Departments Issue PPACA Rules for Non-Grandfathered Plans on

Internal Claims and Appeals and External Review Processes

 

            On July 23, 2010, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury published an Interim Final Rule relating to internal claims and appeals and external review processes under the Patient Protection and Affordable Care Act (PPACA).  This PPACA coverage mandate requires both self-insured and fully-insured group health plans to implement an internal claims and appeals process that satisfies standards set forth in the Interim Final Rule and to comply with either a state or federal external review process.  Group health plans must comply with the new claims and appeals procedures beginning with the first plan year that begins on or after September 23, 2010 (January 1, 2011, for calendar year plans).

 

            This coverage mandate does not apply to grandfathered health plans.  Therefore, it is important for employers that are in the process of determining whether they will maintain grandfathered status for their group health plans to understand how the coverage requirements described in this article would impact their plans if they choose to relinquish grandfathered status.  

           

Requirements for Internal Claims and Appeals Processes

           

            The PPACA requires group health plans to provide an internal claims and appeals process that incorporate the claims and appeals procedures (including urgent care claims) already applicable to ERISA plans, except as may be modified in accordance with standards established by the DOL.  The Interim Final Rule sets forth the additional standards that group health plans must meet in addition to those set forth in ERISA in order to comply with this mandate.  ERISA plans (and non-ERISA plans that voluntarily follow the ERISA claims and appeals procedures) are, therefore, already in significant compliance with this mandate, but will need to make the modifications to their processes outlined in the Interim Final Rule.  Church plans and nonfederal governmental plans that do not currently follow the ERISA claims procedures may need to make substantial revisions to their existing internal claims and appeals processes.  

 

Additional Standards Required for Internal Claims and Appeals Process

           

            The Interim Final Rule requires the following modifications to the existing ERISA claims and appeals rules:

 

·                    Broadened definition of "adverse benefit determination."  The current ERISA claims and appeals procedures generally define an "adverse benefit determination" to include a denial, reduction, or termination of, or failure to provide or make payment (in whole or in part) for a benefit.  Group health plans subject to this PPACA coverage mandate must also treat a rescission as an adverse benefit determination, whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time.  This will permit an employee to appeal a group health plan's decision to rescind coverage (i.e., retroactively cancel coverage) even if the employee received no benefits during the time period affected by the rescission.

 

·                    Expedited notification of benefit determinations involving urgent care.  In the case of an urgent care claim, the current ERISA claims and appeals procedures require the plan administrator to notify the claimant of the plan's benefit determination as soon as possible, taking into account medical exigencies, but generally no later than 72 hours after receipt of the claim by the plan.  The same rule applies to group health plans subject to this PPACA coverage mandate, but with the substitution of "24" hours for the current 72 hour timeframe.

 

·                    Additional criteria to comply with full and fair review.  To provide a "full and fair review" under the ERISA claims and appeals procedures, a group health plan must meet certain standards, including notice to the claimant that he or she may receive, upon request and free of charge, plan documents and any other information relevant to the claim.  In addition to the existing full and fair review standards, a group health plan subject to this PPACA mandate must also provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan in connection with the claim – or any new or additional rationale on which a final internal adverse benefit determination will be based.  This information must be provided to the claimant as soon as possible and sufficiently in advance of the date on which the notice of final internal adverse benefit determination is required to be provided to give the claimant a reasonable opportunity to respond prior to that date.  Note that this information must now be provided to the claimant whether or not it is requested and before the time that the plan issues the final internal adverse benefit determination.

 

·                    Heightened standard to avoid conflicts of interest.  A group health plan subject to this PPACA mandate 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 the decision.  As such, decisions regarding hiring, compensation, termination, promotion or other similar matters with respect to an individual must not be based upon the likelihood that the individual will support the denial of benefits.  The preamble to the Interim Final Rule provides as an example that a plan or issuer cannot contract with a medical expert based on the expert's reputation for outcomes in contested cases, rather than based on the expert's professional qualifications.

 

·                    Additional notice requirements for adverse benefit determinations.  Notice of an adverse benefit determination must be provided in a "culturally and linguistically appropriate manner" that satisfies the current ERISA claims and appeals procedures, as well as provides the following additional information:     

o       information sufficient to identify the claim involved (including the date of service, health care provider, claim amount [if applicable], diagnosis code and its corresponding meaning, and the treatment code and its corresponding meaning);

o       the reason for the adverse benefit determination must include the denial code and its corresponding meaning, a description of the plan's standard (if any) that was used in denying the claim, and a discussion of the decision in the case of a final internal adverse benefit determination;

o       a description of available internal appeals and external review processes, including how to initiate an appeal; and

o       the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman established under the Public Health Service Act to assist individuals with the internal claims and appeals and external review processes.

 

·                    Deemed exhaustion of internal claims and appeals processes.  If a group health plan subject to this PPACA mandate fails to strictly adhere to all of the requirements set forth above, the claimant is deemed to have exhausted the internal claims and appeals process.  This is true even if the plan asserts that it substantially complied with the requirements set forth above or that any error it committed was de minimus.  Therefore, if a group health plan makes any adverse benefit determinations that do not strictly adhere to the standards required under the Interim Final Rule, the claimant may proceed with initiating an external review or pursue any available remedies under ERISA or state law without completing the internal review process.

 

Continued Coverage During Appeal

           

            The Final Interim Rule also requires group health plans to provide continued coverage pending the outcome of an internal appeal.  The Interim Final Rule makes clear that in the context of an ongoing course of treatment that is the subject of the denied claim, the plan cannot reduce or terminate coverage of the treatment without providing advance notice and an opportunity for advance review.

 

Requirements for State and Federal External Review Processes

 

The Interim Final Rule provides that following a final internal adverse benefit determination, a claimant may appeal his or her claim to either a state or federal external review process.

 

Applicability of State External Review Process

           

            A state external review process will apply if:

 

(1)        the state process applies to and is binding on the group health plan or the health insurance issuer insuring a fully-insured group health plan, and

(2)        the state process includes, at a minimum, the consumer protections in the NAIC Uniform External Review Model Act (the specific consumer protections are listed in the Interim Final Rule). 

 

If a fully-insured group health plan is subject to a state external review process, the health insurer must comply with the external review process, not the plan.  Although self-insured group health plans subject to ERISA are not subject to state external review processes due to ERISA preemption, a non-ERISA self-insured group health plan such as a church or nonfederal governmental plan may be subject to a state external review process. 

           

            For plan years beginning before July 1, 2011, a state's external review processes are deemed to comply with the standards required under the Interim Final Rule.  For plan years beginning on or after July 1, 2011, if the state external review process does not meet all of the minimum consumer protections in the NAIC Uniform External Review Model Act, as set forth in the Interim Final Rule and to the satisfaction of the DOL, all group health plans and health insurance issuers that would otherwise be subject to the state external review process must instead comply with the federal external review process.

 

Applicability of Federal External Review Process

           

            If a self-insured group health plan (or, in the case a fully-insured group health plan, the insurer) is not subject to a state external review process that includes the consumer protections in the NAIC Uniform External Review Model Act, then the group health plan is subject to a federal external review process.  The federal external review process applies to any adverse benefit determination or final adverse benefit determination except for an adverse benefit determination based on the determination that a participant or beneficiary fails to meet the requirements for eligibility under the terms of the plan.

 

            The Interim Final Rule states that the federal external review process will be similar to the process set forth in the NAIC Uniform Model Act and will meet specific standards that will be issued by the Secretaries of HHS, Labor, and the Treasury in sub-regulatory guidance.  The standards will include:

 

(1)               procedural rules for initiating a claim and determining if the claim is eligible for external review;

(2)               an expedited review process in certain medical situations;

(3)               specific consumer protections addressing claims involving experimental or investigational treatments; and

(4)               additional notice and disclosure requirements for plans and issuers.  A federal external review decision will be binding on the plan or issuer, as well as the claimant, except to the extent other remedies are available under state or federal law.

 

"Culturally and Linguistically Appropriate" Notices

 

The notices required under the Interim Final Rule must be provided in a culturally and linguistically appropriate manner, which requires the provision of non-English notices when a significant portion of the total of plan participants are literate only in the same non-English language, as follows:

 

·                If the group health plan covers fewer than 100 participants at the beginning of the plan year, it must provide notices upon request in a non-English language in which 25 percent or more of all participants are literate only in the same non-English language.

·                If the group health covers 100 or more participants at the beginning of the plan year, it must provide notices upon request in a non-English language in which the lesser of 500 or more participants, or 10 percent or more of all participants, are literate only in the same non-English language.

 

If one of the above thresholds is met with respect to a group health plan, the plan or issuer must also include a statement in all English versions of notices, prominently displayed and in the relevant non-English language, making available the provision of notices in the non-English language.  If a claimant requests such non-English version of a notice, all subsequent notices must be provided to the claimant in the non-English language.

 

Ice Miller has been tracking the regulations and other guidance issued under the PPACA, and you can read about the regulations that have been issued thus far, including the grandfather rule, the adult-child rule, the prohibition on annual and lifetime limits, and mandated preventive services on Ice Miller's Health Care Reform Web site.

 

            For more information regarding the internal claims and appeals and external review rules under the PPACA, or for any other questions regarding how health care reform impacts group health plans, please contact Mary Beth Braitman, Terry A. M. Mumford, Christopher Sears, Tara Sciscoe, Shalina Schaefer, or the Ice Miller Employee Benefits attorney with whom you work.

 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.