New Federal External Review Requirements

Today, health plans and insurers issuing new policies and offering “non-grandfathered” coverage must provide individuals an expanded reconsideration and appeals process when an adverse benefit determination is made. Last summer, the U.S. Department of Labor (DOL) and Department of Health and Human Services (HHS) regulations issued specific regulatory guidance detailing how health plans and insurers must comply with new national minimum standards for external review pursuant to the Patient Protection and Affordable Care Act of 2010 (PPACA).¹

Brokers and agents should become familiar with the new rules to help support their clients when a health plan or insurer does not provide adequate coverage. To that end, health plans and insurers that have not been subject to state external review requirements must now comply with these new minimum federal requirements. Specifically, the federal government now mandates that each “non-grandfathered” health plan comply with either the higher of the new federal external review regulations, the NAIC Uniform Health Carrier External Review Model Act ², or a state’s external review requirements.³ Although some additional details still need to be worked out, the new rules were effective on September 21, 2010.

The federal government noted that one goal is to make the external review process more efficient, as stated in the interim final rule:

"By making claims and appeals processes more uniform, these interim final regulations will increase efficiency in the operation of employee benefit plans and health care delivery as well as health insurance and labor markets. These interim final regulations are expected to increase efficiency by reducing complexity that arises when different market segments are subject to varying claims and appeal standards."⁴

It is not clear whether or not DOL/HHS will accomplish this goal, but individuals do have more rights under the new federal regulations resulting from an adverse coverage decision or payment.

An Overview of the New Federal Requirements

Here are a few highlights:

• Types of decisions that can be appealed. The definition of “adverse benefit determination” is expanded to include a rescission of coverage which applies when coverage is cancelled or discontinued, except when an individual has failed to pay the required premiums or other contribution toward the cost of coverage.
• More information about how to appeal. The plan or issuer must provide information pertaining to the “available internal appeals and external reviews processes, including information about how to initiate an appeal.”⁵
• Failure to make full payment. The new federal external review protections apply to both “pre-service” and “post-service” claims – including situations where the health plan pays an individual less than the total amount. This includes “(f)ailure to make a payment in whole or in part (and) includes any instance where a plan pays less than the total amount of expenses submitted with regard to a claim…”⁶
• Emergency appeals. The time period for responding to a claim involving urgent care is shortened from 72 hours to 24 hours.
• More information about denial. To ensure a claimant receives a full and fair review, the health plan must provide additional details on any new or additional evidence considered, relied on or generated by the plan that led to the adverse determination. The rationale must be provided free of charge, as soon as possible and before the appeal process begins. In addition, the “plan or issuer must also ensure that the reason or reasons for the adverse benefit determination…includes the denial code…It must also include a description of the plan’s or issuer’s standard, if any, that was used in denying the claim…” ⁷
• More common language. Notices to individual claimants throughout the process must be provided in a culturally and linguistically appropriate manner.

Last month, the National Association of Independent Review Organizations (NAIRO) released a white paper in order “to make it easier for health plans, third-party administrators and self-insurers to comply with the Interim Final Regulations.” This guidance also should be helpful to brokers and agents. The white paper is available here.

Among other observations, NAIRO notes that “(t)he regulations require that all claims and appeals must be decided in a manner that ensures the independence and impartiality of the person making the benefits determination.” They also highlight the fact that “(c)laimants must be provided continued coverage while waiting for an internal appeal decision.”

Federal or State Oversight?

The new federal external review requirements apply both to “non-grandfathered” groups and individual coverage. The federal government elaborates that “it is preferable to have similar processes in the group and individual markets.” ⁸ In terms of grandfathered plans, it is important to note that they are exempt from the new federal requirements, but state external requirements will likely still apply unless a regulatory exception exists. Interestingly, state external review requirements in many instances will apply to self funded plans, where Employee Retirement Income Security Act (ERISA) would normally preempt state law.⁹ If there is any conflict in terms of which external review rule applies or does not apply, HHS will likely decide whether the state or federal rules apply.¹⁰

In terms of determining whether the new federal requirements or an existing state law applies in a particular jurisdiction, it is recommended that you contact the state insurance department. An insurance regulator should be able to help brokers, patients and others determine which process is applicable.¹¹

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The federal government expects to issue more regulations on the external review process later this year. As more information becomes available, BenefitMall is committed to keeping you up-to date in a timely manner. Visit www.BenefitMall.com to view past Legislative Alerts in the “Newsroom” section. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources. If you have any questions, please contact your local BenefitMall Sales Team and they will be happy to assist you. Thank you for taking the time to read through this important notification.

The views expressed in this legislative alert do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

1. See Federal Register, vol. 75, no. 141, pgs. 43330-43364 (July 23, 2010) and U.S. DOL Technical Release 2010-01 (August 23, 2010). See also Federal Register, vol. 75, no. 165, pgs. 52597-52599 (Aug 26, 2010).
2. This Act can be downloaded here.
3. See Federal Register, vol. 75, no. 141 at page 43334. In addition, the federal interim rule discusses the minimum state requirements at pages 43335-6.
4. Idbid at page 43341.
5. Idbid at page 43333.
6. Idbid at page 43332.
7. Idbid at page 43333.
8. Idbid at page 43334.
9. Idbid at page 43335.
10. Idbid at page 43336.
11. However, the interim final regulations did note the following: At the time of PPACA’s enactment, “all state except Alabama, Mississippi, Nebraska, North Dakota, South Dakota, and Wyoming had external review laws, and thirteen States had external review laws that apply only to certain market segments…” Idbid at page 43340.