The New Consumer Appeals Process (continued)

B. EXTERNAL APPEALS

Pursuant to the interim final regulations, all non-grandfathered health plans must offer the opportunity for an external review by an independent entity that is binding on a plan or issuer. This requirement will be new for many plans, including self-insured plans that are subject to ERISA rather than state laws.

A plan’s or health insurance issuer’s external review process must satisfy state or federal standards, whichever applies. The interim final regulations provide rules for determining which process applies, as well as guidance regarding each process.²² In general, if a plan is insured, state external review requirements apply if they satisfy certain minimum standards outlined in the interim final regulations. Meanwhile, if a plan is self-funded, federal external review standards generally apply. However, these standards have yet to be issued.

1. State External Review Process

State external review procedures generally apply to non-grandfathered insured plans.²³ Following the interim final regulations, these plans must continue to comply with applicable state insurance law external review procedures if those procedures satisfy the minimum standards for a state external review process specified in the interim final regulations.

The minimum standards in the interim final regulations consist of 16 requirements from the National Association of Insurance Commissioners (NAIC) Uniform Model Act.²⁴ However, by basing the minimum requirements on the NAIC Uniform Model Act, the scope of adverse benefit determinations eligible for state external review is narrower than those eligible for the internal claims and appeals process and federal external review. Pursuant to the NAIC Uniform Model Act requirement adopted by the interim final regulations, a state standard must provide for the external review of adverse benefit determinations only with regard to “medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.”²⁵ This standard excludes external review of rescissions of coverage and other adverse benefit determinations which are clearly treated as an adverse benefit determination for purposes of internal claims and appeals and the federal external review process.

Moreover, the final regulations fail to expressly include important protections found in the NAIC Uniform Model Act such as a consumer’s right to be represented by a third party, including counsel, whom the consumer has designated in writing. In addition, the interim final regulations should explicitly state that the standard of review is de novo for external reviews of adverse benefit determination. The Department of Labor mentioned this standard of external review in sub-regulatory guidance and it is only applicable to the federal review process. A de novo standard of external review allows an objective review of the facts surrounding an adverse benefit determination

Nevertheless, if the state law is deemed sufficient, the plan may continue to operate under those rules. If the state law is not sufficient, the plan will be subject to new federal external review procedures to be established by HHS and DOL.

a. Transition Period

An enforcement grace period was granted to give States an opportunity to amend their laws to meet the NAIC external review standards.²⁶ Specifically, in States with external review laws in effect on March 23, 2010, for plan or policy years beginning prior to July 1, 2011, a health insurance issuer is deemed, to comply with the new consumer appeals requirements if it follows that State’s external review process during this transition period. In States that have passed external review laws between March 23, 2010 and September 23, 2010, under this guidance, the process provided for under those laws will apply in that State.^{27 28} After the July 1, 2011 transition date, a state’s review procedures must be specifically approved by the Department of Health and Human Services (DHHS) or the federal review procedures will apply.

In States that have not passed an external review law that is in effect on September 23, 2010, a health insurance issuer must follow an interim external review process administered by the Office of Personnel Management (OPM). The interim process divides external reviews into two (2) categories: standard and expedited reviews. A consumer must request a standard external review in writing within four (4) months after receipt of a notice of an adverse benefit determination or final internal adverse benefit determination.²⁹ The consumer may send the request electronically, by facsimile, or by mail.

Review will be conducted by an independent third party with clinical and legal expertise and with no financial or personal conflicts with the health insurance issuer. The examiner will review all of the information and documents timely received. In reaching a decision, the examiner will review the claim de novo and not be bound by any decisions or conclusions reached during the health insurance issuer’s internal claims and appeals process.

Prior to reaching a decision, the examiner will forward any information submitted by the consumer to the health insurance issuer for reconsideration. After completing its reconsideration, the health insurance issuer may reverse its adverse benefit determination or final internal adverse benefit determination. Within one (1) business day after making a decision to reverse, the health insurance issuer must provide written notice of its decision to the consumer and the examiner. The examiner must terminate the external review upon receipt of the notice from the health insurance issuer.

If the health insurance issuer does not reverse its benefit determination, the examiner must review the claim and provide written notice of the final external review decision as expeditiously as possible and within 45 days after it receives the request for the external review. Upon receipt of a notice of a final external review decision reversing the adverse benefit determination or final internal adverse benefit determination, the health insurance issuer immediately must provide coverage or payment (including immediately authorizing or immediately paying benefits) for the claim. The determination is binding except to the extent other remedies may be available under State or Federal law to either the health insurance issuer or to the consumer. Judicial review may be available to the consumer.

A consumer may request an expedited appeal if the claim involves a medical condition for which the timeframe for completing an internal or external appeal would seriously jeopardize the life or health of the consumer, or his/her ability to regain maximum function; or concerns an admission, availability of care, continued stay, or health care item or service relating to emergency care in which the individual has not been discharged from the facility.

The process for an expedited external review mirrors the process for a standard external review except that the examiner must immediately determine if a request is eligible for external review and the examiner must provide notice of the final external review decision as expeditiously as the medical circumstances require and within 72 hours or less (depending on the medical circumstances of the case) once the examiner receives the request for the external review. The examiner must deliver the notice of final external review decision to the claimant and the health insurance issuer. This notice can be initially provided orally but must be followed up in writing within 48 hours.

The process set forth in the OCIIO guidance reflects the intent of the NAIC Uniform Model Act by ensuring the independence of the external review process. However, this interim process does not include many of the requirements set forth in the NAIC Uniform Model Act, including random assignment to independent review organizations. However, it achieves the goal of this provision by ensuring no financial relationship between the issuer and the body making the final external review decision.

2. Federal External Review Process

If the applicable state external review process requirements do not meet the minimum standards specified in the regulations, or if the plan is self-funded, then federal external review standards apply. External review is available for adverse determinations, including denials of claims and adverse coverage determinations and rescissions based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit, as well as those involving whether treatment is experimental or investigational. However, external review is not available for participants and beneficiaries in group health plans to resolve disputes about eligibility to participate in an employer-sponsored group health plan other than those disputes that are related to rescissions.³⁰ Thus, plans subject to the federal external review process will retain authority for making eligibility determinations.

The Federal external review procedures and requirements have yet to be issued. The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a technical release, EBSA Technical Release 2010-01, which provides interim Federal external review procedures for self-funded group health plans not subject to a State external review process and establishes an enforcement safe harbor for compliance with the Federal external review requirements during a transition period.

Under EBSA Technical Release 2010-02, for plan years beginning on or after September 23, 2010, a self-funded plan will be treated as satisfying the external review compliance safe harbor during the transition period and no enforcement action will be taken if it either complies with the requirements in Technical Release 2010-01 or it voluntarily complies with a state external review process in any state in which it operates, provided that the state makes its external review process available to plans that are not subject to State law such as self-funded plans.³¹ For self-insured non-federal governmental health plans in territories and states without external review processes (Alabama, Mississippi, and Nebraska) in effect on or before September 23, 2010, these plans must either contract with Independent Review Organizations as set forth in Technical Release 2010-01 or use the interim federal external review process for health insurance issuers in states without external review laws as established in the technical guidance available detailed above.

Prior to July 1, 2011, HHS and the Departments of Labor and Treasury will issue guidance on the standards for the Federal external review process that will replace the interim process.

The interim Federal external review procedures divides external reviews into two (2) categories: standard and expedited reviews. A consumer must request a standard external review in writing within four (4) months after receipt of a notice of an adverse benefit determination or final internal adverse benefit determination.³²

Within five (5) business days of receipt of the external review request, the plan must complete a preliminary review of the request to determine whether: (1) the claimant was covered under the plan at the time the service was requested or provided; (2) the adverse determination does not relate to the failure to meet the eligibility requirements; (3) the claimant exhausted the plan’s internal appeal process (unless it was not required); and (4) the claimant has provided all information and forms required to process an external review.

Within one (1) business day after completing the preliminary review, the plan must provide the claimant with written notice whether the request is eligible for external review. If the request is complete but not eligible for external review, the notice must include the reasons for why the request is ineligible. If the request is incomplete, the notice must describe the information necessary to make the request complete and the plan must allow a claimant to perfect the request within the four-month filing period or within 48 hours following the receipt of the notice, whichever is later.

If the request is eligible for external review, the plan must assign an independent review organization (IRO) that is accredited by URAC or by a similar nationally-recognized accrediting organization to conduct the external review. To ensure unbiased and independent decisions, plans must contract with at least three IROs for assignments under the plans and either rotate claims assignments among them or use other independent, unbiased methods for selection, such as random selection. In addition, the IRO may not be eligible for any financial incentives based on the likelihood that the IRO will support the denial of benefits. However, there still may be an inherent conflict of interest as the plan contracts with the IRO and pays the expenses associated with a review. Instead, these regulations should require that plans pay a government entity, which in turn pays the IRO expenses.

The assigned IRO will timely notify the claimant in writing of the request’s eligibility and acceptance for external review. This notice will include a statement that the claimant may submit in writing to the assigned IRO within ten (10) business days following receipt of the notice additional information that the IRO must consider when conducting the external review. The IRO is not required to, but may, accept and consider additional information submitted after ten (10) business days. This two-step process may create confusion. Consumers must be cognizant of this short deadline in advance if they need to collect medical records or do additional research.

Prior to reaching a decision, the IRO will forward any information submitted by the consumer to the health insurance issuer for reconsideration. After completing its reconsideration, the health insurance issuer may reverse its adverse benefit determination or final internal adverse benefit determination. Within one (1) business day after making a decision to reverse, the health insurance issuer must provide written notice of its decision to the consumer and the IRO. The IRO must terminate the external review upon receipt of the notice from the health insurance issuer.

If the health in surance issuer does not reverse its benefit determination, the IRO must review the claim and provide written notice of the final external review decision as expeditiously as possible and within 45 days after it receives the request for the external review. In reaching a decision, the assigned IRO will review the claim de novo and not be bound by any decisions or conclusions reached during the plan’s internal claims and appeals process. The assigned IRO must provide written notice of the final external review decision within 45 days after receiving the request for the external review. Upon receipt of a notice of a final external review decision reversing the adverse benefit determination or final internal adverse benefit determination, the health insurance issuer immediately must provide coverage or payment (including immediately authorizing or immediately paying benefits) for the claim. As a result, the plan must pay the claim before appealing the decision in court. The determination is binding except to the extent other remedies may be available under State or Federal law to either the health insurance issuer or to the consumer. Judicial review may be available to the consumer.

A consumer may request an expedited appeal if the claim involves a medical condition for which the timeframe for completing an internal or external appeal would seriously jeopardize the life or health of the consumer, or his/her ability to regain maximum function; or concerns an admission, availability of care, continued stay, or health care item or service relating to emergency care in which the individual has not been discharged from the facility.

The process for an expedited external review mirrors the process for a standard external review except that immediately upon receipt of the request, the plan must make a preliminary review determination of whether the request meets the standard external review criteria, and then immediately notify the claimant as to eligibility for an expedited review. Upon a determination that a request is eligible for an expedited external review, the plan will refer the matter to a contracted IRO for standard review. The plan must provide or transmit all necessary documents and information considered in making the adverse or final internal adverse benefit determination to the IRO electronically, by phone, by fax, or other expeditious method. The IRO must provide notice of the final external review decision as expeditiously as the claimant’s medical condition or circumstances require, but in no event, more than 72 hours following receipt of an expedited external review request. If the IRO does not provide the notice in writing, it must follow-up with a written confirmation of its decision within 48 hours.

The procedures are based on the NAIC Model Act. However, not all of the consumer protections of the NAIC Model Act were included. For example, the Federal external review procedures do not include the special provisions for claims relating to experimental or investigational treatment and do not include a government agency certifying and assigning independent review organizations (“IROs”).

IV. SUMMARY

Although the new consumer appeals process contains many of the components and features of the Department of Labor’s (DOL’s) claims procedure regulation and the National Association of Insurance Commissioners (NAIC) Uniform Model Act, there are numerous changes that impact the consumer, including requirements that provide enhanced consumer protections as well as the absence of certain requirements that provide important protections.

Nevertheless, the new consumer appeals regulations replace the existing patchwork of protections that apply to only some plans in some States with a simpler and more uniform internal and external review process. The final interim regulations establish enhanced protections to prevent inappropriate denials and excessive delays when consumers challenge adverse decisions made by their health plan. Legal counsel representing consumers and health care providers in the consumer appeals process should be fully aware of the new requirements and limitations in the process.

²² The applicable external review process for any particular claim is based on the external review process applicable to the plan or issuer at the time a final internal adverse benefit determination (or, in the case of simultaneous internal appeals and external review, the adverse benefit determination) is provided. For this purpose, the final internal adverse benefit determination includes a deemed final internal adverse benefit determination in which the internal claims and appeals process is exhausted because of the failure by the plan or issuer to comply with the requirements of the internal claims and appeals process. Thus, for an issuer with a calendar year plan year in a State in which the State external review process fails to meet the minimum standards, external review of final internal adverse benefit determinations provided prior to the first day of the first calendar year on or after July 1, 2011 (that is, January 1, 2012) must comply with the State external review process, while external reviews of final internal adverse benefit determinations provided on or after January 1, 2012 must meet the alternative Federal external review requirements.

²³ certain self-funded plans (i.e., nonfederal governmental plans and church plans not covered by ERISA preemption), and multiple employer welfare plan arrangements.

²⁴ 45 CFR §147.136

²⁵ 45 CFR 147.136(c)(2)(i).

²⁶ On September 1, 2010, the Department of Health and Human Service issued “Technical Guidance for Interim Procedures for Federal External Review Relating to Internal Claims and Appeals and External Review for Health Insurance Issuers in the Group and Individual Markets under the Patient Protection and Affordable Care Act.”

²⁷ See Guidance on the Interim Federal External Appeals Process for Insurers (Sept. 8, 2010), discussed below.

²⁸ Under PHS Act section 2719(c), the Departments are provided with discretion to consider an external review process in place on the date of enactment of the Affordable Care Act to be in compliance with the external review requirement under section 2719(b) ‘‘as determined appropriate.”

²⁹ If there is no corresponding date four months after the date of receipt of such a notice, then the request must be filed by the first day of the fifth month following the receipt of the notice. For example, if the date of receipt of the notice is October 30, because there is no February 30, the request must be filed by March 1. If the last filing date would fall on a Saturday, Sunday, or Federal holiday, the last filing date is extended to the next day that is not a Saturday, Sunday, or Federal holiday.

³⁰ 45 CFR 147.136(d)(1).

³¹ Even though these procedures are based on the NAIC Model Act, they do not include all the consumer protections of the NAIC Model Act. For example, the procedures set forth in this notice do not include tspecial provisions for claims rela ting to experimental or investigational treatment and do not include a government agency certifying and assigning independent review organizations. The NAIC Model Act is available at http:///www. Dol.gov/ebsa. Future guidance will addresss the minimum consumer protections required under the Federal external review process after the interim enforcement safe harbor period.

³² If there is no corresponding date four months after the date of receipt of such a notice, then the request must be filed by the first day of the fifth month following the receipt of the notice. For example, if the date of receipt of the notice is October 30, because there is no February 30, the request must be filed by March 1. If the last filing date would fall on a Saturday, Sunday, or Federal holiday, the last filing date is extended to the next day that is not a Saturday, Sunday, or Federal holiday.