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Executive Summary

In 1997 the Texas Legislature created an independent review process that consumers could use when their Health Maintenance Organizations (HMOs) denied coverage for treatments and procedures.

It has been close to five years since the Texas Legislature passed the law, and Consumers Union believed that it was time to evaluate its effectiveness. In general we find that Texas consumers benefit from independent review because the reviewers overturn the worst kinds of insurer denials but also hold doctors to a standard of medical necessity that discourages unnecessary hospitalization or therapies.

Consumers Union evaluated 263 review decisions (without any information identifying a patient). We divided the cases into various categories based on the medical issue in question and looked for patterns of care denied or care made available as a result of independent review.

Overall, the independent review system appears to work for both consumers and the larger health finance system. Consumers receive an independent assessment of their individual medical needs, but reviewers do not approve care that is not supported by the medical record or where reasonable alternatives are available.

• The reviewers overturned slightly more than half of the HMO denials. Out of the 263 cases reviewed by Consumers Union, 144 (55 percent) were either completely or partially overturned and 119 were upheld. We call this the "overturn rate." In all the overturned cases, consumers were able to get more care covered by their health plan.
  
  
• About 74% of the requests for review handled by the Independent Review Organizations (IROs) consistently concerned: a handful of contested prescription drugs (19 cases), surgical treatment for obesity (16 cases), mental illness (46 cases), substance abuse (54 cases), and the number of days (if any) required for hospital care for physical illness (60 cases).
  
  
• HMOs consistently deny and are overturned on the same issues-mental illness treatment, gastric bypass for obesity, and substance abuse treatment. This raises concerns about HMOs' practices with respect to these conditions, especially when there are clear guidelines that indicate how an IRO will decide.
  
  
• Mental health and substance abuse treatment constitute only 8% of the nation's medical care costs, and private insurance only pays 27% of the price. Yet, these conditions together accounted for 38% of care denials sent for independent review in our sample. Mental health treatment denials were overturned much more frequently than the general overturn rate (70 percent overturned or partially overturned).
  
  
• Independent reviewers only rarely overturned an HMO's decision not to pay for certain drugs. For the most part, reviewers supported alternatives proposed by the plan.
  
  
• Envoy and Independent Review, Inc. (IR) overturned HMO denials more frequently than Texas Medical Foundation (TMF). The variance could reflect material differences in approach to treatment worthy of additional investigation.
  
  
• Despite the strong likelihood of additional treatment, the number of reviews remains relatively small. Insurance companies make thousands of coverage decisions each week, yet only 587 cases were settled by independent review last year.
  
  This may be because health plans are making better coverage decisions now that someone can take an independent look. The same statute that created independent review also authorized consumers to sue a health plan for care denials.
  
  But the low level of use could be because few consumers have the time and energy to pursue independent review after a discouraging internal review process. (They must be denied twice before accessing an independent reviewer.) Other consumers (those covered by employer based ERISA plans) are not guaranteed access to the system at all. Federal changes to ERISA proposed in the Patient Protection Act would ensure that more consumers could get an unbiased look at their health plan's treatment decisions.