Health Care Appeals and Review Regulations Issued

The IRS and the Departments of Labor (DOL) and Health and Human Services issued interim final regulations and proposed regulations governing how individuals can appeal medical coverage or claims denials by their health insurer (T.D. 9494; REG-125592-10). The regulations implement the requirements regarding internal claims and appeals and external review processes for group health plans and health insurance coverage in the group and individual markets under the Patient Protection and Affordable Care Act, P.L. 111-148. The preamble to the regulations says they will generally affect health insurance issuers; group health plans; and participants, beneficiaries, and enrollees in health insurance coverage and in group health plans.

The interim final regulations set forth rules implementing Public Health Service Act Section 2719 for internal claims and appeals and external review processes for group health plans and health insurance coverage. These requirements do not apply to grandfathered health plans under the Patient Protection and Affordable Care Act.

The interim final regulations set forth rules related to the form and manner of providing notices in connection with internal claims and appeals and external review processes.

The interim final regulations also set forth six new requirements:

1. For purposes of the interim final regulations, the definition of an adverse benefit determination is broader than the definition in the DOL claims procedure regulations. Under the interim final regulations, an adverse benefit determination for purposes of the interim final regulations also includes a rescission of coverage.

2. The interim final regulations provide that a plan or issuer must notify a claimant of a benefit determination (whether adverse or not) with respect to a claim involving urgent care (as defined in the DOL claims procedure regulations) as soon as possible, taking into account the medical exigencies, but not later than 24 hours after the receipt of the claim by the plan or health insurance coverage, unless the claimant fails to provide sufficient information to determine whether, or to what extent, benefits are covered or payable under the plan or health insurance coverage.

3. The interim final regulations provide additional criteria to ensure that a claimant receives a full and fair review.

4. The interim final regulations provide new criteria with respect to avoiding conflicts of interest.

5. The interim final regulations provide new standards regarding notice to enrollees.

6. The interim final regulations provide that, in the case of a plan or issuer that fails to strictly adhere to all the requirements of the internal claims and appeals process with respect to a claim, the claimant is deemed to have exhausted the internal claims and appeals process, regardless of whether the plan or issuer asserts that it substantially complied with these requirements or that any error it committed was de minimis. Accordingly, upon such a failure, the claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review.

In addition to the six new requirements, the health care legislation and the interim final regulations require a plan and issuer to provide continued coverage pending the outcome of an internal appeal.

The interim final regulations expand the scope of the group health coverage internal claims and appeals process to cover initial eligibility determinations for individual health insurance coverage.

Although the DOL claims procedure regulation permits plans to have a second level of internal appeals, the interim final regulations require that health insurance issuers offering individual health insurance coverage have only one level of internal appeals. The interim final regulations also require health insurance issuers offering individual health insurance coverage to maintain records of all claims and notices associated with their internal claims and appeals processes.

The health care legislation and the interim final regulations provide that plans and issuers must comply with either a state external review process or the federal external review process. The interim final regulations provide a basis for determining when plans and issuers must comply with an applicable state external review process and when they must comply with the federal external review process.

The interim final regulations set forth the scope of claims eligible for review under the federal external review process.

The health care legislation and the interim final regulations require that notices of available internal claims and appeals and external review processes be provided in a culturally and linguistically appropriate manner. Under the interim final regulations, the requirement to provide notices in a non-English language is based on thresholds of the number of people who are literate in the same non-English language. In the group market, the threshold differs depending on the number of participants in the plan. For a plan that covers fewer than 100 participants at the beginning of a plan year, the threshold is 25% of all plan participants being literate only in the same non-English language. For a plan that covers 100 or more participants at the beginning of a plan year, the threshold is the lesser of 500 participants or 10% of all plan participants being literate only in the same non-English language. If an applicable threshold is met, notice must be provided upon request in the non-English language with respect to which the threshold is met.

The interim final regulations are effective September 21, 2010.