Maternity coverage in Illinois        

Almost all insurance companies and HMOs pay claims based upon the concept of medical necessity. This Fact Sheet explains what medical necessity means and how to appeal adverse decisions by your insurer or HMO.

What Is Medical Necessity?

A sample definition of "Medically Necessary" contained in an insurance policy is:

"Medically Necessary means that a service, supply or medicine is necessary and appropriate and meets the standards of good medical practice in the medical community for the diagnosis or treatment of a covered illness or injury, as determined by the insurance company."

If you are a member of an HMO, your primary care physician is responsible for deciding if a proposed treatment or service is medically necessary. However, the HMO may require the primary care physician to obtain approval from its Medical Director.

Examples of hospitalizations and other health care services and supplies that are not considered Medically Necessary include:

• Inpatient hospitalizations for treatment that could be safely and adequately provided on an outpatient basis;
• Continued inpatient hospital care, when the patient's medical symptoms and condition no longer required a continued stay in the hospital;
• Cosmetic surgery;
• Treatment provided for the convenience of the patient, such as an elective Caesarean Section;
• An advanced procedure or treatment provided without first trying less invasive, less expensive treatments.

Insurance companies and HMOs exclude coverage for treatment that is not medically necessary because they do not want to pay for unnecessary treatment. The problem is that medical necessity is a judgment call. Just because your doctor prescribes a treatment or procedure, it does not mean the insurance company or HMO will agree it is medically necessary.

Most major medical policies and all HMOs require that you pre-authorize elective inpatient hospital stays and major surgical procedures. Failure to pre-authorize the service can result in a penalty or denial of the claim. If your policy requires pre-authorization, follow the proper procedure so you know whether or not coverage is available. If your policy does not require pre-authorization of the service, you will not know if it is covered until the claim is submitted.

NOTE: Preauthorization by an insurance company is not a guarantee that benefits will be paid. All policy provisions, such as preexisting condition waiting periods apply. Additionally, benefits are only payable if you are eligible for coverage on the date the service is provided.

How To Appeal A Denial Due To Medical Necessity

If an insurer or HMO denies a pre-authorization request or a claim due to lack of medical necessity, you may appeal the decision.

For HMOs: Appeal procedures for HMOs are set forth within the Managed Care Reform and Patient Rights Act. You or your physician can file an oral or written appeal with the HMO. The Act requires an HMO to render a decision on an appeal for urgently needed treatment within 24 hours after submission of the appeal. All other appeals must be handled within 15 business days of receipt of all necessary information. If the appeal is denied, you are entitled to an external independent review. You, your physician and the HMO select the independent reviewer jointly. The decision of the independent reviewer is final.

For insurance companies: There are no state laws or rules governing appeals to insurance companies. The federal ERISA regulations do provide some appeals procedure requirements. To find out if your plan is protected by those regulations, refer to your plan document. Most companies have an appeal procedure that requires a Medical Director to review appeals of medical necessity denials. You should ask your doctor to write a letter to the company explaining why the treatment is medically necessary. The appeal should include pertinent medical records. State law does not require an insurance company to grant you an external independent review. If your appeal is denied, you may contact the Division of Insurance for assistance. Although we are unable to review your medical records and make medical determinations, we can contact the company and request the highest level of review of the claim or pre-authorization request. If the matter is not resolved through this process, it is possible you may have to seek remedy through the legal system where a judge can make the decision.