The Office of General Counsel issued the following opinion on December 27, 2005, representing the position of the New York State Insurance Department.
Re: ABC Health Plan, Inc. - Gastric Bypass Surgery
Are denials of gastric bypass surgery subject to utilization review in accordance with New York Insurance Law Article 49 (McKinney 2000) and New York Public Health Law Article 49 (McKinney 2002)?
Yes. Because a denial of coverage for gastric bypass surgery by a health plan involves a question of medical necessity, it is subject to utilization review in accordance with New York Insurance Law Article 49 and New York Public Health Law Article 49.
The inquirers client, ABC Health Plan ("ABC Health"), is a Health Service Corporation with a license from the Insurance Department in accordance with New York Insurance Law § 4302(b) (McKinney 2000) and operates a Health Maintenance Organization with a Certificate of Authority from the Health Department in accordance with New York Public Health Law § 4403 (McKinney 2002) as a line of business. ABC Health had issued contracts that purported to exclude certain treatments for weight loss services. The exclusion in question, which had been approved in a number of forms by the Insurance Department, provided:
Weight loss services. We will not provide coverage for any service or care in connection with weight reduction or dietary control, including, but not limited to, gastric stapling, gastric bypass, gastric bubble, other surgery we determine to be medically inappropriate for treatment of obesity, or weight loss programs. We will, however provide benefits for covered services related to Medically Necessary treatment of morbid obesity, where weight loss is at least twice the ideal amount specified for frame, age, height, and gender in the most recent generally accepted life insurance tables. (emphasis added)
When the Consumer Services Bureau (CSB) became aware that ABC Health was relying on the second sentence of the exclusion to deny coverage for gastric bypass surgery, the matter was referred to the Departments Health Bureau. By letter of April 26, 2005, that Bureau wrote to the inquirers firm:
We have been advised that the plan is only providing utilization review and appeal rights to those members that meet the definition of morbid obesity found in the exclusion and is not providing its members who do not meet the definition with the same. This is contrary to the Departments position that insurers/HMOs must cover all medically necessary services, unless such service is properly excludable under § 52.16(c) of our Regulation 62. . . . We permitted ABC Health to put this weight loss exclusion in its contracts based upon our understanding that the definition of morbid obesity in the exclusion was an example of when the plan would find weight loss services to be medically necessary . . . . As a result of this issue, the Department will no longer permit ABC Health to put this provision with the example in its contracts. . . .
Subsequently, after some correspondence, the Department approved replacement exclusion:
Weight loss services. We will not provide coverage for any services or care in connection with weight loss programs. We will also not provide benefits for any covered services or care set forth in your Contract, Certificate or Group Health Plan when rendered in connection with weight reduction or dietary control, including, but not limited to, laboratory services, and gastric stapling, gastric bypass, gastric bubble or other surgery for treatment of obesity, unless Medically Necessary.
The CSB has requested that ABC Health, as required by New York Insurance Law Article 49 and New York Public Health Law Article 49, revisit those claims that arose in the past three years under the appropriate standard of medical necessity.
N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16(c) (Regulation 62) (2002) provides:
No policy shall limit or exclude coverage by type of illness, accident, treatment or medical condition, except as follows: (1) preexisting conditions or diseases . . .except for anomalies of a covered dependent child . . . (2) mental or emotional disorders, alcoholism and drug addiction . . .(3) pregnancy, except to the extent coverage is required . . .and except for complications of pregnancy . . . (4) illness, accident, treatment or medical condition arising out of: (i) war or act of war . . . (ii) suicide, attempted suicide or intentionally self-inflicted injury; (iii) aviation, other than as a fare-paying passenger on a scheduled or charter flight operated by a scheduled airline; . . . (5) cosmetic surgery . . . (6) foot care . . . (7) care in connection with the detection and correction by manual or mechanical means of structural imbalance, distortion or subluxation in the human body for purposes of removing nerve interference and the effects thereof, where such interference is the result of or related to distortion, misalignment or subluxation of or in the vertebral column . . . (8) treatment provided in a government hospital; benefits provided under Medicare or other governmental program . . . (9) dental care or treatment . . . (10) eyeglasses, hearing aids, and examination for the prescription or fitting thereof; (11) rest cures, custodial care and transportation . . . (12) coverage while the insured is outside the United States, its possessions or the countries of Canada and Mexico.
Thus, an insurer or HMO must cover all medically necessary services, unless such service is properly excludable under N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16(c).
When the original exclusion was approved by the Department, New York Insurance Law Article 49 and New York Public Health Law Article 49 had not been enacted. When 1996 N.Y. Laws 705 added New York Insurance Law Article 49, it defined "adverse determination", New York Insurance Law § 4900(a) (McKinney 2000):
Adverse determination means a determination by a utilization review agent that an admission, extension of stay, or other health care service, upon review based on the information provided, is not medically necessary.
Subsequently, 1998 N.Y. Laws 596 added New York Insurance Law § 4910(b)(1)(A) (McKinney 2000):
An insured, the insured's designee and, in connection with retrospective adverse determinations, an insured's health care provider, shall have the right to request an external appeal when: (1) (A) the insured has had coverage of the health care service, which would otherwise be a covered benefit under a subscriber contract or governmental health benefit program, denied on appeal, in whole or in part, pursuant to title one of this article on the grounds that such health care service is not medically necessary,
New York Public Health Law §§ 4900(1) (McKinney 2002) and 4910 are identical provisions.
New York Insurance Law § 3103(a) (McKinney 2000) provides:
Except as otherwise specifically provided in this chapter, any policy of insurance or contract of annuity delivered or issued for delivery in this state in violation of any of the provisions of this chapter shall be valid and binding upon the insurer issuing the same, but in all respects in which its provisions are in violation of the requirements or prohibitions of this chapter it shall be enforceable as if it conformed with such requirements or prohibitions.
In accordance with New York Insurance Law §§ 4900(a) & 4910 and New York Public Health Law §§ 4900(1) & 4910, there can be no contractual limitation of the right to have medical necessity disputes determined in accordance with New York Insurance Law Article 49 or New York Public Health Law Article 49. Thus, in accordance with New York Insurance Law § 3103(a), the contracts are deemed to be in compliance with New York Insurance Law Article 49 and New York Public Health Law Article 49.
Further, contrary to the inquirers statement that prospective remediation is improper because this is a "new interpretation", the Insurance Department has repeatedly and consistently advised that denials of surgical procedures are subject to utilization review. Indeed this position has been conveyed to the inquirers client on numerous occasions since the enactment of New York Insurance Law Article 49 & New York Public Health Law Article 49 and to attorneys in the inquirers firm representing other health insurers. In addition, both the Insurance Department and the Health Department in their joint Annual Reports concerning New York Insurance Law Article 49 and New York Public Health Law Article 49 stated:
In New York, surgery is a mandated benefit that must be covered under a health insurance contract; however, cosmetic surgery may be excluded. Some New York health plans have argued that a cosmetic surgery denial is a covered benefit determination that should not be eligible for. External Review. The New York State Insurance Department and Health Department have advised health plans that a determination as to whether surgical services are covered by the plan as a mandated benefit or denied as cosmetic is a medical necessity determination that must be subject to external review.1
It is only with respect to cosmetic procedures that the Department has modified this position, as evidenced in the September 29, 2005 letter to the inquirer.
Thus, for the reasons stated above, the Department believes that the remediation directive of the CSB to ABC Health is reasonable.
For further information please contact Principal Attorney Alan Rachlin at the New York City office.
1 New York State External Appeal Program 2002.