This Q&A focuses on new joint interim final regulations from the Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services. The regulations address the internal and external benefit claims review procedures for nongrandfathered group health plans.
Q.1 Which employer sponsored plans must comply with these regulations?
A.1 These regulations apply to nongrandfathered group health plans—including insured plans, self-funded plans, church plans and nonfederal governmental plans—offering health benefits to employees. A nongrandfathered group health plan is a health plan that was not in existence on March 30, 2010, or one which has made changes relinquishing its grandfathered status. Go here to read more about retaining or relinquishing grandfathered status.
Q.2 Does this include cafeteria, vision-only or dental-only plans?
A.2 Plans that offer "excepted benefits" are not subject to these claims procedure regulations. Most vision-only, dental-only and limited medical flexible spending arrangements are considered "excepted benefits" and therefore plans offering such benefits are not considered group health plans for purposes of the claims procedures. Of course, since the procedures apply only to health plans, 401(k) plans and other pension plans do not need to implement them.
Q.3 Who is responsible for implementing compliant claims procedures?
A.3 If either the plan or insurer complies with the internal claims procedure regulations, then both are considered compliant. Therefore, most employers will probably rely upon their health plan insurer to implement compliant procedures. Only the insurer needs to comply with the external claims procedures for an insured plan. A self-funded plan must comply with both the internal and federal external claims procedure regulations.
Q.4 What changes must be made to the internal claims process?
A.4 Six new requirements have been added to the existing ERISA claims procedures:
I. A rescission is now considered an adverse benefit determination and is subject to appeal under the claims procedures.
II. Urgent care claims must now be decided within 24 hours of receipt in most cases. The timeframe was previously 72 hours.
III. Claimants must be allowed to receive the claim file and be given any new evidence (or rationale) relied upon, considered or generated in the claim process sufficiently in advance of the plan's decision to be able to respond to the information.
IV. Stricter standards for avoiding conflicts of interest to ensure independence and impartiality of the claim reviewer must be followed.
V. Benefit denial notices must contain more information, such as dates, treatment/diagnosis/denial codes, identification of health care provider and discussion of the determination process, in a "culturally and linguistically appropriate manner." Model notices in English can be found here and, if a significant portion of employees cannot read English, substitute notifications in a non-English language must be provided.
VI. A plan's failure to adhere strictly to all of the internal claims processes will result in "deemed exhaustion" by a claimant of internal claims procedures. Claimants can then pursue external review or judicial review without further exhaustion of the claims procedures, and any decision by the plan or insurer will be reviewed de novo rather than under a more plan-friendly abuse of discretion standard (learn more here). During the internal review and appeals process, the plan must continue to provide coverage pending the outcome of the appeal.
Q.5 When must internal claims procedures be modified?
A.5 Although the modifications should be effective for plan years beginning on or after September 23, 2010 (January 1, 2011, for calendar year plans), a September 20, 2010, technical release from the DOL has provided an enforcement safe harbor for items II, V and VI above. If a group health plan works in good faith to implement these standards, then the DOL, IRS and DHHS will not take enforcement action against it in connection with these standards.
Q.6 How are state external review procedures affected?
A.6 Insurers subject to state regulation must follow state external review procedures if they meet minimal standards established in the regulations. These minimal standards address issues of timing, notice, conflict of interest, assignment of independent reviewer organizations (IROs), state or issuer payment of review costs and prohibition of a minimum claim amount threshold. A state which does not currently require external review procedures which meet these requirements will need to amend its laws to be compliant. If the state procedures are not compliant or if the state does not have such procedures, then insured plans must follow the federal procedures. Plans not subject to state regulations, such as self-funded medical plans, may choose to use compliant state procedures or can use federal procedures if a state makes these procedures available to such plans. Existing state procedures are considered compliant until plan years beginning on or after July 1, 2011. The DHHS will be evaluating state procedures and will list on this Web site state programs that meet federal standards.
Q.7 What do the federal external review procedures require?
A.7 On August 23, 2010, the Employee Benefits Security Administration (EBSA), the enforcement agency within the DOL focused on ERISA, published Technical Release 2010-01. It provides guidance on an interim enforcement external review procedure safe harbor for nongrandfathered, self-insured group health plans. The safe harbor applies to plan years beginning on or after September 23, 2010, and runs until it is superseded by future guidance. Under the guidance, the DOL and IRS will not take action against a plan that follows a compliant state procedure or a method that meets the requirements set forth in the guidance.
Under the guidance, within five business days of receipt of a claim, a plan must perform a preliminary review of a claim. To be timely, the claim must be submitted within four months after an adverse benefit determination. The preliminary review checks for exhaustion of appeals, forms submitted and the eligibility of the claimant under the plan. Next, the claim must be assigned on a random or rotating basis to one of at least three IROs with whom the plan must contract. The guidance details the required content of such contracts, including time lines and procedures for reviewing claims. The IRO will then make a benefit determination according to the standards in the guidance as incorporated into the contract. An expedited process is detailed for urgent care claims.
Q.8 What actions should employers take?
A.8 Fully insured plans should verify that the insurance company has or will have in place compliant internal review procedures. As even de minimus noncompliance with internal review procedures results in deemed exhaustion of the review process, plan administrators need to fully understand the procedures that apply to their plan and to train benefits personnel as needed. Additionally, all plan sponsors should evaluate the extent to which notifications will be required to be available in a foreign language.
Self-funded plans will need to incorporate these new internal review procedures into their documents. They will also need to implement either the federal external review process or, if available, the state external review process. Current Minnesota external claims review law can be found at Minn. Stat. 62 Q. 73, which you can view here.