Defining “Medically Necessary”
While health plans must provide medical benefits in accordance with a multitude of federal laws such as the Affordable Care Act, Mental Health Parity and Addiction Equity Act, HIPAA, and Americans with Disabilities Act, health plans still have a wide range of latitude to determine what types of medical claims to cover. It is extremely common that health plans specify that only “medically necessary” care will be covered. However, as a recent case from a district court in Connecticut suggests, that requirement may not be as black and white as many health plans assume.
In this case, S.B. v. Oxford Health Ins., Inc., a health plan’s plan document stated that medical care was covered as long as it was provided in accordance with generally-accepted standards of medical practice. The plan’s third-party administrator, however, employed stricter rules than these generally-accepted standards when determining medical necessity. Because the health plan did not incorporate those stricter rules into the plan documents, the court found that it could not deny claims based on the stricter standards and must instead cover medical care as long as such care was an accepted standard of medical practice.
This case suggests that commonplace terms in health plans, such as “medical necessity,” may warrant a closer look. If health plans do not further define what “medical necessity” means within the plan documents, courts will likely look to the larger medical community for guidance. If health plans or their third-party administrators wish to administrate the health plan with a unique definition of “medical necessity” they may do so, but such definition must be comprehensively outlined in the plan documents.