Claims and Appeals Rules for Non-Grandfathered Health Plans Amended

In a welcome set of guidance published in the Federal Register on June 24, 2011 (http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25131), 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:

External Review
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):

Conclusion
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.

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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).

 

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