7/7/2011
On June 24, 2011 the IRS (Internal Revenue Service), DOL (Department of Labor) and DHHS (Department of Health and Human Services) jointly published an amendment to the interim final rules on rules relating to internal claims and appeals and external review processes. Along with the new rules (on June 22) the departments also issued Technical Release No. 2011-02 and revised model notices (Revised Model Notice of Adverse Benefit Determination, Revised Model Notice of Final Internal Adverse Benefit Determination, Revised Model Notice of Final External Review Decision). The new guidance and new notices came just one week before the benefit denial notice requirements are no longer under an enforcement grace period (scheduled to end the first plan year beginning on or after July 1, 2011).
While the changes are voluminous and can be difficult to digest, in general the changes should come as some relief to plan sponsors. Most of the changes made in the new interim final rules and the technical release either ease due dates for compliance or lessen overly strict rules. The changes do, however, mean that plans may need to amend previously adopted document language regarding the new appeals process and will generally need to update claim denial notices. The deadline for complying with all the recently released changes was already extended to plan years beginning on or after January 1, 2012 in Technical Release 2011-01.
In our prior article, Cafeteria plans, HRAs and External Appeals Requirements, we discussed the new external appeals requirements in detail as applied to account-based health care plans. Please note that all the health care reform rules for internal and external appeals processes only apply to plans that are subject to HIPAA Portability and are not grandfathered. We discuss these two issues in detail in our earlier article, linked above.
This article will discuss highlights of the changes in detail according to whether the change affects the internal or external claims processes and will note if the rules discussed would typically not apply to account-based health plans (like cafeteria or HRA plans). We'll also summarize changes to the denial notices.
Internal Claims Process Changes
Urgent Care Claims
The amended interim final rules clarify that plans must notify participants of the plan's benefit determination "as soon as possible... but not later than 72 hours after receipt of the claim" (DOL Reg Section 2590.715-2719(b)(2)(ii)(B), emphasis added). The earlier version of the interim final rule required notification of the status of the claim no later than 24 hours after receipt of the claim.
Note: Since claims to cafeteria and HRA plans are post-service claims seeking reimbursement, expedited and urgent appeal timelines will not apply to these plans.
Notices of Adverse Benefit Determination
The amended interim final rules clarify that plans and issuers must provide "as soon as practicable, upon request" diagnosis codes, treatment codes and their meanings (DOL Reg Section 2590.715-2719(b)(2)(ii)(E)(2), emphasis added). The earlier version of the interim final rule required the codes and their meanings to be included in the notice of adverse benefit determination.
Note: Since claims to cafeteria and HRA plans are post-service claims, diagnosis codes and treatment codes will typically not apply to these plans.
Deemed Exhaustion of Internal Claims and Appeals Process
The amended interim final rules clarify the internal claims process will be deemed exhausted if "a plan or issuer fails to adhere to all the requirements" of the internal claims process. The earlier version of the interim final rule deemed the internal claims process exhausted for any failure to "strictly" adhere to the internal claims process. The amended interim final rules further clarify the internal claims process
will not be deemed exhausted on de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan or issuer demonstrates that the violation was for good cause or due to matters beyond the control of the plan or issuer and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant
(DOL Reg Section 2590.715-2719(b)(2)(ii)(F)).
The new rules go into greater detail clarifying how the claimaint can raise the issue of possible exhaustion of the internal claims and appeals process and timelines. In general, the plan or issuer has 10 days to respond to the claimant's request for explanation and the plan or issuer also has 10 days to notify the claimant of the opportunity to resubmit and pursue the internal claim if an external reviewer determines the internal claims process was adhered to.
External Claims Process Changes
Both the amended interim final rule and Technical Release No. 2011-02 add guidance to the state external claims process. In general, a plan must either conform with a State external review process or the Federal external review process. Self-funded plans that are subject to ERISA generally must comply with the Federal external claims process; while non-ERISA or fully insured plans generally must comply with a State external review procedure. Note that there are exceptions to this rule in either case: if the state process does not meet minimum standards, plans/issuers would have to use the Federal process; and plans normally subject to the Federal process can choose to use the state process in certain circumstances. The majority of HRA and Cafeteria plans are self-funded, subject to ERISA and would therefore utilize the Federal process.
State Standards for External Review (Insured Plans)
As mentioned above, the new amended interim final rule and Technical Release No. 2011-02 add guidance to the state external claims process. In brief, a state can conform to an external review process that is either "NAIC-parallel" or "NAIC similar" (NAIC is the National Association of Insurance Commissioners). Technical Release No. 2011-02 establishes minimum consumer protection standards that will temporarily apply for "NAIC similar" state external review process until January 1, 2014. If a state does not meet the minimum standards for external review, plans/issuers are required to use the Federal external appeals process. A state can meet either the NAIC-parallel or NAIC-similar procedures prior to January 1, 2014 but all state external review processes will need to be "NAIC-parallel" by January 1, 2014.
Under prior guidance, the existing state review processes were considered to meet the health care reform requirements for plan years beginning before July 1, 2011.
Federal Standards for External Review (Self-funded, ERISA Plans)
Scope of Federal Review. The amended interim final rules restrict the types of claims that can be made under federal external review until further regulations are issued by the secretary. The prior rules allowed all adverse benefit claims to be subject to external review unless the claim related to eligibility under the group health plan. Under the new interim final rule, only claims that involve medical judgment or a recission of coverage are eligible for external review. The preamble to the new rule explains the new temporary standard is more similar to the NAIC Uniform Model Act and would eliminate review of contractual issues.
Independent Review Organizations (IROs). Technical Release No. 2011-02 provides:
To be eligible for a safe harbor from enforcement from the Department of Labor and the IRS, self-insured plans will be required to contract with at least two IROs by January 1, 2012 and with at least three IROs by July 1, 2012 and to rotate assignments among them. These requirements remain part of an enforcement safe harbor, and a plan may use an alternative process to meet the standards of paragraph (d)(2)(i) of the July 2010 regulations regarding random assignment. However, the Department of Labor and the IRS will look closely at any process other than the rotational assignment... when making its case-by-case determinations.The prior interim safe harbor under Technical Release 2010-01 required contracting with at least three IROs by July 1, 2011.
Denial Notices
The amended interim final rules change standards on when denial notices must be provided in a non-English language. If 10% or more of the population residing in the county where a denial notice is sent speaks a non-English language, the plan must meet a number of requirements. Under the prior rules, non-English language notices were required depending upon the population of the plan.
The requirements that a plan must meet if denial notices must be sent in a foreign language have also been changed. Plans/issuers now must provide oral language services in the applicable non-English language (prior guidance required the oral language services only if the plan/issuer provides oral customer assistance - as presumably nearly all plan/issuers do). The remaining requirements remain unchanged: denial notices must include a statement in the applicable non-English language indicating how to access language services and the plan/issuer must provide the notice in the applicable non-English language upon request.
Note that this requirement is not effective until plan years beginning on or after January 1, 2012.
Conclusion
Most of the changes to the appeals process are a welcome change for plans/issuers. As we mentioned above, the compliance deadline for complying with all the recently released changes was extended to plan years beginning on or after January 1, 2012 in Technical Release 2011-01. This gives plans time to update any applicable notices and processes and amend plans for the changes if necessary.
For more information on many health care reform topics, see our "Health Care Reform Talk" blog at www.healthcare-legislation.blogspot.com.
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