Health insurance is a contract. You agree to pay the insurance company, they agree to pay for medical care. But there are limits — health insurance companies generally only cover things they deem “medically necessary.”
Medical necessity has, historically, been a broad standard. Where there are disputes, patients, doctors, and insurance companies can haggle over whether something should or should not be covered under that standard during the appeals process or in court. There are plenty of examples of this: In one 1990 case, a 51-year-old named John Hyde sued Humana after it initially denied coverage for a liver transplant his doctor recommended to treat cirrhosis. 
But research published in the Iowa Law Review shows that many health insurers are moving away from using broad standards to make these determinations, and are instead adopting precise, technical, black-and-white rules for what they will or won’t cover.
It’s a change you probably haven’t noticed if you have health insurance. These rules aren’t always easy to access or even read. But this shift, documented over the past 20 years, may be quietly sapping the value of your health insurance plan and making it harder to win appeals against your health insurance company.
Wait, what’s happening to my health insurance?
The authors of the study found that health insurance companies are increasingly adopting detailed rules of medical necessity. These rules appear in lengthy documents separate from health insurance policies. They may specify, for example, that liver transplants are only covered “for bilateral atresia or certain congenital medical disorders,” or they won't cover gastric bypass unless your body mass index meets a certain threshold or you have a comorbidity.
These rules don’t necessarily appear in your insurance policy, but the study found that the language in policies is increasingly changing to say that certain types of care, or in some cases, all care, are only covered to the extent described in their separate rules of medical necessity guidelines.
Even if you appeal a health insurance denial, these rules make it harder for you or your provider to argue that the denied treatment is medically necessary, says Daniel Schwarcz, a professor at the University of Minnesota Law School who co-authored the Iowa Law Review article with Amy B. Monahan.
“Insurers have essentially changed their contracts so the ultimate rules are the medical policies,” Schwarcz says. “You don’t have any grounds to argue that your medical policy is wrong or that it doesn’t take into account my medical situation or take into account this new study or it wasn’t updated recently. None of those arguments matter.”
Schwarcz and Monahan examined regulatory filings from health insurers in 45 states, covering 180 policies. Almost all of them included “substantive rules of medical necessity for a discrete number of specific types of care.” “We found a lot of variation across insurers and across states, but we found this is a significant phenomenon and that it appears to be a relatively new phenomenon in the last 10 to 15 years,” he adds.
How this affects your health coverage
Emily Brown is patient education content and project manager for the Patient Advocate Foundation, a Virginia-based nonprofit that helps people with chronic, life-threatening, and debilitating illnesses navigate the health care system. She’s been at the nonprofit for 10 years, and for five of them, she was in the case managing department, helping patients with insurance appeals, so she’s familiar with the rules insurance companies set.
Insurance company medical guidelines don’t come out of nowhere — they’re created by medical experts, following standards set by medical research. However, Brown says, “I definitely have seen circumstances where insurance companies do make clinical guidelines, and I’m assuming in an effort to be prohibitive for the patient.”
The “rulification” of health insurance adds more complexity to a system people already have a hard time navigating. While medical necessity guidelines are accessible, says Brown, “You have to have to know to ask for them or you have to know how to look for them.” With few people able to define basic insurance terms like “deductible,” is it reasonable to expect them to wade through what Schwarcz says is “incredibly detailed, incredibly technical, frequently changing documentation” to determine what their insurance plan will cover?
‘We need to have a dialogue’
Schwarcz and Monahan aren’t saying to get rid of medical rules of necessity. Schwarcz says insurance companies may be responding to a period in the 90s, when they lost a number of high-profile lawsuits over medical determinations. The most famous involved a treatment for breast cancer called high-dose chemotherapy with autologous bone marrow transplant. Insurance companies only agreed to cover it due to the threat of litigation, but the treatment was later shown to be ineffective compared to other options. 
“There was this very public set of cases where there was, what I would charitably call, a failure of the legal system,” Schwarcz says.
Writing strict rules about what they’ll cover helps protect insurance companies from the threat of litigation, but it comes with tradeoffs.
“The right solution is a balance,” Schwarcz says. “I think we went from one extreme to another.”
In one extreme, courts and juries had big say over what insurance companies covered. Now, Schwarcz says, insurance companies have a way of avoiding legal and regulatory oversight altogether.
The result could be that insurance companies deny more claims. You may still be able to appeal those denials, allowing a third-party reviewer to decide whether a treatment should be covered, but consumers rarely go that route — only 0.2% consumers with marketplace health insurance plans appealed denied claims in 2021.  And even if you do, the study says, “the rules governing an external review generally prohibit a reviewer from ordering coverage of a treatment that is excluded in the insurer’s governing plan documents.” These rules vary by state and are open to interpretation, but, the authors conclude, “When health plans make their rules of medical necessity part of their government legal documents, they can, and often do, fundamentally undermine the capacity of external review to check insurers’ clinical judgements.”
The authors cited the example of gastric bypass surgery:
“If an insurance policy specified that weight loss surgery was only covered for individuals with a BMI above 40 for at least one year, external reviewers would not generally have authority to order coverage for someone who did not meet this requirement, even if they believed that weight loss surgery was indeed medically and scientifically appropriate for that individual.”
If you’re concerned about whether a particular treatment will get covered, it’s possible to search online for the insurance company’s medical guidelines and see what it says, Brown says. Your doctor may be able to help you understand whether the treatment is covered. This is a good idea during open enrollment, especially if you have a chronic condition.
Remember that you can always appeal health insurance company decisions. While there’s no standardized process, each insurer is required to have one and your health care provider, as well as organizations like the Patient Advocate Foundation, can help you navigate it.
Even if you don’t have the time to look up your insurance company’s medical guidelines, you should be sure to read your policy, Brown says, and the policies you may be considering during open enrollment. Many people don’t, and get taken by surprise that their insurance doesn’t cover certain treatments, Brown says. Your policy will also outline the denial and appeal process, so you’ll know what to expect if you have a claim rejected.
“The insurance process does feel like a mountain,” Brown says, "but it is not one that cannot be climbed. You just have to know how to do it, what is needed, and how the process works. But it can definitely feel overwhelming.”
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