Appeals process mandated by health reform don't help workers, onerous for employers

Let me begin with a two-part confession: First, I do not claim to be a health reform expert. I have not read through the massive regulation and rely heavily on the interpretation of other, smarter people. Second, I am fairly apolitical. I don't find politics at the local, national and state levels particularly engaging.

That being said, there's at least one component of the health reform law that has me scratching my head. Health care reform requires nongrandfathered self-insured and insured group health plans to make changes to their internal appeal procedures and offer external reviews of denied claims. As a result, all plans, whether subject to or exempt from ERISA, will have to follow the same general claim-handling rules.

For many of us, this means that some of our plans are subject to the regulation, like fully insured or self-insured medical plans that aren't grandfathered. Some won't be, like dental and retiree medical. Will we implement one process for all plans or will we only adapt the processes and forms in order to comply on our required plans?

Speaking of complying, there's an enforcement grace period with lots of "if/then" statements in it, so if you're worried about getting "caught" flat-footed, make sure you understand which grace period applies to your plans. Plus, if you don't strictly adhere to your newly documented and compliant procedures, a claimant may leapfrog your internal review process and go directly to external review.

Oh, and the rules keep changing. New, revised notices with model language were published in June 2011. They are required for plan years beginning after July 1, 2011. This translates to Jan. 1, 2012, for calendar year plans like ours. Some of the newer changes include:

* Plans may take up to 72 hours (rather than the initial 24 hours) to decide urgent care claims, provided certain conditions are met. Umm ... was there ever any wonder whether this may be deemed impractical/impossible?

* Plans do not need to include specific diagnosis and treatment codes in claims denial notices. (Participants may, however, request this information.) Score one for readability! Even so, they are lo-o-ng.

* Plans only need to give non-English language versions of claims denial notices if at least 10% of the residents in the claimant's county are literate in the same foreign language. The need to do this may suggest that the notices are readable and relatively understandable for those of us who read English.

 

So what's the problem, exactly?

I'm still trying to figure out what problem our legislators were trying to solve. I can only presume they are trying to provide a "fair and consistent" recourse to plan participants whose claims have been denied. And that they assumed the previously required Department of Labor and state Departments of Insurance requirements weren't adequately ensuring this.

Our self-insured employee and retiree medical plans cover about 6,500 to 7,000 people. About 13% of the claims they submit are denied (most often because they are duplicate submissions, as opposed to being not covered.) Only 36 of those denials have been appealed. For the rare participants who actually enter the appeal process, about 30% succeed in getting their claim denials reversed in full or in part. Of the 70% whose initial appeals are denied, about 25% of them will pursue our voluntary, second-level appeal.

It would appear that most of our participants are satisfied (or at the very least, complacent) about the way their claims are being paid. Perhaps most of them understand - even if they don't always like it - that the plan is not intended to cover every possible medical treatment, service or supply.

 

From the administrators

We are self-insured and self- administered. Our appeal processes (because we're a carrier in the fully insured market) complies with DOL requirements but looks a bit more like the process required by a stringent state Department of Insurance. We've been consistent in applying our documented procedures. We have long offered a voluntary, second level of appeal on our self-insured plan. Many of those are sent outside to medical experts. So we already have an external appeal process (many states have long required this.)

I checked with several of our plan administrators - the people charged with implementing the mandatory changes for our employees and our insured clients, and who work in employee benefits, claims management, legal and compliance. Their responses regarding the impact of the regulatory changes were:

* The appeal process will take longer. The specific format and content of the letters will take more time to generate. The required processes - and relying on governmental entities to play a role - will extend the time to resolve and close a disputed claim. This does not help the claimant. "We do not deny claims lightly ... those who conduct our [existing, state-required] external appeals almost always back up our original decision."

* Our participants will be overwhelmed with information. There are times a denial letter can reach eight pages in length! We don't think people will really read all of that. We don't believe it helps them as much as it confuses them. And, resoundingly, we don't want our participants to think this was our idea!

* "The response letters are massive and ridiculous. They are very confusing and long with lots of attachments. We can add 'the format of this response is required by the Federal government.' I'd love to add, 'So, please talk to your congressman or senator if you don't like it.'"

* "There is so much stuff in the mandatory responses and notices that no one will understand them. In fact, the privacy notice the feds make us include is enough to make anyone run away from doing an [external] appeal with them. It basically says, 'We know your information is private, but we have the right to make it public without telling you, and you have to sign this form to exercise your appeal rights.'"

There's not a lot of reward in being an early adopter. We spent considerable time reviewing the regulations and implementing changes for Jan. 1, 2011. We modified plan documents and summary plan documents to incorporate the external review process. And we identified external reviewers. Now, the regulations have changed again. We are trying to figure out the balance between reasonably complying and digging in to our more typical degree of perfection in compliance.

Do you just toe the water or dive in? How deep do you dive? These questions are especially important if you expect pushback and additional appeals/adjustment to the regulations.

 

The squeaky wheel gets the legislation?

Participants whose claims (their own or a loved one's) have been denied - especially for large dollar amounts and especially for serious or life-threatening illnesses - are passionate and vocal about their "right" to coverage. Still, I'm astounded that this small, albeit vocal, minority has succeeded in creating such complexity for us all. In the end, I doubt the new and ever-changing regulations on claims appeals will have any real impact on claimants actually getting their desired treatment, service or supply covered. Plans with good appeal processes aren't necessarily going to pay any more claims. We're just going to send out a lot more paper.

 

Contributing Editor Cindy Bucher is a senior benefits analyst for a Midwestern financial services company and has been in her current role since 2004. She can be reached at cindy1967lou@aol.com.

For reprint and licensing requests for this article, click here.
Healthcare reform Benefit plan design
MORE FROM EMPLOYEE BENEFIT NEWS