Recently, the Department of Health and Human Services, the Department of Labor and the Treasury Department (the “Agencies”) issued amendments to the interim final regulations implementing, among other things, the requirements regarding internal claims and appeals processes for group health plans and issuers under the Patient Protection and Affordable Care Act of 2010 (the “Interim Final Regulations”). The amendments to the Interim Final Regulations (the “Amendments”) make significant changes to the internal claims and appeals processes, which will need to quickly be implemented and reflected in plan documentation.

Background

The Patient Protection and Affordable Care Act of 2010, and the Health Care and Education Reconciliation Act of 2010 (together, “PPACA”), which were both enacted on March 23, 2010, instituted certain healthcare-related reforms, including changes to existing internal claims and appeals process requirements. On July 23, 2010, the Agencies issued the Interim Final Regulations, which, in relevant part, implemented these changes. In September 2010, the Department of Labor (the “DOL”) issued Technical Release 2010-2, and in March 2011, the DOL issued Technical Release 2011-01, each of which provided an “enforcement grace period” for certain of the Interim Final Regulations’ internal claims and appeals process requirements.

Amendments to the Interim Final Regulations

On June 24, 2011, the Agencies issued amendments to the Interim Final Regulations, which make changes to four of PPACA’s requirements for internal claims and appeals processes. These changes and clarifications, made in response to comments received by the Agencies, are discussed in greater detail below.

Urgent Care Notices  

The Interim Final Regulations had provided that a group health plan or issuer must notify a claimant of a benefit determination, whether adverse or not, with respect to a claim involving “urgent care” as soon as possible, but not later than 24 hours after the receipt of the claim by the group health plan or issuer. Prior to PPACA and the Interim Final Regulations, the time period for urgent care notifications was 72 hours, instead of 24 hours.

In the preamble to the Amendments, the Agencies noted that many commenters argued that the new 24-hour turnaround presented a heavy burden to group health plans and issuers, and that the Agencies had considered the costs and benefits of imposing an “absolute” 24-hour decision-making deadline for urgent care claims. As a result, the Amendments return to a 72-hour maximum, requiring that notifications of the plan’s benefit determination for urgent care claims be provided as soon as possible, taking into account the medical exigencies, but not later than 72 hours after the group health plan’s or issuer’s receipt of the claim. The Amendments also require the group health plan or issuer to defer to the determination of the claimant’s attending provider as to whether the claim involves a matter of urgent care.

Additional Content of Notices   

The Interim Final Regulations required that the notice of any adverse benefit determination (or final internal adverse benefit determination) given to claimants by group health plans and issuers include (i) information sufficient to identify the claim involved, including the relevant diagnosis and treatment code(s), and (ii) the corresponding meaning(s) of such diagnosis and treatment code(s), as well as a description of the standard, if any, used in denying the claim.    

After receiving comments regarding privacy, interference with the doctor-patient relationship, and the high costs surrounding the required provision of the diagnosis and treatment code(s) and their corresponding meaning(s), among other considerations, the Agencies decided to eliminate this requirement. As a result, the Amendments do not require group health plans or issuers to automatically provide the diagnosis and treatment code(s) and their corresponding meaning(s) to the claimant. Instead, the Amendments require that the notice include a statement notifying the claimant of the opportunity to request the codes and their corresponding meanings, and further, require the group health plan or issuer to provide such codes and their corresponding meanings as soon as practicable upon receipt of such a request. The Amendments also clarify that group health plans and issuers must not consider a claimant’s request for such information as a request for (and therefore a trigger of the start of) an internal appeal or external review.

“Deemed Exhaustion” Standard

Under the Interim Final Regulations, if a group health plan or issuer failed to “strictly adhere” to all of PPACA’s new claims and appeals process requirements, the claimant was deemed to have exhausted the internal claims and appeals process, regardless of whether the group health plan or issuer asserted that it had substantially complied with the requirements. Further, the claimant could then initiate any external review process or remedies available under the Employee Income Retirement Security Act of 1974 (“ERISA”) or applicable state law.

The Amendments scale back the Interim Final Regulations’ “deemed exhaustion” standard, citing in the preamble to the Amendments a number of negative comments the Agencies received regarding this approach. As a result, the Amendments provide an exception from the “deemed exhaustion” standard for any violation of the procedural rules that was (i) de-minimis, (ii) non-prejudicial, (iii) attributable to good cause or matters beyond the group health plan’s or issuer’s control, (iv) in the context of an ongoing good-faith exchange of information, and (v) not reflective of a pattern or practice of non-compliance. In addition, the Amendments also state that a claimant may receive, upon written request, an explanation of the group health plan’s  or issuer’s basis for asserting that it meets the exception, and further, provide that if an external reviewer or a court rejects a claimant’s request for immediate review of their claim, on the basis that the plan met the requirements for the exception, the Amendments give the claimant the right to resubmit and pursue an internal appeal of the claim.

Form and Manner of Notice

PPACA required group health plans and issuers to provide relevant notices in a “culturally and linguistically appropriate manner.” Under the requirements imposed by the Interim Final Regulations on the group market, a group health plan covering fewer than 100 participants at the beginning of the plan year was required to provide notice in a particular non-English language if 25% of the participants were literate only in that non-English language, and a plan covering 100 or more participants at the beginning of the plan year was required to provide notice in a particular non-English language if the lesser of (i) 500 participants or (ii) 10% of all plan participants were literate only in that non-English language. Further, the Interim Final Regulations required all future notices to be provided in such non-English language(s) after the applicable threshold was met.

After receiving comments regarding the inconsistency between the two thresholds, and the difficulty and high costs of compliance with the thresholds, the Agencies decided to streamline the requirements. Therefore, the Amendments establish a single threshold, under which the group health plan or issuer (regardless of the number of plan participants) must provide notice in a particular non-English language if 10% or more of the population residing in the claimant’s county, using data published by the US Census Bureau and included in the Amendments, speak such non-English language. The Amendments also require that each notice sent to an address in a county meeting such threshold include a prominently displayed statement in the applicable non-English language describing how to access the availability of language services, which, according to the Amendments, must include a customer assistance process (such as a telephone hotline) with oral language services in the applicable non-English language. The Amendments further require the group health plan or issuer to provide a written translation of any notice in the applicable non-English language, upon request.

Effective Date

Although the Amendments technically became effective on July 22, 2011, the internal claims and appeals process requirements that were changed by the Amendments are covered by the “enforcement grace period” provided in DOL Technical Release 2011-1. As a result, the Agencies will not begin enforcing the amended requirements until plan years beginning on or after January 1, 2012. We note that the “enforcement grace period” provided in DOL Technical Release 2011-1 for PPACA’s requirement regarding broader content and specificity in notices--other than with regard to the disclosure of diagnosis and treatment codes and their corresponding meanings, which is covered by the Amendments--was extended until the first day of the first plan year beginning on or after July 1, 2011 (which is January 1, 2012, for calendar year plans). However, since the remainder of PPACA’s changes to the internal claims and appeals process requirements became effective for plan years beginning on or after September 23, 2010, even group health plans and issuers who previously amended their plan documentation to comply with the Interim Final Regulations will need to revisit such documentation to make the changes required by the Amendments.