As mentioned in a previous alert, group health plans will be subject to new claims and appeals requirements under the Patient Protection and Affordable Care Act (PPACA), signed into law on March 23, 2010, as modified by the Health Care and Education Affordability Act of 2010 (“Reconciliation Bill” and combined, “Health Care Act”). In July and August, the Departments of Treasury, Labor, and Health and Human Services issued interim final regulations and other guidance regarding these new requirements.
The new claims and appeals procedures apply to all non-grandfathered group health plans and are effective on the first day of the first plan year beginning on or after September 23, 2010. These changes will require all sponsors of non-grandfathered plans to revise their plan documents, summary plan descriptions and other communications to participants and beneficiaries. The claims and appeals procedures under Section 503 of ERISA (as amended by the Health Care Act) will now apply to all non-grandfathered group health plans, regardless of whether a plan is subject to ERISA. The ERISA claims and appeals procedures are, however, modified as follows:
Definition of “Adverse Benefit Determination”: The definition of “adverse benefit determination” for purposes of claims and appeals now includes any rescission of coverage that has a retroactive effect, regardless of whether there is an adverse effect on any particular benefit.
Notification of Urgent Care Determinations: The deadline for providing notice in the case of an urgent care claim has been shortened from 72 hours to 24 hours.
Additional Criteria for “Full and Fair Review” on Appeal: Claimants must be allowed to present “evidence and testimony” during the initial claim and internal appeal process. This new standard may require a plan to hear testimony as part of the claims process.
Avoiding Conflicts of Interest: Decisions regarding compensation and other similar matters for individuals who decide internal claims and appeals cannot be based on the likelihood that the individual will support a denial of benefits.
Additional Content for Benefit Denial Notices: Benefit denial notices must contain additional information, including, for example, diagnosis, treatment and denial codes. The DOL has issued model notices that incorporate the new content requirements.
Foreign Language Requirements: Group health plans with a certain threshold of participants who are literate only in a common non-English language are required to provide foreign language benefit denial notices.
Deemed Exhaustion of Internal Process for Less than Strict Compliance: If a plan fails to strictly follow all of the claims and appeals requirements, a claimant is permitted to sue the plan in court or initiate an external appeal as if the claimant had exhausted all internal claims procedures. If the claimant sues in court, the claim or appeal will be deemed to have been denied without the exercise of fiduciary discretion, meaning the court will review the claim or appeal de novo (without deference to the claims administrator’s decision).
External Review Process: Plans must now have an external review process for claimants who have exhausted internal review procedures. The external review process must meet certain requirements as outlined in the regulations and in other recent guidance issued by the DOL (Technical Release 2010-01).
The specific requirements for state and federal external review processes are detailed and require coordination with independent review organizations. We therefore strongly recommend that plan sponsors work with counsel to ensure that plans are in compliance with these requirements.