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Insurance Federation of Pennsylvania, Inc. v. Commonwealth

May 27, 2009

THE INSURANCE FEDERATION OF PENNSYLVANIA, INC.; THE MANAGED CARE ASSOCIATION OF PENNSYLVANIA; AETNA HEALTH, INC.; HEALTHASSURANCE PENNSYLVANIA, INC.; INDEPENDENCE BLUE CROSS; MAGELLAN BEHAVIORAL HEALTH, INC.; AND VALUEOPTIONS, INC.,
v.
COMMONWEALTH OF PENNSYLVANIA, INSURANCE DEPARTMENT,
APPEAL OF: THE INSURANCE FEDERATION OF PENNSYLVANIA



Appeal from the Opinion and Order of the Commonwealth Court entered July 26, 2007, which denied the motion for judgment on the pleadings filed by the Insurance Federation of Pennsylvania and granted the motion for judgment on the pleadings filed by the Pennsylvania Insurance Department 929 A.2d 1243 (Pa.Cmwlth. 2007).

The opinion of the court was delivered by: Mr. Justice McCAFFERY

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, JJ.

ARGUED: May 14, 2008

OPINION ANNOUNCING THE JUDGMENT OF THE COURT

The Insurance Federation of Pennsylvania ("the Federation") appeals from the order of the Commonwealth Court declaring that, by statute, group health insurers must provide specified minimum coverage for alcohol and drug abuse treatment once an insured receives a certification and a referral for treatment from a licensed physician or a licensed psychologist.*fn1 The issue presented is whether the statutory mandate precludes the application of utilization review for medical necessity and appropriateness of the mandated treatment. We conclude that managed care plans may not apply utilization review to abrogate or alter the sole statutory prerequisites to obtaining treatment for alcohol and drug abuse, i.e., certification and referral by a licensed physician or licensed psychologist. Accordingly, we affirm the order of the Commonwealth Court.

The facts of the instant case are not in dispute, and are centered on two statutes and a Notice issued by the Pennsylvania Insurance Department ("the Department") interpreting those statutes. Specifically, in 1989, the General Assembly passed Act 106 , 40 P.S. §§ 908-1 - 908-8, which requires group health insurers to include specified minimum coverage for treatment of drug and alcohol abuse and dependency. Subsequently, in 1998, the General Assembly passed Act 68, 40 P.S. §§ 991.2101 -991.2193,*fn2 a consumer-protection statute that sets forth the responsibilities of and requirements pertaining to managed care plans in the delivery of health care services.

The Notice in question, which the Department issued in August 2003, addressed the obligations of insurers to provide coverage for drug and alcohol abuse treatment under Act 106 and concluded that Act 68 does not alter Act 106's requirements. See Drug and Alcohol Use and Dependency Coverage; Notice 2003-06, 33 Pa.Bull. 4041-42 (August 9, 2003) ("the Notice"). The Notice in its entirety reads as follows:

Drug and Alcohol Use and Dependency Coverage; Notice 2003-06

This notice is issued to advise all entities subject to Act 106 of 1989 (act) (40 P.S. §§ 908-1--908-8) of their obligations under Commonwealth law in the provision of coverage for alcohol or other drug abuse and dependency benefits. The act requires specific coverage of drug and alcohol treatment services in certain group insurance policies or contracts. Drug and alcohol use and dependency are recognized in this Commonwealth as public health problems with serious workplace, health care, community and criminal justice ramifications. The Insurance Department (Department) releases the following guidance concerning the provision of benefits under the act.

The act specifies that all group policies, contracts and certificates subject to the act providing hospital or medical/surgical coverage shall include within that coverage certain benefits for alcohol or other drug abuse and dependency. Under the act, the only lawful prerequisite before an insured obtains non-hospital residential and outpatient coverage for alcohol and drug dependency treatment is a certification and referral from a licensed physician or licensed psychologist. It is the Department's determination that the same prerequisite applies for inpatient detoxification coverage. The certification and referral in all instances controls both the nature and duration of treatment. The location of treatment is subject to the insuring entity's requirements regarding the use of participating providers.

Act 68 of 1998 (40 P.S. §§ 991.2101-991.2193), governing quality health care accountability and protection, does not change the requirements under [Act 106] and should be read in conjunction with these existing requirements. Thus, an entity subject to Act 68 may utilize precertification or utilization reviews, provided, however, that the decision of the precertification or utilization review does not limit [Act 106] certification and referral by the licensed physician or licensed psychologist.

Questions regarding this notice should be addressed to Ronald A. Gallagher, Jr., P.E., Deputy Commissioner, Office of Consumer and Producer Services, Insurance Department . .

Id. (emphasis added).

Following publication of the Notice, the Federation and other trade associations, insurers, and managed care plans challenged the Department's interpretation of Act 106 as applied to managed care plans by filing a petition for review in the nature of a complaint for declaratory judgment addressed to the Commonwealth Court's original jurisdiction. The petitioners, including the Federation, sought, inter alia, a declaration that Act 106 did not preclude, limit, or regulate the application of utilization review for medical necessity and appropriateness*fn3 by managed care providers. It was the petitioners' view that the General Assembly had not intended to exempt Act 106's mandated benefits from the managed care practice of utilization review for medical necessity and appropriateness, but rather had intended that utilization review be incorporated into Act 106's statutory scheme.

Agreeing that the issue presented was solely a legal one, the petitioners and the Department filed cross-motions for judgment on the pleadings. Following oral argument before a three-judge panel and then an en banc panel, the Commonwealth Court concluded that the controversy was not ripe and therefore declined to exercise jurisdiction. The Federation and the Managed Care Association of Pennsylvania appealed to this Court, which on February 21, 2006, vacated the Commonwealth Court order and remanded for a consideration of the merits of the declaratory judgment action. Insurance Federation of Pennsylvania, Inc. v. Commonwealth of Pennsylvania, Insurance Department, 893 A.2d 69 (Pa. 2006) (per curiam order).*fn4

Following oral argument on the merits, a unanimous en banc panel of the Commonwealth Court granted the Department's motion for judgment on the pleadings, denied the Federation's motion for judgment on the pleadings, and dismissed the petition with prejudice. Insurance Federation of Pennsylvania, Inc. v. Commonwealth of Pennsylvania, Insurance Department, 929 A.2d 1243 (Pa.Cmwlth. 2007) (en banc). The Commonwealth Court concluded that the Department's interpretation of Act 106, as set forth by the Notice, was logical, rational, and consistent with legislative intent. Id. at 1250. More specifically, the Commonwealth Court determined that Act 106 plainly and clearly mandates coverage of the specified drug and alcohol abuse treatment once an insured has received a certification and a referral by a licensed physician or licensed psychologist. Id. at 1250-51, 1252. In agreement with the Department, the Commonwealth Court expressly concluded that the General Assembly did not intend for a managed care plan to have authority to overrule the certification and referral by a licensed physician or psychologist. Id. at 1251.

The Federation has now appealed to this Court for review of the Commonwealth Court's order, raising the following four issues:

1. Whether, in the absence of any supporting express statutory language or other indicia of legislative intent, it is legal error to conclude that the General Assembly intended to prohibit managed care plans ("MCPS") from applying managed care princip[les] in the delivery of Act 106 mandated benefits for alcohol and other drug abuse and dependency?

2. Whether an interpretation of Act 106 that prohibits any management of the delivery of Act 106 benefits by MCPs is against the public interest of ensuring the cost-effective delivery of quality health care benefits?

3. Whether the Commonwealth Court erred by affording deference to an administrative agency's interpretation that is offered to justify the agency's position in litigation or in interpretive rules or statements of policy?

4. Whether the Insurance Department's Drug and Alcohol Use and Dependency Coverage, Notice 2003-06, 33 Pa.Bull. 4041 (Aug. 9, 2003) is more than a mere "press release" or statement of policy and should have been promulgated as a regulation?

Federation's Brief at 5.

We will address the Federation's issues in turn, but initially we note our standard and scope of review when considering the grant of a motion for judgment on the pleadings. "A motion for judgment on the pleadings will be granted where, on the facts averred, the law says with certainty that no recovery is possible." In re Weidner, 938 A.2d 354, 358 (Pa. 2007) (citation omitted). Because the question presented is a legal one, our scope of review is plenary. Id.

The Federation's first issue requires interpretation of a statute, which is a question of law. Tritt v. Cortes, 851 A.2d 903, 905 (Pa. 2004). Accordingly, we must be guided by the Statutory Construction Act of 1972, 1 Pa.C.S. §§ 1501-91, the relevant principles of which we have recently described as follows:

The goal of statutory interpretation is to ascertain and effectuate the intent of the Legislature. 1 Pa.C.S. § 1921(a). The best indication of legislative intent is the language used in the statute. When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit. 1 Pa.C.S. § 1921(b). We look beyond the language employed by the General Assembly only when the words are not explicit. 1 Pa.C.S. § 1921(c).

Commonwealth of Pennsylvania, Office of Administration v. Pennsylvania Labor Relations Board, 916 A.2d 541, 547-48 (Pa. 2007).

In determining legislative intent, we must read all sections of a statute "together and in conjunction with each other," construing them "with reference to the entire statute" and giving effect to all the statutory provisions. Housing Authority of the County of Chester v. Pennsylvania State Civil Service Commission, 730 A.2d 935, 945 (Pa. 1999); 1 Pa.C.S. § 1921(a).

When the words of a statute are not explicit, our determination of legislative intent may be informed by other factors, including administrative interpretations of the statute, the consequences of a particular interpretation, and analysis of other statutes addressing the same or similar subjects. Colville v. Allegheny Retirement Board, 926 A.2d 424, 432 (Pa. 2007) (citing 1 Pa.C.S. § 1921(c)). We emphasize that while "an interpretation of a statute by those charged with its administration and enforcement is entitled to deference, such consideration most appropriately pertains to circumstances in which the provision is not explicit or is ambiguous." Tritt, supra at 905 (internal citation omitted).

If possible, we avoid a reading that would lead to a conflict between different statutes or between individual parts of a statute. Housing Authority of the County of Chester, supra at 946. Finally, we presume that when enacting any statute, the General Assembly intended to favor the public interest as against any private interest. 1 Pa.C.S. § 1922(5); Vitac Corporation v. Workers' Compensation Appeal Board (Rozanc), 854 A.2d 481, 485 (Pa. 2004).

The principal statute at issue in the instant case is Act 106 of 1989, which requires group health insurers to include, in their policies offered to subscribers, specified minimum coverage for treatment of drug and alcohol abuse and dependency:

All group health . insurance policies . and all group subscriber contracts . shall . include within the coverage those benefits for alcohol or other drug abuse and dependency as provided in sections [-3, -4, and -5].

40 P.S. § 908-2.

The specific benefits mandated by Act 106 fall into three categories: (1) inpatient detoxification; (2) non-hospital residential alcohol or other drug services; and (3) outpatient alcohol or other drug services. See 40 P.S. §§ 908-3, -4, and -5, reproduced in relevant part below:

§ 908-3. Inpatient detoxification

(a) Inpatient detoxification as a covered benefit under this article shall be provided either in a hospital or in an inpatient non-hospital facility which has a written affiliation agreement with a hospital ., meets minimum standards for client-to-staff ratios and staff qualifications . and is licensed as an alcoholism and/or drug addiction treatment program.

(b) The following services shall be covered under inpatient detoxification:

(1) Lodging and dietary services.

(2) Physician, psychologist, nurse, certified addictions counselor and trained staff services.

(3) Diagnostic X-ray.

(4) Psychiatric, psychological and medical laboratory testing.

(5) Drugs, medicines, equipment use and supplies.

(c) Treatment under this section may be subject to a lifetime limit, for any covered individual, of four admissions for detoxification and reimbursement per admission may be limited to seven (7) days of treatment or an equivalent amount.

40 P.S. § 908-3. "Detoxification" is defined in the statute as follows.

"Detoxification." The process whereby an alcohol-intoxicated or drug-intoxicated or alcohol-dependent or drug-dependent person is assisted, in a facility licensed by the Department of Health, through the period of time necessary to eliminate, by metabolic or other means, the intoxicating alcohol or other drugs, alcohol and other drug dependency factors or alcohol in combination with drugs as ...


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