New Interim Federal External Review Process for Health Insurance Appeals Announced

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As reported earlier in New Rules for Insurance Appeals, the departments of Health and Human Services, Treasury, and Labor issued interim final rules on July 23, allowing patient appeals of health insurance coverage.  On August 23, the U.S. Department of Labor, Employee Benefits Security Administration (EBSA) issued Technical Release 2010-01, regarding “Interim Procedures for Federal External Review Relating to Internal Claims and Appeals and External Review” under PPACA.

Looking back at the interim final rules, as they relate to the interim procedures (from New Rules for Insurance Appeals):

Under the rules, new health plans beginning on or after Sept. 23, 2010, must have an internal appeals process for beneficiaries to challenge “adverse benefits decisions” — a “denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.”

If the internal appeal is denied, patients may choose to have the claim reviewed by an independent reviewer.  According to Appealing Health Plan Decisions, States are encouraged to adopt the National Association of Insurance Commissioners (NAIC) standards in “their external appeals laws to adopt these standards before July 1, 2011.”  If State laws don’t meet these standards, consumers in those States will be protected by comparable Federal external appeals standards.

The EBSA release “sets forth an interim enforcement safe harbor for non-grandfathered self-insured group health plans not subject to a State external review process, and therefore subject to the Federal external review process.”  The Federal process will apply to plan years beginning on or after Sept. 23, 2010 and will continue until the interim period is over.

The issuer of the “non-grandfathered self-insured group health plans” (hereinafter, “health plans”) is primarily responsible for compliance with the interim final regulations.  During the interim enforcement safe harbor, the Internal Revenue Service (IRS) will not take enforcement action against health plans that comply with either of the two interim methods provided by the EBSA.

1.      Compliance with State external review processes

Health plans may voluntary comply with the provisions of their State’s external review processes.  However, the State must first choose to expand access to their external review processes to health plans that are not subject to relevant State laws.

2.      Compliance with the procedures set forth in the technical release

A health plan may also adopt the external review procedure outlined in Technical Release 2010-01.  The release sets forth procedures based on the Unified Health Carrier External Review Model Act promulgated by the National Association of Insurance Commissioners (NAIC Model Act).  The EBSA procedure requires that an external review may be standard or expedited.

A. Standard Review

Health plans must allow a claimant’s request for external review if filed within four months of the adverse benefit determination.  A preliminary review must be completed by the health plan within five days of the claimant’s request and must determine whether:

a.       The claimant was covered under the plan at the time the service was requested or provided

b.      The adverse benefit determination was related to a failure to meet eligibility requirements

c.       The internal appeals process has been exhausted or is not required

d.      All information and forms required for the external review have been provided

Within one business day of completion, the health plan must provide written notice to the claimant of the health plan’s determination.  If the claimant is not eligible for external review, the health plan must provide the reason for ineligibility.  If the request is incomplete, the health plan must notify the claimant that further information or materials are required and provide the claimant with an opportunity to complete the request.  Health plans must allow the claimant until the end of the four-month filing period or forty-eight hours from the receipt of the notification, whichever is later, to perfect the request.

The health plan must contract with at least three independent review organizations (IRO) to conduct external reviews.  The IROs must be “accredited by URAC or by a similar nationally-recognized accrediting organization.”  An independent, unbiased method for claim assignments, such as rotation or random selection, must be used.  The IRO may not have a financial stake in the outcome of its decision.

The following must be provided in the contract between a health plan and an IRO:

a.       The IRO will utilize legal experts as appropriate.

b.      The IRO will provide the claimant with timely written notification including a statement of the request’s eligibility and acceptance for external review and a statement that claimant may submit additional information for consideration within ten business days of the receipt of notification.

c.       The IRO may choose to consider additional information received ten business days after the receipt of notification.

d.      The IRO must submit all additional information received by the claimant to the health plan within one business day.  The health plan may reconsider its adverse determination and terminate the external review if it decides to reverse its prior determination and provide coverage or payment.

e.       The health plan must provide all documents and information related to the adverse determination within five days; otherwise, the IRO may terminate the external review and reverse the adverse decision.

f.       The IRO will review the claim de novo based on all information and documents timely received.

g.      Within 45 days of the assignment, the IRO will provide written notice of its decision to the health plan and claimant. The decision notice will contain a description of the disputed claim, the date of assignment, and reference to the evidence relied upon and reasoning for its decision.  The notice must provide a statement that the decision is binding to the extent that other remedies may be available under the law and that judicial review is available to the claimant.

h.      The IRO will maintain all records related to a claim for six years and make them available for examination upon request by the claimant, health plan, or government oversight agency.

B. Expedited Review

A group health plan must allow a claimant to request an expedited review when a claimant receives:

(a) An adverse benefit determination if the adverse benefit determination involves a medical condition of the claimant for which the timeframe for completion of an expedited internal appeal under the interim final regulations would seriously jeopardize the life or health of the claimant or would jeopardize the claimant’s ability to regain maximum function and the claimant has filed a request for an expedited internal appeal;

or

(b) A final internal adverse benefit determination, if the claimant has a medical condition where the timeframe for completion of a standard external review would seriously jeopardize the life or health of the claimant or would jeopardize the claimant’s ability to regain maximum function, or if the final internal adverse benefit determination concerns an admission, availability of care, continued stay, or health care item or service for which the claimant received emergency services, but has not been discharged from a facility

The main difference between the expedited and standard review is the timeframe (unsurprisingly).  During an expedited review, the health plan must perform the preliminary review immediately and send notice of its determination immediately.  Upon assignment to the IRO, the health plan must transmit all documents and information related to the claim by any expeditious method.  The IRO must provide notice of the final external review decision as quickly as possible, but no later than 72 hours after assignment of the claim.

New Rules for Insurance Appeals Under PPACA

On July 22, the Obama Administration released interim final rules that allow patient appeals of health insurance coverage decisions as required under the Patient Protection and Affordable Care Act (”PPACA”) and Health Care and Education Reconciliation Act (”Reconciliation Act”).  Published by the departments of Health and Human Services, Treasury, and Labor, these rules create standards for the internal and external processes by which patients can appeal adverse benefits decisions.

Prior to these rules, coverage appeals were governed by contract and State law.  Forty-four States have created some form of external appeal process for insurance coverage decisions; however, their coverage is limited and the processes vary greatly.  Effective January 1, 2003, changes to the Employee Retirement Income Security Act of 1976 (”ERISA”) regulations provided standards for internal appeals processes.  However, these standards only apply to employer-sponsored group health insurance.

As stated in the Obama Administration fact sheet entitled, “Appealing Health Plan Decisions,”

Today, if your health plan tells you it won’t cover a treatment your doctor recommends, or it refuses to pay the bill for your child’s last trip to the emergency room, you may not know where to turn. Most health plans have a process that lets you appeal the decision within the plan through an “internal appeal” — but depending on your State’s laws and your type of coverage, there’s no guarantee that the process will be swift and objective. Moreover, if you lose your internal appeal, you may not be able to ask for an “external appeal” to an independent reviewer.

Internal Appeals Process

Under the rules, new health plans beginning on or after Sept. 23, 2010, must have an internal appeals process for beneficiaries to challenge “adverse benefits decisions” — a “denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.”  Such adverse benefits decisions may be based on individual eligibility, benefit coverage, limitations on otherwise covered benefits (such as preexisting condition exclusions, source-of-injury exclusions, and network exclusions), and a determination that a benefit is experimental or not medically necessary.

In addition, health plans must do the following:

• Notify a claimant of a benefit determination as soon as possible;
• Provide claimants, free of charge, with the evidence relied upon and the rationale for the decision;
• Avoid conflicts of interest by making decisions regarding hiring, compensation, termination, and promotion independent of a claims adjustor or medical experts record of denial of benefits; and
• Meet additional requirements for notice, including information on internal appeals and external review processes.

However, these requirements do not pertain to so-called “grandfathered health plans” — those health plans that were in existence before March 23, 2010 when PPACA was enacted.  In the individual market, health insurance providers must meet the foregoing requirements as well as the following three:

• Applicants for individual insurance must be allowed to appeal initial eligibility determinations;
• Internal review must be limited to a single level, allowing claimants to appeal to external or judicial review immediately; and
• Insurers must maintain all claims and notices for a minimum of six years, which is already required of employer-sponsored health plans under ERISA.

External Appeals Process

If the internal appeal is denied, patients may choose to have the claim reviewed by an independent reviewer.   According to Appealing Health Plan Decisions, States are encouraged to adopt the National Association of Insurance Commissioners (NAIC) standards in “their external appeals laws to adopt these standards before July 1, 2011.”

The NAIC standards call for:

• External review of plan decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.
• Clear information for consumers about their right to both internal and external appeals — both in the standard plan materials, and at the time the company denies a claim.
• Expedited access to external review in some cases — including emergency situations, or cases where their health plan did not follow the rules in the internal appeal.
• Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.
• Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflicts of interest.
• Emergency processes for urgent claims, and a process for experimental or investigational treatment.
• Final decisions must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.

If State laws don’t meet these standards, consumers in those States will be protected by comparable Federal external appeals standards.

As Kaiser Health News reported, “This is a regulation that benefits everyone — consumers get protections, business and providers get more certainty in the rules and the need for litigation to settle these issues should be dramatically minimized,” Phyllis Borzi, assistant secretary of the Department of Labor, said at a briefing for reporters Thursday.

Consumer Assistance Grants

However, procedural rights for consumers are not sufficient to ensure proper appeals.  “Not enough consumers know this is an option that they have,” said Angel Robinson, the consumer advocate in the Iowa Insurance Division, according to Kaiser Health News.

In addition to the new requirements for internal and external appeals processes under the interim final rules, the federal government is offering nearly $30 million in resources to States and Territories to strengthen and establish consumer assistance programs.  Specifically, these programs are charged with:

• Helping consumers enroll in health coverage;
• Helping consumers file complaints and appeals against health plans;
• Educating consumers about their rights and empowering them to take action; and
• Tracking consumer complaints to help identify problems and strengthen enforcement.

Image Credit: Appeal to the Great Spirit, Cyrus Edwin Dallin (1909) Photo by Toni To via Flickr