3/23/2011

The Patient Protection and Affordable Care Act and Health Care Act and Reconciliation Act (PPACA) mandated a new external appeals process for non-grandfathered plans covered by HIPAA Portability effective plan years beginning after September 23, 2010. Although not often discussed, the external appeals process does apply to most HRA plans and some cafeteria plans (unless the plans are grandfathered). This new requirement may be the most difficult PPACA requirement for Cafeteria and HRA plans to adhere to as meeting the safe harbor requirements requires contracting with at least three independent review organizations.

This article is meant to explain in detail how the external appeals requirements apply to Cafeteria and HRA plans. We will first discuss which Cafeteria and HRA plans are subject to the external appeals requirements and then discuss those requirements (and their effective dates) in detail.

Note: for purposes of this article, we are referring to all the health care reform appeals process changes as 'external appeals'. The specific requirements related to the appeals process will be discussed in detail.

Which Cafeteria/HRA Plans are Subject to External Appeals?

An HRA or Cafeteria plan will only be subject to the external appeals process if all of the following applies:

  1. The plan is not grandfathered and

  2. The plan is subject to HIPAA Portability.
Each will be explained in more detail below.

Grandfathered Plans

Plans in existence as of March 23, 2010 are grandfathered plans provided they meet several requirements: disclosure of grandfathered status to participants, maintenance of documents showing coverage in effect on March 23, 2010, in general, no change in insurance or eligibility under the plan and no reductions in coverage.

HRA and Cafeteria Plans Subject to HIPAA Portability

The following HRA plans and/or Cafeteria plans with a health care flexible spending account (HCFSA) feature are not subject to HIPAA Portability:

  • Plans that have less than two participants who are current employees as of the first day of the plan year;
  • Plans that provide coverage (reimbursements) for benefits that are limited to dental, vision and long-term care benefits that are not an integral part of a group health plan; or
  • The employer offers other group health plan coverage (that is not just dental, vision or long term care coverage) and the maximum benefit payable to a participant under the HRA or Cafeteria Health Care Reimbursement Account plan is less than or equal to the greater of:
    • $500 (plus any participant contribution, if applicable) or
    • two times the participant's salary reduction election for the year.

Cafeteria plans: HIPAA Portability does not apply to most Cafeteria plans since we assume that most Cafeteria plans with a HCFSA feature do not have employer contributions. Therefore, as long as the employer offers other group health plan coverage, the cafeteria plan will not be subject to HIPAA Portability. If a cafeteria plan offers a HCFSA feature and a) employer contributions of $501 or more, b) employer matching contributions greater than 100% match (two times the participant's salary reduction is the same as a 100% match on salary reductions) or c) does not offer other group health plan coverage, the cafeteria plan is subject to HIPAA Portability.

Note that only Cafeteria plans with a HCFSA can be subject to HIPAA Portability. Premium only plans and/or plans with other FSA accounts (dependent care, adoption assistance, etc.) are not subject to HIPAA Portability.

HRA plans: HIPAA Portability does apply to most HRA plans. Since HRAs by definition are employer-only funded and most HRAs will have a maximum reimbursement amount greater than $500, most HRAs will be covered by HIPAA Portability. Note that HRAs with employer contributions under $500 are still covered by HIPAA Portability if the employer does not offer other group health plan coverage.

What do Cafeteria/HRA Plans that are Subject to External Appeals Need to Do?

Assuming you have HRAs or Cafeteria plans that are subject to HIPAA Portability and not grandfathered, what do the plans need to do to meet the external appeals requirements?

There have been numerous guidance documents released by the DOL explaining the new requirements and delaying the effective date of some requirements. The Interim Final Rules were released in July of 2010. An interim enforcement safe harbor for non-grandfathered self-insured group health plans not subject to a State external review process was released in August of 2010 (applicable to most HRA and Cafeteria plans). Most recently, Technical Release 2011-01 extended the enforcement grace period for some external appeals requirements until plan years beginning on or after January 1, 2012 (extending the grace period for some requirements that were first extended under Technical Release 2010-02).

The new requirements applicable to Cafeteria and HRA plans will be discussed below incorporating the above guidance as applicable.

External Appeals Process In General

PPACA actually provides different rules for different plan types to meet the external appeals process requirements. Self-funded plans that are subject to ERISA must comply with the federal external claims process; while non-ERISA or fully insured plans generally must comply with a State external review procedure. Since the majority of HRA and Cafeteria plans are self-funded and subject to ERISA, we will focus on the federal external claims process. The DOL and IRS "will not take enforcement action against any plan that complies with the procedures set forth" in Technical Release 2010-01. Note that under the interim enforcement safe harbor, non-ERISA self-funded plans may choose to voluntarily comply with their State's external review process if the State chooses to expand access to their review process.

Overview of the Federal External Appeals Process Interim Safe Harbor

The safe harbor sets out standards for independent review organization (IRO) contracts and appeals timelines. The new external review process is effective the first plan year beginning after September 23, 2010 - although denial notices are under an enforcement grace period to describe the external appeals process until the first day of the first plan year beginning on or after July 1, 2011.

The safe harbor requires contracting with at least three independent review organizations (IROs) and describes the content required in the contract between the IRO and the plan. In Part I of the DOL's PPACA FAQs, Q9 indicates that TPAs can contract with IROs on behalf of plans. Q8 also indicates "a self-insured group health plan's failure to contract with at least three IROs does not mean the plan has automatically violated PHS Act 2719(b). Instead, a plan may demonstrate other steps taken to ensure that its external review process is independent and without bias." Of course, contracting with three IROs is the simplest method to ensure compliance.

The IROs should be accredited by URAC (www.urac.org) or by a similar nationally-recognized accrediting organization. A search on URAC's website reveals 53 URAC accredited IROs (go to http://www.urac.org/directory/DirectorySearch.aspx and select a module of "Independent Review Organization").

The safe harbor also outlines timeframes for the external appeals process (ERISA dictates timeframes for coverage denials during the internal review process):

  • Participants with a denied claim have four months after receiving a final internal adverse benefit determination to file a request for an external review.

  • Within 5 business days of receiving the external review request, the plan must complete a preliminary review to determine if the claimant was covered under the plan (coverage denials due to not meeting eligibility requirements are not eligible for external review), the claimant provided all the information and forms necessary to process the external review and the claimant has exhausted the internal appeals process.

  • Once the review above is complete, the plan has one business day to notify the claimaint in writing. If not eligible for external review, the notice must include contact information for EBSA (Employee Benefits Security Administration of the DOL).

  • If the claimant's request for external review was incomplete, the notice must describe materials needed to complete the request and provide the later of 48 hours or the four month filing period to complete the filing.

If the external review process does not "strictly comply" with all the standards set forth in the technical release," compliance will be determined on a case-by-case basis under a facts and circumstances analysis" (Q8 of Part I of the DOL's PPACA FAQs).

Benefit Denial Notice Content Requirements

This requirement is no longer under an enforcement grace period effective the first plan year beginning on or after July 1, 2011. DOL has provided sample claim denial notices (and we have updated our welfare document software with these sample notices if the plan is not grandfathered and subject to HIPAA Portability). There are a few denial notice requirements:

  • The plan or issuer must provide a description of available internal appeals and external review processes, including information regarding how to initiate an appeal.

  • The plan or issuer must ensure that the reason or reasons for an adverse benefit determination or final internal adverse benefit determination as well as a description of the plan's or issuer's standard, if any, that was used in denying the claim is disclosed. In the case of a final internal adverse benefit determination, this description must also include a discussion of the decision.

  • The plan or issuer must disclose the availability of, and contact information for, an applicable office of health insurance consumer assistance or ombudsman established under PHS Act section 2793.

    Technical Release 2011-01 provided a list of health insurance consumer assistance or ombudsman by state. We have updated our benefit denial notices to include this chart as an addendum. The DOL stated that the list will be periodically updated. Plans should check to ensure notices are up to date but are only required to update their notices for this information once per year.

  • Any notice of adverse benefit determination or final internal adverse benefit determination must include information sufficient to identify the claim involved, including the date of the service, the health care provider, and the claim amount (if applicable).

Denial Notices in for Non-English Speakers

This requirement is under an enforcement grace period until plan years beginning on or after January 1, 2012.

For plans with less than 100 participants, if 25% or more of participants are literate only in the same non-English language relevant appeals procedures notices must be made available in that language. For plans with 100 or more participants, if the lesser of 10% of participants or 500 participants or more are literate only in the same non-English language relevant appeals procedures notices must be made available in that language.

Strict Adherence

This requirement is under an enforcement grace period until plan years beginning on or after January 1, 2012.

If a plan or issuer fails to strictly adhere to all the requirements of the 2010 interim final regulations, the claimant is deemed to have exhausted the plan's or issuer's internal claims and appeals process, regardless of whether the plan or issuer asserts that it has substantially complied, and the claimant may initiate any available external review process or remedies available under ERISA or under State law.

Other Requirements Generally Inapplicable to Cafeteria or HRA Plans

Since claims to cafeteria and HRA plans are post-service claims seeking reimbursement, expedited and urgent appeal timelines will not apply. Denial codes and treatment codes are also typically not applicable to HRA and Cafeteria plans.

Conclusion

Arguably coverage denials and appeals are relatively uncommon in Cafeteria and HRA plans since the plans tend to have broad definitions of eligible expenses. However, even if a Cafeteria or HRA plan has never had an internal appeal of a coverage denial (or perhaps never had a coverage denial), the plan or the plan's TPA should be contracting with at least three IROs to meet the interim enforcement safe harbor. Internal claims denial notices also should be updated and formalized to comply with the requirements under PPACA.

For more information on many health care reform topics, see our "Health Care Reform Talk" blog at www.healthcare-legislation.blogspot.com.

If you have any questions please feel free to contact us at support@ftwilliam.com or call 800.596.0714.

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