Does Iowa's Health Care External Review Process Replace Common-Law Rights?

Does Iowa’s Health Care External Review Process Replace Common-Law Rights? Wade S. Hauser  ABSTRACT: The Patient Protection and Affordable Care Act (“ACA”) established a federal external review process that enabled covered persons to appeal to independent reviewers if their health insurers deny coverage for a particular health care service. The ACA also required each state to implement an adequate external review process. Iowa’s appellate courts have not decided whether the external review process is “exclusive”—meaning covered persons must use the process to challenge insurers’ adverse benefit determinations—or “cumulative”—meaning covered persons may bypass the process and file an action in a district court. This Note argues that Iowa’s external review process is cumulative. The application of two rules of statutory interpretation—the new-right test and the comprehensive-scheme test—suggests that courts should construe Iowa’s external review statute as a supplement to, rather than a replacement of, a covered person’s common-law rights against an insurer. While the external review process provides a covered person with beneficial protections and a faster, less expensive, and often more convenient means to challenge an insurer’s denial of coverage, its short statute of limitations, exclusion of oral testimony, and limited jurisdiction may motivate a covered person to pursue traditional litigation in some circumstances. I. INTRODUCTION .................................................................................... 1403 II. BACKGROUND ...................................................................................... 1405 A. E XTERNAL R EVIEW P ROCESSES B EFORE THE ACA AND B ARRIERS TO E XTERNAL R EVIEW ......................................................................... 1405 B. T HE C URRENT E XTERNAL R EVIEW P ROCESS ..................................... 1408 1. The ACA’s Consumer Protection Requirements ............... 1411 2. Iowa’s Amended External Review Process ......................... 1411  J.D. Candidate, The University of Iowa College of Law, 2014; B.A., St. Olaf College, 2009. I would like to thank the writers and editors of the Iowa Law Review for their assistance with this Note. I would also like to thank my friends and family for their continuous support. 1402 IOWA LAW REVIEW [Vol. 99:1401 III. MAY A COVERED PERSON BYPASS THE EXTERNAL REVIEW PROCESS? ... 1413 A. L EGISLATIVE I NTENT AND THE T EXT OF I OWA ’ S E XTERNAL R EVIEW S TATUTE ........................................................................................ 1414 B. W HETHER I OWA ’ S E XTERNAL R EVIEW S TATUTE C REATES A N EW R IGHT ........................................................................................... 1418 1. Whether the New-Right Test Requires a Completely New Right ............................................................................. 1419 2. Application of the New-Right Test to Iowa’s External Review Statute ....................................................................... 1420 C. W HETHER I OWA ’ S E XTERNAL R EVIEW S TATUTE C REATES A C OMPREHENSIVE S CHEME ............................................................... 1421 1. Definition of the Comprehensive-Scheme Test and Application in Lamb ............................................................. 1421 2. Application of the Comprehensive-Scheme Test to Iowa’s External Review Statute ............................................ 1422 D. P UBLIC P OLICY G OALS I NDICATE THAT THE E XTERNAL R EVIEW P ROCESS S HOULD B E C UMULATIVE .................................................. 1426 IV. THE STAKES FOR COVERED PERSONS AND LITIGATION CONSIDERATIONS ................................................................................. 1427 V. CONCLUSION ....................................................................................... 1429 2014] HEALTH CARE EXTERNAL REVIEW PROCESS 1403 I. INTRODUCTION The Patient Protection and Affordable Care Act (“ACA”) is one of the most scrutinized and controversial laws in recent American history. 1 Much of the attention surrounding the law has focused on the “individual mandate,” health insurance exchanges, and the expansion of eligibility for Medicaid. 2 Yet, the law contains other facets that, despite their low profile, significantly affect insurance companies, medical providers, and consumers. 3 One such facet, and the focus of this Note, is the ACA’s requirement that most private insurers 4 comply with either a state or federal “external review process.” 5 The process is a procedure that allows covered persons 6 to appeal insurers’ decisions to deny benefits for specified reasons 7 to an 1. See David Goldin, External Review Process Options for Self-Funded Health Insurance Plans , 2011 COLUM. BUS. L. REV. 429, 430; Sara Rosenbaum, Realigning the Social Order: The Patient Protection and Affordable Care Act and the U.S. Health Insurance System , 7 J. HEALTH & BIOMEDICAL L. 1, 1–4 (2011). 2. See generally KAISER FAMILY FOUND., FOCUS ON HEALTH REFORM: SUMMARY OF THE AFFORDABLE CARE ACT (2013), available at http://www.kaiserfamilyfoundation.files.wordpress. com/2011/04/8061-021.pdf (describing the major aspects of health care reform—such as the individual mandate (the requirement that most Americans obtain health insurance or pay a penalty), exchanges from which people can buy health insurance, and funding to allow states to expand Medicaid—but not describing external review). 3. See id. ; ANNIE L. MACH & BERNADETTE FERNANDEZ, CONG. RESEARCH SERV., R42069, PRIVATE HEALTH INSURANCE MARKET REFORMS IN THE PATIENT PROTECTION AND AFFORDABLE CARE ACT (ACA) (2012), available at http://digitalcommons.ilr.cornell.edu/cgi/viewcontent. cgi?article=1909&context=key_workplace; Andrew B. Wachler & Jesse Adam Markos, The New Consumer Appeals Process , HEALTH LAW., June 2011, at 21, 21. 4. Some insurers are exempt from the external review requirement. See infra notes 47–49 and accompanying text (noting that “grandfathered plans” are exempt from the requirement to establish an external review process). Except when necessary to distinguish them, this Note uses the term “insurers” to refer to both “group health plans and health insurance issuers in the group and individual markets.” See Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Internal Claims and Appeals and External Review Processes Under the Patient Protection and Affordable Care Act, 75 Fed. Reg. 43,330, 43,331 (July 23, 2010) [hereinafter Interim Final Rules] (to be codified at 26 C.F.R. pts. 54 & 602, 29 C.F.R. pt. 2590, 45 C.F.R. pt. 147) (defining “group health plan” as including both self-insured and insured employer-based group health plans); see also infra notes 51, 58 (defining various types of health plans). 5. 42 U.S.C. § 300gg-19(b) (2006 & Supp. V 2011); Interim Final Rules, supra note 4, at 43,332. The ACA also requires all insurers to establish an internal review process, which allows a covered person to challenge an insurer’s initial adverse benefit determination in a process conducted by the insurer. 42 U.S.C. § 300gg-19(a). Although the internal and external review processes are closely related, this Note focuses on the latter. For more information regarding internal review, see 29 C.F.R. § 2560.503-1(h) (2013) and Interim Final Rules, supra note 4, at 43,332–34. 6. This Note uses the term “covered persons” to refer to insureds. See IOWA CODE § 514J.102(11) (2013) (“ ‘Covered person’ means a policyholder, subscriber, enrollee, or other individual participating in a health benefit plan.”). 7. State external review processes must allow covered persons to appeal “adverse benefit determinations,” which include denials “based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.” Interim Final Rules, supra note 1404 IOWA LAW REVIEW [Vol. 99:1401 independent review organization (“IRO”). 8 Although the external review requirement makes up less than five pages of a more than 900-page law, 9 it established unprecedented consumer protections and has spawned substantial new federal regulations and new statutes in almost every state. 10 In Part II, this Note describes the origins of the external review process. It then examines the federal regulations that govern the current process and mandate minimum consumer-protection requirements. Part II also presents Iowa’s external review process as amended in 2011 to comply with the ACA. 11 Part III considers an important question Iowa’s appellate courts have not yet answered: May a covered person bypass the external review process— meaning the process is “cumulative”—or, as one district court held, 12 does the external review process provide the “exclusive” means to challenge an insurer’s adverse benefit determination? Iowa’s external review statute is silent on this question. After examining applicable rules of statutory interpretation 13 and public policy considerations, this Note argues that Iowa’s external review process is cumulative rather than exclusive. Part IV considers how Iowa’s cumulative external review process affects covered persons’ efforts to challenge adverse benefit determinations and influences their litigation strategies. Covered persons might often elect to use the external review process. However, the process’s short statute of limitations, limits on discovery and oral testimony, and limited jurisdiction may motivate covered persons to pursue traditional litigation in some cases. 4, at 43,334–35; see also IOWA CODE § 514J.105. The federal external review process allows covered persons to seek review of the same types of denials as well as rescissions of coverage. See Interim Final Rules, supra note 4, at 43,336. 8. See 42 U.S.C. § 300gg-19(b) (requiring the establishment of an external review process). The Iowa Code defines an “independent review organization” as “an entity that...