Interim final rules clarify the scope of internal claims and appeals procedures and external review processes under PPACA.
Recently issued interim final rules clarify the scope of the internal claims and appeals procedures and external review processes, and provide details on the external review requirements under the Patient Protection and Affordable Care Act.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (PPACA), generally requires non-grandfathered group health plans and health insurance issuers offering group or individual health insurance coverage to comply with specific internal claims and appeals procedures and external review processes, effective for the first plan year commencing on or after September 23, 2010. The U.S. Departments of Health and Human Services, Labor and the Treasury recently issued interim final rules which clarified the scope of the internal claims and appeals procedures and external review processes, and provided details on the external review requirements under PPACA.
Internal Claims and Appeals ProcessesUnder PPACA, group plans and insurers offering group coverage must implement internal claims and appeals processes that comply with the claims and appeals procedures requirements under Section 503 of the Employee Retirement Income Security Act (ERISA), if they are not already subject to those requirements (e.g., church and governmental plans). In addition, the interim final rule creates the following six new requirements for group health plans and insurers:
External Review ProcessGroup health plans and insurers must also comply with new external review processes added by the regulations. The regulations require group health plans and insurers to comply with any applicable external review process in states that have implemented such a process if the state’s external review process applies to and is binding on an issuer of health insurance coverage and includes, at a minimum, the consumer protections set forth in the Uniform Health Carrier External Review Model Act promulgated by the National Association of Insurance Commissioners (the NAIC Model Act) that was in effect on July 23, 2010.
Self-insured plans that are not subject to state insurance regulation, and (beginning the first day of the first plan year beginning on or after July 1, 2011) self-insured or fully insured plans that are not subject to a state external review process that meets the minimum standards, must comply with a federal external review process that will be detailed in future guidance. These standards will be similar to those in the NAIC Model Act.
The secretaries of the U.S. Departments of Health and Human Services, Labor and the Treasury have the ability to determine whether a plan’s or insurer’s external review process is in compliance with PPACA and the interim final rule. The interim final rule contains a lengthy list of requirements for state external review processes, designed to provide minimum consumer protections similar to those contained in the NAIC Model Act. The appeals rules created by PPACA are effective for plan years beginning on or after September 23, 2010, but under a transition rule, a state external review process applicable to a plan or insurer is deemed to meet these requirements for plan years beginning before July 1, 2011.
Most self-insured group plans will not be subject to state law and, thus, will be subject to the federal external review process. Fully insured group health plans and self-insured group plans that are subject to state external review processes (i.e.,self-insured church and governmental plans not subject to ERISA, and multiple employer welfare arrangements) will be required to follow state review processes, assuming they comply with the NAIC model. While the new external review procedures will assist in reducing existing conflicts of interest in deciding benefit claims internally, the new external review procedures will add more administrative cost to benefit claim administration and add to the difficulty in timely adjudicating administrative benefit claims.
Next StepsGroup health plans and insurers subject to the new requirements should review their current internal claims and appeals procedures, and revise them as necessary to avoid potential liability and loss of deference upon judicial review. Group health plans and insurers should also begin to evaluate how they will comply with the new external appeal procedures. If an insurer is currently complying with a state-mandated external appeal procedure, the insurer will need to verify that the procedure complies with the NAIC Model Act. Non-grandfathered, self-insured group health plans will be required to comply with the new federal external review requirements yet to be issued. Plan administrators and insurers will be required to update existing plan documents, summary plan descriptions, internal claim and appeal guidelines, claim and appeal response letters, and other plan documentation to reflect these new claims and appeals processes.
Amy Gordon, Michael Graham and Jamie Weyeneth are partners with the Employee Benefits & Pensions practice group of global law firm McDermott Will & Emery LLP. Ms. Gordon focuses her practice on the areas of welfare benefits, including self-funded and insured health plans, counseling clients with respect to HIPAA, ERISA and the Internal Revenue Code. Mr. Graham focuses his practice on employee benefits litigation and controversy matters, litigating fiduciary breach, funding and benefit denial issues involving employee stock ownership plans, pension plans, and welfare benefit plans, in federal and state courts around the country. Ms. Weyeneth advises companies on a wide variety of retirement and welfare benefits issues. She has extensive experience with privacy compliance under HIPAA and continuing health coverage under COBRA. Joanna Kerpen and Natalie Nathanson are associates with the firm and focus on a variety of employee benefits tax and ERISA matters related to 401(k) plans, pension plans, profit sharing plans, cafeteria plans, health and welfare plans, and executive compensation. They can be reached at email@example.com, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com.