In June 2011, federal regulators issued new guidance on PPACA’s internal claims and external review procedures for non-grandfathered group health plans and insurers. The guidance includes an amendment to the interim final regulations issued last year, Department of Labor (“DOL”) Technical Release 2011-02, Department of Health & Human Services (“HHS”) Technical Guidance, and revised model notices of claims determinations. The remaining guidance is available at: http://www.dol.gov/ebsa.
Background. The 2010 regulations require plans and insurers to comply with existing DOL claims procedures (to the extent not modified by the new rules) and to provide continued coverage pending the outcome of an appeal. Further, plans and insurers must comply with additional internal claims requirements and a new external review process. The regulations were effective for the first plan year beginning on or after September 23, 2010, although regulators have announced they will not take enforcement action with respect to certain internal claims requirements during an “enforcement grace period.” The grace period was initially set to end on July 1, 2011, but was generally extended (with some modifications) until the first day of the first plan year beginning on or after January 1, 2012, though some requirements are effective with the first plan year on or after July 1, 2011.
Changes to internal claims procedures. The new amendment to the 2010 regulations makes multiple changes to the internal claims rules, the most significant of which are summarized below. Although the amendment is effective July 22, 2011, the changes below are subject to the enforcement grace period described above.
•Extension of urgent care timeframe. Previously, the PPACA-required deadline for making initial decisions on urgent care claims was 24 hours following receipt of a claim. The amendment requires decisions be made as soon as possible, taking into account medical exigencies, but no later than 72 hours following receipt of the claim. (This is the original rule under the DOL’s pre-PPACA claims procedure regulations.) However, plans and insurers must defer to the attending provider’s determination as to whether the claim is an “urgent care” claim.
•Exception to strict compliance standard. Previously, if a plan or insurer failed to adhere to every element of the internal claims process, the claimant was deemed to have exhausted the internal requirements and could proceed directly to court or the external review process, even if the failure was de minimis. The amendment adds a narrow exception for failures that are de minimis and meet certain other conditions.1 If the exception is invoked, the plan or insurer must provide, within 10 days of the claimant’s request, a written explanation of the grounds for invoking the exception. Further, if the external reviewer or court rejects the claimant’s request for immediate review on the basis that the plan or insurer met the de minimis exception, the claimant must be provided with notice of the opportunity to resubmit and pursue an internal appeal. Notice must be provided within a reasonable time (not to exceed 10 days) after the external reviewer or court rejects the claim. Time periods for re-filing the claim begin to run when the claimant receives the notice.
•Less burdensome notice requirements. Previously, notices of adverse benefit determinations had to include diagnosis and treatment code information. The amendment requires notices merely inform claimants of their right to receive this information upon request.
•Changes to language requirements. The 2010 regulations require that notices be provided in a “culturally and linguistically appropriate manner” in certain cases. Previously, the standard for determining whether this requirement applied was keyed off of the number of plan participants who were literate only in the same non-English language. This amendment changes the standard, providing that the special requirements apply only if 10% or more of the population of the claimant’s county is literate only in the same non-English language. (The preamble to the amendment includes a chart listing counties that qualify, and the DOL will post annual updates on its website, at www.dol.gov/ebsa/healthcarereform.) If the new threshold is met, the plan or insurer must: (a) provide oral language services (such as a hotline) that include answering questions and providing assistance with filing claims and appeals in the non-English language; (b) provide a notice in the non-English language upon request; and (c) include in all notices a statement in the non-English language explaining how to access the language services (the revised model notices include sample statements).
Changes to external review process rules. The 2010 regulations and subsequent guidance require that plans and insurers comply with either a state external review process or the federal external review process, depending on the type of plan and funding arrangement. Significant modifications made by the new guidance include:
•More time to contract with IROs under the safe harbor federal process. Generally, self-insured plans subject to ERISA and/or the Code must comply with the federal external review process. However, in previous guidance, regulators announced an interim enforcement safe harbor for plans that either voluntarily comply with a state’s external review process (if the state makes the process available to the plan) or follow a safe harbor federal process outlined in the guidance. The safe harbor federal process required, among other things, that the plan contract with at least three independent review organizations (“IROs”) and rotate reviews among them. New DOL Technical Release 2011-02 modifies the safe harbor federal process to require plans contract with at least two IROs by January 1, 2012, and at least three IROs by July 1, 2012. If a plan does not strictly comply with the safe harbor, regulators will determine its compliance with the external review requirements on a case-by-case basis.
•Changes to rules applicable to insurers and self-insured nonfederal governmental plans. Under the 2010 regulations, if these plans and insurers would otherwise be subject to a state’s external review process, the plan or insurer must comply with the state process during the “transition period.” Previously, the transition period ended on the first day of the plan year beginning on or after July 1, 2011. After the transition period, the federal process applied unless the state process included certain consumer protections based on the NAIC Uniform Model Act. Generally, if the federal process applied, insurers were subject to an HHS-administered process and plans were subject to the safe harbor federal process discussed above.
Under the new guidance, the transition period ends on December 31, 2011. After the transition period, the state process will apply if it includes the consumer protections (as modified by the amendment to the regulations) or if it satisfies a temporary alternative standard described in the new DOL Technical Release. HHS will determine whether each state process meets one of these standards by October 2011 – giving plans and insurers following a non-compliant state process three months to change to a federal process before the transition period ends. Beginning in 2014, the temporary alternative standard is unavailable; therefore, the state process will apply only if it includes the consumer protections.
A plan or insurer not subject to a state process, or in a state which has no external review process, can choose either the HHS-administered federal process or the safe harbor federal process. The new HHS Technical Guidance describes how to elect one of these federal processes.
•Temporary limit on claims eligible for federal external review. Currently, all claims are eligible for federal external review (regardless of the type of federal process) except those claims relating to a failure to meet the plan’s eligibility requirements. With respect to claims for which federal external review is initiated on or after September 20, 2011, the new amendment suspends this rule until regulators announce the suspension is lifted (likely before 2014). While this suspension is effective, the only claims eligible for federal external review are claims involving “medical judgment,” as determined by the external reviewer, or a rescission of coverage. (Claims involving “medical judgment” include, for example, those based on determinations of whether a treatment is medically necessary; whether a treatment is experimental or investigational; whether a medical condition is a pre-existing condition; and whether a claimant is entitled to a reasonable alternative standard for a wellness program reward.) Therefore, during the suspension period, claims regarding legal or contractual issues that do not involve medical judgments or rescissions are not eligible for federal external review.
Not Intended As Legal Advice.
- To qualify for the exception to the strict compliance standard, a de minimis failure must: (a) not cause or be likely to cause prejudice or harm to the claimant; (b) occur in the context of an ongoing, good faith exchange of information; (c) be for good cause or due to matters beyond the plan’s or insurer’s control; and (d) not be part of a pattern or practice of failures by the insurer or plan.