Insurance Federation of Pennsylvania, Inc. v. Commonwealth

970 A.2d 1108, 601 Pa. 20, 2009 Pa. LEXIS 1037
Supreme Court of Pennsylvania·Decided May 27, 2009·No. 89 MAP 2007·Published·Cited by 19 cases

Opinions

OPINION ANNOUNCING THE JUDGMENT OF THE COURT

Justice McCAFFERY.

The Insurance Federation of Pennsylvania (“the Federation”) appeals from the order of the Commonwealth Court declaring that, by statute, group health insurers must provide specified minimum coverage for alcohol and drug abuse treatment once an insured receives a certification and a referral for treatment from a licensed physician or a licensed psychologist.1 The issue presented is whether the statutory mandate precludes the application of utilization review for medical necessity and appropriateness of the mandated treatment. We conclude that managed care plans may not apply utilization review to abrogate or alter the sole statutory prerequisites to obtaining treatment for alcohol and drug abuse, i.e., certification and referral by a licensed physician or licensed psychologist. Accordingly, we affirm the order of the Commonwealth Court.

The facts of the instant case are not in dispute, and are centered on two statutes and a Notice issued by the Pennsylvania Insurance Department (“the Department”) interpreting those statutes. Specifically, in 1989, the General Assembly passed Act 106, 40 P.S. §§ 908-1 — 908-8, which requires group health insurers to include specified minimum coverage for treatment of drug and alcohol abuse and dependency. Subsequently, in 1998, the General Assembly passed Act 68, 40 P.S. §§ 991.2101 — 991.2193,2 a consumer-protection statute [26] that sets forth the responsibilities of and requirements pertaining to managed care plans in the delivery of health care services.

The Notice in question, which the Department issued in August 2003, addressed the obligations of insurers to provide coverage for drug and alcohol abuse treatment under Act 106 and concluded that Act 68 does not alter Act 106’s requirements. See Drug and Alcohol Use and Dependency Coverage; Notice 2003-06, 33 Pa. Bull. 4041-42 (August 9, 2003) (“the Notice”). The Notice in its entirety reads as follows:

Drug and Alcohol Use and Dependency Coverage; Notice 2003-06
This notice is issued to advise all entities subject to Act 106 of 1989 (act) (40 P.S. §§ 908-1 — 908-8) of their obligations under Commonwealth law in the provision of coverage for alcohol or other drug abuse and dependency benefits. The act requires specific coverage of drug and alcohol treatment services in certain group insurance policies or contracts. Drug and alcohol use and dependency are recognized in this Commonwealth as public health problems with serious workplace, health care, community and criminal justice ramifications. The Insurance Department (Department) releases the following guidance concerning the provision of benefits under the act.
The act specifies that all group policies, contracts and certificates subject to the act providing hospital or medical/surgical coverage shall include within that coverage certain benefits for alcohol or other drug abuse and dependency. Under the act, the only lawful prerequisite before an insured obtains non-hospital residential and outpatient coverage for alcohol and drug dependency treatment is a certification and referral from a licensed physician or licensed psychologist. It is the Department’s determination that the same prerequisite applies for inpatient detoxification coverage. The certification and referral in all instances controls both the nature and duration of treatment. The location of treatment is subject to the insuring [27] entity’s requirements regarding the use of participating providers.
Act 68 of 1998 (40 P.S. §§ 991.2101-991.2193), governing quality health care accountability and protection, does not change the requirements under [Act 106] and should be read in conjunction with these existing requirements. Thus, an entity subject to Act 68 may utilize precertification or utilization reviews, provided, however, that the decision of the precertification or utilization review does not limit [Act 106] certification and referral by the licensed physician or licensed psychologist.
Questions regarding this notice should be addressed to Ronald A. Gallagher, Jr., P.E., Deputy Commissioner, Office of Consumer and Producer Services, Insurance Department ....

Id. (emphasis added).

Following publication of the Notice, the Federation and other trade associations, insurers, and managed care plans challenged the Department’s interpretation of Act 106 as applied to managed care plans by filing a petition for review in the nature of a complaint for declaratory judgment addressed to the Commonwealth Court’s original jurisdiction. The petitioners, including the Federation, sought, inter alia, a declaration that Act 106 did not preclude, limit, or regulate the application of utilization review for medical necessity and appropriateness3 by managed care providers. It was the petitioners’ view that the General Assembly had not intended to exempt Act 106’s mandated benefits from the managed care practice of utilization review for medical necessity and appropriateness, but rather had intended that utilization review be incorporated into Act 106’s statutory scheme.

Agreeing that the issue presented was solely a legal one, the petitioners and the Department filed cross-motions for judg[28] ment on the pleadings. Following oral argument before a three-judge panel and then an en banc panel, the Commonwealth Court concluded that the controversy was not ripe and therefore declined to exercise jurisdiction. The Federation and the Managed Care Association of Pennsylvania appealed to this Court, which on February 21, 2006, vacated the Commonwealth Court order and remanded for a consideration of the merits of the declaratory judgment action. Insurance Federation of Pennsylvania, Inc. v. Commonwealth of Pennsylvania, Insurance Department, 586 Pa. 268, 893 A.2d 69 (2006) (per curiam order).4

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Insurance Federation of Pennsylvania, Inc. v. Commonwealth, 970 A.2d 1108, 601 Pa. 20, 2009 Pa. LEXIS 1037 (Pa. 2009).

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