Amended Claims and Appeals Process Regulations

Late last month, the Departments of Labor ("DOL"), Health and Human Services, and the Treasury (the "Agencies") issued an amendment to the interim final regulations issued in July 2010 relating to the internal and external claims and appeals process rules under the Patient Protection and Affordable Care Act ("PPACA").  This amendment is intended to respond to comments the Agencies received about the original regulations and to assist group health plans and others with complying with the new rules regarding claims and appeals.  As mentioned in a previous SGR Client Alert, under PPACA, non-grandfathered group health plans are required to implement specific changes regarding their internal claims and appeals processes and provide participants with certain external review protections.

Internal Claims and Appeals Process Changes

Some of the most significant changes contained in the amended regulations with regard to internal claims and appeals processes are as follows:

  • The Agencies restored the original 72-hour timeframe for health plans to make decisions regarding urgent care claims, rather than imposing a 24-hour deadline for such decisions.
  • The Agencies eliminated the requirement that health plans automatically provide diagnostic or treatment codes in notices of claim denials.  However, health plans must notify claimants in the notices that they have the opportunity to request the diagnosis or treatment codes.
  • The Agencies provide an exception to the requirement that participants be permitted to seek immediate review if a plan fails to strictly adhere to all of the regulatory requirements for internal claims and appeals.  For the exception to apply, the violation must be: (1) de minimis, (2) non-prejudicial, (3) attributable to good cause or matters beyond the plan's control, (4) in the context of an ongoing good faith exchange of information, and (5) not reflective of a pattern or practice of noncompliance.
  • The Agencies establish a single threshold for determining when it is necessary to provide notices to participants in a "culturally and linguistically appropriate" manner.  The threshold is set at 10% or more of the population residing in the claimant's county, as determined based on the American Community Survey data published by the United States Census Bureau. This threshold information will also be posted on the EBSA website and will be updated annually.

External Claims and Appeals Process Changes

The amended regulations also made the following significant changes to the external claims and appeals processes:

  • To give group health plans and issuers the time to adjust to the requirements to provide external review, the Agencies have temporarily suspended the July 2010 interim regulations and temporarily narrowed the availability of the federal external review process to claims that involve: (1) medical judgment (excluding those that involve only contractual or legal interpretation without use of any medical judgment), as determined by the external reviewer, or (2) a rescission of coverage. The suspension is expected to be lifted by January 1, 2014.
  • The Agencies have clarified that decisions made by independent review organizations ("IROs") are binding, and that the plan must provide benefits (including making payment on the claim) pursuant to the final external review decision without delay regardless of whether the plan intends to seek judicial review of the decision.
  • The Agencies have clarified that the transition period for insurance coverage to follow the federal external review process in the case that applicable state law does not meet the requirements of the NAIC Uniform Model Act will end on December 31, 2011.

In addition, in subregulatory guidance issued by the DOL in Technical Release 2011-02, the DOL has amended its enforcement safe-harbor by permitting self-insured health plans to contract with at least two IROs by January 1, 2012, and with at least three IROs by July 1, 2012, and to rotate assignments among them. While compliance with these safe-harbor requirements is not required, any other alternative process will be closely reviewed by the Agencies to ensure that the process is independent and without bias.

These amendments to the claims and appeals process regulations become effective July 22, 2011.