Internal and External Review
For plan years beginning on or after September 23, 2010, non-grandfathered plans must comply with new claims procedures - including improved internal claim review procedures and a new requirement for external review. Insured plans must comply with state external review processes. Self-funded plans (or insured plans in states that do not have external review laws) must comply with new federal external review rules.
On June 24, 2011, the Departments of Treasury, Labor and Health and Human Services revised their previous guidance on the Health Care Reform internal claims and external review requirement applicable to non-grandfathered group health plans. The new regulations are generally effective July 22, 2011.
Internal claim review procedures
The internal claim review procedures require insured and self-funded plans to adopt the following changes:
- Expanded scope. A plan must treat a rescission of coverage (a retroactive termination of coverage) as a claim subject to its internal appeal procedures.
- Urgent care. A plan must notify a claimant of a benefit determination as soon as possible, but not later than 72 hours after receipt and the plan must defer to the attending provider on whether the claims constitutes “urgent care.”
- Full and fair review. A plan must provide a claimant with any new information considered on appeal (either new evidence or a new rationale), and the claimant must have an opportunity to respond.
- Culturally and linguistically appropriate. A plan must ensure that notices of adverse benefit determinations (for both initial claims and appeals) are provided in a culturally and linquistically appropriate manner. These requirements are triggered if 10 percent or more of the population residing in the claimant’s county are literate only in the same non-English language.
- Form and content of notices. A plan must include additional content in notices of adverse benefit determinations, including: (1) information sufficient to identify the claim involved; (2) the reason for the adverse determination; (3) a description of internal appeal and external review requirements; (4) the availability of, and contact information for, State health insurance consumer assistance; and, (5) a statement describing the availability, upon request, of the diagnosis and treatment codes. The plan cannot treat a request for diagnosis and treatment codes as a request for appeal or external review.
- Strict adherence. A plan must strictly adhere to the new claim review procedures – if it fails to do so, a claimant is deemed to have exhausted the plan’s administrative remedies and may immediately initiate external review or legal action. There is an exception for “minor” errors that satisfy certain conditions. If a plan relies on the exception, two additional requirements apply: (1) the plan must provide an explanation describing how the plan satisfies the exception within 10 days of a claimant’s request; and (2) if a claimant’s request for immediate review is rejected by a tribunal (either a court or an external reviewer) because the plan satisfies the exception, the plan must provide notice within 10 days of the tribunal’s decision giving the claimant the opportunity to continue the internal claims procedure.
Insured plans must comply with state external review processes. Self-funded plans (or insured plans in states that do not have external review laws) must comply with new federal external review rules described in Department of Labor Technical Release 2010-01. Among other requirements, plans must establish contracts with at least two accredited independent review organizations (IROs) by January 1, 2012, (and with at least three IROs by July 1, 2012) to handle regular and expedited external reviews, and plans and IROs must adhere to strict timelines for processing regular and expedited external reviews. External review decisions are binding on the plan or insurer. Until further guidance is issued, the only claims eligible for federal external review are claims involving either medical judgments or rescission of coverage.
Note: The internal and external claims review standards only apply to certain types of health plans, such as major medical insurance. Under the Health Care Reform statute and federal agency guidance published to date, they do not apply to HIPAA excepted benefits, such as disability, cancer, hospital indemnity, or accident insurance. Click here for more information about the types of benefits that are exempt from the Health Care Reform plan design mandates.
Internal and External Claims Review Hot Topics & FAQs
- DOL Further Delays Certain Internal Claim Review Procedures
In March 2011, the Department of Labor issued Technical Release 2011-01 further extending the compliance date for certain internal appeal rules until plan years beginning on or after January 1, 2012 (last year, the DOL extended the compliance date until plan years beginning on or after July 1, 2011). The new compliance extension is limited to the following internal claim review procedures: (1) the requirement that plans make initial determinations on urgent claims within 24 hours; (2) the requirement that adverse determinations be provided in a culturally and linquistically appropriate manner; (3) the requirement that adverse benefit determinations include information sufficient to identify the claim involved; and (4) the requirement holding plans to a “strict adherence” standard.
- Hot Topic - Enforcement Grace Period
In March 2011, the Department of Labor issued Technical Release 2011-01 further extending the compliance date for certain internal appeal rules until plan years beginning on or after January 1, 2012 (last year, the DOL extended the compliance date until plan years beginning on or after July 1, 2011). The enforcement grace period applies to some, but not all, of the internal claim review procedures including: (1) the requirement that plans make initial determinations on urgent claims within 24 hours; (2) the requirement that adverse determinations be provided in a culturally and linquistically appropriate manner; (3) the requirements relating to form and content of notices; and (4) the requirement holding plans to a “strict adherence” standard. The grace period will give plans and issuers more time to make certain procedural and computer system changes.
- If the plan sponsor of a self-funded plan currently contracts with a third party administrator (TPA) to administer claims and appeals, can the plan contract with the TPA to administer external review?
Answer: Yes. According to a Department of Labor FAQ, federal guidance does not require a plan to contract directly with an Independent Review Organization (IRO) to perform the required external review. Where a self-funded plan contracts with a TPA that, in turn, contracts with an IRO, the external review requirements can be satisfied in the same manner as if the plan had contracted with the IRO directly. Of course, such a contract does not automatically relieve the plan from responsibility if there is a failure to provide an individual with external review. The Department of Labor guidance also notes that fiduciaries of plans that are subject to ERISA have a duty to monitor the service providers to the plan.
- Do the new internal claims review requirements apply to all ERISA health plans?
Answer: This isn’t entirely clear. At the moment, the new internal claims review requirements apply only to non-grandfathered plans that are subject to the plan design mandates (e.g., major medical plans). However, the preamble to the interim final regulations indicates that the Department of Labor intends to update the ERISA claims procedure rules that apply to all ERISA health and welfare plans to include the internal claims review rules added by the Health Care Reform law. (For more information, see the summary of exemptions.)
American Fidelity Assurance Company does not provide tax or legal advice.