How Insurers Decide Whether to Pay for Testing (2024)

Important Points Highlighted by the Individual Speakers

  • Payers use well-recognized guidance from professional societies,evidence-based consensus reports, and health care organizations toestablish the clinical validity and utility of molecular diagnostictests.

  • It is suggested that Medicare will likely not be the leader forsetting genomic testing reimbursem*nt policies.

  • Payers will be increasingly challenged with processing an enormousvolume of coverage and reimbursem*nt requests as a rapidly growingnumber of new genomic tests become available for clinical use.

There are several steps between determining the actionability of a geneticvariant (see Chapter 2) and decidingto take clinical action, said Bruce Blumberg, institutional director of graduatemedical education, Northern California Kaiser Permanente, Permanente MedicalGroup. One of the steps between actionability and action is the consideration ofwhether or not genomic testing costs should be reimbursed by public and privatepayers. To shed light on this issue, representatives from the commercial andgovernment payer sectors explained their processes for evaluating genomic ormulti-gene panel sequencing tests as well as their criteria for deciding whetherto provide coverage of such testing.


Aetna is a large multi-payer company that offers health insurance plans andother types of insurance throughout the United States. Its process forhandling genomic testing requests is the same process used to developclinical policy, said Robert McDonough, senior director of clinical policyand research and development at Aetna. The company applies very similarcriteria for determining the coverage of such testing as it does for othertypes of medical technologies (e.g., positron emission tomography, or PET,scans). Aetna policies cover only medically necessary tests and treatmentsand exclude coverage for experimental and investigational technologies,McDonough said. All plans must have a definition for coverage that addresscertain elements—specifically whether use in clinical practice isexperimental, investigational, or medically necessary.

“The goal is to develop objective, clinically supported, anddefensible coverage determinations,” McDonough said. To assess and toprovide information about whether specific medical services are necessary orinvestigational, the Clinical Policy Unit has developed more than 700clinical policy bulletins (CPBs), or medical policies, including bulletinsabout genomic and genetic tests, which are all posted on the companywebsite.1 CPBsdescribe which tests and procedures Aetna considers to be medicallynecessary versus those that are for cosmetic, experimental, or unprovenuses. These determinations are based on information from consultation ofdifferent sources, including peer-reviewed medical journal articles andreviews, evidence-based consensus statements and other expert opinions, andguidelines from nationally recognized health care organizations. The CPB forgenetic testing provides a list of criteria that all must be met before agenetic test can be considered medically necessary for diseasediagnosis.2These criteria are

  • The patient displays clinical features, or is at direct risk ofinheriting the mutation in question (pre-symptomatic); and

  • The result of the test will directly impact the treatment; and

  • After history, physical examination, pedigree analysis, geneticcounseling, and completion of conventional diagnostic studies, adefinitive diagnosis remains uncertain, and one disease diagnosis,as defined by Aetna, is suspected.

Additional criteria are also defined for specific diseases before a test isconsidered medically necessary.

Explanations and references are included within these documents to help thereader understand why a particular test is or is not covered. The CPBs helpto support a policy that is “applied consistently and fairly and hasa sound basis” as well as to provide transparency about the coverage,McDonough said. Policies are not created for every technology; they areprioritized based on questions that arise during the claims,precertification, and preauthorization processes. Revisions toAetna's policies are typically generated by new evidence, guidelines,consensus statements, and alterations in relevant regulations for aparticular technology.

Coverage Criteria and Creating Policies

Aetna uses established criteria developed by the Blue Cross and BlueShield Association's Technology Evaluation Center for assessingwhether a medical technology warrants clinical coverage, McDonough said.The criteria3include the following:


The test or treatment must have final approval from appropriategovernmental regulatory bodies, where required;


scientific evidence must permit conclusions about its effect onmedical outcomes;


technology must improve net health outcomes;


the technology must provide as much health benefit as establishedalternatives; and


the improvement in health must be attainable outsideinvestigational settings.

The CPB drafting process entails a comprehensive search of thepeer-reviewed medical literature and an assessment of the currentregulatory status of the technology of interest. The Clinical PolicyUnit then considers evidence-based guidelines, such as those from theAmerican Society of Clinical Oncology and the National ComprehensiveCancer Network (NCCN) for cancer diagnostic testing. Aetna also performstechnology assessments and solicits expert opinions (e.g., through aliaison group that regularly seeks input from specialty medicalsocieties). All of this information is synthesized into an initial CPBdraft which is then subjected to review by the head of Aetna'snational medical policy and operations department and the legaldepartment, and then it is finally reviewed for approval by the chiefmedical officer or a designee. Upon approval of a new policy, theClinical Policy Unit helps facilitate implementation across coding andreimbursem*nt areas.

Covered Genetic Testing

Examples of genomic technologies that are currently covered includenoninvasive prenatal detection of chromosomal abnormalities, such asfound in Down syndrome. Guidelines from the American College ofObstetrics and Gynecology4 that supported the test were important in thedecision to cover it, McDonough said; the covered tests sequencecell-free fetal DNA in blood samples taken from expecting mothers. Whenit comes to genomic sequencing for diagnosing individuals with suspectedgenetic disorders (e.g., cystic fibrosis), the approach that Aetna hastaken is to reimburse genetic testing for core cystic fibrosismutations. Because next-generation sequencing may potentially be used toidentify additional cystic fibrosis mutations not included in therecommended panel, the testing laboratory may offer a separate test tothe individual member, but the member, rather than the payer, would payfor it directly, McDonough said.


Many people are looking to the Medicare program to lead the way indetermining coverage of molecular diagnostics, said Louis Jacques, directorof the Coverage and Analysis Group at the Centers for Medicare &Medicaid Services (CMS). However, while it is true that genomic testing ofcancerous tumors is relevant for the aging population, if a predispositionfor lung cancer could be identified and used to prevent someone fromsmoking, the target age for genetic testing would be in the teenage years,not at 65 years old. Thus from a practical standpoint, Jacques said,Medicare is “not going to be the major driver” onreimbursem*nt for the genomic testing space.

Under Medicare regulations, a basic requirement for finding a diagnostic testto be medically reasonable and necessary is that the treating physician hasto order it to help manage the patient, which automatically raises thequestion of how the physician is using the test for the patient, Jacquessaid. When considering coverage for such technology, CMS applies the sameprocedures it uses to evaluate any tests or treatments, Jacques said: thenational coverage determination process (which takes 9 to 12 months), thelocal coverage determination process (which takes roughly 3 months), or aquicker, claim-by-claim adjudication process. Because of the variety ofcoverage determination mechanisms, the system has been criticized for notbeing transparent enough.

In 2009, the agency undertook a national coverage determination forpharmacogenomic testing to evaluate genetic tests predicting how a patientwill respond to treatment with warfarin, a commonly prescribedanticoagulant.5Aside from a fair number of meetings by the Medicare Evidence Developmentand Coverage Advisory Committee (MEDCAC) to examine various genetic tests,“that's about the last you've heard from us on thistopic,” Jacques said. Because of the way that the current codingsystem functions, a non-unique test code makes it possible that the defaultdecision may be to reimburse for test or services without needing anindividual to make a conscious decision for the claim to be paid. However,Jacques noted that the agency has started a “novel andinnovative” pilot program called MolDx, which manages moleculardiagnostic services and identifies and establishes unique identifiers andcoverage and payment for such testing.6 The program is overseen by Palmetto GBA, anadministrative contractor in South Carolina. Before potentially expanding itnationally, CMS would have to examine how the pilot program could evolve orgrow and decide whether a nationwide program would be overseen by a singlecontractor or by a few regional contractors.

CMS can grant conditional coverage of testing or a procedure—a statuscalled coverage with evidence development (CED)—only in selectedpatients enrolled in research studies that could provide further evidence ofits utility. In some cases, Jacques said, therapeutic knowledge is so welldeveloped that it is possible to provide sufficient evidence to successfullyargue for CMS coverage of a diagnostic test. For example, when the agencyreviewed FDG-PET imaging (positron emission tomography using F-18fluorodeoxyglucose) for cervical cancer, it found that the evidenceindicated that physicians could use scan results to make meaningful changesin a patient's treatment plan; because anticancer therapies typicallycome with toxic side effects, it is meaningful for a patient if thephysician determines that chemotherapy or invasive surgery is notappropriate. “Even though we did not have the perfect clinical trialfrom soup to nuts, we said, well, we've got enough[evidence],” Jacques said.

Medicare used a MEDCAC to review the evidence for the use of beta-amyloid PETimaging for diagnosis or treatment of dementia or neurodegenerative disease,Jacques said. While the review found that there was insufficient evidencefor coverage, a decision was made to identify the status as CED for thepurposes of excluding Alzheimer's disease in specific diagnoses andfor the purpose of enriching clinical trials that addressed diseasetreatment and prevention strategies.7

Another example of evidence consideration was in the case of pharmacogenetictesting to predict patient response to warfarin. Variations in the genesthat encode CYP2C9 or VKORC1 enzymes (among others) affect disposition,response, and toxicity for individual patients receiving chronic warfarintherapy (Dean, 2013). Whilethere was no doubt that this testing would provide clinically valid results,the real question was what difference the results would make in the medicalmanagement of typical Medicare patients, Jacques said. The FDA packagelabel8 forwarfarin specifies that prescribers should individualize the dosing regimenfor each patient, adjusting it based on the international normalized ratioresponse, or a test to measure the clotting time of blood; additionally,Jacques said, knowledge of genotype can inform initial dose selection if apatient is taking drugs known to affect warfarin metabolism and either hasan adverse genetic profile or is an older adult who has multiple illnesses.The latter describes most Medicare beneficiaries, he said, “so wewere left with a clinical utility vacuum” for the genotyping. Giventhat physicians already know if a given patient is elderly and hascomorbidities and which medications the patient takes, Jacques said,“Why would you go ahead and wait a few days or potentially a week toget a genetic test result? Even if results say the patient's geneticprofile is fine, the doctor is not going to ignore the otherfactors.” Thus CMS decided to grant CED of warfarin pharmacogenomictesting to assess utility, he said. Several clinical trials ofgenotype-guided warfarin dosing and similar drugs have found varying results(Kimmel et al., 2013;Pirmohamed et al., 2013;Verhoef et al., 2013).There is still uncertainty about the use of genetic testing for warfarindosing even after randomized controlled trials were conducted.


In its coverage determination process, Medicare is required by law toconsider public comments, Jacques said, and how persuasive those commentsare depends on a variety of factors. For example, the clinical policy unitwill not find thousands of form letters driven by interested stakeholders tobe as convincing as a few well-considered public comments that point out,for instance, that an entire body of relevant evidence was omitted from thedetermination analysis. But public sentiment might sway other players whocan influence agency decisions; in particular, Congress has the final say indecision making.

Commercial insurance companies are highly regulated, McDonough said. Incertain circ*mstances, individual states may mandate coverage for certaintreatments despite a lack of evidence for the value of such treatments, suchas the use of bone marrow transplantation in treating breast cancerpatients. Demand from members and plan sponsors can also have an impact onpolicy, McDonough said, but overall the primary coverage decision is basedon “high-quality evidence and outcomes.”

Because decisions are based on a rigorous review of the evidence, it isunusual for coverage to be withdrawn based on new information, McDonoughsaid. A disinvestment would need to go through a process similar to the onedescribed earlier for coverage decisions. Jacques said that the removal ofcoverage is also rare for Medicare, as most requests are for expandedcoverage by those who say there is now evidence to support the use of a testor service.


How will payers cope as a rapidly growing number of new genomic tests becomeavailable and patients and their providers ask insurers to pay for them? Asone participant put it, administrative systems are going to be facing“a giant train wreck” where they are unable to process thevolume of reimbursem*nt and prior authorization requests. A particularlytroublesome challenge for CMS, Jacques said, is that the volume of new testsis so huge that is it difficult to assess all of them for clinical utility.Nonetheless, he said, if diagnostic testing companies or researchers“come to us with an argument that is fundamentally grounded inclinical utility, that will be a persuasive argument” for coverage.Other workshop speakers described examples of difficulties with obtainingreimbursem*nt for clinical genomic testing, such as in cases where a patientat high risk for a genetic disorder would benefit if sequencing could bedone on a DNA specimen from a family member who died from the illness (seeChapter 2).

Jacques acknowledged the general challenge ahead at CMS. If several genomictests come along that are all claimed to do the same thing but that arebuilt on different platforms or look at different parts of the genome withsome overlap, he asked, “how do we know whether those differences aresignificant or not? I don't know that the best paradigm currentlyexists to handle that.” CMS would be open to hearing input fromstakeholders on innovative or collaborative solutions, he added.

McDonough observed that Medicare and commercial payers have addressed similarchallenges, such as handling different indications for cancer drugs byrecognizing medications that are listed in certain published compendia.Similarly, he suggested, it is possible that a molecular diagnosticscompendia could be created for which payers would recognize oncology markersidentified in certain listings. The challenge with compendia, Jacques said,is that they are proprietary publications and not publicly accessible.

McDonough also suggested that concerns about the huge volume of differentgenomic tests on the horizon will be tempered because payers will only beaware of the most common tests—those with specific, identifiedcodes—which will limit the number of tests that need to really beevaluated. Other, uncommon tests will be billed with generic codes, whichgenerally get paid without review, he said.


No matter what the disease of focus, Jacques said, the type of evidence thatis acceptable to public or private payers in their coverage decisions aboutgenetic testing could be the subject of a vigorous, open debate held in acredible and bias-free public forum, where participants can discuss whichtypes of evidence they find to be persuasive and which types they do notbelieve to be persuasive. As one potential starting point, Jacques suggestedthat interested stakeholder groups (such as professional societies or publicinterest groups) could go to Capitol Hill with a proposal for rule making todetermine what is “reasonable and necessary” and to establisha particular process within Medicare.

The evaluation process, McDonough noted, is an important source ofinformation for effectiveness guidance documents (EGDs), which discuss thetype of research that is needed to provide reliable evidence for payers onthe effectiveness and safety of medical technologies for specific diseases.For example, the nonprofit Center for Medical Technology Policy (CMTP) inBaltimore has completed an EGD on evidence standards for studies of theclinical validity and utility of molecular diagnostics for oncology (CMTP, 2013).9 The center is nowplanning an EGD on evidence standards for next-generation sequencing inoncology.

McDonough observed that the CMTP effectiveness guidance documents forevidence standards recommend convening a multidisciplinary group ofstakeholders to determine the preferred evidence-based decision-makingprocess for certain classes of technologies. But, he added, “Idon't think we can rely solely on expert opinion in making thesedecisions.” If the expert opinion “is not really bounded byreliable evidence, then one really needs to question the validity of theexpert opinion.” What may be more important is the quality of theevidence; however, if stakeholders can agree on an evidentiary framework forassessing new genomic tests, that will make the process predictable, henoted.

The CED process needs to be more efficient and accessible, Jacques said, butthat is a matter of resources, because the process is mostly done under anational coverage determination, which takes a total of 2 years of staffwork. The analysts on his staff have been affected by the sequester andfurloughs, which means that his unit can only manage 5 or 6 nationalcoverage determinations a year, including areas beyond diagnostic testing.“If we want CED more broadly,” Jacques said—and heagreed it makes sense to do that—“we need to find a better wayto do CED.” One possibility, he suggested, would be to have avoluntary process in which CED could “essentially be a defaultposition for medical technologies that meet certain criteria.” Testdevelopers might be given, say, a 3-year grace period to establishsufficient evidence for full coverage approval. Such a system, he said,could motivate everybody to say, “Okay, we've got 3 years toget the answer on this. Let's do it.”


For more information, see Clinical Policy Bulletins, http://www​​/health-care-professionals​/clinical-policy-bulletins.html(accessed May 15, 2014).


Clinical Policy Bulletin for Genetic Testing, http://www​​.medical/data/100_199/0140.html(accessed May 15, 2014).


Technology Evaluation Center, http://www​ (accessed May 15,2014).


For more information, see National Coverage Determination (NCD) forPharmacogenomic Testing for Warfarin Response (90.1), http://www​​/details/ncd-details​.aspx?NCDId=333&ncdver​=1&bc=BAAAgAAAAAAA& (accessed May 15, 2014).


For more details, visit MolDx, http://www​.palmettogba​.com/palmetto/MolDX​.nsf/DocsCatHome/MolDx(accessed May 15, 2014).


Decision Memo for Beta Amyloid Positron Emission Tomography in Dementiaand Neurodegenerative Disease (CAG-00431N), http://www​​/details/nca-decision-memo​.aspx?NCAId=265(accessed April 29, 2014).


Coumadin® Package Label, Bristol-Myers Squibb Company,Princeton, New Jersey 08543 USA, revised October 2011.


For more information, see www​​/view/egd-on-mdx(accessed July 11, 2014).

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