, the Public Health Law, and the U.S. Department of Labor Claims Payment Regulation collectively apply.

Urgent preauthorization example. If an urgent preauthorization for a step therapy protocol override request is submitted without supporting rationale and documentation from a health care professional that demonstrates one of the items in Q.10, the health plan must request the information in 24 hours and the insured and the insured's health care professional will have 48 hours to submit the information. The health plan must make a determination and provide notification to the insured (or the insured's designee) and the insured's health care professional within the earlier of 24 hours of its receipt of the information or 48 hours of the end of the 48 hour period if the necessary information is not received. See 29 CFR 2560.503-1(f)(2)(i), Insurance Law § 4903(c-2), and Public Health Law § 4903(3-b).

Non-urgent preauthorization example. If a non-urgent preauthorization for a step therapy protocol override request is submitted without supporting rationale and documentation from a health care professional that demonstrates one of the items in Q.10, the health plan must request the information within 72 hours of receipt of the preauthorization request. The insured and the insured's health care professional will have 45 calendar days to submit the information. The health plan must make a determination and provide notification to the insured (or the insured's designee) and the insured's health care professional within the earlier of 72 hours of its receipt of the information or 15 calendar days of the end of the 45 day period if the necessary information is not received. See 29 CFR 2560.503-1(f)(2)(iii)(A), Insurance Law § 4903(c-1), and Public Health Law § 4903(3-a).

Concurrent review example. If a non-urgent concurrent step therapy protocol override request is submitted without supporting rationale and documentation from a health care professional that demonstrates one of the items in Q.10, the health plan must request the information within the earlier of 72 hours or one business day of receipt of the concurrent review request. The insured and the insured's health care professional will have 45 calendar days to submit the information. The health plan must make a determination and provide notification to the insured (or the insured's designee) within the earlier of 72 hours or one business day of its receipt of the information or 15 calendar days of the end of the 45 day period if the necessary information is not received. See 29 CFR 2560.503-1(f)(2)(iii)(A), Insurance Law § 4903(c)(1) and (c-1), and Public Health Law § 4903(3)(a) and (3-a).

Retrospective review example. If a step therapy protocol override request is submitted retrospectively (e.g. as a claim for the prescription drug when preauthorization has not been requested or a claim that is submitted after a prescription drug has been purchased) without supporting rationale and documentation from a health care professional that demonstrates one of the items in Q.10, the health plan must request the information within 72 hours of receipt of the request / claim. The insured and the insured's health care professional will have 45 calendar days to submit the information. The health plan must make a determination and provide notification to the insured (or the insured's designee) within the earlier of 72 hours of its receipt of the information or 15 calendar days of the end of the 45 day period if the necessary information is not received. See 29 CFR 2560.503-1(f)(2)(iii)(B), Insurance Law § 4903(c-2), and Public Health Law § 4903(3-a).

*DOH will be issuing guidance regarding Medicaid managed care plans and Child Health Plus.

Q.13 Insurance Law § 4903(g), and Public Health Law § 4903(7) provide that a health plan's failure to meet the timeframes for an initial step therapy protocol override determination shall be deemed an override of the protocol (e.g. an approval of the service). To which timeframes does this requirement apply?

This requirement applies only to the 72 or 24 hour step therapy protocol override request timeframes in Insurance Law § 4903(c-1) and (c-2) or Public Health Law § 4903(3-a) and (3-b) that run from the receipt of information for an initial step therapy override determination (not an appeal). This requirement does not apply to the other utilization review timeframes in Insurance Law § 4903, Public Health Law § 4903, or 29 CFR 2560.503-1.

Q.14 Do health plans need to provide patient-specific detail to both the insured and the physician if a step therapy protocol override is denied?

Health plans must comply with the requirements for adverse determinations in Insurance Law § 4903(e), Public Health Law § 4903(5) and, as applicable, the U.S. Department of Labor Claims Payment Regulation 29 CFR 2560.503-1.

Q.15 If a health care professional recommends a prescription drug, must a health plan find the prescription drug to be medically necessary?

No. Chapter 512 of the Laws of 2016 does not require that the prescriber prevail and the health plan may conduct a medical necessity review. Note, however, with respect to Medicaid managed care plans, Social Services Law § 364-j(25) and (25-a) requires that the prescriber prevail for certain drugs.

Q.16 What is meant by the same pharmacologic class with respect to Insurance Law § 4903(c-1)(3) and Public Health Law § 4903(3-a)(c)?

The term is not defined in the Insurance Law or Public Health Law. However, the same pharmacological class generally means the same mechanism of action, chemical structure, and physiological effect.

Q.17 Is it considered a lack of efficacy of the prescription drug for purposes of Insurance Law § 4903(c-1)(3) or Public Health Law § 4903(3-a)(c) if the insured does not comply with the plan of care for taking the drug (e.g. taking the drug as directed)?

No. A failure to take the prescription drug as directed is not the same as a lack of efficacy of the drug. A lack of efficacy includes when a drug is no longer able to achieve the desired clinical response or goal despite proper drug administration. Examples of a drug's lack of efficacy include, but are not limited to, instances where an insured develops a tolerance to a drug.

Q.18 What criteria should a health plan use to determine whether an insured is "stable on a prescription drug or drugs selected by his or her health care professional for the medical condition under consideration" as provided for in Insurance Law § 4903(c-1)(4) and Public Health Law § 4903(3-a)(d)?

A health plan should develop reasonable and uniform written criteria based on sound clinical judgment (and evidence-based practice protocols, if available) for use in determining whether an insured is "stable" for purposes of Insurance Law § 4903(c-1)(4) and Public Health Law § 4903(3-a)(d). A health plan's criteria for determining the insured's stability on a requested prescription drug could, for example, take into consideration the following factors:

The medical profile of the insured (e.g., age, condition severity, the presence of any comorbidities, any concurrent medications, any history of adverse reactions, any history of use of alternative drugs known to be clinically effective in treating the condition etc.);
The state of the insured's condition under consideration, while on the requested prescription drug;
The prescriber's rationale for deeming an insured stable on the requested prescription drug (i.e., how, why, and on what bases did the prescriber conclude that the insured is stable on the requested prescription drug) and how such rationale aligns with standard medical practice and/or evidence based practice protocols for the treatment of the insured's condition.

Q.19 Do the use of prescription drug samples or drugs obtained through coupon cards meet the criteria in Insurance Law § 4903(c-1)(4) and Public Health Law § 4903(3-a)(d) for the insured to be stable on a prescription drug?

Insurance Law § 4903(c-1)(4) and Public Health Law § 4903(3-a)(d) require the insured to be stable on a prescription drug or drugs selected by his or her health care professional for the medical condition under consideration. Insureds who undergo a trial period of a prescription drug primarily due to the availability of free or low cost samples or where the prescription drug was not selected by the insured's health care professional specifically for the insured's medical condition, may not have sufficient experience with available therapies for the insured's condition to meet the requirements in these sections of the law, depending upon review of the prescriber's documentation, the insured's documented case history, and whether the health plan's criteria has otherwise been met. See Q.18 with respect to when an insured could be considered stable.

Q.20 What criteria should a health plan use to determine whether a prescription drug is likely to cause a significant barrier to the insured's adherence to or compliance with the plan of care, will likely worsen a comorbid condition of the insured, or will likely decrease the insured's ability to achieve or maintain reasonable functional ability in performing daily activities as provided for in Insurance Law § 4903(c-1)(5) and Public Health Law § 4903(3-a)(e)?

A health plan should develop reasonable and uniform written criteria based on sound clinical judgment (and evidence-based practice protocols, if available) for use in determining whether a drug is likely to cause a significant barrier to the insured's adherence to or compliance with the plan of care, will likely worsen a comorbid condition of the insured, or will likely decrease the insured's ability to achieve or maintain reasonable functional ability in performing daily activities as provided for in Insurance Law § 4903(c-1)(5) and Public Health Law § 4903(3-a)(e). A health plan should consider the insured's physical condition, mental health condition, and intellectual ability in determining whether a drug is likely to cause a significant barrier to the insured's adherence to or compliance with the plan of care. For example, a drug that requires three doses per day to achieve clinical stability, instead of a drug that requires one dose per day, could be considered a barrier for an insured with a history of clinical deterioration as a result of non-compliance with a treatment regimen requiring multiple doses per day. Or, a drug that causes drowsiness and cautions against operating machinery or a vehicle, and will likely decrease an insured's ability to achieve or maintain reasonable functional ability in performing daily activities, could be considered a barrier for an insured whose daily activities are operating machinery or a vehicle.

Q.21 Does the step therapy legislation prohibit health plans from having a step therapy protocol that requires an insured to try more than one preferred prescription drug before a step therapy protocol override determination is granted?

Insurance Law § 4900(g-9) and Public Health Law § 4900(7-f-3) define "step therapy protocol" as "a policy, protocol or program established by a utilization review agent…that establishes the specific sequence in which prescription drugs for a specified medical condition are approved for a particular insured." In addition, Insurance Law § 4903(c-1)(3) and Public Health Law § 4903(3-a)(c) provide that the health plan should consider whether the insured has tried the required prescription drug or another prescription drug or drugs in the same pharmacologic class or with the same mechanism of action and such prescription drug or drugs was discontinued due to lack of efficacy or effectiveness, diminished effect, or an adverse event. The definition of step therapy protocol does not preclude a health plan from requiring an insured to try more than one preferred prescription drug before a step therapy protocol override determination is granted, as long as the health plan's step therapy protocol is based on recognized evidence-based and peer reviewed clinical review criteria and the health plan complies with the internal and external appeal requirements of Article 49 of the Insurance Law and Public Health Law. For example, a health plan's clinical review criteria may provide that an insured should try drugs A, B and C before the health plan will consider drug D to be medically necessary under its step therapy protocol. If the insured's provider prescribes drug D and the insured has not tried one or all of A, B and C drugs the health plan may deny drug D as not medically necessary under its step therapy protocol. The insured may request an internal and external appeal pursuant to Article 49 of the Insurance Law and the Public Health Law. If the external appeal agent overturns the health plan's denial and determines that drug D is medically necessary, the health plan must cover drug D regardless of whether drugs A, B or C have been tried.

Q.22 The law requires a health plan to consider atypical patients when establishing its step therapy clinical review criteria. How should a health plan proceed if there are no studies relevant to atypical patients?

Insurance Law § 4902(a)(10) and Public Health Law § 4902(3) require a health plan or utilization review agent to utilize recognized evidence-based and peer reviewed clinical review criteria that takes into account the needs of atypical patient populations and diagnoses when establishing the clinical review criteria. If such evidence-based and peer reviewed clinical review criteria does not exist, the health plan should rely on sound clinical judgment when applying a step therapy protocol to the needs of atypical patient populations and diagnoses.

Q.23 How do the step therapy requirements apply with respect to an emergency supply of medication for a substance use disorder?

Insurance Law §§ 3216(i)(31-a), 3221(l)(7-b) and 4303(l-2) require health plans to provide immediate access, without prior authorization, to a five day emergency supply of prescribed medication for the treatment of a substance use disorder where an emergency condition exists, including a prescribed drug or medication associated with the management of opioid withdrawal and/or stabilization. Health plans may not impose preauthorization requirements on the emergency supply, but may conduct retrospective utilization review using step therapy protocols. If the health plan uses step therapy protocols, the requirements in Insurance Law § 4903(c-1), (c-2) and (c-3) and Public Health Law § 4903(3-a), (3-b) and (3-c) apply.

Q.24 Do the step therapy requirements apply to both pharmacy benefits and medical benefits in a health insurance policy?

The step therapy requirements apply to prescription drugs covered by the health insurance policy regardless of whether the prescription drug is considered a pharmacy benefit or a medical benefit in the health insurance policy.

Q.25 What standard will external appeal agents use to review appeals of step therapy protocol override determinations that are based on medical necessity (i.e. not denials because the drug is considered experimental / investigational or a treatment for a rare disease)?

Insurance Law § 4914(b)(4)(A) and Public Health Law § 4914(2)(d)(A) require external appeal agents to review the health plan's final adverse determination and make a determination as to whether the health plan acted reasonably and with sound medical judgment and in the best interest of the patient. When the external appeal agent makes its determination it is required to consider the clinical standards of the plan, the information provided concerning the patient, the attending physician's recommendation, and applicable and generally accepted practice guidelines developed by the federal government, national or professional medical societies, boards and associations. The clinical standards of the plan would include the health plan's step therapy protocol. However, while external appeal agents are required to consider the health plan's clinical standards, they are not required to uphold the health plan's clinical standards. Also note, 11 NYCRR 410.9(h)(2) and 10 NYCRR 98-2.9(h)(2) require health plans to transmit their clinical standards to the external appeal agent within three business days of receiving notification from the external appeal agent for a standard appeal and 24 hours for an expedited appeal.

Q.26 What disclosure requirements apply to health plans with respect to step therapy protocols?

DFS encourages health plans to provide full consumer disclosures. In addition, Insurance Law §§ 3217-a(b)(10), 4324(b)(10) and Public Health Law § 4408(2)(j) require health plans, upon written request, to provide an insured or prospective insured specific written clinical review criteria relating to a particular condition or disease including clinical review criteria relating to a step therapy protocol override determination and, where appropriate, other clinical information which the health plan might consider in its utilization review. The clinical review criteria, and other clinical information must also be made available to a health care professional on behalf of an insured and upon written request.

Updated 05/02/2017

Questions and Answers on Step Therapy Legislation (Chapter 512 of the Laws of 2016)

Insurance Industry Questions

Translation Services