First comments: Medical Loss Ratio

The Department of Health and Human Services has requested comments on the provision of the health reform bill that requires insurers to disclose their medical loss ratios, the percentage of premium dollars spent on health care vs. the percentage spent on administration and profit. Here are Advocacy for Patients' comments. Submit your own at www.regulations.gov.

Thank you for this opportunity to comment on sections 1001 and 10101 of the Patient Protection and Affordable Care Act (PPACA), Pub. L. 111-148, which added Section 2718 to the Public Health Service Act (PHS Act).Section 2718 requires health insurers offering individual or group coverage to submit annual reports to the Secretary on the percentages of premiums that the coverage spends on reimbursement for clinical services and activities that improve health care quality, and to provide rebates to enrollees if this spending does not meet minimum standards for a given plan year.

Advocacy for Patients with Chronic Illness is a 510(c)(3) tax exempt organization that provides free information, advice and advocacy services to patients with chronic illnesses nationwide.We serve approximately 1500 patients per year nationwide, and reach many more through publications and public speaking.At least half of our clients contact us with health insurance-related matters, i.e., they do not have coverage and have a pre-existing condition that precludes them from getting coverage, or they have insurance but their insurer has denied coverage of a treatment that their physician believes is medically necessary and appropriate.We file more than 500 insurance appeals each year on very complex coverage issues, mostly related to treatments of relatively rare disorders that insurers claim are experimental or investigational.It is from that perspective that we submit these comments.

First, section 2718 not only requires that insurers spend 80 to 85 percent of premium dollars on health care, but it conversely limits the percentage of premium dollars that can be earned as profit. That should help to bend the premium cost curve in favor of consumers. Second, requiring insurers to publicize the amount of premium dollars spent on administration will help to expose the sometimes abusive utilization review and appeal practices undertaken by insurers. Because we have handled so many insurance appeals, our experience is particularly relevant to this latter point.

Based on our experience, our strong recommendation is that the regulation requiring insurers to report the percentage of premium dollars spent on administration be broken down to show the percentage of premium dollars being spent on utilization review and the processing and defense of appeals, including the new external appeals that are created by the PPACA, so that States can evaluate whether this administrative expense is reasonable and necessary to fulfill the business needs of the insurer.

We understand and appreciate the role that utilization review plays in controlling costs. Insurers are permitted to limit coverage to treatments that are medically necessary. In addition, insurers are permitted to make educated decisions about whether an expensive treatment will be beneficial to the patient when the treatment is new and, thus, is considered experimental or investigational. If we are to control health care costs in the United States, frivolous, expensive treatments that do not hold great promise for positive health outcomes can and should be prohibited by insurers. However, in our experience, not all insurers limit denials of coverage to circumstances in which the treatment truly is experimental or investigational, or not medically necessary.

For example, we currently are handling an appeal from the denial of coverage of an occipital nerve stimulator (ONS) for occipital neuralgia (ON). This is a treatment that has been used for many years, that is supported by extraordinarily voluminous clinical research.The insurer has denied coverage on the ground that the treatment is experimental or investigational based on an assessment conducted by Hayes, Inc., an organization that performs medical technology assessments and sells them to insurers.In this particular case, the Hayes assessment says that the studies that have been conducted are not large enough to support a finding of efficacy.However, Hayes also admits that there are not enough patients with ON to conduct larger trials.Denying coverage of a treatment for a rare disorder is arbitrary and capricious when based solely on the fact that the studies that have been conducted have been small; indeed, Hayes states that larger studies are not feasible, but rejects ONS because these infeasible studies are needed anyway!That simply makes no logical sense and, thus, no reasonable insurer should be permitted to spend premium dollars denying coverage based on this sort of rationale.

Similarly, treatments are not covered despite the fact that they have FDA approval for one use but not another, and even when their use is well supported by medical literature and experience. For example, although 6-mercaptopurine and azathioprine have been used in the treatment of inflammatory bowel disease (IBD) for over thirty years, some insurers deny coverage of these drugs for IBD patients because they are FDA approved only for the treatment of cancer. This is so despite the fact that the FDA, as long ago as 1982, issued policy guidance encouraging physicians to prescribe off-label uses in appropriate circumstances as follows:

The appropriateness or the legality of prescribing approved drugs for uses not included in their official labeling is sometimes a cause of concern and confusion among practitioners. Under the Federal Food, Drug, and Cosmetic (FD&C) Act, a drug approved for marketing may be labeled, promoted, and advertised by the manufacturer only for those uses for which the drug’s safety and effectiveness have been established and which the FDA has approved. These are commonly referred to as the “approved uses.” This means that adequate and well-controlled clinical trials have documented these uses, and the results of the trials have been reviewed and approved by the FDA.

The FD&C Act does not, however, limit the manner in which a physician may use an approved drug. Once a product has been approved for marketing, a physician may prescribe it for uses or in treatment regimens or patient populations that are not included in approved labeling. Such “unapproved” or, more precisely, “unlabeled” uses may be appropriate and rational in certain circumstances, and may, in fact, reflect approaches to drug therapy that have been extensively reported in medical literature.

The term “unapproved uses” is, to some extent, misleading. It includes a variety of situations ranging from unstudied to thoroughly investigated drug uses. Valid new uses for drugs already on the market are often first discovered through serendipitous observations and therapeutic innovations, subsequently confirmed by well-planned and executed clinical investigations. Before such advances can be added to the approved labeling, however, data substantiating the effectiveness of a new use or regimen must be submitted by the manufacture to the FDA for evaluation. This may take time and, without the initiative of the drug manufacturer whose product is involved, may never occur. For that reason, accepted medical practice often includes drug use that is not reflected in approved drug labeling.

FDA Drug Bulletin re: “Use of Approved Drugs for Unlabeled Indications,” Department of Health and Human Services, Public Health Service Food and Drug Administration, April 1982, Volume 12 Number 1, Pages 4-5.Thus, while it is entirely appropriate for insurers to deny coverage of drugs for “off-label” uses when their use has no precedent and medical judgment does not support the use of the drug, when, instead, a drug has been used to treat an illness for many years, there has been ample clinical study, and the insurer’s reservation about providing coverage is based solely on the fact that the drug’s manufacturer has not gone back to the FDA to expand its labeling, the denial of coverage is inappropriate.

Again, this is especially true in the case of treatment of rare diseases as to which large clinical trials simply are impossible.We recently appealed the denial of coverage of Rituxan (rituximin) for the treatment of neuromyelitis optica (NMO) when the patient had been treated with intravenous steroids for years, and was rapidly losing her eyesight because the steroids no longer were effective.This patient had actually undergone two treatments of Rituxan that had produced her longest remission in ten years.We were able to conduct sufficient medical research to establish that the use of Rituxan to treat NMO is entirely accepted by the medical community, and the insurer ultimately relented. There simply is no excuse for the insurer not having done the research that we did; what about the patients who cannot find us and do not have vigorous advocates who are capable and willing to perform extensive medical and legal research?

This pattern of denials of coverage in situations in which the use of the treatment is well-established extends beyond drugs.For example, gastric electrical stimulation is used in the treatment of diabetic and idiopathic gastroparesis. Patients with gastroparesis suffer from constant nausea and vomiting. When drugs such as Reglan and Erythromycin do not work, when the patient has even tried Botox injections to the pylorus, and/or a drug called Domperidone which is not FDA approved or covered by any insurer, when the patient requires enteral or parenteral nutrition, and especially when a diabetic cannot control glucose levels due to the inability to control food intake, gastric electrical stimulation is the last resort. Gastric electrical stimulation has a Humanitarian Device Exemption from the FDA because it is used on fewer than 4000 patients annually in the United States.For this reason – and this reason alone – insurers deny coverage on the ground that gastric electrical stimulation is experimental or investigational. We have handled 104 cases involving gastric electrical stimulation. We win our appeals more than 95 percent of the time.Due to our efforts, UnitedHealthcare and the Coventry family of insurers have changed their policy and now cover gastric electrical stimulation routinely in cases in which all other options have been tried and failed. Yet, there are several other insurers – most notably Blue Crosses nationally – who continue to deny coverage.In each such case, we have to exhaust the insurer’s appeal process and pursue external appeals in order to prevail.That means that patients who are in ERISA plans, which are not currently subject to external appeal, and patients in the five states that do not yet have an external appeal mechanism, are lost unless we can find an attorney to pursue litigation on their behalf, which is something we cannot do ourselves based on our limited budget and staffing.

These examples are designed to illustrate the fact that, although some insurers are responsible in conducting utilization review and appeals, not all of them are, and for those who force consumers to file repeated appeals that ultimately are granted by independent reviewers – especially for those who deny coverage of treatments for rare diseases for which large clinical trials are impossible – the abusive, unprincipled use of utilization review should be discouraged in every way. This is so particularly because most consumers do not have the resources to assemble what amounts to a summary judgment motion’s worth of legal and medical research and analysis. One way to accomplish this would be to require insurers to report publicly the percentage of administrative costs that are spent on utilization review and appeals, especially in cases in which coverage ultimately is granted either by the insurer or by an external reviewer.This percentage then could be tracked, and the practices of various insurers could be compared so that States could determine whether and when an insurer may be abusing its right to conduct utilization review.This data could be used by States to evaluate the reasonableness of rates, and to engage in dialogues and with, and perhaps even take action against, insurers that are spending an unusually high percentage of premium dollars attempting to curtail coverage.

In closing, it is important to note that we are not overly skeptical of insurers due to our experience; we are, instead, realistic. In a report from the Senate Commerce Committee released on April 15, 2010, that Committee found that insurers already had “reclassified more than half a billion dollars of administrative expenses as medical expenses, and a leading industry analyst recently released a report explaining how the new law gives for-profit insurers a powerful new incentive to ‘MLR shift’ their previously identified administrative expenses.”Dan Froomkin, “Health Insurance Companies Shifting Costs to Protect Profits From New Law,” Huffington Post, April 15, 2010.If, in fact, insurers cynically attempt to disguise administrative expenses as medical expenses, one of the most obvious places to do that is in utilization review, which easily can be characterized as medical necessity review, thereby hidden from scrutiny when States review medical loss ratio data.Requiring insurers to report the percentage of costs spent on utilization review and appeals separately would block one avenue by which insurers could hide administrative costs, thereby better preserving the intent of the PPACA.

Of course, if you would like any additional information or examples, or to discuss this matter, please do not hesitate to contact me.

Jennifer C. Jaff, Esq.
Executive Director
Advocacy for Patients with Chronic Illness, Inc.