STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DENNIS J. MAGEE, )

)

Petitioner, )

)

vs. ) Case No. 00-1229

)

DEPARTMENT OF MANAGEMENT )

SERVICES, DIVISION OF STATE )

GROUP INSURANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard by David M. Maloney, Administrative Law Judge of the Division of Administrative Hearings, on June 15, 2000, in Largo, Florida.

APPEARANCES

For the Petitioner: Dennis J. Magee, pro se

Post Office Box 636

Safety Harbor, Florida 34695

For the Respondent: Cindy Horne, Esquire

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950 STATEMENT OF THE ISSUE

Does the Prescription Drug Services Plan administered by the Division of State Group Insurance provide coverage for the drug Xenical as prescribed to the Petitioner?

PRELIMINARY STATEMENT

On March 22, 2000, the Division of Administrative Hearings received a letter from J. Bruce Hoffmann, General Counsel for the Department of Management Services. Attached to the letter was a petition for hearing from Dennis J. Magee and an earlier, second letter to Mr. Magee from Charles P. Slavin, Director of the Division of State Group Insurance (the "Division"). In the second letter, dated January 20, 2000, Director Slavin wrote:

I am writing in response to your appeal of the decision by Eckerd Health Services (EHS) to deny coverage for Xenical.

In considering your appeal, we have reviewed all available supporting documentation regarding Xenical. Regrettably, we must concur with EHS's determination. Even though the drug was prescribed by a medical provider, any drug determined to be for anti-obesity by the servicing agent is excluded from coverage, as set forth in the State of Florida Employees' Group Health Self Insurance Plan Booklet and Benefit Document. (See page 57, Section W, paragraph 5(c) of the Benefit Document.)

The letter went on to inform Mr. Magee of his right to contest the decision under the Administrative Procedure Act.

Mr. Magee availed himself of that right in the petition. Accordingly, "[t]he Petition [was] transferred to the Division of Administrative Hearings with the request that an Administrative Law Judge be designated to conduct the

proceedings in accordance with Chapter 120, Florida Statutes." Hoffmann letter, 3/22/00.

The Division assigned the petition Case No. 00-1229 and the undersigned was designated as the Administrative Law Judge to conduct the proceedings. A Notice of Hearing was issued setting the case for final hearing on June 15, 2000, in Largo.

At the hearing, Mr. Magee testified and offered seven exhibits, numbered Petitioner's Exhibits 1-7. All were admitted except Petitioner's Exhibit 5, the third page of a letter to the Hearing Coordinator of the Department of Management Services which contained information obtained by Mr. Magee from an internet site. The Division presented one witness, C. Merrill Moody, Assistant Division Director of the Division of State Group Insurance, accepted as an expert in health insurance. The Division offered two exhibits, numbered as Respondent's Exhibits

1 and 2. Respondent's Exhibit 1 was admitted into evidence.

Respondent's Exhibit 2 was not allowed into evidence pursuant to Mr. Magee's objection, but it was made available to Mr. Magee for purposes of cross examination since it constituted literature that supported, in part, Mr. Moody's opinion testimony.

Official recognition was taken of three documents offered by Mr. Magee to which no objection was raised. The documents were marked as OR-1, OR-2 and OR-3.

The parties filed proposed orders in a timely fashion. The Division's was filed on July 13, 2000; Mr. Magee's on July 17, 2000. This Recommended Order follows.

FINDINGS OF FACT

1. The Plan

   
   

   1. The Division of State Group Insurance is authorized to provide health insurance coverage to employees of the State of Florida through a fully insured plan or a self-insured plan. The decision to offer a self-insured plan is explained in the State of Florida Employees Group Health Self Insurance Plan Booklet and Benefits Document (the "Plan Booklet and Benefits Document"):

      As is the case with many major employers, the State of Florida determined that a self- insured plan would result in significant savings to the participating members, and, therefore, implemented the current self- insured program in 1978. Being self-insured means that Claims are paid directly from funds belonging to the State of Florida, with the State earning interest on all fund balances. In addition, the Plan avoids charges normally charged by insurance companies such as retentions, reinsurance, risk factors, and other insurance related charges.

      
      

      (Petitioner's Ex. 7, p. 2.)

      
      

   2. Denominated the State of Florida Employees' Group Health Insurance Plan, the Plan has both a Servicing Agent and a Prescription Drug Program Administrator. At the time the events

      leading to this case arose, the Servicing Agent was Blue Cross/ Blue Shield of Florida, Inc., and the Prescription Drug Program Administrator was Eckerd Health Services ("EHS"). By designation of the Florida Legislature, however, the Division is responsible for the administration of the Plan. In the capacity of Plan Administrator, "the Division . . . has full and final decision-making authority concerning eligibility, coverage, benefits, claims, or interpretation of the Benefit Document." (Id.)

2. Mr. Magee, Diabetes and Hypercholesteremia

   
   

   1. Dennis J. Magee is an employee of the Department of Corrections. He has been covered by State Health Insurance since he commenced his employment with the state in 1971. Mr. Magee has participated in numerous health insurance plans over the course of his employment. For the past three or four years, at least, he has participated in the State of Florida Group Health Self-Insurance Plan administered by the Division.

   2. Approximately twelve years ago, Mr. Magee was diagnosed with diabetes. Since the initial diagnosis, his diabetes mellitus type 2 has become complicated by microangiopathy, nephropathy, retinopathy, hypercholesterolemia (elevated serum cholesterol) and obesity. With regard to obesity, Mr. Magee was determined near the time of hearing to have a body mass index of 32.25, an index beyond the threshold for obesity.

3. Dr. Croom and Xenical

   
   

   1. Mr. Magee's physician is William P. Croom, M.D.

      
      

      Dr. Croom is an endocrinologist specializing in the treatment of types 1 and 2 diabetes mellitus. On July 22, 1999, Dr. Croom prescribed Xenical, a drug used in the control of obesity, at a dosage of 150 milligrams for Mr. Magee. The prescription was medically necessary in Dr. Croom's view because Mr. Magee "has been unsuccessful in managing his obesity with diet and exercise" (Petitioner's Ex. 2) and because "his diabetes and hyperlipidemia [elevated cholesterol] are driven by his obesity

      . . . ." (Petitioner's Ex. 3).

      
      

4. Attempt to Fill the Prescription

   
   

   1. Mr. Magee presented the prescription to Express Pharmacy Services. It was not honored. On August 3, 1999, Express Pharmacy Services wrote to Mr. Magee that "[t]his item is not covered by your insurance. Please contact your benefits rep. if you have questions." Petitioner's Ex. 4.

5. Appeal to the Division

   
   

   1. Eckerd Health Services, the Prescription Drug Program Administrator, affirmed the denial of the prescription.

      Mr. Magee appealed the decision to the Division.

      
      

   2. The Department of Management Services has an appeals committee, which reviews all denials of coverage by EHS. The appeals committee is composed of three members within the

      Division: the director, the assistant director and the Policy and Development Bureau Chief.

   3. The Director, at the time Mr. Magee's appeal was considered, Mr. Slavin, is a diabetic.

   4. The appeals committee looked into Xenical as a treatment for diabetes. It obtained information through literature and internet research and from consultation with physicians at Blue Cross/Blue Shield. On the basis of the research, the committee concluded that Xenical is used only for the treatment of obesity and not for the treatment of diabetes.

   5. The appeal resulted in the letter from Director Slavin (referenced in the Preliminary Statement of this order) in which the Director wrote, "I am writing in response to your appeal of the decision by Eckerd Health Services (EHS) to deny coverage for Xenical [and] [r]egrettably, we must concur with EHS' determination."

6. The Plan Booklet and Benefits Document Basis for the Denial

   
   

   1. The Division's concurrence with EHS that coverage for Xenical should be denied was based on the Prescription Drug Program Section of the Plan Booklet and Benefits Document. The program is described in Part XXVIII, Section W. Subsection 1., Covered Drugs, on p. 57 lists "(a) [f]ederal legend drugs" and "(b) [s]tate restricted drugs" as among those drugs covered. Among the list under Subsection 5., entitled "Exclusions,"

      however, is "(c) [a]nti-obesity drugs." The listing of anti- obesity drugs under Part XXVIII, Section W., Subsection 5, the "Exclusions" subsection, ultimately, is the basis for the Division's denial of coverage of Xenical as prescribed for Mr. Magee.

   2. The Plan Booklet and Benefits Document is prepared on an annual basis by the Division. Typically, the Plan Booklet and Benefits Document is "enacted by the Legislature every year through the appropriation[] process of Section 8 of the Appropriations Act." (Tr. 54). For example, the Conference Report on Senate Bill 2500, General Appropriations for 1999- 2000, under Specific Appropriation states:

      9) All State Group Health Insurance Plan benefits as provided in the State of Florida Employees Group Health Insurance Plan Booklet and Benefit Document effective January 1, 1998, . . . shall remain in effect.

      
      

      Changes to the benefits provided by the Plan Booklet and Benefits Document are normally initiated by submission of the Governor in his Legislative Budget Request. Benefit changes must be approved by the Legislature.

   3. The Plan Booklet and Benefit Document provides, among many, the following definitions:

      "Covered Services and Supplies" shall mean those health care services, treatments, therapies, devices, procedures, techniques, equipment, supplies, products, remedies,

      vaccines, biological products, drugs, pharmaceutical and chemical compounds which expenses are covered under the terms of the Benefit Document. The Administrator has final authority to determine if a service or supply is covered or limited by the Plan.

      
      

      * * *

      
      

      "Medical Supplies or Equipment" means supplies or equipment that must be:

      
      

      1. ordered by a Physician;

      2. of no further use when medical need ends;

      3. usable only by the Participant patient;

      4. not primarily for the Participant patient's comfort or hygiene;

      5. not for environmental control;

      6. not for exercise;

      7. manufactured specifically for medical use.

         
         

         (Petitioner's Ex. 7, Definitions 21 and 50, pgs. 17 and 23, respectively.)

   4. Drugs are services as defined by the Plan Booklet and Benefits Documents. But drugs that are excluded from coverage, such as anti-obesity drugs, are not "covered services" as defined by the Plan Booklet and Benefits Document since by definition, an exclusion prevents them from being "covered." As a "service," moreover, Xenical is not covered by virtue of Section G. of the Benefits Document, also entitled "Exclusions." Petitioner's Ex. 7., p. 38. With regard to services "related to obesity and weight reduction," the Benefits Document states the following:

   G. EXCLUSIONS

   
   

   The following are not Covered Services and Supplies under the Plan.

   
   

   * * *

   
   

   1. All services and supplies related to obesity or weight reduction except:

      
      

      1. Medically Necessary intestinal or stomach by-pass surgery; or

         
         

      2. medically related services provided as part of a weight loss program when weight loss of a Participant is required by the surgeon prior to performing a Medically Necessary surgical procedure.

      
      

      (Petitioner's Ex. 7, pgs. 38, 41.)

      
      

7. Xenical and Section 627.65745, Florida Statutes

   
   

   1. Subsection 627.65745(1), Florida Statutes, states:

      
      

      A health insurance policy or group health insurance policy sold in this state, including a health benefit plan issued pursuant to 727.6699, must provide coverage for all medically appropriate and necessary equipment, supplies and diabetes outpatient self management training and educational services used to treat diabetes, if the patient's treating physician or a physician who specializes in the treatment of diabetes certifies such services are necessary.

      
      

   2. Xenical, a drug, is obviously not "equipment."

      
      

   3. Nor would it fall under the category of "self management training and educational services used to treat diabetes."

   4. It does not fall under the category of "supplies" either. Under the coding system developed by the Health Care Financing Administration of the United States Department of Health and Human Services, the standard coding system for the payment of health claims, drugs are not supplies. Examples of supplies include prosthetics, testing supplies, artificial limbs, ventilators, needles, and insulin pumps.

8. Update of the Basis for the Prescription

   
   

   1. In a letter dated June 13, 2000, Dr. Croom more fully explained the basis for the prescription.

      Xenical is medically necessary for the treatment of diabetes and is not for cosmetic purposes. Xenical is a part of Mr. Magee's outpatient management program which consists of other medications and education. Despite these medications, his most recent hemoglobin A1C is 9.1 significantly higher than the recommended target of 7.0. The use of Xenical would be instrumental in reducing this parameter.

      In my opinion, Xenical is medically appropriate and necessary.

      
      

      (Petitioner's Ex. 3).

      
      

   2. The appeals committee did not have the benefit of

      
      

      Dr. Croom's June 13, 2000, letter in which Dr. Croom opined that in the case of Mr. Magee, "Xenical is medically necessary for the treatment of diabetes and is not being used for cosmetic purposes."

9. Other Purpose for the Prescription

1. That a drug's effectiveness is primarily for the treatment of an excluded purpose may not necessarily exclude it from coverage if it were prescribed for some other purpose. This point was elicited during testimony of the Division's witness, C. Merrill Moody, the Division's Assistant Director:

   
   

   (Tr. 81).

   MR. MOODY: If [Xenical] was being prescribed for obesity, it would be excluded; if it was not, it would not. And I'll give you an example. We have a direct exclusion for contraceptives for contraceptive use . . . [b]ut contraceptives can be used for other purposes. . . .

   [P]articipants are required to provide us with a letter from the doctor describing what the contraceptive is being used for. We then cover that contraceptive.

   
   

2. Mr. Moody went on to explain that oral contraceptives, because of certain properties, are used also in the management of conditions not related to prevention of contraception. For example, oral contraceptives are prescribed in the treatment of menopause because of their ability to maintain the levels of certain hormones. If prescribed for that purpose, then, despite the fact that they are oral contraceptives and normally excluded from coverage, they are covered because of the non-contraceptive basis for the prescription.

3. The Division's position with regard to oral contraceptives is consistent with the exclusion contained in

   Section W.5. of the Plan Booklet and Benefits Document. There the "Exclusions List" states "(a) Oral contraceptives for

   contraception." Petitioner's Ex. 6, p. 59. In other words, it is not some policy of the Division that provides coverage for oral contraceptives when the prescription is for a purpose other than contraception. The coverage is provided by the Plan Booklet and Benefits Document, itself. If oral contraceptives are prescribed "for contraception" then they are excluded from coverage. If prescribed for some other medical purpose, then the exclusion contained in Section W, 5(a) does not prevent coverage of oral contraceptives.

   CONCLUSIONS OF LAW

   
   

4. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Sections 120.569 and 120.57(1), Florida Statutes.

5. Among other arguments, Mr. Magee asserts that Xenical is a "supply." If so, exclusion of its coverage by the Plan Booklet and Benefits Document would run afoul of the mandate in Section 627.65745(1), Florida Statutes, that group health insurance policies "must provide coverage for all medically appropriate and necessary . . . supplies . . . used to treat diabetes . . . ." But Xenical is not a supply. Nor does it fall within any of the other categories listed in the statute for which coverage must be provided if "a physician who

   specializes in the treatment of diabetes certifies such services are necessary." Section 627.65745(1), Florida Statutes (emphasis supplied).

6. Still, the section indicates legislative concern for expansive coverage of medically appropriate equipment, supplies and services in the treatment of diabetics.

7. This concern of the Legislature, the body ultimately responsible for enactment of the Plan Booklet and Benefits Document, is demonstrated elsewhere in enactments of the Legislature. For example, Subsection 385.102, Florida Statutes, (1999), states:

   It is the finding of the Legislature that:

   
   

   1. Chronic diseases exist in high proportions among the people of this state. These chronic diseases include . . . diabetes . . . . These diseases . . . account for a high rate of death and illness.

      
      

   2. Advances in medical knowledge and technology have assisted in the prevention of chronic diseases. Comprehensive approaches stressing application of current treatment, continuing research, professional training, and patient education should be encouraged.

      
      

   3. A comprehensive program dealing with the early detection and prevention of chronic diseases is required to make knowledge and therapy available to all people of this state.

      
      

      (emphasis supplied.)

8. The Appeals Committee did not have the benefit of Dr. Croom's June 13, 2000 letter in which he expressed his medical opinion as an endocrinologist specializing in the treatment of diabetes that Xenical is necessary for the treatment of Mr. Magee's diabetes.

9. Had the letter been before the committee, it could not have made a difference to its decision. The exclusion of anti- obesity drugs in the Plan Booklet and Benefits document does not read "anti-obesity drugs for obesity," so that coverage would have been allowed as explained by Mr. Moody in the case of oral contraceptives. Unlike oral contraceptives excluded from coverage only when prescribed "for contraception," the exclusion of anti-obesity drugs is all encompassing. It is true that the exclusion is modified elsewhere in the document in anticipation of surgery under limited circumstances. But there is no other qualification of the otherwise all-encompassing nature of the exclusion.

10. The plain meaning to be derived from a reading of the exclusions found in Section W. of the Plan Booklet and Benefits Document leads to the conclusion that the Division should adhere to its initial decision to deny coverage. "Anti-obesity drugs" are excluded. (Petitioner's Ex. 6, p. 59, Subsection 5.(c).) The only exceptions to the prescription of an anti-obesity drug are found in Section G. of the Plan Booklet and Benefits

    Document. These exceptions relate to surgical procedures.

    
    

    Mr. Magee was not prescribed Xenical in anticipation of surgery. Xenical is an anti-obesity drug. Therefore, its prescriptions are excluded no matter what the non-surgical purpose is and no matter how medically necessary.

11. The Division is responsible for administration of the Plan by designation of the Legislature. While it has some discretion as the "full and final decision making authority concerning . . . coverage . . . or interpretations of the Benefit Document" (Petitioner's Ex. 7, p. 2), it has no discretion to depart from the plain meaning of the exclusions expressed in the Plan Booklet and Benefits Document, a document approved and enacted into law by the Legislature.

12. This case, however, presents further matters for the consideration of the Division. The Legislature has expressed its intent that comprehensive treatment of diabetes be encouraged and that health insurance coverage for the treatment of diabetics be expansive. Xenical, in Mr. Magee's case, has been shown to be medically necessary for the treatment of his diabetic condition. It is appropriate in light of this intent and the case presented by Mr. Magee for the Division to amend the Plan Booklet and Benefits Document to continue exclusion of coverage of anti-obesity drugs but to provide another exception to that exclusion when such drugs are found to be medically

necessary and prescribed for the management of diabetes. Presentation of the document in such an amended form to the Legislature for enactment would provide the Legislature with the opportunity to conform the Plan Booklet and Benefits Document with its intent exhibited in the law of this state that coverage for diabetics be expansive and treatment of chronic life- threatening diseases, such as diabetes, be comprehensive.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is recommended that:

1. the Division of State Group Insurance in the Department of Management Services enter a final order denying coverage of Dennis J. Magee's prescription for Xenical; and,

2. the Division present to the Legislature the Plan Booklet and Benefits Document amended so as to allow coverage of anti-obesity drugs for diabetics if such drugs are prescribed as medically necessary for management of the subscriber's diabetes.

DONE AND ENTERED this 28th day of July, 2000, in Tallahassee, Leon County, Florida.

DAVID M. MALONEY

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 28th day of July, 2000.

COPIES FURNISHED:

Dennis J. Magee Post Office Box 636

Safety Harbor, Florida 34695

Cindy Horne, Esquire

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Thomas D. McGurk, Secretary Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

J. Bruce Hoffmann, General Counsel Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions to this Recommended Order must be filed with the agency that will issue the final order in this case.

Docket for Case No: 00-001229

Orders for Case No: 00-001229