Prudent Layperson Laws Help Get Insurance Coverage for Emergency Room Visits

April 26, 2004

Embargoed for Release at Noon (EDT) on Monday, April 26, 2004

Prudent Layperson Laws Help Get Insurance Coverage for Emergency Room Visits

WINSTON-SALEM, N.C. – New laws have virtually eliminated the specter of insurance companies refusing to pay for emergency services that a “prudent layperson” thought were needed, according to a study at Wake Forest University Baptist Medical Center.

“Prior to these laws, most managed care plans would determine the necessity for emergency care based more on ultimate diagnoses than on presenting symptoms,” said Mark Hall, J.D., professor of public health sciences and law, writing in the May 2004 Annals of Emergency Medicine.

That meant that a person who had acute chest pain might be denied insurance coverage because the pain turned out to come from heartburn rather than a heart attack.

“Following these laws, such practices appear to have been vastly reduced or to have virtually disappeared,” Hall said. “Prudent-layperson laws have helped to catalyze industry-wide changes in how health insurers review emergency department (ED) claims and how they manage ED costs.”

Hall said that 47 states have passed various versions of “prudent layperson” laws. North Carolina’s law took effect on Jan. 1, 1998.

The few instances where denial still occurs are generally reversed if there is an appeal, the study indicated. However, some people Hall interviewed said that some insurers make it a policy to first deny coverage and agree to pay only after the claim is refiled or a request is made for reconsideration. In North Carolina, regulators found last year that one insurer mishandled 146,000 emergency room claims over a five-year period from 1998 to 2003.

In his study Hall contacted insurance regulators in all 50 states to determine how likely they thought they would be to catch a health plan that repeatedly refused to pay for emergency room care, and whether such action would carry a fine or other penalty.

The prudent-layperson provision is often a part of broader managed care patient protection laws, and some states have stepped in to fine violators of those broader laws.

“Regulators in 23 states reported fining insurers that violated some aspect of managed care patient protection laws, usually prompt payment laws, and some of these fines have amounted to several hundred thousand dollars,” the study found. After the study was complete, in December 2003, North Carolina insurance regulators fined Blue Cross and Blue Shield of North Carolina $1.8 million, a record amount in the state, for not properly implementing the prudent-layperson law.

In six states – Iowa, Louisiana, Michigan, New Jersey, Texas and Virginia – Hall conducted in-depth interviews with insurance company representatives, providers (both hospitals and physicians), human resources benefit managers, regulators and patient advocates. He interviewed 11-15 people in each state, a total of 87 interviews.

“Most people interviewed, from all perspectives, thought that coverage for emergency services was being denied before these laws, based more on ultimate diagnosis than on presenting symptoms, and that these laws have largely corrected such practices,” he said.

However, he stressed that being treated in the ED was not in question, given other laws requiring hospitals to at least screen everyone who comes through the door. “The only issue was who is responsible for paying after treatment is rendered.”

Hall reported that, to discourage inappropriate use of emergency rooms, insurance companies are raising the co-payments that patients are required to pay each time they seek emergency services.

The study was paid for by the Robert Wood Johnson Foundation under its “Changes in Health Care Financing and Organization” program.

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