On July 22, 2010, the Department of the Treasury, Department of Labor, and Department of Health and Human Services (Departments) published Interim Final Regulations (Regulations) setting out new requirements for internal claims and appeals, and external review processes under the Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation Act of 2010.
These Regulations apply to non-grandfathered group health plans and health insurance issuers (i.e., health insurance companies). They do not apply to grandfathered plans. In general, the Regulations apply for plan years beginning on or after Sept. 23, 2010, and will expire on July 22, 2013, or on an earlier date provided in the final regulations.
Comment: The Department of Labor (DOL) is also considering further updates to its claims procedures, and expects to issue further regulations that will propose additional, more comprehensive updates to the standards for plan internal claims and appeals processes for all plans, including grandfathered plans.
Internal Claims Procedure Changes
The Regulations expand upon the DOL’s current internal claims procedure regulations and impose the following new requirements:
- Expanded Adverse Benefit Determination Definition: The Regulations broaden the definition of an “adverse benefit determination” beyond the DOL definition to include recessions of coverage.
- Under the expanded definition, an adverse benefit determination also includes a denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit that is based on eligibility for coverage, covered benefit status, preexisting condition exclusions, source-of-injury exclusions, network exclusions, or a benefit’s status as experimental, investigational or not medically necessary or appropriate.
- For insurance companies, it also includes denial of coverage (i.e., issuing a policy).
- Expedited Notification Requirements: Plans and insurers must notify a claimant of a benefit determination (whether or not adverse) involving urgent care as soon as possible, but not later than 24 hours after the receipt of the claim, unless the claimant has not provided sufficient information to process the claim.
Comment: This reduction from 72 hours to 24 hours (or fewer) will create formidable pressure on sponsors and administrators to develop and fund 24/7 review operations.
- Additional Review Criteria: The Regulations impose claims review requirements in addition to those required by existing DOL procedures. Plans and insurers must provide claimants, free of charge, with any new or additional evidence related to a claim prior to issuing an adverse benefit determination. Claimants must also receive any new or additional rationale for an adverse benefit determination before a plan or insurer issues the determination.
Comment: The preamble to the Regulations provides that the purpose of this early disclosure of the rationale is “to give the claimant a reasonable opportunity to respond” prior to the actual issuance of the adverse determination. The Regulations provide no guidance on how much time must pass between providing the rationale and the adverse determination. Clearly, in the case of an urgent care claim, the interval will be brief.
- Conflicts of Interest: The Regulations provide new criteria for avoiding conflicts of interest. Plans and insurers must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making a decision.
- Decisions regarding hiring, compensation, termination, promotion or other similar matters with respect to any individual cannot be made based upon the likelihood such individual will support a denial of benefits.
- Notifications: Plans and insurers must provide notice to enrollees in a “culturally and linguistically appropriate” manner. This may require production of notices in non-English languages and the inclusion of non-English references to non-English notices in English-based materials.
- Additionally, notices of adverse benefit determinations must include sufficient information to identify the claim involved, a description of the plan’s or insurer’s standard, if any, used in denying the claim, a discussion of the decision, and disclosure as to the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman established under the Act.
- The Departments intend to issue model notices that may be used to satisfy these additional notification requirements.
- Noncompliance: A claimant will be deemed to have exhausted the internal claims and appeals process with respect to a claim if a plan or insurer fails to meet the requirements described above.
Comment: The Regulations set a standard of strict adherence. Failure to follow the Regulations precisely will eliminate any requirement for the claimant to complete the internal review and appeal procedure and will permit the claimant to initiate an external review (see below) and pursue judicial review. Even substantial compliance or a de minimis error will taint the process.
- Continued Coverage: Plans and insurers must continue to provide continued coverage pending the outcome of an internal appeal.
The Regulations also mandate additional requirements for health insurance insurers offering individual health insurance coverage. These additional requirements address claims and appeals regarding initial eligibility determinations, limit insurers to one level of internal appeals, and require insurers to maintain records of all claims and notices associated with internal claims and appeals for at least six years.
State and Federal External Review
The Regulations also require that non-grandfathered group health plans and insurers comply with either a compliant state external review process or the federal external review process. Basing the Regulations on the Model Health Carrier External Review Act promulgated by the National Association of Insurance Commissioners (Model Act), the Departments require state external review procedures to include the following minimum consumer protections:
- External reviews of adverse benefit determinations based on medical necessity, appropriateness, healthcare setting, level of care or effectiveness of a covered benefit.
- Effective written notice to claimants of their rights to an external review.
- Waiver of the need to exhaust internal claims review procedures under certain circumstances.
- Payment by the plan or insurer of the cost of an independent review organization (IRO), to be assigned at random, to conduct the external review, subject to minimal filing charges assessed to a claimant.
- IROs must be approved by the state, and may not participate in external reviews where conflicts of interest exist.
External reviews of all claims, regardless of dollar amount.
- A four-month period in which claimants may request an external review after receipt of an adverse benefit determination.
- An opportunity for claimants to submit additional information to an IRO during an external review.
- Binding decisions on the plan or insurer, as well as the claimant, except to the extent other remedies are available under federal or state law.
- A short review period of not more than 45 days after receipt of the request for such review.
- In expedited external review circumstances, the notice must be provided not later than 72 hours after receipt of the request.
Inclusion of a description of the external review process in employee communication materials (e.g., summary plan descriptions and membership booklets).
- IROs must maintain records and review adverse benefit determinations for experimental or investigational treatments substantially according to the procedures set out in the Model Act.
State external review processes will be deemed to meet these standards for all plan years beginning before July 1, 2011. Thereafter, applicable plans and insurers will continue to be subject to the state review process only where the Department of Health and Human Services has determined that an applicable state process meets the aforementioned standards. Otherwise, the plans and insurers will need to comply with the federal external review process.
The federal process will also follow Model Act. It will apply to a plan or insurer that is not subject to state external review, including self-insured plans, and plans and insurers described in the preceding paragraph. However, the federal external review process will not apply to any claim that is based on a determination that the participant or dependent fails to meet the plan’s eligibility requirements.