Blue Shield of California Files Suit Against DMHC Over Coverage of Weight-Loss Drug

In the latest attempt by managed care organizations to define -- and limit -- the authority of the Department of Managed Health Care, Blue Shield of California filed a lawsuit last week alleging that the agency improperly ordered it to cover a drug excluded by a member's policy, the Los Angeles Times reports. The case involves an obese woman whose doctors determined that she "would die if she did not take the weight-loss drug XenicalJ." While her doctors contended that a new state regulation requiring any health plan that provides drug coverage to cover all "medically necessary drugs" compelled Blue Shield to pay for the treatment, the company "refused," saying that outpatient weight-loss drugs were excluded from the woman's policy. Blue Shield also "refused to comply with the department's request that the matter be heard by an independent medical review board," the Times reports. The company did agree to pay for the drug on Nov. 30 after an independent review board -- conducted without Blue Shield's sanction -- ordered it to do so. Last week, Blue Shield filed a lawsuit over the issue, asking the court to decide whether DMHC can order a case to be sent to a review board, and whether the medically necessary regulation is legal. "We do not think [DMHC has] the authority to require us to provide a service which is not part of the contract," Blue Shield spokesperson Tom Epstein said, adding, "They did not have the authority to require that this drug be paid for, or (to order) an independent medical review."

The Blue Shield lawsuit is the most recent effort by MCOs -- and in some cases physician groups -- to "limit [the] authority" of the department, which has sanctioned health plans and medical groups 48 times since its inception in July 2000, the Times reports. Last week, for example, a judge denied Kaiser Permanente's request to have DMHC Director Daniel Zingale held in contempt over a $1.1 million fine involving a Medicare patient. In addition, the state's large medical groups in September won a "partial victory" in a suit to prevent Zingale from releasing their financial information. Health plans say their actions against DMHC are attempts to draw the agency's boundaries. "This is a new department, and we think they've overstepped their bounds in some of their enforcement actions," Steven Madison, the attorney who filed the Blue Shield suit, said, adding, "There is a sense of trying to find out what the limits are of their authority." According to Zingale, the challenges to the department's authority are to be expected given that it is operating without much established precedent. "One of the things I asked when I came to work at the department was, 'What kind of case law is there regarding this?' And I was told it's really wide open -- there really isn't any. We're creating case law as we go," he said (Bernstein, Los Angeles Times, 12/15).