the Patient Bill of Rights, HMOs and insurers are required to
establish internal formal enrollee grievance procedures.
permits multiple layers of review.
PRIRA, covered persons or insureds must first exhaust the health
carrier’s internal grievance process before seeking external review.
is one of 42 states that has adopted an external review law as a remedy
for insureds when health insurance companies make adverse medical benefit
External review withstood its first significant challenge on June
20, 2002, when the United States Supreme Court ruled that it is saved
from preemption under the Employee Retirement and Income Security Act
of 1974 (ERISA) as long as it is intended to regulate insurance and ‘‘does
not enlarge the claim beyond the benefits available in any action brought
under [29 USC] 1132(a).’’2
Despite the decision, Michigan’s external review law remains vulnerable
to a preemption challenge.
Patient’s Right to Independent Review Act (PRIRA) took effect on October
1, 2000, but consumers have had the right to pursue grievances against
their health plans since 1978.3
Prior to the repeal of the Michigan Health Maintenance Act on June
29, 2000, health maintenance organizations (HMOs) were required to maintain
an internal appeal process that allowed enrollees to file a grievance
as to the operations of the organization.4
HMOs were required to establish and maintain reasonable procedures for
receiving, processing, and resolving enrollee complaints.5
If an enrollee exhausted a plan’s grievance process, the enrollee was
given the opportunity to pursue the grievance further with a three-person
advisory commission. Under the statute, the advisory commission was empowered
to render determinations of the validity of the grievance and direct measures
it considered appropriate under the circumstances. The advisory commission
reported to the Michigan Department of Community Health (DCH).6
Patient Bill of Rights
state’s grievance procedure landscape began to change in 1997 with the
passage of the Michigan Bill of Patient’s Rights Act (PBR).7
Under the PBR, HMOs and insurers are required to establish internal formal
enrollee grievance procedures. The PBR contains unique definitions, which
determine whether an insured has a basis to appeal a benefits determination.
Determination and Grievance
terms adverse determination and grievance were defined for the first time
and continue to remain in effect under PRIRA. Under the PBR, adverse determination
is defined as:
determination that an admission, availability of care, continued stay
or other health care services had been reviewed and denied. Failure
to respond in a timely manner to request for determination constitutes
an adverse determination.8
term grievance is defined as:
complaint on behalf of an enrollee submitted by an enrollee or a person,
including, but not limited to, a physician authorized in writing to
act on behalf of the enrollee regarding:
(i) the availability, delivery or quality of health care services, including
a complaint regarding an adverse determination made pursuant to utilization
(ii) Benefits or claims payment, handling, or reimbursement for health
(iii) Matter pertaining to the contractual relationship between an enrollee
and the organization.9
for submitting grievances or grievances related to an adverse determination
were also established as a result of the legislation. HMOs are required
to make decisions within 35 calendar days of receipt of a written grievance.10
Determinations of expedited grievances must be made within 72 hours.11
An expedited grievance requires immediate attention in the event a physician
substantiates that the failure to address the matter ‘‘would seriously
jeopardize the insured’s or enrollee’s ability to regain maximum function.’’
An insured or enrollee has ten days from the date of the determination
to request that an independent review organization (IRO) conduct an external
allows insureds to challenge adverse determinations made by a health carrier
or its designee utilization review organization. Under PRIRA, covered
persons or insureds must first exhaust the health carrier’s internal grievance
process before seeking external review unless the basis for the request
is considered expedited.13
An expedited external review request is defined as:
adverse determination involves a medical condition of the covered person
for which the time frame for completion of an expedited internal grievance
would seriously jeopardize the life or health of the covered person
or would jeopardize the covered person’s ability to regain maximum function
as substantiated by a physician either orally or in writing.14
provides that upon receipt of a request for an external review of an adverse
determination by a health carrier, the Insurance Commissioner ‘‘shall
complete a preliminary review of the request and decide whether or not
to accept the request for external review.’’15
receipt of a request for an external review, the commissioner then must
determine whether to refer the request to an IRO. If an external review
request ‘‘appears to involve issues of medical necessity or clinical review
criteria,’’ the commissioner must decide the determination for review
by an IRO. If the request ‘‘appears to only involve purely contractual
provisions of the health benefit plan,’’ the commissioner may conduct
his own external review or assign the review to an IRO.16
PRIRA, there is no specific right to an evidentiary hearing regarding
the health carrier’s determination prior to the commissioner’s final determination.
All reviews of a health carrier’s benefit determination are reviewed de
novo and ‘‘the reviewing entity is not bound by any decisions or conclusions
reached during the health carrier’s utilization review process or the
health carrier’s internal grievance process.’’ MCLA 550.1911(a).17
business days after the date of the notice of the commissioner’s acceptance
of the request for external review, the health carrier must provide to
the reviewing entity ‘‘the documents and any information considered in
making the adverse determination or the final determination.’’18
with the evidence submitted by the health carrier and the covered person,
the IRO must consider the following prior to reaching a recommendation:
The covered person’s pertinent medical records.
(b) The attending health care professional’s recommendation.
(c) Consulting reports from a health care professional and other documents
submitted by the health carrier, the covered person, the covered person’s
authorized representative or the covered person’s treating provider.
(d) The terms of coverage under the covered person’s health benefit
plan with the health carrier.
(e) The most appropriate practice guidelines, which may include generally
accepted practice guidelines, evidence-based practice guidelines, or
any other practice guidelines developed by the federal government or
national or professional medical societies, boards, and associations.
(f) Any applicable review criteria developed and used by the health
carrier or its designee utilization review organization.19
IRO must provide its recommendation to the commissioner no later than
14 days after the assignment of the request.20
The IRO’s recommendation is required to include all of the following:
A general description of the reason for the request for external review.
(b) The date the independent review organization received the assignment
from the commissioner to conduct the external review.
(c) The date the external review was conducted.
(d) The date of its recommendation.
(e) The principal reason or reasons for its recommendation.
(f) The rationale for its recommendation.
(g) References of the evidence or documentation, including the practice
guidelines considered in reaching its recommendation.
commissioner is required to review the recommendation to ensure that it
is not contrary to the terms of coverage.21
the commissioner completes a review of the IRO’s recommendation, the commissioner
must then issue a notice of decision, which includes the ‘‘principal reason
or reasons for the decision.’’22
further provides that ‘‘a person aggrieved by an external review decision
may seek judicial review within 60 days from the date of the decision
in state circuit court.’’23
Moreover, the statute does not preclude a health carrier or a covered
person from seeking other remedies available under applicable federal
or state law.24
PRIRA took effect on October 1, 2000, approximately 550 cases have been
presented for external review with about 47 percent of the decisions resulting
in the covered person’s favor.25
Insurance Commissioner’s standard for accepting or rejecting the recommendation
of an IRO has evolved from a medical necessity approach to a plain and
ordinary meaning of the contract standard. In the early stages of PRIRA,
in some instances, the commissioner rejected IRO recommendations to uphold
the denial of a benefit even if the contract of insurance contained an
express exclusion of the medical procedure. Medical necessity dictated
coverage of the benefit, he reasoned, because the definitions of basic
health services and health maintenance contract, as set forth in MCL 500.3501(b)
and (f), must be read into the contract.26
According to the commissioner, a plan ‘‘cannot interpret the provisions
of the certificate to deny coverage for medically necessary basic health
services because such an interpretation would conflict with the requirements
of MCL 500.3501.’’27
the commissioner has taken a strict construction approach in reviewing
decisions recommended for acceptance by the IRO. Although medical necessity
remains relevant, if a contract contains an express exclusion of coverage
clause, the commissioner is inclined to adhere to the unambiguous, plain
meaning of the certificate ‘‘to ensure the recommendation is not contrary
to the terms of coverage.’’28
is Vulnerable to a Preemption Challenge Under Section 1132(a) of ERISA
to Rush, the Supreme Court made it clear that any state law cause
of action that amounts to such an alternative enforcement action is preempted
by ERISA because Congress clearly intended for the remedies set forth
in ERISA to be exclusive:
six carefully integrated civil enforcement provisions found in subsection
502(a) of the statute provide strong evidence that Congress did not
intend to authorize other remedies that it simply forgot to incorporate
expressly. Pilot Life Insurance Company v Dedeaux, 481 US 41,
finding that the Illinois HMO Act did not conflict with Section 1132 (a)
of ERISA, the Court in Rush recognized ‘‘that a state might enact
an independent review requirement with procedures so elaborate and burdens
so onerous, that they might undermine Section 1132(a).’’29
PRIRA might be elaborate enough to be interpreted as a statute that involves
the sort of additional remedy the Court would prohibit.30
the Illinois law, Michigan permits multiple layers of review. An IRO conducts
the first level of review. After the IRO submits its rationale for the
decision, the commissioner is required to review the rationale and either
accept or reject the recommendation. If a covered person or carrier is
not satisfied with the commissioner’s decision, another level of review
can occur by pursuing the matter in a state circuit court. In addition,
the statute permits the pursuit of other remedies under applicable state
or federal law. Under the Illinois HMO Act, only one level of review is
permitted, and the HMO is bound by the decision if the reviewing physician
concludes that the covered service is medically necessary. According to
the Court, the Illinois law is not an arbitration-like remedial device
because the reviewer is an independent physician who determines if the
benefit is medically necessary.31
IROs, however, are constructed differently and, therefore, PRIRA might
be viewed as a device that displaces judicial enforcement of ERISA contrary
to Section 1132(a). PRIRA, for example, requires the IRO to consider several
factors including any relevant evidence submitted by the carrier or the
Not only are medical records and best practice standards fair game
for purposes of the review, but the health carrier’s certificate of coverage
and utilization review criteria must also be evaluated to develop a rationale
to support a recommendation to the commissioner.33
Moreover, the examination of an adverse determination is not limited to
a single physician. A professional appeals staff that includes clinicians
and licensed attorneys conducts the reviews.34
PRIRA’s multiple review process, the variety of evidence an IRO
must evaluate, and the composition of the IRO fit within the context of
the Court’s concern regarding burdensome and arbitration-like independent
review requirements that may result in the law’s preemption.35
of this article originally appeared in the 8th Annual Health Law Institute
Seminar Sponsored by the Michigan Institute of Continuing Legal Education
and the Health Law Section of the State Bar of Michigan and have been
printed with permission. The author extends his gratitude to Michael Shpiece
and Paul Duguay for their advice.
American Association of Health Plans, Survey of Independent Medical Review:
State Laws and Regulations, November 15, 2001.
Rush Prudential HMO, Inc v Moran et al., 536 US ___ (2002); 29
MCL 333.21088, now repealed.
See, MCLA 333.21023, now repealed.
MCL 333.21035, now repealed and replaced by MCL 500.2213.
MCL 550.1907(2) and 1913.
The Supreme Court in Rush viewed de novo review as a permissible
standard because ‘‘[n]othing in ERISA, however, requires that these kinds
of decisions be so ‘discretionary’ in the first place; whether they are
is simply a matter of plan design or the drafting of an HMO contract.’’
Rush, slip op at p 29.
‘‘Breakdown of PRIRA Cases as of July 2002,’’ OFIS (7/02).
Order of the Commissioner, Petitioner John Doe v Physicians Health
Plan, Inc (3/2/01).
MCL 550.1915(15); See, Order of the Commissioner, In the Matter of
Petitioner v Priority Health (2/5/02).
Id. at 24 n 10.
Id. at 23.
Id. at 26.
MCL 550.1911(9), (13).
MCL 550.1911(13)(d), (f).
MCL 550.1919; and Letter from The Center For Health Dispute Resolution
to Michigan Division of Insurance explaining that ‘‘[t]his case has been
reviewed by a practicing physician who is board certified in internal
medicine, a practicing physician who board certified in general surgery
and in surgery critical care and by a licensed attorney on CHDR’s professional
appeals staff.’’ (12/31/01).
See, Joel L. Michaels and Robin J. Bowen, ‘‘Rush To Judgment? An Analysis
of Rush Prudential HMO, Inc v Moran,’’ AHLA Health Law Analysis