Most self-funded group health plans contract with third-party administrators ("TPAs"), such as insurance companies, to perform the plans' internal claims review services. As a result of the recently enacted health reform legislation, employers who sponsor self-funded group health plans will now also have to contract with three Independent Review Organizations ("IROs") to provide an avenue for independent, external review of participant claims once the internal appeals options have been exhausted. Employers will be required to submit claims eligible for external review to one of the three IROs with which they have contracted, selected using an unbiased process. These requirements take effect on January 1, 2011, though a grace period until July 1, 2011 has been issued with respect to certain standards for employers who attempt in good faith to implement them.
Some TPAs may offer to contract directly with the IROs on your behalf as a value-added feature to the claims review services they are already providing. While this may appear to be an attractive option and we recommend taking advantage of the contacts your service providers have to assist you in complying with the new external review requirements, we also recommend that you have your benefits counsel review proposed contracts with an IRO before you sign anything. There are required provisions for how an IRO is selected and what services it provides for which the employer is legally responsible, even if the hiring is done by a TPA. In addition, you should not assume that an IRO with which you are considering contracting is using a standard form contract that contains only the provisions required under the Health Care Reform bill.
If your plan is grandfathered, it is exempt from the external review requirements. To be grandfathered, a plan must have been in existence on March 23, 2010 and it cannot subsequently be changed in any of the following ways: (1) elimination of substantially all benefits to diagnose or treat a particular condition; (2) increase in a percentage cost-sharing requirement (e.g., raising an individual’s co-insurance requirement from 20% to 25%); (3) increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points; (4) increase in a co-payment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation); (5) decrease in an employer’s contribution rate towards the cost of coverage by more than 5 percentage points; or (6) imposition of annual limits on the dollar value of all benefits below specified amounts. There are other notice and documentation requirements you must satisfy to maintain grandfathered status. For example, you must include a statement that the plan believes it is a grandfathered health plan in any plan materials provided to a participant or beneficiary describing the benefits provided under the plan.