In guidance issued on March 18, 2011, the U.S. Department of Labor:
• extended the enforcement grace period previously provided for some of the new requirements relating to internal claims and appeals that are imposed on group health plans and health insurers under the Patient Protection and Affordable Care Act (PPACA), and
• relaxed in some cases the prior requirement that plans and insurers must be working in good faith to implement the new requirements in order to take advantage of the grace period.
In providing this relief, the Departments of Labor, Treasury, and Health and Human Services signaled their intention to make changes to some of the new requirements, including the requirement that notices be provided in a culturally and linguistically appropriate manner, the accelerated time frame for making urgent care decisions and the provision that failure by a plan or insurer to strictly comply with the new requirements is deemed to be an exhaustion of administrative remedies.
Changes to these requirements will be made in a modification to previously issued interim final regulations. While the precise changes are yet to be seen, the new guidance indicates that the changes will respond to the concerns raised by plan sponsors, insurers and others, and provide additional relief from the previously issued regulations.
No relief is provided with respect to the external review requirements; however, the grace period does apply to the requirement that notices to claimants include a description of available external review processes and how to initiate an appeal.
The guidance notes that the agencies have received numerous comments regarding the scope of the federal external review process. This issue is still under review by the agencies and may be addressed in future guidance.
The new internal claims and appeals and external review requirements do not apply to grandfathered plans.
Background
The federal agencies jointly issued interim final regulations, implementing the new internal and external claim review requirements in July 2010.
The interim regulations impose the pre-existing DOL claims procedure regulation, which previously applied only to group health plans, on health insurance issuers in the group and individual markets, as well as group health plans (whether or not they’re subject to ERISA). The interim regulations also impose seven new standards for internal claims and appeals processes.
On September 20, 2010, the Department of Labor issued guidance that established an enforcement grace period for compliance with certain internal claims and appeals standards until July 1, 2011. It provided that, during the non-enforcement period, the agencies would not take any enforcement action against a group health plan that was working in good faith to implement the internal appeals standards, but did not yet have them in place. In addition, HHS would encourage states to apply a similar grace period with respect to insurers.
As a result of the recent grace period extension, rolling effective dates apply with respect to enforcement of the seven new standards imposed by the Interim Regulations.
Enforcement period timing
Plan years beginning on or after September 23, 2010:
No enforcement grace period was provided with respect to the following new requirements, which are effective for plan/policy years beginning on or after September 23, 2010:
• Expansion of the definition of adverse benefit determination: The definition of “adverse benefit determination” eligible for internal claims and appeals is broadened to include rescissions of coverage, regardless of whether the rescission has an adverse effect on any particular benefit at the time.
• Full and fair review: Plans and insurers must provide the claimant, free of charge, with any new additional evidence relied upon, considered or generated by the group health plan in connection with the claim, as well as any new or additional rationale for a denial at the internal appeals stage, and a reasonable opportunity for the claimant to respond to such new evidence or rationale.
• Avoidance of conflicts of interest: Generally, a plan or insurer must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence or impartiality of the persons involved in making the decision. For example, a group health plan cannot provide bonuses based on the number of denials by a claims adjudicator. Similarly, a group health plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases.
First day of the first plan year beginning on or after July 1, 2011 (or Jan. 1, 2012 for calendar-year plans):
The guidance extends the enforcement grace period for the expanded content requirements for notices of adverse benefit determinations. In particular, the grace period for following requirements is extended to the first plan year beginning on or after July 1, 2011. Thus, there will be a rolling effective date for these requirements based on the plan year:
1. Disclosure of information sufficient to identify the claim involved, including the date of the service, the health care provider and the claim amount.
2. In the case of an internal adverse benefit determination, the reason for the determination must include the denial code and its corresponding meaning, as well as a description of the standard, if any, that was used in denying the claim. In the case of a notice of final internal adverse benefit determination, the description of the reason for denial must also include a discussion of the decision.
3. A description of the internal and external appeals review processes, including information regarding how to initiate an appeal. The agencies previously issued guidance relating to the federal external review process, frequently asked questions and model notices of adverse benefit determinations. All of these are available on the DOL website at http://www.dol.gov/ebsa/healthreform. Insured plans are generally subject to the external review process applicable under state law. The federally operated external review process is in effect for three states and four territories: Alabama, Mississippi, Nebraska, U.S. Virgin Islands, Northern Mariana Islands, Guam and American Samoa.
The enforcement grace period does not apply unless the plan or issuer is acting in good faith to come into compliance.
Plan years beginning on or after Jan. 1, 2012:
The enforcement grace period with respect to the following requirements is extended until plan years beginning on or after Jan. 1, 2012, to give the agencies time to publish new regulations. Further, plans are not required to work in good faith to implement these requirements as set forth in the interim regulations in order for the grace period to apply.
• Reduction in time frame for urgent claims: The interim regulations require a group health plan or insurer to notify a claimant of an urgent care benefit determination as soon as possible, taking into account the medical exigencies—but not later than 24 hours after the receipt of the claim.
• Providing notices in a culturally and linguistically appropriate manner: The interim regulations require a group health plan or issuer to provide adverse benefit determination notices in a culturally and linguistically appropriate manner. If the plan covers less than 100 participants at the beginning of the plan year, the plan is considered to comply with this requirement if it provides notices, upon request, in a language in which 25% of more of its participants are literate. If the plan covers 100 or more participants at the beginning of the plan year, the plan is considered to comply with the requirement if it provides the notices, upon request, in a language in which the lesser of 500 or more participants or 10% of all participants are literate. Once a participant requests a notice in an applicable non-English language, all further notices must be provided in that language.
• Strict adherence: The interim regulations provide that if a group health plan or issuer fails to strictly adhere to all of the internal claims and appeals process requirements, the claimant is deemed to have exhausted the internal claims and appeals process, regardless of whether the group health plan asserts that it substantially complied with these requirements or that any procedural error committed was inconsequential. Upon the failure of a group health plan or insurer to strictly adhere to the internal claims and appeals process, the claimant may initiate an external review and pursue any available remedies under ERISA or state law.
• Automatic disclosure of diagnosis and treatment codes: The interim regulations stipulate that notices of adverse benefit determinations must include diagnosis and treatment codes and the meanings of the codes. The recent guidance notes, however, that the existing DOL claims regulations generally require such information to be provided upon request. A request for such codes is not to be considered a request for (and therefore trigger the start of) an internal appeal.
Hickman can be reached at John.Hickman@alston.com and Smith at Carolyn.smith@alson.com and Hamby at annetyler.hamby@alston.com.
