United States: Health Care Reform Internal and External Appeal Requirements for Group Health Plans

On July 23, 2010, the IRS, the Employee Benefits Security Administration (EBSA), and the U.S. Department of Health and Human Services (HHS) jointly published a final rule implementing the new provisions of the Patient Protection and Affordable Care Act (PPACA) governing a group health plan's internal claims and appeal processes and external appeal requirements.

The rule takes effect on September 21, 2010, and applies to group health plans and health insurance insurers for plan years starting on or after September 23, 2010. The rules do not apply to plans that meet the requirements to be "grandfathered" under the PPACA.

Internal Appeals

• Continued care required. Like the current U.S. Department of Labor (DOL) claims regulations, during the pendency of an internal appeal relating to an ongoing course of treatment, the plan or health insurance issuer cannot reduce or terminate benefits for that ongoing course of treatment without providing advance notice and an opportunity for advance review. Enrollees receiving urgent care or an ongoing course of treatment may be allowed to proceed with an expedited external review at the same time as the internal review process is underway. In such a case, the plan/issuer is required to provide simultaneous external review before reducing or terminating benefits for an ongoing course of treatment.
• Six new requirements. Internal appeals must conform with the current DOL claims and appeals regulations applicable to ERISA plans, plus the following six new requirements:
  
• • Expand definition of "adverse benefit determination" to include a rescission, which is the retroactive denial, reduction, or termination of coverage.
  • Urgent care claims — 24-hour turnaround. A plan/issuer must notify a claimant regarding a determination of urgent care as soon as possible, but in any event within 24 hours, after receipt of the claim, whether or not the determination is adverse. The current standard is 72 hours.
  • Full and fair review. If during an appeal process, a plan/issuer either considers or creates new or additional evidence or determines that it may deny the appeal based on a new or additional rationale, then the plan/issuer must provide to the claimant, free of charge, a copy of such new evidence and rationale sufficiently in advance of the adverse determination so that the claimant has time to respond before the adverse determination is finalized. This information must be provided by the plan/issuer automatically, without regard to whether the participant has made a request to receive it.
  • No conflicts of interest. The claim or appeal decision maker must be independent and impartial from the plan/issuer. Therefore, a decision-maker cannot be hired, promoted, or paid a bonus based on the likelihood that the benefit denial will be upheld.
  • Expanded information in claim and appeal denial notices.
    
  • • The claim or appeal denial notice must include sufficient information to identify the claim involved, e.g., the date of service, the identity of the health care provider, the claim amount, and the diagnosis, treatment, and denial codes along with the meaning of those codes.
    • If a standard was used to determine the denial, that standard must be explained in the notice. For example, if a claim is denied because it was not considered to be medically necessary, the definition of "medically necessary" must be included. With respect to an appeal denial, there must be a discussion of the standard.
    • The denial notice must include a description of the available internal and external appeal processes, including information about how the claimant may initiate an appeal.
    • The denial notice must include the contact information of the "ombudsman" (if available), through an applicable office of health insurance consumer assistance.
    • The DOL and HHS expect to publish a model notice on their Web sites in the future at http://www.dol.gov/ebsa and http://www.hhs.gov/ociio.
  • Failure to comply strictly with internal appeal process. Many courts require claimants to exhaust the plan's internal appeal process before filing a lawsuit. These regulations provide that if a plan fails to adhere strictly to the required internal review procedures, the claimant will be deemed to have exhausted the internal claims process and therefore can immediately file a civil lawsuit or request an external review, even when the failure is de minimis. In addition, in such a case, no deference will be given to the plan administrator's denial decision.
• Foreign language notices and assistance. If a plan covers at least 100 enrollees and the lesser of 500 or 10 percent of that plan's enrollees speak the same non-English language, then all English plan communications about the appeal processes must include a notice in the non-English language that appeals and denial communications are available in the native language. Once an enrollee makes a request, all subsequent notices must be in the native language. If a plan covers fewer than 100 enrollees, the same requirement applies if 25 percent or more of the plan's enrollees speak the same non-English language. If the plan maintains a telephone hotline to answer questions or assist in filing claims and appeals, such assistance must be available in the native language. This foreign language requirement appears to apply to all plan communications, not just notices about appeals and denials.

External Appeals

With respect to external appeals, the regulations provide that if a state external review process applies to a plan, and that external process includes certain minimum consumer protections, then the plan in question needs to comply only with such state process. Accordingly, insured plans and non-ERISA plans such as non-electing church and non-federal governmental plans will need to determine if they are subject to a compliant state external review process. If, however, either a state external review process does not apply to a plan (which would be the case for self-insured ERISA plans) or that state external review process does not include the required minimum consumer protections, then the plan must comply with the federal external review requirements.

• State external review process. As discussed above, the state process must include, at a minimum, the consumer protections of the National Association of Insurance Commissioners (NAIC) Uniform Model Act as of July 23, 2010.
  
• • To give states time to review their processes, all 44 existing state external review processes will be deemed to meet this standard for plan years beginning before July 1, 2011.
  • An insured plan can rely on the insurer's compliance with the state external review process.
• Federal external review process. The federal process will not be available for denials based on the enrollee's eligibility for the plan, but will be available for all other denials, including rescissions. The DOL and HHS will issue details later. However, it is expected that the federal external review process will include (1) an explanation of how to initiate an external review, (2) procedures for preliminary reviews to determine whether the claim is eligible for external review, (3) the minimum qualifications of an independent review organization (IRO), (4) the process for approving IROs eligible to be assigned to conduct reviews, (5) a process for the random assignment of IROs, (6) standards for IRO decisions, and (7) rules for providing notice for final decisions.
• The federal external review process will include an expedited external review, which will be available when:
• • The timeframe for completing an expedited internal review would seriously jeopardize the life or health of the claimant or would jeopardize the claimant's ability to regain maximum function, and the claimant has filed a request for an expedited internal appeal.
  • Following a final internal appeal that denied benefits and the timeframe for conducting a standard external review would seriously jeopardize the life or health of the claimant or would jeopardize the claimant's ability to regain maximum function.
  • The claim is for experimental or investigational treatments and will provide additional consumer protections to ensure that adequate clinical and scientific experience and protocols are taken into account.
• The external review decision will be binding on the plan and the insurer, except to the extent that other remedies are available under state or federal law.
• Enrollee communications, e.g., summary plan descriptions, certificates of coverage, or membership booklets, must include a notice describing the federal external review process.
• Plans and insurers must provide claimants with information relevant to the processing of the external review, including, but not limited to, the information considered and relied on in making the adverse benefit determination or final internal adverse benefit determination.
• If applicable, notices must comply with the foreign language requirements discussed above.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.