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IN THE COMMONWEALTH COURT OF PENNSYLVANIA
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., :

Petitioners

:

:

v.

: No. 10 M.D. 2004

:
Commonwealth of Pennsylvania,
: Argued: February 2, 2005
Insurance Department,
:

Respondent

:
BEFORE: HONORABLE JAMES GARDNER COLINS, President Judge
HONORABLE
DORIS
A.
SMITH-RIBNER, Judge
HONORABLE
DAN
PELLEGRINI, Judge
HONORABLE
ROCHELLE
S. FRIEDMAN, Judge

HONORABLE BONNIE BRIGANCE LEADBETTER, Judge

HONORABLE ROBERT SIMPSON, Judge
HONORABLE
MARY
HANNAH LEAVITT, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE SIMPSON
FILED: April 25, 2005

This action for declaratory relief in our original jurisdiction concerns
the legal effect of a notice published by the Insurance Department (Department).
In general, the notice explained the Department's current interpretation of statutes
requiring coverage for drug and alcohol treatment in certain group health insurance
policies. Of primary concern is the effect of the notice on managed care insurers
who provide the mandated drug and alcohol coverage. The essential dispute is
whether medical necessity and duration of treatment should be determined by a

licensed physician or psychologist without additional managed care pre-
certification review.

Currently before this Court are cross-motions for judgment on the
pleadings. We conclude, however, that this Court lacks jurisdiction. Accordingly,
we dismiss the action without prejudice.

The Insurance Federation of Pennsylvania, Inc., the Managed Care
Association of Pennsylvania and several health insurers and managed care plans1
(collectively, Insurers) seek a declaration that the August 8, 2003 Notice published
at 33 Pa. B. 4041 (2003) by the Department, entitled Drug and Alcohol Use and
Dependency Coverage; Notice 2003-06 (Notice) is a misinterpretation of that part
of The Insurance Company Law of 1921 (Insurance Law) known as Act 106.2 Act
106 mandates that group health insurance policies, including those offered by
managed care organizations, provide coverage for treatment of drug and alcohol
addiction and dependency. Insurers reference another part of the Insurance Law
known as Act 68,3 which, among other things, provides for pre-certification
utilization review by managed care insurers. Insurers seek declaratory relief.4

1 Insurers include Aetna Health, Inc., HealthAssurance Pennsylvania, Inc., Independence
Blue Cross, Magellan Behavioral Health, Inc., and ValueOptions, Inc.
2 Sections 601-A--608-A of the Insurance Law, Act of May 17, 1921, P.L. 682, as
amended, added by the Act of June 11, 1986, P.L. 226, as amended, 40 P.S. §§ 908-1--908-8.
3 Sections 2102-2193 of the Insurance Law, added by the Act of June 17, 1998, P.L. 464,
40 P.S. §§ 991.2102--991.2193.
4 Specifically, Insurers seek a declaration: that Act 106 does not limit pre-certification
utilization review for medical necessity and appropriateness of treatment by managed care
providers; that Act 106 benefits are not exempt from pre-certification utilization review of Act
(Footnote continued on next page...)
2

In response, the Department denied the material allegations and
averred that Act 106 clearly mandates that all group health plans, including
managed care plans, provide drug and alcohol treatment benefits to patients
receiving an appropriate referral from any licensed physician or psychologist. The
Department further avers that the General Assembly did not intend to permit group
health plans to manage or control Act 106 benefits by means of pre-certification
review under Act 68 or otherwise. Also, the Department avers that the Notice
merely interpreted existing law and regulations.

After the close of the pleadings, the parties filed cross-motions for
judgment on the pleadings, and they submitted exuberant argument.5 This Court,
however, raised a jurisdictional question. In particular, a concern arose as to
whether this pre-enforcement challenge to the Notice was ripe for review. The
parties were permitted supplemental written argument. We now determine that
pre-enforcement review is not allowable here.

(continued...)

68; that certification by a licensed physician or psychologist under Act 106 is only a prerequisite
for Act 106 benefits and is not, by itself, determinative of the medical necessity or the
appropriate duration of treatment; and that Act 106 benefits, which are limited to a maximum
number of days of coverage, were intended to be subject to managed care review to ensure that
they are not prematurely exhausted.
5 In addition to the parties, friends of the court Pennsylvania District Attorneys
Association, County Commissioners Association of Pennsylvania, Pennsylvania Drug and
Alcohol Administrators, Pennsylvania Children and Youth Administrators, Pennsylvania Council
of Chief Juvenile Probation Officers and Pennsylvania Association of Student Assistance
Professionals, submitted written argument.
3

Generally, courts are reluctant to grant a declaratory judgment against
an administrative agency unless the controversy is ripe for judicial resolution.
Pennsylvania Dental Hygenists' Ass'n, Inc. v. State Bd. of Dentistry, 672 A.2d 414
(Pa. Cmwlth. 1996). Ripeness arises out of a judicial concern to avoid
entanglement in abstract disagreements of administrative policies and to protect the
agencies from judicial interference until a decision has been formalized and its
effects felt in a concrete way. Id.

Ripeness is defined as the presence of an actual controversy. Texas
Keystone Inc. v. Pennsylvania Dep't of Conservation and Natural Res., 851 A.2d
228 (Pa. Cmwlth. 2004)(quoting Gardener v. Dep't of Envtl. Res., 658 A.2d 440,
444 (Pa. Cmwlth. 1995)). It insists on a concrete context, where there is a final
agency action so that the courts can properly exercise their function. Id. The
doctrine of ripeness is described as a legal principle instructing courts to review
government actions only when the government's position has crystallized to the
point at which a court can identify a relatively discrete dispute. Id. Since lack of
ripeness goes to this Court's subject matter jurisdiction, we may raise the issue on
our own. Id.

In the context of a pre-enforcement challenge to the validity of an
agency action, this Court refrains from exercising jurisdiction where there exists an
adequate statutory remedy. Dental Hygenists' Ass'n. A post-enforcement
statutory review process constitutes an adequate remedy if the effect of the
challenged regulations upon the industry regulated is not direct and immediate.
Arsenal Coal Co. v. Dep't of Envtl. Res., 505 Pa. 198, 477 A.2d 1333 (1984).

4

Thus, the exercise of jurisdiction over a pre-enforcement challenge
frequently involves whether agency action constitutes a direct and immediate
effect on the regulated industry. Courts consider whether a regulation itself caused
actual, present harm. Neshaminy Water Res. Auth. v. Dep't of Envtl. Res., 511 Pa.
334, 513 A.2d 979 (1986)(explaining Arsenal Coal). Also, courts consider
whether a regulation is self executing. This Court holds that unless the regulation
is self-executing, there is no harm until the agency takes some action to apply and
enforce its regulation, in which case the normal post-enforcement review is
deemed adequate. Duquesne Light Co., Inc. v. Dep't of Envtl. Prot., 724 A.2d 413
(Pa. Cmwlth. 1999); Concerned Citizens of Chestnuthill Township v. Dep't of
Envtl. Res., 632 A.2d 1 (Pa. Cmwlth. 1993). Further, courts consider averments
that a party must spend substantial amounts of money to secure an agency
determination, Dusquesne Light, and averments that a party must take immediate
action or risk sanctions for noncompliance. Concerned Citizens. Finally, courts
consider whether the case appears in a concrete context involving a final agency
action and a factual record that allows proper review. Texas Keystone.

Here, the case is clearly not ripe for judicial involvement, for many
reasons. First, the Notice6 is not a regulation immediately applicable. At most, it

6 The Notice provides in pertinent part (with emphasis added):

This notice is issued to advise all entities subject to [Act
106] of their obligations under Commonwealth law in the
provision of coverage for alcohol or other drug abuse and
dependency benefits. [Act 106] 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
(Footnote continued on next page...)
5

is a statement of policy. See Section 102 of the Act of July 31, 1968, P.L. 769, as
amended, 45 P.S. §1102(13). Unlike a regulation, a policy statement announces
the agency's tentative intentions for the future. Woods Services, Inc. v. Dep't of
Pub. Welfare, 803 A.2d 260 (Pa. Cmwlth. 2002), aff'd, 576 Pa. 228, 839 A.2d 184
(2003). A statement of policy does not have the force of law. Texas Keystone,
851 A.2d at 240 n.18. The Notice here "advises" applicable entities as to the
Department's position. Its terms do not specify any immediate action to be taken.

(continued...)

ramifications. The [Department] releases the following guidance
concerning the provision of benefits under [Act 106].

[Act 106] specifies that all group policies, contracts and
certificates subject to [Act 106] providing hospital or
medical/surgical coverage shall include within that coverage
certain benefits for alcohol or other drug abuse and dependency.
Under [Act 106], the only lawful prerequisite before an insured
obtains nonhospital 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....

[Act 68], 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 the [Act 106]
certification and referral by the licensed physician or licensed
psychologist.

Insurers' Complaint, Exhibit A (33 Pa. B. 4041-4042).

6

Moreover, the pleadings fail to specify any actual, present harm.
Thus, there is no reference to harm of any sort in Insurers' pleadings. There is no
averment that the Notice was detrimentally applied to anyone, there is no averment
that a party must spend substantial amounts of money to secure a Department
determination, and there is no averment that a party must take immediate action or
risk sanctions for noncompliance. In these circumstances, there is no reason to
conclude that the normal post-enforcement review is inadequate.

Finally, because no facts relating to application or harm are even
averred, there is no concrete context for review. Specifically, no final agency
action is described, and no factual record exists.

Also, Sections 354 and 354.4 of the Insurance Law, 40 P.S. §§477b,7
477b.4,8 collectively provide that it shall be unlawful for any insurance company
to issue a group health insurance policy until the forms have been submitted to and
approved by the Insurance Commissioner. A disappointed insurer shall receive a
hearing if properly requested. Subsequent judicial review in accordance with the
Administrative Agency Law9 is specifically provided. There is no explanation here
why this pre-enforcement statutory procedure is inadequate.

While the dispute between the parties undoubtedly involves a matter
of concern, judicial review is impaired without some quantification of the effects

7 Added by the Act of June 23, 1931, P.L. 904, as amended.
8 Added by the Act of February 17, 1994, P.L. 92.
9 2 Pa. C.S. §§701-04.
7

of the alleged change in Department policy. In sum, we cannot permit the parties
to take us down a shortcut which obscures our view of the consequences of
requested relief. For these reasons, we decline to exercise jurisdiction,10 and we
dismiss the petition without prejudice.

ROBERT
SIMPSON,
Judge

10 We do not decide whether we lack jurisdiction for another reason: exclusive
jurisdiction lies with the Insurance Commissioner pursuant to the cited sections of the Insurance
Law. See 42 Pa. C.S. §7541(c)(2), (3).
8

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
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., :

Petitioners

:

:

v.

: No. 10 M.D. 2004

: Argued: February 2, 2005
Commonwealth of Pennsylvania,
:
Insurance Department,
:

Respondent

:
BEFORE: HONORABLE JAMES GARDNER COLINS, President Judge
HONORABLE
DORIS
A.
SMITH-RIBNER, Judge
HONORABLE
DAN
PELLEGRINI, Judge
HONORABLE
ROCHELLE
S. FRIEDMAN, Judge

HONORABLE BONNIE BRIGANCE LEADBETTER, Judge

HONORABLE ROBERT SIMPSON, Judge
HONORABLE
MARY
HANNAH LEAVITT, Judge
OPINION NOT REPORTED
DISSENTING OPINION
BY JUDGE SMITH-RIBNER
FILED: April 25, 2005

I disagree with the Majority's decision to decline to exercise its
jurisdiction over the Petitioners' (Insurers) "pre-enforcement challenge" to the
Respondent's (Department) August 8, 2003 Notice published at 33 Pa. B. 4041
(2003) (Notice 2003-06), which, according to Insurers, misinterprets the law. The
Notice is entitled "Drug and Alcohol Use and Dependency Coverage," and it
mandates that all group health plans, including those offered by managed care
plans, provide drug and alcohol dependency treatment benefits to patients who

receive the appropriate certification and referral from a licensed physician or
psychologist. Insurers argue that the Notice misinterprets Sections 601-A - 608-A
of The Insurance Company Law of 1921 (Insurance Law),11 as amended by Section
8 of the Act of December 22, 1989, P.L. 755 (Act 106).

Insurers seek a declaration from this Court that: (1) Notice 2003-06 is
inconsistent with Act 106 and with Sections 2101 - 2193 of the Insurance Law,
known as Act 68;12 (2) Act 106 does not regulate or otherwise limit utilization
review for medical necessity and appropriateness by managed care providers
inherent in the managed care system; (3) Act 106 benefits are not exempt from
utilization review of medical necessity and appropriateness by managed care
providers inherent in the managed care system as authorized and regulated by Act
68; (4) certification by a licensed physician or psychologist under Act 106 is a
prerequisite for certain mandated Act 106 benefits but does not by itself determine
medical necessity or appropriate duration of treatment; and (5) Act 106 benefits are
limited and must be managed to ensure against premature exhaustion.

On May 12, 2004, the Court entered an order granting the parties' joint
application requesting the Court to establish a filing deadline and briefing schedule
for their cross-motions for judgment on the pleadings now before the Court,13

11Act of May 17, 1921, P.L. 682, as amended, added by Section 10 of the Act of June 11,
1986, P.L. 226, 40 P.S. §§908-1 - 908-8.
12Added by Section 1 of the Act of June 17, 1998, P.L. 464, 40 P.S. §§991.2101 -
991.2193.
13The Court must consider whether, on the facts averred, the law says with certainty that
no recovery is possible. Lindstrom v. City of Corry, 563 Pa. 579, 763 A.2d 394 (2000). See also
Pa. R.C.P. No. 1034; Parish v. Horn, 768 A.2d 1214 (Pa. Cmwlth. 2001), aff'd, 569 Pa. 45, 800
A.2d 294 (2002) (the court will only consider pleadings and documents properly attached).
DAS-R - 11

which the parties filed on June 23, 2004. The parties agree that the issue is a legal
one and that no further facts are needed for the Court to decide the issue.

Citing, among others cases, Arsenal Coal Co. v. Department of
Environmental Resources, 505 Pa. 198, 477 A.2d 1333 (1984), the Majority has
concluded that because a "post-enforcement" statutory review process exists,
Insurers have an adequate remedy to challenge the validity of the Department's
Notice as its effect upon the industry regulated is not direct or immediate. The
Majority further concludes that the dispute is not ripe for court intervention despite
the obvious fact that the Department's position "has crystallized to the point at
which a court can identify [the] relatively discrete dispute." Texas Keystone Inc. v.
Pennsylvania Department of Conservation and Natural Resources, 851 A.2d 228,
239 (Pa. Cmwlth. 2004). Pursuant to Section 7532 of the Declaratory Judgments
Act (Act), 42 Pa. C.S. §7532, I strongly disagree that the Court lacks jurisdiction
and that Notice 2003-06 does not have a direct and immediate effect upon the
industry regulated.
In
Arsenal Coal Co. the Pennsylvania Supreme Court reversed this
Court's decision declining to exercise equitable jurisdiction in an action filed by
fifty-five anthracite coal mine operators and producers that was a pre-enforcement
challenge to the Department of Environmental Resource's implementation and
enforcement of regulations that the appellants argued were invalid because the
regulations violated a statute limiting rulemaking authority of the Environmental
Quality Board regarding anthracite mining regulation. The Supreme Court
disagreed with this Court's holding that the appellants had an adequate remedy via
an opportunity for review upon piecemeal application and enforcement of the
DAS-R - 12

challenged regulations, essentially what the Majority has concluded in the case sub
judice. More to the point, however, the Supreme Court held:
Where the effect of the challenged regulations
upon the industry regulated is direct and immediate, the
hardship thus presented suffices to establish the
justiciability of the challenge in advance of enforcement.
... [T]he lengthy process by which the validity of the
regulations will be addressed on a basis of application to
the litigant would result in ongoing uncertainty in the day
to day business operations of an industry which the
General Assembly clearly intended to protect from
unnecessary upheaval.
505 Pa. at 209 - 210, 477 A.2d at 1339 - 1340. That is precisely the situation
confronting the Court here as the Department's interpretation has a direct and
immediate effect upon the managed care industry in Pennsylvania.
I
(Act 106)

Section 602-A(a) of the Insurance Company Law provides that "[a]ll
group health or sickness or accident insurance policies providing hospital or
medical/surgical coverage ... shall in addition to other provisions ... include within
the coverage those benefits for alcohol or other drug abuse and dependency as
provided in sections 603-A, 604-A and 605-A." 40 P.S. §908-2(a).14 Section 603-
A(a), relating to inpatient detoxification, provides as follows:

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 for emergency,

14Section 602-A(a) specifically states that "this act", i.e., Sections 601-A through 608-A
as amended by Act 106, applies to group plans issued by various entities including managed care
providers covered by the Health Maintenance Organization Act, Act of December 29, 1972, P.L.
1701, as amended, 40 P.S. §§1551 - 1567.
DAS-R - 13

medical and psychiatric or psychological support
services, meets minimum standards for client-to-staff
ratios and staff qualifications which shall be established
by the Department of Health and is licensed as an
alcoholism and/or drug addiction treatment program.
40 P.S. §908-3(a). Pursuant to Section 603-A(c), 40 P.S. §908-3(c), treatment
under this section is subject to a lifetime limit of four detoxification admissions,
and reimbursement may be limited to seven days per admission.

Section 604-A, relating to non-hospital residential alcohol or other
drug services, provides:
(a) Minimal additional treatment as a covered
benefit under this article shall be provided in a facility
which meets minimum standards for client-to-staff ratios
and staff qualifications which shall be established by the
Office of Drug and Alcohol Programs and is
appropriately licensed by the Department of Health as an
alcoholism or drug addiction treatment program. Before
an insured may qualify to receive benefits under this
section, a licensed physician or licensed psychologist
must certify the insured as a person suffering from
alcohol or other drug abuse or dependency and refer the
insured for the appropriate treatment.
40 P.S. §908-4(a) (emphasis added). Pursuant to Section 604-A(c), 40 P.S. §908-
4(c), non-hospital residential treatment is required for a minimum of 30 days with
a lifetime limit of 90 days.

Section 605-A, relating to outpatient alcohol or other drug services,
provides:
(a) Minimal additional treatment as a covered
benefit under this article shall be provided in a facility
appropriately licensed by the Department of Health as an
alcoholism or drug addiction treatment program. Before
an insured may qualify to receive benefits under this
section, a licensed physician or licensed psychologist
must certify the insured as a person suffering from
DAS-R - 14

alcohol or other drug abuse or dependency and refer the
insured for the appropriate treatment.

(b) The following services shall be covered under
this section:

(1)

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

(2) Rehabilitation therapy and counseling.

(3) Family counseling and intervention.

(4)

Psychiatric, psychological and medical
laboratory tests.

(5) Drugs, medicines, equipment and supplies.
40 P.S. §908-5 (emphasis added). Pursuant to Section 605-A(c), 40 P.S. §908-
5(c), coverage is required for a minimum of 30 full-session outpatient visits or
equivalent partial visits per year and may be subject to a lifetime limit of 120 full-
session outpatient visits. The Department passed regulations implementing the
above-cited provisions of Act 106. See 31 Pa. Code §§89.601 - 89.623.
(Act 68)

On June 17, 1998, the legislature enacted Act 68 relating to quality
health care accountability and protection. Insurers are correct that this legislation
strictly regulates the utilization review process followed by managed care plans
with regard to delivery of health care services. Section 2111(3) of the Insurance
Law requires that managed care plans15 "[a]dopt and maintain a definition of

15Section 2102 defines a "managed care plan" as:

A health care plan that uses a gatekeeper to manage the
utilization of health care services; integrates the financing and
delivery of health care services to enrollees by arrangements with
health care providers selected to participate on the basis of specific
standards; and provides financial incentives for enrollees to use the
participating health care providers in accordance with procedures
established by the plan.
40 P.S. §991.2102. Section 2102 defines "utilization review" as "[a] system of prospective,
concurrent or retrospective utilization review performed by a utilization review entity of the
(Footnote continued on next page...)
DAS-R - 15

medical necessity used by the plan in determining health care services." 40 P.S.
§991.2111(3) (emphasis added). On the other hand, the Department is correct that
the true purpose of Act 68 is to protect consumers from misguided applications of
managed care principles. For example, Section 2136(a)(1) requires that upon
written request, a managed care plan shall supply each insured or potential insured
with "a description of coverage, benefits and benefit maximums, including benefit
limitations and exclusions of coverage, health care services and the definition of
medical necessity used by the plan in determining whether these benefits will be
covered." 40 P.S. §991.2136(a)(1) (emphasis added).

In addition, Act 68 requires managed care plans to establish and
maintain internal and external grievance processes that permit an insured to file a
grievance and appeal from denial of that grievance, see Sections 2161 - 2162, 40
P.S. §§991.2161 - 2162. Under Section 2182, 40 P.S. §991.2182, the Department
may impose a civil penalty of up to $5,000 for violation of Act 68 or take other
action such as seeking injunctive relief.
(Notice 2003-06)

The Department's Notice 2003-06 provides:

This notice is issued to advise all entities subject to
[Act 106] of their obligations under Commonwealth law
in the provision of coverage for alcohol or other drug
abuse and dependency benefits. [Act 106] 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

(continued...)

medical necessity and appropriateness of health care services prescribed, provided or proposed to
be provided to an enrollee." Id.
DAS-R - 16

workplace, health care, community and criminal justice
ramifications. The [Department] releases the following
guidance concerning the provision of benefits under [Act
106].

[Act 106] specifies that all group policies,
contracts and certificates subject to [Act 106] providing
hospital or medical/surgical coverage shall include within
that coverage certain benefits for alcohol or other drug
abuse and dependency. Under [Act 106], the only lawful
prerequisite before an insured obtains nonhospital
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....

[Act 68], 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
the [Act 106] certification and referral by the licensed
physician or licensed psychologist.
Insurers' Complaint, Exhibit A (33 Pa. B. 4041 - 4042) (emphasis added).
II

In their Motion for Judgment on the Pleadings Insurers aver that in its
publication of Notice 2003-06, the Department seeks to prohibit precertification
utilization review16 in the delivery of Act 106 mandated drug and alcohol treatment
benefits. Insurers assert that Notice 2003-06 is inconsistent with the fundamental

16Section 2102 of the Insurance Law defines "prospective utilization review" as "[a]
review by a utilization review entity of all reasonably necessary supporting information that
occurs prior to the delivery or provision of a health care service and results in a decision to
approve or deny payment for the health care service." 40 P.S. §991.2102.
DAS-R - 17

principles of managed care that would permit precertification review for medical
necessity and appropriateness of treatment and that the Department's position is
inconsistent with the language of Act 106 providing that "[b]efore an insured may
qualify to receive benefits under this section, a licensed physician or licensed
psychologist must certify the insured as a person suffering from alcohol or other
drug abuse or dependency and refer the insured for the appropriate treatment." 40
P.S. §§908-4 and 908-5 (emphasis added).

Insurers assert that by inserting the permissive phrase "may qualify"
into the statute, the legislature expressly recognized that there may be further extra-
statutory processes, such as those inherent in the managed care system, which also
would affect the delivery of Act 106 benefits, including possible adjustment of
treatment based upon a precertification review. The Department responds that the
legislature's use of the phrase "may qualify" merely indicates that there is one
condition precedent that must be satisfied in order for an insured patient to receive
Act 106 benefits. The Department contends that managed care is guided by the
concept of medical necessity and that in Act 106 the legislature intended that a
determination as to medical necessity, i.e., a certification and referral by a licensed
physician or psychologist, is the only condition an insured patient must meet to be
entitled to substance abuse treatment benefits. In short, the legislature intended
that only a licensed physician or psychologist determine whether substance abuse
treatment is medically necessary for purposes of Act 106 coverage.17 Based on

17The rule is well settled that "[w]hen interpreting a statute, a court must ascertain and
effectuate the intent of the legislature and give full effect to each provision of the statute if at all
possible." Galloway v. Workers' Compensation Appeal Board (Pennsylvania State Police), 756
A.2d 1209, 1213 (Pa. Cmwlth. 2000) (citing Section 1921(a) of the Statutory Construction Act of
1972, 1 Pa. C.S. §1921(a)). See also 1 Pa. C.S. §1921(b).
DAS-R - 18

well-established rules of statutory construction, the Department is correct that if
the legislature intended to provide for utilization review by managed care providers
for purposes of a second determination as to whether substance abuse treatment
was medically necessary in each instance, it would have so specified in the statute.

Insurers claim that the Department's interpretation of Act 106 is in
direct conflict with Act 68, wherein the legislature created an extensive framework
for the delivery of managed care health benefits in Pennsylvania. Citing the
definition of "health care service" in Section 2102 of the Insurance Law, 40 P.S.
§991.2102, Insurers argue that in Act 68 the legislature expressed its intent that the
managed care principles authorized under Act 68, including precertification
utilization review to determine medical necessity, be applied to the delivery of
behavioral health care services, which would encompass Act 106 benefits for
substance abuse treatment. Furthermore, if the legislature had intended that Act
106 benefits be excluded from utilization review by managed care plans, it would
have expressly excluded those benefits in Section 2192, 40 P.S. §991.2192, which
lists four statutorily authorized benefit programs to which Act 68 does not apply.
The Department acknowledges that under Act 68, managed care plans are guided
by the concept of medical necessity in determining whether to pay benefits, but it
reiterates that in enacting Act 106 the legislature clearly intended that only a
licensed physician or psychologist determine what kind of treatment is medically
necessary in drug and alcohol dependency cases.

I similarly concur with the Department that Act 68 does not authorize
managed care plans to override an Act 106 certification and referral for treatment
from a licensed physician or psychologist. Both Act 106 and Act 68 are consumer
protection statutes designed to safeguard consumers from overzealous applications
DAS-R - 19

of managed care principles. Act 68 places limits on managed care providers to
prohibit them from providing health care that is less than what is medically
necessary. Act 106 provides that a licensed physician or psychologist determine
what treatment is medically necessary. Hence, the contention that the
Department's interpretation of Act 106 conflicts with Act 68 should be rejected.

Next, Insurers argue that the Department's interpretation of Act 106
cannot be applied to inpatient detoxification coverage because there is no statutory
requirement in Act 106 that an insured patient must first obtain a certification of
his or her condition and a referral for appropriate treatment from a licensed
physician or psychologist before qualifying for detoxification benefits. Insurers
thus assert that the Department's interpretation of Act 106 has no foundation in the
statute in this regard. The Department notes that "detoxification" as defined in
Section 601-A of the Insurance Law, 40 P.S. §908-1, explicitly requires a licensed
physician to determine that a patient is intoxicated or drug or alcohol dependent
before referring the patient for inpatient detoxification. An insured patient
therefore must satisfy the same certification and referral requirement for inpatient
detoxification treatment as required for non-hospital residential and outpatient
treatment.

Although neither the definition of "detoxification" in Section 601-A
nor the language in Section 603-A includes the terms "certification" or "referral," I
agree with the Department that as stated in Section 601-A, a licensed physician
must make a determination of whether the patient is so intoxicated or drug or
alcohol dependent that inpatient detoxification is medically necessary. It therefore
is logical to conclude that the Section 601-A requirement for a licensed physician
to determine that inpatient detoxification is medically necessary is essentially the
DAS-R - 20

same as the certification and referral procedure required in non-hospital residential
treatment and outpatient services. To accept Insurers' position would result in
placing on hold a patient's hospitalization until a utilization reviewer determined
that inpatient detoxification was medically necessary and appropriate, which is a
delay that could be disastrous for a patient in need of immediate hospitalization.

Insurers postulate that the Department's interpretation of Act 106, as
reflected in its Notice 2003-06, is absurd and unreasonable. Insurers posit that the
Act does not require that certification and referral include an individualized
treatment plan adequately detailing the nature and duration of treatment. Insurers
contend that even if the appropriate level of detail is included, the Notice creates a
rigid construct that limits delivery of benefits to those set forth in the initial
certification and referral. The Department notes, however, that the legislature
intended for the certifying and referring physician or psychologist to determine the
nature and duration of treatment and that the treating physician develop an
individualized treatment plan within the scope of the certification and referral.

Nothing in the Department's statement in Notice 2003-06, that the Act
106 certification and referral in all instances controls both the nature and duration
of treatment, is unreasonable or absurd as Insurers assume. In the event of a
referral lacking the necessary guidance or a referral where the treating physician
disagrees as to the type or duration of treatment, it is not unreasonable to expect
that the referring physician or psychologist and the treating physician will
cooperate in establishing an individualized treatment plan for the patient.18

18Insurers submit that Notice 2003-06 is contrary to the public interest in ensuring the
cost-effective delivery of quality health care benefit, and they argue that the Department's
interpretation of Act 106 as reflected in Notice 2003-06 essentially turns managed care plans into
"fee-for-service" plans, wherein the health care provider merely submits a bill to the insurer for
(Footnote continued on next page...)
DAS-R - 21

III

I comment, parenthetically, on the arguments presented by Amicus
Curiae, Pennsylvania District Attorneys Association (Association), which agree
with the Department that Act 106 does not provide for medical necessity review by
managed care providers. The Association observes that the proper interpretation of
Act 106 will have an enormous and direct impact upon prosecuting crime in the
Commonwealth, and it cited testimony from a behavioral health care services
expert who corroborated the systematic and persistent practice and pattern by
managed care providers of denying needed drug and alcohol treatment benefits.
The remaining Amici Curiae represent county commissioners and other public
officials within the Commonwealth's sixty-seven counties along with drug and
alcohol administrators, children and youth administrators, juvenile probation
officers and other professionals who assist children, families and school students
needing alcohol and drug treatment.
The
remaining
Amici Curiae argue that Act 106 is clear in its
mandate, and they raise, as well, the overriding societal issues that must be
confronted when faced with alcohol and drug addiction among members of their
populations. They quote at length in their brief from the testimony of former
Pennsylvania Attorney General Mike Fisher before the Pennsylvania House of
Representatives Committee on Drug and Alcohol in October 2001. Mr. Fisher
indicated, among other things, that although Act 106 required all group health

(continued...)

payment, resulting in higher costs and ultimately higher premiums. The legislature evidently
took into account the costs of substance abuse treatment, and by including managed care
principles in Act 106 it apparently considered the financial concerns of managed care providers.
DAS-R - 22

plans to provide minimum coverage for substance abuse treatment, his office noted
that treatment was often routinely denied where no dispute existed as to need, that
providers used delay tactics in authorizing treatment, that in some cases a pattern
of consistent denial of treatment existed, resulting in physicians and facilities
foregoing authorization requests, and that in some cases treatment was authorized
for one day only, requiring a facility to seek authorization for each day of
treatment. Mr. Fisher was clear that if left untreated an alcoholic conceivably
could drive drunk every day, a heroin addict could steal to support his or her habit
or addiction and a teenager on drugs could be at risk of suicide, or other harm.
IV
(Conclusion)

Under Section 7532 of the Declaratory Judgments Act a "declaration
may be either affirmative or negative in form and effect, and such declarations
shall have the force and effect of a judgment or final decree." The basic purpose of
the Act is to declare legal rights and duties of the parties and to afford them relief
from uncertainty with regard to those rights. See Nationwide Mut. Ins. Co. v.
Wickett, 563 Pa. 595, 763 A.2d 813 (2000). Accordingly, the Court should assume
its responsibility under the Act and declare the rights and duties of the parties to
this litigation. Because the issue of the validity of Notice 2003-06 is ripe for
judicial consideration, I am convinced that the Majority has erred in declining to
exercise jurisdiction as the Supreme Court has instructed. See Arsenal Coal Co.

Having reviewed the merits of the arguments, I conclude as a matter
of law that Insurers are not entitled to the declaration that they seek. To the
contrary, I would conclude that the Department's interpretation of Act 106 is based
on clear and sound legal reasoning and therefore that it is the correct interpretation
DAS-R - 23

of the law i.e., Act 106 mandates that all group health plans, including those
offered by managed care plans, provide drug and alcohol dependency treatment
benefits to those patients who have received the appropriate certification and
referral from a licensed physician or psychologist. Therefore, the Department's
cross-motion for judgment on the pleadings should be granted and Insurers' action
dismissed with prejudice.19

DORIS A. SMITH-RIBNER, Judge
President Judge Colins joins in this dissent.

19Unlike Insurers' motion, the Department's motion requests that this Court also
determine whether Notice 2003-06 amounts to a de facto regulation, which the Department failed
to promulgate in accordance with Sections 201 - 208 of what is commonly known as the
Commonwealth Documents Law, Act of July 31, 1968, P.L. 769, as amended, 45 P.S. §§1201 -
1208. The Department contends that its Notice did not need to be promulgated as a regulation
because it is merely an interpretation of existing law and does not establish new regulatory
requirements. In Pennsylvania Human Relations Commission v. Norristown Area Sch. Dist., 473
Pa. 334, 374 A.2d 671 (1977), the Supreme Court, adopting reasoning from Pacific Gas & Elec.
Co. v. Federal Power Commission, 506 F.2d 33 (D.C. Cir. 1974), stated that a substantive rule,
establishing a standard of conduct which has the force of law, must be promulgated as a
regulation. A general statement of policy, announcing an agency's tentative intentions in future
rulemakings or adjudications, does not establish a "binding norm" and need not be promulgated
as a regulation. In Home Builders Ass'n of Chester and Delaware Counties v. Department of
Environmental Protection., 828 A.2d 446 (Pa. Cmwlth. 2003), aff'd, 577 Pa. 274, 844 A.2d 1227
(2004), this Court determined that a Department of Environmental Protection stormwater policy
did not need to be promulgated as a regulation because its stated goal was to implement existing
regulations and not to create new requirements. The Majority agrees that the Department's
Notice is not a regulation but rather a statement of the Department's policy, and I concur.
DAS-R - 24