The new group health plan external review requirements require analysis on several levels.
Some of the more obvious issues involve whether the external review requirements apply, and if so, whether state or federal external review requirements will apply. As the note below suggests, these issues are just the beginning of the analysis.
Unless grandfathered, a group health plan must comply with either a federal or a state external review process. Thus, the first level of inquiry might be something like this:
#1 Is the plan a grandfathered plan? If so, the rules don’t apply.
#2 Does a state law external review process apply to the plan?
Point #2 involves consideration of several factors. As a general matter, plans that provide coverage through health insurance are typically subject to state external review laws (due to ERISA’s savings clause – see Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002)).
On the other hand, the state external review process must be equivalent to the minimum requirements imposed by the interim procedures for external review . . . so if the state law does not comport with the minimum standards set forth in the interim regulations, then the federal external review procedures apply.
#3 Is the plan a governmental plan, a church plan or a multiple employer welfare arrangement (”MEWA”)? If so, a state external review process may apply.
Point # 3 will require careful consideration – first, to ascertain the plan’s status under ERISA, second, to determine if state external review processes could apply, and third, even if they might otherwise apply, whether the state external review process meets the minimum standards.
A plan or issuer is subject to the Federal external review process where the State external review process does not meet, at a minimum, the consumer protections in the NAIC Uniform Model Act, as well as where there is no applicable State external review process.
Note: The requirement of external review poses a major change in plan administration for self funded ERISA plans. Moreover, several important additional issues remain to be sorted out.
For example, under the interim guidance, the standards will:
provide that an external review decision is binding on the plan or issuer, as well as the claimant, except to the extent other remedies are available under State or Federal law.
If an external review affirms the benefit denial, the regulations appear to contemplate that the decision can be challenged in a claim for benefits under ERISA (Section 1132(a)(1)(B)). What, however, are the plan’s options if the external review is in favor of the participant?
The quoted language above suggests that the external review decision must be binding – but then further adds the proviso regarding remedies under federal law. The form of the plan challenge to the external review decision is not clear from the regulations.
Further, assuming that the employer challenges the decision in federal court, does the independence of the external review become a factor to be reviewed under the analysis in MetLife v. Glenn? Does it serve, for example, to mitigate a conflict of interest whether the plan fiduciary both adjudicate claims and pays benefits?
Similar issues have arisen in the context of state external review statutes requiring “binding” external review. These administrative regimes raise substantial questions of due process and separation of powers.
I anticipate supplementing this line of inquiry with research acquired during work on an upcoming law review article. In the meantime, the interim rules remain the only official source of guidance and careful regard should be given to the effective dates and the technical releases concerning implementation.