As explained in our August 2010 article, “interim final regulations” issued under the Affordable Care Act (“ACA”) require that group health plans (other than those that are “grandfathered”) comply with a number of internal claims and appeals procedures that go beyond those previously required under ERISA. The ACA also requires group health plans to offer a new state or federal external review process to review denied claims.
Although these new requirements are generally effective for plan years beginning on or after September 23, 2010, the Department of Labor (“DOL”) has granted two separate extensions of this compliance deadline (in late 2010 and early 2011). Some of the delayed rules become effective for plan years beginning on or after July 1, 2011, while other rules were delayed until plan years beginning on or after January 1, 2012. (See our May 2011 article for specifics regarding these extensions.) Now, however, the DOL and other federal agencies have jointly issued amendments to the interim final regulations that make significant changes to the rules.
To recap, the ACA made the following changes to ERISA’s claims and appeals procedures:
- The types of “adverse benefit determinations” for which the internal claims and appeals procedures are available must include any “rescission” of coverage.
- Notice of any denial of an “urgent care claim” must be provided within 24 hours, rather than 72 hours.
- Plans must provide claimants with any new or additional evidence considered, relied upon, or generated in connection with the claim, as well as any new or additional rationale for a denial at the initial appeals stage, and a reasonable opportunity for the claimant to respond to the new evidence or rationale.
- Decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to an individual (such as a claims adjudicator or medical expert) must not be based on the likelihood that the individual will support the denial of benefits.
- Notices must be provided in a culturally and linguistically appropriate manner.
- Notices to claimants must include the following additional content:
a. Information sufficient to identify the claim involved, including the date of service, the health care provider, the claim amount, the diagnosis code and its corresponding meaning, and the treatment code and its corresponding meaning;
b. In the case of any claim denial, the denial code and its corresponding meaning, as well as a description of the plan’s standard (if any) that was used in denying the claim;
c. A description of available internal appeals and external review processes, including information on how to initiate an appeal; and
d. The availability of, and contact information for, an applicable state office of health insurance consumer assistance or ombudsman.
- If a plan fails to strictly adhere to all of these requirements, a claimant is deemed to have exhausted the plan’s internal claims and appeals procedures — regardless of whether the plan has “substantially complied” with the requirements. This will allow the claimant to initiate any available external review process or remedies available under ERISA or state law.
The new guidance makes the following revisions to these rules:
- Repeal of the 24-Hour Deadline for Urgent Care Claims. The amended regulations reject a hard and fast 24-hour deadline for decisions on urgent care claims. Instead, the amended rule permits plans to revert to the original DOL claims procedure rule (requiring a decision as soon as possible, but in no event later than 72 hours).
- No Requirement to Provide Diagnosis and Treatment Codes in Notices. The requirement that plans automatically provide diagnosis and treatment codes as part of any notice of adverse benefit determination or final internal adverse benefit determination has been eliminated. Instead, a plan must include a notification of the opportunity to request diagnosis and treatment codes (and their meanings) in all notices, and then provide this information upon request.
- Relaxation of the Strict Compliance Standard. The amended regulations provide an exception to the strict compliance standard for certain minor errors that are attributable to good cause or matters beyond the plan’s control.
- Revisions to Notice Requirements. The requirement to provide “culturally and linguistically appropriate” notices has been eased. Previously, plans were required to consider the number of participants in the plan who were literate only in the same non-English language. Now, plans need only look to whether the claimant resides in a county in which 10% or more of the population is literate only in the same non-English language. The applicable counties are based on U.S. Census data; and the guidance includes a table, which will be updated periodically, listing 255 counties and four languages.
- Clarification Regarding Binding Nature of External Review. Finally, the amended regulations clarify that a plan must provide benefits pursuant to a final external review decision, even if the plan intends to seek judicial review of that decision.
In connection with the issuance of amendments to the interim final regulations, the DOL has also issued Technical Release 2011-02. This modifies the scope of claims eligible for federal external review. Before the issuance of this latest guidance, there was some uncertainty as to whether the federal external review process applicable to self-funded plans was broader than the existing state external review processes applicable to insurers. The Technical Release clarifies that the scope of claims eligible for federal external review is limited to those involving (1) medical judgment (as determined by the external reviewer), or (2) rescission of coverage.
The external review changes apply to claims with respect to which external review has not been initiated before September 20, 2011. The technical release states that these changes are a temporary suspension of the original rule, meaning that the original rule could become applicable again if the suspension is lifted. The agencies are seeking further comments on this issue, and the technical release makes clear that if the suspension is lifted, the agencies will give advance notice to plan sponsors so that they have time to comply.
Additionally, according to the Technical Release, the DOL and IRS are modifying their enforcement policy, as previously announced in Technical Release 2010-01, with respect to independent review organizations (“IROs”). In order to be eligible for a safe harbor from enforcement, self-insured plans must contract with only two IROs (rather than three) by January 1, 2012, and with at least three IROs by July 1, 2012. The agencies have also issued revised model notices of adverse benefit determination, final internal adverse benefit determination, and final external adverse benefit determination.
The new guidance provides welcome relief for plan sponsors, particularly with respect to the scope of the federal external review process. The amendments are generally effective as of July 22nd, subject to certain enforcement grace periods discussed above.