In a welcome set of guidance published in the Federal Register on June 24, 2011, the Department of Labor (the “DOL”), the Internal Revenue Service (the “IRS”), and the Department of Health and Human Services (“HHS”) jointly amended the interim final rules implementing the internal claims and appeals and external review requirements for non-grandfathered health plans under the Patient Protection and Affordable Care Act of 2010, as amended (the “Affordable Care Act”). Issued in response to the feedback elicited by the original July 23, 2010, interim final rules, the amendments make the following major changes:
- The decision-making deadline for urgent pre-service claims is extended from not later than 24 hours after receipt of the claim, to 72 hours.
- The requirement to include diagnosis and treatment codes in denial notices is replaced with the requirement to provide a statement regarding the claimant’s right to obtain such information upon request.
- Minor errors are exempted from the “deemed exhaustion requirement,” thereby preserving the “arbitrary and capricious” standard of review for ERISA plans despite such errors.
- The criteria for determining whether notices must be translated is modified by shifting the standard from the plan’s population to county populations as determined by reference to U.S. Census Bureau data.
- The external review requirements are modified in several respects, including but not limited to narrowing the scope of claims that are eligible for external review.
The DOL also contemporaneously provided separate guidance on the external review requirements in Technical Release 2011-02 (http://www.dol.gov/ebsa/pdf/tr11-02.pdf). This guidance:
- modifies the minimum external review standards applicable to insured plans, self-insured non-federal government plans and church plans;
- clarifies the binding nature of an independent review organization’s (“IRO”) decision;
- reduces the number of independent review organizations that self-funded plans must contract with by January 1, 2012, from three to two; and
- provides new model notices for adverse benefit determinations and external review decisions (see http://www.dol.gov/ebsa/healthreform/).
These changes are described in further detail below.
Internal Claims and Appeals Procedure for Non-Grandfathered Plans
Health plans are generally subject to the claims and appeals requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). After the passage of the Affordable Care Act, however, health plans that have lost their grandfathered status and nongrandfathered plans1 must also comply with the internal claims and appeals and external review requirements of the Affordable Care Act, unless otherwise exempt2. As described in our September 2010 issue, the interim final rules issued on July 23, 2010, set forth the standards for internal claims and appeals processes. Non-grandfathered health plans are now subject to the following amended requirements3:
|Original Interim Final Rule (Issued on July 23, 2010)||Amended Interim Final Rule (June 24, 2011)||Date of Applicability(incorporates previously issued enforcement delays, as applicable)|
|Scope of adverse benefit determinations eligible for appeal||Rescissions of coverage (i.e.,retroactive cancellations of coverage because of the participant’s fraud or intentional misrepresentation of a material fact regarding eligibility for coverage) may be appealed. The plan must provide at least 30 days’ advance notice to allow the individual to appeal the rescission.||No change.||The first day of the first plan year beginning on or after September 23, 2010 (i.e.,January 1, 2011 for calendar-year plans).|
|Expedited deadline to provide notice of urgent pre-service claim||Not later than 24 hours after receipt of the claim, taking into account the medical exigencies.||Not later than 72 hours after receipt of the claim, taking into account the medical exigencies.||The first day of the first plan year beginning on or after January 1, 2012 (i.e.,January 1, 2012 for calendar-year plans).|
|Expanded full and fair review requirements||Requirement to provide claimant (free of charge) with new or additional evidence considered, relied upon, or generated by (or at the direction of) the plan in connection with the claim and with any new or additional rationale for a denial at the internal appeals stage. Such information must be provided prior to the issuance of the appeal decision to give the claimant a reasonable opportunity to respond to the new evidence or rationale.||No change.||The first day of the first plan year beginning on or after September 23, 2010 (i.e.,January 1, 2011 for calendar-year plans).|
|Requirement to avoid conflicts of interest||Decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to an individual, such as a claims adjudicator or medical expert, may not be based on the likelihood that the individual will support the denial of benefits.||No change.||The first day of the first plan year beginning on or after September 23, 2010 (i.e.,January 1, 2011 for calendar-year plans).|
|Requirement to provide notices in a culturally and linguistically appropriate manner (i.e.,obligation to translate notices)||Threshold for translating notices for group health plans:
If the applicable threshold is met, translated notices must be provided in that non-English language. English versions of all notices must also include prominent statement regarding the availability of translated notices.
Once requested, all subsequent notices must be translated.
If plan makes a customer assistance plan available (e.g., telephone hotline) to answer questions or provide assistance for filing claims and appeals, assistance in the non-English language must be made available.
|The threshold for determining translation requirement shifts from the plan’s participant population to the participant’s county of residence:
All other requirements
|The first day of the first plan year beginning on or after January 1, 2012 (i.e.,January 1, 2012 for calendar-year plans).|
|Broader content for denial notices at claim and internal appeal levels||Notices must include:a) Information sufficient to identify the claim (including, date of service, health care provider, claim amount, diagnosis code and treatment code and their corresponding meanings).
b) The reason for an adverse benefit determination must include the denial code and corresponding meaning, and a description of the standard used to deny the claim, if any. For denial on appeal, the description must also include a discussion of the decision.
c) A description of internal appeals and external review processes.
d) A disclosure of the availability of, and contact information for, an applicable office of health insurance consumer assistance or an ombudsman established under PHS Act section 2793.
|Notices must include:a) Information sufficient to identify the claim (including, date of service, health care provider, and a statement regarding the right to request the diagnosis code and treatment code. All other requirements remain the same.||First day of the first plan year beginning on or after July 1, 2011 (i.e.,January 1, 2012, for calendar year plans).The requirement to provide the diagnosis and treatment codes statement commences the first day of the first plan year beginning on or after January 1, 2012.
See model notices for format at www.dol.gov/ebsa.
|Deemed exhaustion of appeals process giving rise to immediate right to seek external review and or available remedies under ERISISA or state law (i.e.,civil suit) and loss of deferential arbitrary and capricious standard of review (i.e.,court’s standard of review is de novo)||If a plan fails to strictly adhere to the internal claims and appeals regulations, the claimant is deemed to have exhausted the internal claims and appeals requirement and may pursue external review and/or remedies under ERISA or state law. (Note: For grandfathered plans subject to ERISA, there is no deemed exhaustion of appeals process if the plan substantially complied with ERISA’s claims regulations.)||The deemed exhaustion requirement does not apply if the failure to comply with the internal claims and appeals regulations was:
The claimant has a right to receive an explanation of the plan’s basis for asserting that the above standard has been met, upon written request. The claimant can then decide whether to seek immediate review.
If a claimant seeks immediate review and the court or IRO rejects the request because the plan met the exception for de minimis errors, the court or IRO must provide written notice to the claimant within 10 days of the rejection. The notice must include a statement regarding the claimant’s right to resubmit and pursue the internal appeal of the claim.
Deadlines for re-filing the claim begin to run upon the claimant’s receipt of the notice of rejection.
|The first day of the first plan year beginning on or after January 1, 2012 (i.e.,January 1, 2012, for calendar-year plans).|
|Continued coverage pending outcome of internal appeal||Plans are required to provide continued coverage pending the outcome of an internal appeal.||No change.||The first day of the first plan year beginning on or after September 23, 2010 (i.e.,January 1, 2011, for calendar-year plans).|
Under the Affordable Care Act, if a claimant has exhausted the non-grandfathered plan’s internal claims and appeals process, the claimant may pursue his or her remedies under ERISA or state law, as applicable, and/or seek an external review of the denial by an independent review organization (“IRO”). The June 24, 2011, amendments and Technical Release 2011-02 modify the external review requirements as follows (note: an expedited external review process applies to urgent care claims; see our September 2010 newsletter for details):
|Original Interim Final Rule (Issued July 23, 2010)||Amended Interim Final Rule (June 24, 2011)||Date of Applicability|
|Types of claims that are eligible for external reviewNote: IRO’s review will not afford any deference to the plan’s determination of the claim and appeal.||Any adverse benefit determination (claim or appeal level) may be submitted for external review, unless the denial relates to the failure to meet the requirements for eligibility under the plan (e.g., worker classification).||The amendments narrow the scope of claims that are eligible for the Federal external review process (e.g., self-insured ERISA plans) to those claims that involve a medical judgment as determined by the external reviewer; and rescissions of coverage.Examples of claims that involve medical judgment:
||The amended rule applies to claims for which external review has not been initiated before September 20, 2011.|
|Binding nature of external review decision by IRO||The external review decision by an IRO is binding on the plan or insurance issuer and the claimant, except to the extent other remedies are available under State or Federal law.||The amendments clarify that because the IRO’s decision is binding, the plan must provide benefits pursuant to the decision without delay, regardless of whether the plan intends to seek judicial review of the IRO’s decision and unless or until there is a judicial decision otherwise.||The first day of the first plan year beginning on or after September 23, 2010 (i.e.,January 1, 2011, for calendar-year plans).|
|Minimum State external review process standards (applies to insured plans, self-insured non-federal govern- mental plans, and church plans)||Insured plans, self-insured non-federal governmental plans, and church plans are required to comply with State external review laws, provided the laws meet the requirements of the NAIC Model Act. If the State external review laws do not, these plans must comply with Federal external review standards.||In recognition of the fact that the States have not yet been able to adopt or amend their external review laws to comply with the NAIC’s requirements and to help ensure uniformity among the States, the amendments allow applicable plans to comply with State external review laws even if such laws do no comply with NAIC requirements, through December 31, 2011. During this transition period, a State external review process will be deemed to comply with the Affordable Care Act and the plan will not have to comply with the Federal external review laws. If a State has no external review process, the Federal external review process applies.||The transition period is effective from July 22, 2011, through December 31, 2011.For denials of internal appeals provided on or after January 1, 2012, the Federal external review process will apply unless HHS determines that the State law meets the minimum requirements for external review under the Affordable Care Act.|
|Temporary minimum standards for a State-administered external review process (see T.R. 2011-02)||States were required to adopt external review process standards that met the minimum equirements described in the NAIC Model Act (“NAIC-parallel process”). These standards are described in our September 2010 issue.||A State’s external review process will be deemed to comply with the Affordable Care Act if it complies with the temporary standards provided in T.R. 2011-02. The process will be considered an “NAIC-similar process.” The 13 standards include, but are not limited to the following (see T.R. 2011-02 for a full list):
||If a State adopts the temporary standards, applicable health insurance issuers and self-funded nonfederal governmental plans in that State may use those standards until January 1, 2014.After January 1, 2014, a State external review process must meet the standards described in the July 23, 2010, regulations (i.e.,it must adopt the NAIC-parallel process). If it does not, the affected plans must comply with the Federally-administered external review process.
Not later than July 31, 2011, HHS will determine which States meet the standards described in the July 23, 2010, regulations or the temporary standards described in T.R. 2011-02.
|Minimum external review process standard (applies to self-insured ERISA plans and federal governmental plans)||The plan may choose to participate in a Federally-administered external review process (“HHS-administered process”) OR engage in the private accredited IRO process.The external review standards for self-insured and federal governmental plans are set forth in T.R. 2010-01. If a plan complies with these standards or voluntarily complies with a State external review process, no enforcement action will be taken against the plan (see our September 2010 issue for a description of these standards). The standards include the requirement to contract with at least three (3) accredited IROs and rotate assignments among them (or use some other unbiased method for selecting the IRO).||T.R. 2011-02 amends the enforcement safe harbor by only requiring plans to contract with at least two (2) IROs by January 1, 2012, and with at least three (3) IROs by July 1, 2012, and to rotate assignments among them.||See column to immediate left.|
|Model notices of
||See T.R. 2011-02 or see http://www.dol.gov/ebsa/healthreform/ for revised model notices|
While the tasks of documenting and implementing these new requirements and coordinating with vendors may be daunting, the amendments provide some measure of relief from the requirements of the interim final rules. Successful implementation will require an in-depth understanding of the new rules, your plan’s processes (including any amendments), training on those processes, and close collaboration with your vendors. To avoid the imposition of excise taxes for failing to comply with the rules, and to preserve the deferential standard of review available under ERISA, it is critical that the plan and all vendors understand their roles and the plan’s processes, and implement those processes accordingly. If you have any questions or would like our assistance with implementation, contact the author of this article or the attorney with whom you normally work.
1 A non-grandfathered health plan is a plan that was newly introduced on or after March 23, 2010 — the date that the Affordable Care Act was enacted. A plan that covered participants on March 23, 2010, is considered a “grandfathered plan,” but may lose its grandfathered status upon the effective date of any reduction in benefits or increase in participant cost-sharing as provided in 26 C.F.R. Section 54.9815–1251T; 29 C.F.R. Section § 2590.715–1251 and 45 C.F.R. Section § 147.140, as applicable.
2 Plans that only cover retirees and other former employees and limited-scope dental and vision plans are two types of plans that are exempt from the internal claims and appeals and external review requirements of the Act.
3 The chart takes into account the corrections issued on July 26, 2011 (http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25197) and the following Technical Releases issued by the DOL: T.R. 2010-01 (August 23, 2010), T.R. 2010-02 (September 20, 2010), and T.R. 2011-01 (March 18, 2011).