Is coverage for experimental medical care fair? - News & Trends

Business & Health, April, 1994

The debate heated up last month on paying for medical care deemed experimental. A study by Duke University researchers and published in the New England Journal of Medicine concluded that insurers often use "inconsistent ... arbitrary and capricious" criteria to deny coverage or reimbursement for new and experimental procedures.

Specifically, the study found that some insurers covered the cost of bone marrow transplants for the treatment of advanced breast cancer while others did not, and that even within a single insurance company, coverage was being granted for the procedure for some patients while denied to others, without any clear medical explanation for the disparity.

Insurers immediately cried foul, saying their policies are often dictated by employers, and particularly self-insured employers. "The employers set the rules," says John Cova, a consultant on medical technology to the Health Insurance Association of America, in Washington.

In truth, the matter is not that simple, benefits experts say. Employers often set broad parameters of coverage and exclude coverage of experimental procedures in their benefit plans. But contracts typically leave insurers with considerable freedom to make judgments on what is covered and what is not. However, it is mostly true that a self-insured company would be asked to rule on a big-ticket item such as a bone marrow transplant (costing: $100,000 or more) if the insurer were only administering the employer's benefit program.

Bone marrow transplants for breast cancer have come to be a test case in the debate over experimental treatment. Late last year, a jury in California, in a landmark decision, held an HMO (Health Net of Woodland Hills, Calif.) liable for denying coverage for a bone marrow transplant to a 40-year-old woman with advanced breast cancer. The award to the since-deceased woman's family was for an unprecedented $89.3 million, $77 million of which was for punitive damages. Health Net is appealing the decision.

Nevertheless, in the wake of the decision, dozens of HMOs have begun setting up more formal decision-making procedures to rule on coverage of new technologies and experimental procedures. Most often this step involves establishing panels of independent researchers and specialists to decide what should be covered. A second approach: let employers choose between two plans--One that covers controversial new treatments and one that specifically excludes them.

Qual-Med Inc., an HMO in Pueblo, Colo., now offers employers such a choice. The price difference between the two plans is 1.5%, or $2.60 per member per month. Employers often don't want the anguish--not to mention the legal exposure--that comes with denying coverage to a desperately ill employee, says Malik Hasan, M.D., Qual-Med's chief executive officer.

Congress will have to grapple with the issue as it moves toward health reform.