When Colonel Steve Austin, the main character in the $6 Million Man TV series, wanted to save his fiancée, Jaime Sommers, from the effects of a devastating skydiving accident, he promised her services to a intelligence agency in exchange for bionic body parts.

Today, in the real world, patients who need expensive new procedures try to raise the necessary funds with bake sales, crowdfunding websites, home equity loans, and whatever cash they can squeeze out of their insurance policies.

Even if you shut down your health insurance business years ago, you could still end up talking to a diabetic life insurance policyholder who needs a life settlement to pay for a pancreas transplant.

Harvard Bioscience Inc., Holliston, Mass. (Nasdaq:HBIO), put the experimental treatment finance issue in the spotlight late last year when it announced that it was helping Christopher Lyles, a 30-year-old Abingdon, Md., engineer who was dying from trachea cancer, grow an artificial windpipe from his own stem cells.

Lyles had some of the best health insurance coverage in the United States – federal employees’ health benefits through the U.S. Department of Defense – but the trachea transplant researchers could not get U.S. Food and Drug Administration (FDA) approval to perform a transplant in the United States. Lyles had to travel to a hospital in Sweden to have his transplant.

That meant Lyle was getting an experimental procedure, and getting the procedure done overseas.

“His insurance company would not pay for that surgery,” said David Green, president of Harvard Bioscience.

Major medical policies usually exclude coverage for experimental treatments. But insurers sometimes use definitions of “experimental” that leave themselves flexibility. Even if they clearly state that they do not cover experimental treatments, they occasionally might, because of legal considerations, concerns about bad publicity, or other reasons.

The medical review teams that make the decisions have to balance the need to conserve scarce health funding resources against consciousness of what’s at stake, according to J.D. Piro, the Norwalk, Conn-based leader of Aon Hewitt’s health and benefits legal practice.

“Very few people want to be in a position to deny life-saving treatment,” Piro said. “There’s always an element of emotion when you deal with stuff like that.”

WHAT IS EXPERIMENTAL?

The U.S. Food and Drug Administration (FDA) classifies a new drug or procedure as experimental if the treatment seems to be safe enough to test on humans but regulators have not resolved questions about how safe and effective the treatment really is. The FDA requires that new treatments undergo three levels of pre-approval clinical trials and, in some cases, a phase of post-approval trials.

Experimental treatments are not necessarily expensive, and expensive treatments are not necessarily experimental. Kidney dialysis, for example, has been around since the 1940s and costs about $25,000 per year. The Foundation for Innovative New Diagnostics, Geneva, Switzerland, recently developed an innovative new system for detecting multi-drug-resistant tuberculosis that costs less than $20 per test.

Definitions of “experimental treatment” vary.

Medicare may classify a treatment as experimental if the FDA has not yet decided whether it is safe and effective but will let researchers test it on human subjects.

Network Health, Medford, Mass. — a private, nonprofit plan — says “experimental and/or investigational drugs” are “new kinds of treatment.” “We decide whether to cover new drugs and procedures based on scientific evidence and what doctors and other clinicians recommend,” the company says in its plan member handbook.

Kaiser Permanente of Colorado, an arm of Kaiser Permanente, Oakland, Calif., gives an eight-part definition of “experimental or investigational services” in a member guide. To determine the status of a new treatment, Kaiser committees consider the views of state health agencies and the U.S. Department of Health and Human Services as well as the FDA.

Congress included minimum standards for health insurer internal appeal and external review programs in the Patient Protection and Affordable Care Act of 2010 (PPACA). Because lawmakers refused to let the new PPACA standards preempt stronger state standards, the rules continue to differ from state to state.

California has an independent medical review law that gives insureds seeking experimental treatments for “life threatening or seriously debilitating conditions” an edge. The law also lists the kinds of sources patients can use to support arguments about whether a treatment is or is not experimental, consultants at Kelch Associates, Elk Grove, Calif., wrote in an analysis for the California HealthCare Foundation, Oakland, Calif., earlier this year.

WHO PAYS FOR THAT?

About 33% of the independent review cases involving California health insurers and about 25% of the cases involving California health maintenance organizations are experimental treatment cases, the consultants reported.

Texas has been another trend-setting state. The attorney general’s office there negotiated a settlement with Aetna Inc., Hartford (NYSE:AET), in April 2000. The settlement requires Aetna to post coverage policy bulletins on its website and to cover experimental treatments for terminally ill patients with life expectancies of less than two years who are not responding well to conventional treatments.

The National Association of Insurance Commissioners (NAIC), Kansas City, Mo., tried to bring order to claim decision reviews by adopting the Uniform Health Carrier External Review Model Act in 2008. Section 10 of the model gives a patient access to an external review if a carrier denies coverage because it says a procedure is experimental and if the patient’s physician will certify that standard treatments have not worked, standard treatments are not medically appropriate for the individual involved, or there is no standard treatment that is more beneficial than the requested treatment.

About 9 states have adopted laws or regulations based on the NAIC model.

The federal appeals courts have given mixed messages about experimental treatment decisions.

Federal courts have often used the Employee Retirement Income Security Act (ERISA) to give employers and health insurers wide latitude to make what the courts believe to be employers’ reasonable decisions about what plan and policy terms mean.

In a 2002 ruling, a three-judge panel at the 2nd U.S. Circuit Court of Appeals ruled 2-1 that a health insurer, Empire Blue Cross and Blue Shield, New York, ought to provide coverage for high-dose chemotherapy for a man with breast cancer, even though one of the foremost authorities on bone marrow transplants, Dr. Thomas Spitzer, told the company that high-dose chemotherapy would likely be no more effective than conventional chemotherapy.

In 2004, a three-judge panel at the 8th U.S. Circuit Court of Appeals ruled 3-0 the UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), could deny coverage for intravenous feeding to a woman who was said to be suffering from the toxic effect of petrochemicals and other health problems. The 8th Circuit observed that UnitedHealth had put the request through a total of five rounds of review, including two by in-house physicians and two by independent physicians.

Other indicators, such as whether other competing payers are covering a treatment and whether a new product has a Current Procedural Terminology (CPT) also count, according to Dr. Bruce Quinn, a senior health policy specialist at Foley Hoag L.L.P., Boston.

When a procedure has a CPT code, “It means you passed a certain bar,” Quinn said. “It gives a procedure a certain amount of credibility.”

The insurers themselves have created what amount to in-house judicial systems to handle patient concerns about claim decisions.

UnitedHealth has a Consumer Affairs Committee and a National Appeals Service Center; Kaiser has a Regional New Technology and Benefit Interpretation Committee, an Interregional New Technology Committee, and a Medical Technology Assessment Unit.

Aetna publishes clinical policy bulletins about matters such as how the company intends to cover knee ligament transplants. Cigna Corp., Bloomfield, Conn. (NYSE:CI) has published coverage policy bulletins about cooling devices for people with multiple sclerosis.

An insurer will deny coverage for a treatment if it believes the treatment is simply not covered by the plan, treatment is covered but is not medically necessary, or, in most cases, if the treatment is covered and is medically necessary but is experimental.

ENTER PPACA

Dr. Allan Khoury, a Cleveland-based senior health management consultant at Towers Watson & Company (NYSE:TW), said carriers are serious about considering the safety and effectiveness of new treatments, not just the cost.

“There’s always a medical credibility decision,” Khoury said. “Everyone knows you’re talking about someone’s life. Everyone knows it could be you or a relative involved.”

But, at the same time, insurers want to be careful about using plan assets and exposing patients to untried therapies, Piro said.

“If plans pay for every unproven treatment, they’re going to go bust pretty quickly,” Piro said.

Meanwhile, health insurance company medical review teams are highly conscious of the fact that thalidomide the anti-nausea wonder drug, produced deformities in women’s children, and that efforts to combine high-dose chemotherapy with bone marrow transplants reduced the likelihood that women with breast cancer would survive.

Harvard Bioscience, for example, makes bioreactors that other researchers can use to create artificial organs by shooting patients’ own stem cells into plastic scaffolds. The first patient to get an artificial trachea, Andemariam Beyene, had his operation June 2011. The New York Times reports that Beyene is well.

Lyles was told in June 2011 that he had six months to live. He had his operation in November 2011, contracted pneumonia, then recovered from the pneumonia well enough to go home to Abingdon and make cookies with his four-year-old daughter. In early March, he died. The cause of death has not been announced.

Some of the federal experimental treatment court cases hinge on treatments that went wrong and killed the patients.

UnitedHealth states in the annual rights and resource disclosure documents that it provides for group health plan sponsors such as Hialeah, Fla., that patients have a right to be “informed about, and refuse to participate in, any experimental treatment.”

Another problem is gaps in coverage.

Hospital indemnity insurance typically pays reliably when insureds enter the hospital, but not very much.

Critical illness insurance can pay significant sums when people become seriously ill, but only when they suffer from specified illnesses, and the triggers for collecting benefits may vary.

An American man who went to teach English in Korea and married a woman there is now using GiveForward.com to try to raise $300,000 to help his 19-month-old baby, Hannah Warren, get a trachea transplant at Peoria Children’s Hospital. She was born without a trachea and has been in neonatal intensive care units (NICU) most of her life.

Hannah’s family needs to raise just $150,000 more to get her a trachea. “How much do you think that costs?” Green asked. “I can save a lot of money here by getting that surgery approved.”

Lyles had great coverage in the United States but couldn’t port it to Sweden. Hannah has health insurance in Korea but can’t use it to pay for care in Peoria.

Green said he thinks agents and brokers have room to win over insurers in some cases, when a big-ticket experimental treatment could actually save money.

PPACA could lead to changes in the world of experimental treatment finance.

One PPACA creation, the Patient-Centered Outcomes Research Institute (PCORI), is supposed to develop general guidelines for determining which treatment options for a given condition appear to be the safest, cheapest and most effective. To keep PCORI from rationing care, or health insurers from using PCORI’s work as an excuse to ration chair, Congress has prohibited insurers from using PCORI recommendations to deny coverage for care in a specific case.

PCORI will simply publish its findings and hope physicians use the results to make their practices more efficient.

PPACA also tinkered with the internal appeal and processes.

Jennifer Jaff, executive director at the Advocacy for Patients with Chronic Illness Inc., Farmington, Conn., would like to see the government be more precise about just what evidence a doctor or patient needs to produce to show that a treatment is not experimental.

“The standards to be used in such a case are especially important in cases involving relatively new treatments, or treatments of relatively rare diseases,” Jaff said.

Other PPACA provisions – the ones that eliminated lifetime benefits caps and are phasing out temporary caps — could put more pressure on carriers to deny requests for experimental treatment coverage. PPACA requires insurers to accept patients with health problems and set prices without considering patients’ health status. PPACA does not require health insurers to pay for experimental procedures.

What can producers do to help consumers who need experimental treatment cope?

• Either be or know a good patient advocate and a creative financial planner. Consumers in these situations need advisors who can find any bits of cash in health insurance policies, voluntary benefits, and even credit insurance policies.

• Participate in NAHU, NAIFA, CAHI and other groups that help consumers understand the economics of health insurance; why paying for heroic measures may not always be in a patient’s best interests; and why the resources available for paying for heroic measures that are in patients’ best interests are limited. The more people know, the more realistic they may be.