New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on September 15, 2003, representing the position of the New York State Insurance Department.

RE: Denial of Pre-Certification of Medical Procedure, Applicable Law.

Question Presented:

If a health plan denies pre-certification for a medical procedure on the grounds that it is experimental or investigational, what law governs the right to appeal?

Conclusion:

Whether or not the plan is insured or self-insured, Ms. B has internal appeal rights. As to external appeals, if the plan is insured through a policy of insurance issued in New York, appeal rights are governed both by New York Insurance Law Article 49 (McKinney 2000) and the Employee Retirement Income Security Act, 29 U.S.C.A. § 1001 et seq. (West 1999 and 2003 Supplement) (ERISA). If the plan has purchased a contract from a New York Health Maintenance Organization, appeal rights are governed by New York Public Health Law Article 49 (McKinney 2002) and ERISA. If the plan is self-funded, appeal rights are governed solely by ERISA and a Regulation promulgated by the United States Department of Labor.

Facts:

Ms. A is an in-house intellectual property lawyer and is inquiring on behalf of her sister, Ms. B., who is a New York resident. Ms. B is covered for health benefits as a dependent through a plan established by her husband’s employer.

Ms. B has been diagnosed with Non-Hodgkins Lymphoma and her physician has recommended an Allogeneic Bone Marrow Transplant with Ms. A as donor preceded, in one of three clinical trials, by non-myeloablative chemotherapy. The Administrator of Ms. B’s health plan has denied pre-certification for the procedure on the grounds that, since there is no standard non-myeloablative preconditioning protocol, the procedure is deemed to be experimental/investigational. Ms. A believes that the administrator is in error, since all drugs involved have previously been approved by the United States Food and Drug Administration for oncology purposes.

Ms. A’s brother-in-law’s employer has both a self-funded plan and an insured plan. Both plans are multi-employer plans. Ms. A is not sure whether Ms. B is covered under the self-funded plan or the insured plan.

Ms. A inquires as to Ms. B’s appeal rights.

Analysis:

The provision of health care by an employer to employees and dependents constitutes an employee welfare benefit plan under ERISA. 29 U.S.C.A. § 1002(1) (West 1999). Pursuant to 29 U.S.C.A. § 1144(a) (West 1999), all state laws relating to employee welfare benefit plans are preempted by ERISA, except that, pursuant to 29 U.S.C.A. § 1144(b)(2)(A), laws regulating insurance are not preempted. Finally, pursuant to 29 U.S.C.A. § 1144(b)(2)(B), a self-funded employee welfare benefit plan is not deemed to be an insurer.

There is an exception, however, to the general preemption of state laws with relation to Multiple Employer Welfare Arrangements (MEWA). A MEWA is defined, 29 U.S.C.A. § 1002(40):

(A) The term ‘multiple employer welfare arrangement’ means an employee welfare benefit plan, or any other arrangement (other than an employee welfare benefit plan), which is established or maintained for the purpose of offering or providing any benefit described in paragraph (1) to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries, except that such term does not include any such plan or other arrangement which is established or maintained-- (i) under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements, (ii) by a rural electric cooperative, or (iii) by a rural telephone cooperative association.

If the MEWA is fully insured, a state may only apply those statutes and regulations dealing with financial security. 29 U.S.C.A. § 1144(b)(6)(A)(i). If the MEWA is not fully insured, a state may apply any statute or regulation that is not inconsistent with ERISA. 29 U.S.C.A. § 144(b)(6)(A)(ii).

The United States Department of Labor has promulgated a Regulation, 29 C.F.R. § 2560.503-1 (2000), dealing with claims procedures for employee welfare benefit plans providing health benefits and to insurers, including HMOs, that provide fully insured group health coverage to such plans. The Regulation, 29 C.F.R. § 2560.503-1(k) (2000), preempts state laws that prevent the application of a federal requirement. The Regulation, however, specifically provides that state external appeal statutes shall not be preempted by the Department of Labor Regulation.

New York Insurance Law § 4910 (McKinney 2000) provides:

(a) There is hereby established an insured's right to an external appeal of a final adverse determination by a health plan.

(b) An insured, the insured's designee . . . shall have the right to request an external appeal when: . . . (2) (A) the insured has had coverage of a health care service denied on the basis that such service is experimental or investigational, and such denial has been upheld on appeal under section four thousand nine hundred four of this article [internal utilization review] or both the plan and the insured have jointly agreed to waive any internal appeal, and (B) the insured's attending physician has certified that the insured has a life-threatening or disabling condition or disease . . . (c) for which there exists a clinical trial, and (C) the insured's attending physician, who must be a licensed, board-certified or board-eligible physician qualified to practice in the area of practice appropriate to treat the insured's life-threatening or disabling condition or disease, must have recommended . . . (b) a clinical trial for which the insured is eligible. Any physician certification provided under this section shall include a statement of the evidence relied upon by the physician in certifying his or her recommendation, and (D) the specific health service or procedure recommended by the attending physician would otherwise be covered under the policy except for the health care plan's determination that the health service or procedure is experimental or investigational.

In addition, New York Public Health Law Article 49 provides identical external appeal rights for subscribers of HMOs.

Health plan is defined in New York Insurance Law § 4900(d-5):

"Utilization review agent’ means any insurer subject to article thirty-two [commercial insurer] or forty-three [Not-For Profit insurer] of this chapter, or any organization licensed under article forty-three of this chapter.

New York Public Health Law § 4900(4-e) (McKinney 2002) has a similar definition encompassing HMOs.

Accordingly, if Ms. B is covered under a policy or contract issued by an insurer in New York, including an HMO, her external appeal is governed by either New York Insurance Law Article 49 or New York Public Health Law Article 49. Of course, unless both the plan and Ms. B agree to waive it, an internal appeal within the plan is a condition precedent to any right of external appeal.

If Ms. B is covered by a self-funded plan, her internal appeal rights would be governed by the United States Department of Labor Regulation, which provides, 29 C.FR. § 2560.503-1(h)(3) (2000), that a plan must:

(ii) Provide for a review that does not afford deference to the initial adverse benefit determination and that is conducted by an appropriate named fiduciary of the plan who is neither the individual who made the adverse benefit determination that is the subject of the appeal, nor the subordinate of such individual;

(iii) Provide that, in deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, including determinations with regard to whether a particular treatment, drug, or other item is experimental, investigational, or not medically necessary or appropriate, the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment; . . .

If Ms. B is not satisfied with the outcome of the appeal, she has a right under ERISA, 29 U.S.C.A. § 1132(a) (West 1999 and 2003 Supplement), to bring a court action to enforce her rights under the plan. Even if she is covered under an insured plan, the Regulation of the United States Department of Labor provides, 29 C.F.R. § 2560.503-1(k)(2)(ii) (2000), that she need not exhaust any benefits under New York law before she may bring a court action.

While Ms. A does not know whether Ms. B is covered under an insured or a self-funded plan, Ms. A did indicate, however, that she has been informed that Ms. B has until January 3, 2004 to bring an appeal. New York Insurance Law § 4914(b)(1) (McKinney 2000) and New York Public Health Law § 4914(2)(a) (McKinney 2002) provide a 45 day period in which to request an external appeal and the Labor Department Regulation, 29 C.F.R. § 2560.503-1(h)(3)(i), provides a 180 day period in which to appeal. Since enforcement of New York’s 45 day requirement would frustrate the federal requirement, New York’s time limit is preempted.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.