Overview

Safe, effective treatments exist for substance use disorders (SUD), or what we commonly call addictions. This includes alcohol use disorder (AUD) and opioid use disorder (OUD), among others. Effective treatment for SUDs reduces harm and benefits individuals, families, and communities. Insurance coverage for these treatments has expanded, in particular following the passage of the Mental Health Parity and Addiction Equity Act (MHPAEA) in 2008 and the Affordable Care Act (ACA) in 2010. Despite more individuals being covered for SUD treatment, barriers still exist to accessing care.

Utilization management is a technique used by insurance companies to ensure quality and control costs, but it can also act as a barrier to patients by causing denials or delays in access (one of many barriers still faced by patients trying to access SUD care). In the interest of mitigating this barrier, some states have begun to pass legislation restricting utilization management for SUD coverage for specified time durations. These pieces of legislation differ widely in their scope and specificity. While more research is needed to understand the impact of mandates for patients, providers, and insurance coverage, differences in state approaches can be understood by examining the legislation of Massachusetts, New Jersey, Pennsylvania, and Texas. This list of mandates is not comprehensive, and new mandates are being implemented across the nation. However, this analysis offers insight into overarching differences between certain mandates.

What is utilization management?

Utilization management (UM), also known as utilization review, is a method by which insurance carriers limit fraud, waste, and abuse of insurance coverage and healthcare services.  As part of utilization review, carriers compare a claim to the guidelines or criteria deemed appropriate for that service.

Utilization review can be prospective – prior to the delivery of services (also known as prior authorization or preauthorization); concurrent – while the services are being delivered; or retrospective – following the delivery of services.

One common example of prior authorization UM is step therapy, also known as ‘fail first’ criteria. Under this type of review, a patient must show that a ‘first-step’ treatment (such as inpatient admission) was ineffective or ‘failed’ before being granted coverage of a ‘second-step’ treatment, such as medication to treat SUD.

Step therapy and other utilization management techniques are used to contain costs, ensure the proper use of healthcare services, control for quality, and limit fraud, but also may increase wait times for treatment and hinder providers from delivering care.

Benefits and Drawbacks of UM Restriction Mandate Laws

UM restriction mandate laws limit the ability of carriers to perform utilization management. These laws can act as a key step towards reducing patient and provider barriers to SUD treatment, but it is important to consider these laws in the context of their associated benefits and drawbacks.

Restricting utilization management, including prior authorization, has the potential to improve access by reducing delays in care or premature treatment termination for patients, while increasing treatment adherence. However, such laws may also lead to overtreatment of SUDs – the practice of physicians recommending patients for more intensive SUD care than is medically necessary, in this case to avoid litigation, among other negative incentives.
In addition, while mandates offer one fix for a flawed SUD treatment system, they are not a comprehensive solution – many mandates only target a fraction of the state’s insurance enrollees, and may result in increased premiums for these enrollees, while providing no solution for those who have different insurance, or who are uninsured.

Furthermore, while prior authorization is a particular barrier for accessing care, concurrent review and other forms of utilization management may provide the opportunity to ensure higher quality care while reducing delays. Ultimately, more research is needed to understand how to best conduct utilization management to protect against waste, fraud, and abuse, while still enabling patients to access the care they need, as well as how to create sustainable solutions for the SUD treatment system.

Mandates State by State

Massachusetts

In Massachusetts, Chapter 258, effective October 1st, 2015, limits carrier utilization management for SUD treatment coverage. This act applies to all MA employee group insurance; individual or group hospital service plans; individual or group health maintenance organizations (HMOs); and Medicaid managed care plans.

The law applies when an enrollee accesses what is termed “substance abuse treatment,” which includes early intervention services for SUD treatment; outpatient services including medically assisted therapies; intensive outpatient and partial hospitalization services; residential or inpatient services, and medically managed intensive inpatient services. In accordance with the mandate, the insurance carrier is prohibited from requiring preauthorization prior to the enrollee starting treatment, or from conducting utilization review for the first 7 days of treatment, provided that the prescribing physician is certified or licensed by the Massachusetts Department of Public Health.

  • Applicable Care Settings
    • Early intervention
    • Outpatient
    • Intensive outpatient and partial hospitalization
    • Residential or inpatient
    • Medically-managed intensive inpatient
  • Timing
    • Prior to starting treatment – preauthorization prohibited
    • First 7 days of treatment – UM prohibited
  • Provider type
    • Any – prescribing physician must be certified or licensed by Massachusetts Department of Public Health
  • Applicable insurance types
    • MA employee group
    • Individual or group hospital service
    • Individual or group HMO
    • Medicaid managed care

New Jersey

In 2017, the New Jersey legislature passed multiple bills that restrict the use of utilization management by insurance carriers for addiction treatment services. In New Jersey, the mandate structure is complex, consisting of three pieces of legislation1 which provide guidance on when utilization review can be implemented for different types of SUD treatment services and settings.

When an enrollee accesses treatment at an in-network provider (or an out-of-network provider deemed to be an appropriate substitute due to lack of availability or accessibility of in-network providers), the NJ mandate limits insurer utilization review for the enrollee’s claim, as follows:

  • No prospective, concurrent, or retrospective review can be conducted for the first 180 days of treatment during the plan year and no pre-payment can be required during this time when the enrollee utilizes outpatient SUD treatment,2 as long as the services are prescribed by a licensed physician, licensed psychologist, or licensed psychiatrist. This means the enrollee cannot be required to pay before receiving any treatment services for the first 180 days.
  • No prospective, concurrent, or retrospective review can be conducted during the first 28 days of treatment during the plan year if the enrollee utilizes inpatient SUD treatment.  Medical necessity of treatment is determined by the physician using the ASAM criteria or the Level of Care Index (LOCI) clinical review tool. The facility must provide notice to the insurance plan within 48 hours of the patient’s admission, and must submit the initial treatment plan during the first 28 days. After the first 28 days, concurrent review alone is permitted at 2-week intervals, and in the case of a claim denial, benefits must be provided through the day after the enrollee is notified of the denial. After 180 days, prospective, concurrent, and retrospective review are all permitted.
  • Similarly, if the enrollee is accessing intensive outpatient care, or partial hospitalization, no prospective, concurrent, or retrospective review can be conducted during the first 28 days of treatment, and medical necessity is determined entirely by the physician. After the first 28 days, retrospective review is permitted. After 180 days, prospective, concurrent, and retrospective review are permitted.
  • If the enrollee is accessing outpatient prescription medication for treating SUD, no utilization review can be conducted during the first 180 days of the prescription, and medical necessity is determined entirely by the physician.

This mandate is also summarized in the following chart:

Provider Type

Applicable Care Settings

Timing

Mandate

In-network, or exception out-of-network

Outpatient

<180 days

Services must be prescribed by licensed physician, licensed psychologist, or licensed psychiatrist; no pre-payment can be required; no prospective, concurrent or retrospective review, no utilization management

Inpatient

1-28 days

No prospective, concurrent, or retrospective review; medical necessity as determined by physician, with guidance from the ASAM criteria or the Level of Care Index (LOCI) clinical review tool

29-180

Concurrent review permitted at 2-week intervals, benefits provided through day after notification of denial, no prospective or retrospective review

181+

Prospective, concurrent, and retrospective review permitted

Intensive outpatient or partial hospitalization

1-28 days

No prospective, concurrent, or retrospective review; medical necessity as determined by physician

29-180

Retrospective review permitted, no prospective or concurrent review

181+

Prospective, concurrent, and retrospective review permitted

Outpatient prescription

<180 days

No prospective, concurrent, or retrospective review; medical necessity as determined by physician

Pennsylvania

Pennsylvania House Bill 1104, effective 1989, restricts prior authorization for nonhospital residential and outpatient AUD/SUD treatment accessed through group health insurance. Under this mandate, the insurance carrier cannot require preauthorization before the enrollee starts treatment, provided that a licensed physician or psychologist certified that the enrollee is “suffering from alcohol/drug abuse or dependency,” and referred the enrollee to the facility for treatment. While this legislation is currently limited, Pennsylvania Governor Tom Wolf has indicated that he would like to waive prior authorization requirements for medication-assisted treatment for opioid use disorder.

  • Applicable Care Settings
    • Outpatient
    • Non-hospital residential
  • Timing
    • Prior to starting treatment – preauthorization prohibited
  • Provider type
    • Any – licensed physician or psychologist must certify that the enrollee is “suffering from alcohol/drug abuse or dependency”, and refer to the facility for treatment
  • Applicable insurance types
    • Group

Texas

In Texas Title 28, Rule §3.8005 of the Texas Administrative Code, effective February 14th 1999, limits the application of step therapy requirements by private insurers when an enrollee is accessing inpatient SUD treatment. In accordance with the mandate, the enrollee does not need to fail an episode of outpatient treatment to qualify for admission to inpatient treatment, provided they meet the other criteria for inpatient treatment.

Senate Bill 1922, effective September 1st, 2017, places restrictions on the coverage determinations permitted for Medicaid managed care organizations (MCOs). Under this mandate, MCOs must adhere to three conditions:

  1. MCOs are prohibited from requiring an enrollee to repeat step therapy when coming into Medicaid or when moving between plans if the provider can document a reason for exemption based on previous step therapy for particular drug.
  2. MCOs are prohibited from requiring step therapy if a provider can document that the step therapy drug will worsen another of the patient’s conditions or will likely cause a barrier to patient drug adherence, among other contraindications.
  3. MCOs are required to deny a provider’s step therapy exemption request within 72 hours of receiving the request, otherwise the request is considered granted.
  • Applicable Care Settings
    • Inpatient
  • Timing
    • Prior to admission to inpatient – no outpatient treatment failure required
  • Provider type
    • N/A
  • Applicable insurance types
    • Private
  • Applicable Care Settings
    • Prescription
  • Timing
    • Prior to drug prescription – no step therapy required if exempt or contraindicated
  • Provider type
    • N/A
  • Applicable insurance types
    • Medicaid MCOs

 Looking Ahead

The landscape of utilization management restriction varies widely among these four states. Both Massachusetts and New Jersey’s mandates restrict the timing of utilization review, while the mandates of Pennsylvania and Texas limit the use of prior authorization. Mandates vary in their timeliness – both Pennsylvania and Texas have not issued new private insurance mandates since the turn of the 21st century, and the current mandates are therefore likely not effectively meeting the needs of patients grappling during this current opioid epidemic – while the New Jersey mandate was passed in 2017. However, interest in limiting prior authorization for treatment for OUD as a mechanism for expanding access to evidence-based care is indicative of a potential sea change that could bring about broader mandates in the coming years. Research is still needed to understand how restrictions around different utilization management techniques impact care quality and access for patients. As recent mandates begin to take effect and new mandates are implemented in different states, the impacts on access, quality, and cost must be examined.

REFERENCES
1. P.L. 2017, Chapter 28 (The New Jersey Substance Use Disorder Law), which became effective May 16th, 2017; Bulletin 17-05 issued May 8th, 2017; and Rule 10:163, added to the New Jersey Administrative Code on October 16th, 2017
2. Learn about the different types of SUD treatment programs.