Section 2719 of the Public Health Services Act sets forth standards for plans and issuers that are not grandfathered health plans regarding internal claims and appeals and external review. These rules are aimed at bolstering ERISA’s “due process” requirements by amplifying the old claims regulation released back in 2000, namely, 29 CFR 2560.503-1.
The various departments engaged in publishing regulations under the new statute (DOL, IRS, HHS) published interim final regulations implementing PHS Act section 2719 on July 23, 2010, at 75 FR 43330 (the 2010 interim final regulations). The finished product bears the mark of a hurried assembly of rules with little comprehension of how claims adjudication actually works.
Thus, on September 20, 2010, the regulators retreated, with the Department of Labor issued Technical Release 2010-02 (T.R. 2010-02), which set forth an enforcement grace period for compliance with certain new provisions with respect to internal claims and appeals until July 1, 2011.
Based on comments, the regulators have retreated once again. Now, Technical Release 2011-01 extends, with a few modifications, the enforcement grace period set forth in T.R. 2010-02 until plan years beginning on or after January 1, 2012 “to give the Departments time to publish new regulations necessary or appropriate to implement the internal claims and appeals provisions of PHS Act section 2719(a).”
I recently analyzed these rules applicable to claims appeals and external review as a part of an upcoming law review article on the subject. The regulations attempt to alter not only claims appeals, but also to affect the judicial standard of review in a number of respects. In other words, the implementation of these rules bears careful observation by plan fiduciaries.
Summary of New Standards
The new technical release summarizes important points in the 2010 interim final regulations which I list below with headings I supplied for ease of reference:
# 1 [Recissions]The scope of adverse benefit determinations eligible for internal claims and appeals includes a rescission of coverage (whether or not the rescission has an adverse effect on any particular benefit at the time).
# 2 [Notifications – Timeframes] Notwithstanding the rule in the 2000 DOL claims procedure regulation that provides for notification in the case of urgent care claims not later than 72 hours after the receipt of the claim, 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 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 issuer.
# 3 [New Evidence/Rationales] Clarifications with respect to full and fair review, such that plans and issuers are clearly required to provide the claimant (free of charge) with new or additional evidence considered, relied upon, or generated by the plan or issuer in connection with the claim, as well as any new or additional rationale for a denial at the internal appeals stage, and a reasonable opportunity for the claimant to respond to such new evidence or rationale.
#4 [Impartiality/Independence] Clarifications regarding conflicts of interest, such that decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to an individual, such as a claims adjudicator or medical expert, must not be based upon the likelihood that the individual will support the denial of benefits.
#5 [Notifications – Medium] Notices must be provided in a culturally and linguistically appropriate manner, as required by the statute, and as set forth in paragraph (e) of the 2010 interim final regulations.
#6 [Notifications – Technical Elements] Notices to claimants must provide additional content. Specifically:
a. 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, the claim amount (if applicable), the diagnosis code and its corresponding meaning, and the treatment code and its corresponding meaning.
b. The plan or issuer must ensure that the reason or reasons for an adverse benefit determination or final internal adverse benefit determination includes the denial code and its corresponding meaning, as well as a description of the plan’s or issuer’s standard, if any, that was used in denying the claim. In the case of a final internal adverse benefit determination, this description must also include a discussion of the decision.
c. The plan or issuer must provide a description of available internal appeals and external review processes, including information regarding how to initiate an appeal.
d. 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.
# 7 [Strict Adherence] 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.
Key Points In Technical Release 2011-01
The reprieve provided in this latest technical release are summarized in the conclusion (quoted below, sans footnotes and with some added bolding and paragraph breaks for ease of reference) – the entire technical release can be viewed on the DOL website:
This technical release extends, with a few modifications, the enforcement grace period set forth in T.R. 2010-02 until plan years beginning on or after January 1, 2012 to give the Departments time to publish new regulations necessary or appropriate to implement the internal claims and appeals provisions of PHS Act section 2719(a).
Specifically, this Technical Release 2011-01 extends the enforcement grace period until plan years beginning on or after January 1, 2012 with respect to standard #2 above (regarding the timeframe for making urgent care claims decisions), standard #5 above (regarding providing notices in a culturally and linguistically appropriate manner), and standard #7 above (regarding substantial compliance).
During the grace period, the Department of Labor and the IRS will not take any enforcement action against a group health plan, and HHS will not take any enforcement action against a self-funded nonfederal governmental health plan, with respect to these provisions.
Similarly, HHS is encouraging States to provide similar grace periods with respect to issuers, and HHS will not cite a State for failing to substantially enforce PHS Act section 2719(a) in these situations.
Moreover, whereas T.R. 2010-02 required plans to be working in good faith to implement such standards for the enforcement grace period to apply, under this Technical Release 2011-01, no such requirement will apply for either the extended or the original enforcement grace period.
With respect to standard #6 above (requiring broader content and specificity in notices), the Departments are extending the enforcement grace period in part only. Specifically, with respect to the requirement to disclose diagnosis codes and treatment codes (and their corresponding meanings), this Technical Release 2011-01 extends the enforcement grace period until plan years beginning on or after January 1, 2012. Accordingly, during this period, the Department of Labor and the IRS will apply the same enforcement policy applicable to standards #2, 5, and 7 (described in the paragraph immediately above) with respect to automatic disclosure of diagnosis and treatment information pursuant to standard #6.
The enforcement grace period will be extended with respect to the other disclosure requirements of standard #6 from July 1, 2011 until the first day of the first plan year beginning on or after July 1, 2011 (which is January 1, 2012 for calendar year plans). Therefore, enforcement with respect to the following provisions will take effect on a rolling plan year basis, starting on the first day of the first plan year beginning on or after July 1, 2011:
(a) the disclosure of information sufficient to identify a claim (other than the diagnosis and treatment information),
(b) the reasons for an adverse benefit determination,
(c) the description of available internal appeals and external review processes, and
(d) for plans and issuers in States in which an office of health consumer assistance program or ombudsman is operational, the disclosure of the availability of, and contact information for, such program.
To assist plans and issuers in making these disclosures, the Departments have taken several steps:
The current list of relevant consumer assistance programs and ombudsmen is provided in the Appendix to this Technical Release 2011-01. Plans and issuers with July 1 plan years may rely upon the list in this Appendix when developing their notices of adverse benefit determination and final internal adverse benefit determination for plan years beginning on July 1, 2011.
The Departments will continue to review and update this list, and will provide any updated information on their websites (www.dol.gov/ebsa/healthreform and http://cciio.cms.gov/programs/consumer/capgrants/index.html).
For plan years beginning after July 1, 2011, plans and issuers should check these websites within a reasonable time before the beginning of the plan year to ensure that the notices contain information that is as up-to-date as practicable. In any case, plans and issuers are not required to update the information more than once per year.
Regarding the description of external review processes for self-insured plans, the Department of Labor issued Technical Release 2010-01 on August 23, 2010, and has frequently-asked-question guidance available at www.dol.gov/ebsa/healthreform, to assist self-insured plans in understanding their responsibilities with respect to implementing external review processes.
The Departments have issued model notices (also available at www.dol.gov/ebsa/healthreform) that provide a template for the disclosures that should be made regarding external review (e.g., contact information and timeframes for initiating external review). As indicated in the preamble to the 2010 interim final regulations, plans and issuers that complete and use the model notices authorized by the Departments are considered to meet the relevant content requirements.
With respect to insured coverage, the 2010 interim final regulations set forth standards for the required external review process, and indicated that HHS will make a determination as to whether the State external review process satisfies applicable requirements. HHS will provide guidance as to when external review will be performed in a Federally-operated external review process, instead of by a State process. Accordingly, insured plans and health insurance issuers should review the Departments’ model notices and provide information (e.g., contact information and timeframes for initiating an external review) consistent with the State external review process to the extent that process now applies, unless HHS determines that the Federally-operated external review process applies.
For the States in which the Federally-operated external review process applies, HHS has issued technical guidance describing the interim process applicable to insured coverage, which is helpful in completing the model disclosures (including contact information and timeframes for initiating an external review). In the guidance HHS intends to issue on the applicability of the Federally-operated external review process to insured coverage in additional States and territories, HHS will provide insured plans and issuers with reasonable time to make any changes that are prompted by the new guidance.