What does it mean that a Minnesota health insurer is bound by a decision of an external review organization? In Linn v. BCBSM, Inc. (Minn. Ct. App. 1/30/17), Mr. Linn purchased a private health policy from Blue Cross Blue Shield of MN (BCBSM). He later developed chondrosarcoma of the thoracic spine. His physicians recommended proton beam radiation therapy (PBRT).
But the BCBSM policy stated PBRT was medically necessary for chondrosarcoma affecting the cervical spine or base of the skull. However, for all other conditions PBRT was investigational and not covered.
BCBSM denied Mr. Linn’s claim as not covered. Under Minn. Stat. §62Q.73, an insured who receives an adverse determination from a health insurer may seek review by an external review organization (“ERO”). The ERO decides whether the care was “medically necessary” as defined by the statute. That determination is nonbinding on the insured but binding on the insurer. Minn. Stat. §62Q.73, subd. 8.
The ERO concluded PBRT was medically necessary. BCBSM paid the claim.
Normally that would end the dispute. But Mr. Linn claimed the policy also promised he would receive “timely” service. He claimed the favorable ERO determination meant that BCBSM breached the contract when it denied his claim and thereby delayed. BCBSM defended saying it followed the policy language and when the ERO reversed BCBSM paid. Where is the breach?
On appeal the Court of Appeals concluded the decision of an ERO is a binding decision on the coverage of the policy, not just a binding decision to pay a claim. The Court of Appeals allowed the breach of contract claim to go forward on a theory that denial causing delay can be a breach of the timeliness covenant in the policy.
At the end of last month, the Minnesota Supreme Court granted further review. That Court will be asked how the statutory rights in Minn. Stat. §62A.73 should integrate with the terms of an insurance policy? Is the statutory ERO process some sort of super contract term that gets imposed upon the policy? Or is the ERO process a statutory “second opinion” that directs payment of a claim because of medical necessity but is made outside the language of the policy?
I predict the Supreme Court will reverse the Court of Appeals. Despite a thoughtful and comprehensive opinion from Judge Jesson at the Court of Appeals, I feel it is unlikely that the Supreme Court will construe the external review statute process as policy interpretation that overrides policy language.