Update on Health Care Reform: The Claims Appeals Process Changes

The Departments of Health and Human Services (“HHS”), Labor (“DOL”) and the Treasury jointly-issued interim final rules and additional guidance addressing another key aspect of the health care reform legislation affecting non-grandfathered health plans – the claims appeals process changes. The claims appeals process changes under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Health Care Reform Legislation”) are effective for plans years beginning on or after September 23, 2010 – January 1, 2011 for calendar year plans.

Background on Appeals Process Changes

As a reminder, under the Health Care Reform Legislation, group health plans and issuers are required to have an effective process for appeals of coverage determinations, claims, and adverse benefit determinations. The plan or issuer must, at a minimum:

Have in effect an internal claims appeal process;
Provide appropriate notice to enrollees of available internal and external appeals processes;
Allow an enrollee to review his or her file, present evidence, and receive continued coverage pending the outcome of an appeal; and
Include certain external review protections.

Internal Claims and Appeals Processes

Generally, group health plans offering coverage subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), must continue to comply with the claims procedure regulation issued by the DOL. The claims appeals process changes add several new requirements to the existing DOL claims procedure regulation with regard to internal claims and appeals. That is, the claims appeals process changes are intended to supplement the existing requirements under the DOL’s claims procedure regulation. The additional requirements imposed by the claims appeals process changes under the Health Care Reform Legislation are summarized as follows:

The scope of the definition of “adverse benefit determination” is expanded to include a rescission of coverage.
The timeframe for responding to urgent care claims is shortened from 72 hours to 24 hours.
The “full and fair review” requirements under the DOL’s claims procedure regulations are updated to include the following additional requirements:
- The plan must provide the claimant, free of charge, any new or additional evidence considered, relied upon, or generated by the plan in connection with the claim; and
- Before the plan can use a new or additional rationale to deny an appeal, the claimant must be provided, free of charge, with the rationale.
All claims and appeals must be decided in a manner that ensures the independence and impartiality of persons involved in making the decision.
A plan must provide continued coverage pending the outcome of an appeal.
Notices of adverse benefit determinations must be provided in a “culturally and linguistically appropriate manner,” and must contain certain information, such as the date of service, health care provider, claim amount, and the diagnosis and treatment codes with corresponding meanings (as well as other information). These notices must also include a description of available internal appeals and external review processes. The agencies have issued model notices to satisfy these notice requirements.
A failure to strictly comply with any of the claims appeals process changes is deemed to be an exhaustion of internal claims and appeals processes, allowing a claimant to initiate an external review or legal proceedings.

External Review Processes

The claims appeals process changes under the Health Care Reform Legislation also require group health plans and issuers to comply with either a state or federal external review process. Generally, if an applicable state external review process provides (at a minimum) the consumer protection standards contained in the National Association of Insurance Commissioners (“NAIC”) Model Act, the plan or issuer must comply with the state external review process. If there is no applicable state external review process, or if a state’s external review process does not meet the consumer protection standards in the NAIC Model Act, the plan or issuer must comply with the federal external review process.

Self-Insured Group Health Plans

On August 23, 2010, the DOL issued Technical Release 2010-01 (the “Technical Release”) providing an interim enforcement safe harbor for non-grandfathered self-insured group health plans that are not subject to a state external review process. Under the safe harbor, for plan years beginning on or after September 23, 2010 (and until superseded by future guidance), the DOL and the IRS will not take any enforcement action against a self-insured group health plan that complies with either (1) the procedures outlined in the Technical Release, or (2) a state external review process.

Under the Technical Release, non-grandfathered self-insured group health plans must implement the following standards for external review:

Plans must permit an external review if a claimant submits a request within four months after the claimant receives notice of an adverse benefit determination;
Plans must complete a preliminary review of the external review request to determine eligibility for external review within five business days following the date of receipt of the request;
Plans must contract with at least three independent review organizations (“IROs”) that are accredited by the Utilization Review Accreditation Commission (“URAC”) or by a similar nationally-recognized accrediting organization to conduct the external review;
Plans must immediately provide coverage or payment upon receipt of a notice of a final external review decision reversing the adverse benefit determination; and
Plans must provide for expedited review in certain circumstances.

Fully-Insured Group Health Plans

On September 1, 2010, HHS’ Office of Consumer Information and Insurance Oversight (“OCIIO”) released interim procedures for the federal external review process applicable to non-grandfathered fully-insured group health plans operating in states with no external review process as of September 23, 2010. The OCIIO guidance states that HHS will not take any enforcement action against a health insurance issuer that complies with (1) a state external review process in place on March 23, 2010, (2) a state external review process enacted between March 23, 2010 and September 23, 2010, or (3) the federal external review process set forth in the OCIIO guidance if no state external review process is in effect on September 23, 2010.

The standards set forth in the OCIIO guidance are substantially similar to the standards set forth in the Technical Release for self-insured plans, although there are some differences. For instance, under the OCIIO guidance applicable to fully-insured plans, the external review examiner (rather than the plan, in the case of a self-insured plan) must conduct the preliminary review of the external review request to determine its eligibility for external review.

Final Thoughts

As you can see, these changes are substantial and complex. However, compliance for non-grandfathered plans is not optional. These new claims appeals process changes do not apply to grandfathered plans. Please keep this in mind as you review your current group health plan’s grandfathered status.

For more information on the claims appeals process changes under the Health Care Reform Legislation or grandfathered status, please contact your SGR Executive Compensation and Employee Benefits counsel.