Fresh off an extension this past spring of an enforcement grace period with respect to internal health claims and appeals requirements, sponsors of non-grandfathered group health plans received some more welcome news recently with the relaxation of certain group health claims procedure requirements first announced in interim final rules issued in July 2010. Although plan sponsors have been challenged to keep up with the various pieces of claims procedure guidance issued by the regulatory agencies over the past year, they may find these recent changes to be, in many ways, worth the wait and effort.

On June 24, 2011, the Departments of Health and Human Services, Labor and Treasury amended their interim final rules relating to internal claims and appeals and external review processes for non-grandfathered group health plans and health insurance issuers. Generally effective July 22, 2011, these amendments for the most part relax requirements imposed on group health plans and health insurance issuers in interim final rules issued by the Departments last July. The internal claims and appeals and external review requirements generally apply to non-grandfathered plans as of the first plan year beginning on or after September 23, 2010. The requirements do not apply to grandfathered plans or to plans that are “excepted benefits” (benefits excepted from HIPAA’s existing portability rules).

Modifications to Internal Claims and Appeals Processes

The amendments make changes to those internal claims and appeals provisions that were the subject of the enforcement grace period extended by the Departments earlier this year. (See our previous post on the enforcement grace period.) Specifically, the amendments

  • Timing of Urgent Care Notification – Revert back to the Department of Labor claims procedure requirement that urgent care benefit determinations be made no later than 72 (as opposed to 24) hours after receipt of the claim, provided that the plan or issuer defers to the attending provider with respect to the determination of whether a claim constitutes “urgent care.”
  • Additional content requirements – Eliminate the requirement to automatically provide diagnosis and treatment codes as part of a notice of adverse benefit determination (or final internal adverse benefit determination). Instead, the plan or issuer must notify the claimant in all notices of adverse benefit determination (or final internal adverse benefit determination) of the opportunity to request the codes (and their meanings) and such information must be provided upon request. Such requests are not to be considered requests for an internal appeal or external review. (See our previous post for a description of the additional content requirements.)
  • Deemed Exhaustion – Provide an exception to the strict compliance standard that would otherwise have allowed claimants to bypass the internal claims and appeals process and immediately seek external or judicial review if a plan or issuer did not strictly adhere to all procedural requirements set forth in the interim final rules.

Under the amendments, a violation of these procedural requirements does not allow a claimant to seek immediate external or judicial review if the violation is (i) de minimis, (ii) non-prejudicial, (iii) attributable to good cause or matters beyond the plan’s or issuer’s control, (iv) in the context of an ongoing good-faith exchange of information, and (v) not reflective of a pattern or practice of non-compliance. The claimant is entitled, upon written request, to an explanation of the plan’s or issuer’s basis for asserting that it meets these standards.

If an external reviewer or court rejects a claimant’s request for immediate review because the plan or issuer has met the standards for the exception, the plan or issuer must notify the claimant within 10 days of the opportunity to resubmit and pursue the internal appeal of the claim.

  • Provision of Notices in Culturally and Linguistically Appropriate Manner – Change the threshold for determining compliance with the requirement to provide relevant notices in a culturally and linguistically appropriate manner. See our upcoming post on this topic entitled “Being Culturally and Linguistically Appropriate in Claims and Appeals.”

Modifications to External Review Requirements

The amendments also make changes to provisions of the interim final rules relating to State and Federal external review processes. Specifically, the amendments

  • Duration of Transition Period for State External Review Processes – Extend by six months, to December 31, 2011, the end of the transition period during which States may amend their external review laws to meet the minimum consumer protections of the NAIC Uniform Model Act. If a State does not have an applicable external review process, separate guidance issued contemporaneously with the amendments provides a choice between an HHS-administered process or a private accredited IRO process.
  • Suspension of Broad Scope of Claims Eligible for External Review using Federal Process – Suspends the original rule regarding the scope of claims eligible for external review using a Federal external review process. If external review of a claim has not been initiated before September 20, 2011, the Federal external review process will be limited to adverse or final internal adverse benefit determinations involving (i) medical judgment, or (ii) a rescission of coverage. The Departments expect this suspension will be lifted by January 1, 2014, at which time the Federal external review process would be available to all adverse or final internal adverse benefit determinations except those based upon a finding that a claimant was not eligible for coverage under the terms of a group health plan.
  • Clarification on Binding Nature of Federal External Review Decision – Clarifies that a plan or issuer may make payment on a claim even after a final external review decision favoring the plan or issuer. Also, the amendments clarify that a plan or issuer must provide any benefits pursuant to the final external review decision without delay, regardless of whether the plan or issuer intends to seek judicial review of the decision.

Action Points

Employers who sponsor non-grandfathered group health plans will need to make sure that their plan documents and summary plan descriptions take into account these amendments to the interim final rules on internal health claims and appeals and external review processes. Modifications may also be required to notices provided to claimants in the claims and appeals process.