What Internal Claims Procedures Changes Are Required Under PPACA?

The regulation applies to group health plans, insurance issuers offering group health insurance coverage, and insurance issuers offering individual policies, but does not apply to grandfathered plans.  These changes apply to plan years beginning on or after September 23, 2010 (January 1, 2011 for calendar year plans). 

This week’s Q&A addresses what changes health plans are required to make under PPACA with respect to internal claims procedures. 

What types of claims are subject to the new regulation?

The IFR applies to “claims for benefits” that currently are required to be decided under the Department of Labor (“DOL”) claims regulation.  The IFR also applies to any rescission in coverage, which generally means a cancellation or discontinuance of coverage that has retroactive effect, except to the extent that it is attributable to a failure to timely pay required premiums or contributions. The IFR does not appear to extend to claims for eligibility alone (that are not tied to a claim for benefits), except with respect to individual coverage, where the IFR expressly covers eligibility determinations as well.

Do the Department of Labor claims procedure regulations still apply?

Yes – the IFR extends the DOL rules to non-ERISA plans (including individual coverage) and adds new requirements.  So plans must comply with the existing DOL claims regulations, along with the new PPACA IFR.   

What additional requirements will apply? 

The IFR makes several changes to the DOL rules,  including:

·                     New Urgent Claim Timeframe – The IFR reduces the 72-hour notification period for urgent claims under the current DOL claims regulation to as soon as possible, but no later than 24 hours after receipt of the claim.  Note that this requirement appears only to apply to initial claims, not appeals.

·                     Information To Be Provided Upon Appeal – In connection with an appeal, plans must provide any new or additional evidence considered in connection with the appeal and any new rationale considered.  It appears that this information must be provided automatically (not just upon request) as soon as possible and sufficiently in advance of the final denial notice date to give the claimant an opportunity to respond.   

·                     Conflicts of Interest – Under the IFR, claims and appeals must be adjudicated in a manner designed to ensure the independence and impartiality of the person involved in making the decision.  Decisions regarding hiring, compensation, termination, and promotion must not be made based upon the likelihood that the individual will deny benefits.

·                     Updated Explanations of Benefit (“EOBs”) – The IFR requires that denial notices at the initial claim and appeals level include new information (in addition to the content already required under the DOL regulations).  The new information includes: date of service, provider, claim amount, diagnosis code and meaning, treatment code and meaning, denial code and meaning, description of plan’s standard used in denying claim, discussion of decision (for final notice), description of internal and external review process, and contact information for health insurance consumer assistance.  Notices also must be provided in a culturally and linguistically appropriate manner (meaning in another language if a certain number of plan participants speak the same non-English language).

·                     Strict Adherence to Rules – A claimant is deemed to exhaust his or her appeals and may go straight to external appeal or court if plan “fails to strictly adhere to all the requirements” of the internal claims procedure rules, “regardless of whether the plan or issuer asserts that it substantially complied . . .  or that any error it committed was de minimis.”  This means that even a minor or single failure could lead to a participant being considered to have exhausted all internal appeals and possibly cause loss of deference in court.

·                     Continued Coverage Upon Appeal – The IFR requires the plan to provide continued coverage pending the outcome of an appeal.  The IFR says, for this purpose, the plan must comply with the current DOL regulation governing concurrent claims for providing coverage during an ongoing course of treatment. 

Did the regulation address new external review standards?

Yes – the IFR provides that most appeals also will be eligible for external review by an independent reviewer.  Generally, insured plans or plans that currently are subject to state external review standards will continue to be subject to these state standards (with additional requirements imposed by the IFR).  Other plans, such as most self-funded ERISA plans, will be subject to a new federal external review requirement.  The agencies said that standards generally will be based on the NAIC Uniform Model Act and that they would be providing additional guidance on the new federal standard in the “near future.”   (In fact, the agencies issued additional informal guidance on federal external review on August 23^rd – see www.dol.gov/ebsa – so more on external review in a later column!)

Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html  

Contributors:

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm’s Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.