Is it Time for Soft Law to Apply to Commercial Payor Policies?

I recently attended the 7^th Annual ASU Workshop on Regulation and Reimbursement of Molecular Diagnostics.  This workshop is sponsored by the Sandra Day O’Connor School of Law.  In a day completely full of informative presentations and stimulating discussion, I was most taken by Kirk T. Hartley’s presentation “Experimental Exclusions and Other State Law Failures; A ‘Soft Law’ Approach is Needed.” Admittedly, the concept of soft law was new to me, but I was taken by how appropriate it may be to the regulation of molecular diagnostics. In this context, soft law refers to originally non-binding rules that are reached by consensus of experts in a given area, that eventually form the basis for binding policy.

Laboratories, physicians and patients have all dealt with the frustration of trying to get coverage policies applied consistently and objectively, instead of the seemingly subjective manner in which they are currently applied.  What we need is a binding glossary of terms and criteria that will be universally applied. The chart below shows the varied definitions of “Experimental” and “Investigational” that are in payor policies today. To make things even more complex, even when often lengthy coverage and non-coverage rules for specific disease areas are stated, they are subject to change and the beneficiary’s coverage will be determined by the policy that is in place at the time of the claim, not at the time the policy was purchased.

This creates a major barrier to patients obtaining coverage for molecular diagnostics, particularly, but not exclusively, among cancer patients.

As illustrated above, several large payors use inconsistent standards to classify “experimental exclusions.” Other payors do not publish any definition at all. To exacerbate this issue, payors also use fungible “medical policies” that lack clarity and are not part of the contract. This leaves far too much room for interpretation and “wiggle room” for payors to deny valuable treatment options.

State regulatory processes are unable to keep up with rapid scientific change in diagnostics and healthcare and that “experimental exclusions” are merely one symptom of the failure of private payor health insurance and its associated state regulation. As more scientific complexity and new technologies emerge, state laws cannot keep up and as a result, commercial payors can deny coverage for useful tests and therapies based on terms such as “experimental,” “investigational” and “medical necessity.”

State-level regulators are perpetually understaffed, and the overburdened staff lack the knowledge and expert resources needed to deal with the complexities involved in today’s health insurance. This knowledge gap will only expand as the breadth and depth of molecular knowledge continues to grow and diagnostic processes become increasingly multifactorial. Nor do any states collect or report on the claims, adjudication, or outcomes associated with their healthcare decision making. 

State-level regulation of health insurance is no longer meaningful in the age of national medical protocols and standards (unless a state chooses to require more than the federal minimum) and State regulators don’t govern “self-funded” health insurance plans operated by large employers. Has State regulation of commercial payor contracts outlived its usefulness?

Has the time come for a soft law approach to payor commercial policies?

What Might a Soft Law Approach Look Like?

One approach outlined by Hartley is based on leadership by companies with a proven record of looking forward and staking out commitments to consumer healthcare. This approach would adopt Federal agency decisions as a minimum. It may also include a “favored nations” clause, whereby plan members receive coverage for any benefit provided by that health insurer under any health insurance plan it issues. There is precedent for this in the regulations that mandate Medicare Advantage plans to cover services that are covered under fee for service Medicare. This approach would also adopt terms to increase transparency, consistency, and rule of law.

My position is that this is an issue worthy of further discussion. I see value for the industry in solidifying principles for substance of coverage and coverage standards for different diseases, including economic and reporting standards. Certainly, we have the expertise to contribute greatly to this process!