Medical Necessity

[Guest TRIADtrisha]

Hello everyone:

We have an irate participant that would like written documentation that specifies what documentation is needed to substantiate a claim. We requested that she submit proof of medical necessity for a specific service.

Any ideas where I could find this information?

Thank you very much!!

[KIP KRAUS]

Your SPD should define Medical Necessity so you should be able to site such definition. In addition, the SPD should have language that substantially states that the Plan Administrator or insurer if the plan is insured, has the right to request medical evidence that a medical procedure is medically necessary.

On the other hand, no claim should be processed if the doctor doesn’t provide a diagnosis for the procedure he/she is performing. Check the claims procedures in the SPD.

[Lisa Hand]

Section 213 of the IRC would be a good direction to point her in as well as Publication 502 which specifically states many procedures are not eligible unless they are medically necessary.

[Moe Howard]

Kip is correct about the summary plan description. The plan's "medical hand-book" (which according to ERISA is part of the SPD, when referenced in the SPD) will state what criteria a medical service or medical condition must meet, in order to be covered by the plan. Also, if the plan is fully insured .... you can have the insurance company write him a letter which references the section of the insurance policy which adresses his specific question.

[Lisa Hand]

While the company's medical plan insurance provider and SPD might be helpful, this issue normally arises in cases where the service is not covered by insurance but is still eligible to be processed through the Medical FSA, if properly documented as medically necessary. The SPD for the Section 125 should give general guidelines and refer to the specific section of the IRC which govern medical expenses.

Trisha, you could be a bit more specific on the type of expense in question?

[Moe Howard]

All medical plans are welfare benefit plans ... which are required to have a SPD. The SPD is required by ERISA to explain what is covered and how claims are to be filed & presented for processing. If the plan has no SPD, then the plan is in violation of ERISA. If the plan has a SPD but it does not explain what kind of proof must be attached to a claim ... then the plan is in violation of ERISA.

Now might be a good time for the employer to hire a TPA to design a good SPD.

[Guest TRIADtrisha]

I do work for a TPA, however, our SPD is quite vague, and sometimes participants will ask us for proof that this is necessary documentation.

[Moe Howard]

If your SPD is too vague, then you should hire a professional TPA (more experienced than your employer) to draft a new SPD.

[Guest TRIADtrisha]

It does say that a reciept needs to be administered by a third party, but does not say that the third party needs to be a medical dr. Similar to what I've seen in the EBIA manual

[Moe Howard]

Is the irrate employee covered by a fully-insured medical group policy that is in the name of his employer (even though his claim in question is not covered by the insurance company because he has not yet met his deductible) and he wants his employer to pay the claim under the employer's supplemental self-insured medical reimbursement plan ??

If yes ... then, the definitions of "medically necessary & proper claim" as defined in the medical policy (which the insurance company sent to the employer) will rule.

Read the policy and see what it says about medical necessity & proper documentation required for a claim.

Once you determine that the policy would allow (or not allow the claim) if he had already met his deductible.... then photo-copy that portion of the policy and give it to the employee.

[KIP KRAUS]

The simple maters of fact are that 99.9% of group medical plans do not cover medical procedures that are not “medically necessary”. If you are administering a plan that does not at least make this statement, then your plan is in trouble. If the plan does make a similar statement why not tell the irate participant that a written diagnosis from her doctor will determine the “medical necessity”. Sounds to me like the employee must have some suspicion that the procedure she had was not medically necessary.

In my opinion, whether or not you specify what is needed to prove medical necessity it is common practice to require it before a claim is processed. If a TPA is paying every claim that crosses his desk without knowing if the procedure was medically necessary he is not adjudicating claims properly and is providing a disservice to his clients.

I would tell this participant that the claim is not going to be paid until evidence of medical necessity is received. Her doctor should have enough sense to know what is required to prove medical necessity.

Before some of you out there accuse me of giving advice let me say that all of the above are my opinion based on experience and common sense.

[Lisa Hand]

Trisha: Give us some more specifics on the expense in question. Is it one that would not be permitted without the requested documentation as defined in Publication 502 such as weight loss, which is permitted if to treat an existing disease such as heart disease, but not permitted simply to maintain general health? The regulations for Section 125 require independent third-party verification of expenses, what has the participant provided at this point?

Kip is correct that it must be medically necessary, otherwise it is not permitted. Irrate or not, those are the rules and to be in compliance and not be discriminatory, the Plan must apply them to everyone. As Kip said, it does raise the question, why is the participant so reluctant to provide valid documentation, if the expense is valid. That in itself should be a red flag.