Federal Healthcare Reform – internal claims and appeals requirements; external reviews for self-insured plans

As your business partner, HNE is committed to keeping you informed of changes to the healthcare industry, particularly those which could have an impact on your business.  

Background:

In this letter, we address the following changes that Federal Healthcare Reform requires:

• Modifications to the internal claims and appeals requirements for non-grandfathered group health plans – these changes do not apply to health plans that are grandfathered plans.
• New requirements for external reviews 

Timeline of rules and regulations:

The US Departments of Labor (DOL), Health and Human Services (HHS), and the Internal Revenue Service (IRS) (the Departments) issued regulations relating to internal Claims and Appeals and External Review Processes in several phases.

• On July 23, 2010, the Departments jointly released rules for all non-grandfathered plans effective on plan years beginning after September 23, 2010.
• On September 20, 2010, the DOL delayed enforcement for compliance with certain provisions of the rules until July 1, 2011.
• Finally, on March 18, 2011, the DOL extended the enforcement grace period for some provisions of the law until plan years beginning on or after January 1, 2012.

Exhibit A lists these new internal claims and appeals standards along with the applicable compliance dates.

Internal claims and appeals procedures:

Group health plans must establish an “effective” internal claims review process. To clarify, group health plans must comply with all of the requirements currently applicable to ERISA-covered group health plans. These requirements are described in the ERISA Claims Rules.  The new rules apply whether ERISA applies or not, for example, for church plans. HNE’s internal claims review process currently complies with existing ERISA Claims Rules.         

Requirements for internal claims and appeals processes:

1. Expansion of the definition of adverse benefit determination to include recissions: The definition of “adverse benefit determination” is broadened to include rescissions of coverage. A rescission is a cancellation or discontinuance of coverage that has a retroactive effect. Plans must not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. Recission does not include termination for non-payment of premiums. The DOL recently clarified when a plan may make retroactive cancellations in FAQ – Question 7 at http://www.dol.gov/ebsa/faqs/faq-aca2.html.

 

HNE has revised our policies as needed.

1.  Full and fair review: Plans must allow the claimant to review the claim file and present evidence and testimony. More specifically, the group health plan must:

• Provide the claimant, free of charge, with any evidence used by the group health plan in connection with the claim sufficiently in advance of the due date of the notice of final adverse benefit determination to give the claimant a reasonable opportunity to respond.

Although not clear, it would not appear that a plan must allow the claimant to present testimony in person; plans should be permitted to limit testimony to written testimony.

HNE’s existing policies comply with this requirement.

1. Avoidance of conflicts of interest: Generally, the group health plan must ensure that all claims and appeals are adjudicated in a manner designed to ensure the        independence or impartiality of the person involved in making the decision.

 

HNE’s existing policies comply with this requirement.

1.  Continued coverage: A group health plan must provide continued coverage pending the outcome of an internal appeal. This means that benefits for an ongoing course of treatment cannot be reduced or terminated without providing advanced notice and an opportunity for advanced review.

HNE’s existing policies comply with this requirement for inpatient stays. We will revise policies as needed for other services.  

Changes to Notice Requirements

Notices of adverse benefit determinations must satisfy the current requirements set forth in the ERISA Claim Rules. Starting July 1, 2011 they also must include:

• A description of the standard used in denying the claim (such as a medical necessity standard)
• In the case of a final internal adverse benefit determination, a discussion of the decision and a description of the internal and external appeals review processes
• The contact information for any office of health insurance consumer assistance.

New External review requirements Effective July 1, 2011

External review is a formal process for resolving disputes between health plans and consumers.

After the plan’s current appeals are exhausted, a Member may ask for review by an independent review organization (IRO). The decision of the IRO is binding on the Plan. A Member is able to appeal an unfavorable IRO decision.

How do I know if our plan follows the state or federal external review process?

HNE’s fully insured plans and self-insured plans not subject to ERISA[1] will continue to comply with the Massachusetts external review process. The Massachusetts external review process currently differs from the federal requirements. The Massachusetts Office of Patient Protection (OPP) will continue to administer its external review process until either state legislative changes bring it in line with the new federal requirements or the federal government exempts the Massachusetts process from or deems it compliant with the federal requirements. If the federal government finds the Massachusetts external appeals process to be non-compliant with the federal regulations, such process would cease to operate beyond July of 2011.  If this should occur, HNE will modify its external review process to be compliant with the new federal external review process.

The Department of Health and Human Services will be working with state insurance regulators during the transition period to help bring nonconforming state external review processes in line with the federal requirements.

HNE will help our ERISA self-insured plans comply with the external review process:

Self-insured plans that are subject to ERISA must comply with the transitional federal external review process until the federal government establishes a uniform external review procedure. Generally, a self-insured plan must contract with three IROs and meet the procedural requirements described in the flow chart in Exhibit B. The Departments clarified that a Plan Sponsor that contracts with an Administrator that contract with an IRO will be considered to have a direct contract with the IRO. The Plan Sponsor will still have the obligation to monitor the performance of the IRO. To comply with the federal external review standards, a plan or a plan’s administrator must contract with at least three IROs so the claims can be rotated among the 3 IROs.

 HNE has contracted with the three URAC accredited IROs’ listed below to perform federal external reviews for your plan:

1. MES Peer Review Services;
2. Maximus Federal Services, Inc., and
3. MCMC, LLC.

Plans are responsible for the cost of the reviews. I am available to discuss in detail IRO fees and also discuss any additional fees for the cost of processing external reviews on behalf of your plan.

For copies of the IFR and DOL Technical Releases for changes to internal appeals rules and external review decisions, go to the following links:

• Regulation and model notices: http://www.dol.gov/ebsa/healthreform
• Technical Release No. 2010-01:  http://www.dol.gov/ebsa/pdf/ACATechnicalRelease2010-01.pdf
• Technical Release No. 2010-02:  http://www.dol.gov/ebsa/newsroom/tr10-02.html
• Technical Release No. 2011-01:  http://www.dol.gov/ebsa/newsroom/tr11-01.html

HNE will keep you informed as additional information becomes available regarding the federal healthcare reform law. The full implications of which may not be known until the final implementing regulations and additional guidance are issued. If you have any questions about these new laws, please contact HNE Sales at 413-233-3535. Thank you.

Sincerely,

Brian Kivel

HNE Sales Manager

Exhibit A – Chart of Standards and Grace Periods for Internal Claims and Appeals

The following chart lists these new internal claims and appeals standards as well as the dates compliance is required.

Standard Number	Standard	Grace Period Ends/Compliance Required by	HNE Plan Compliance
1.	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).	Plan Years beginning on or after September 23, 2010	All HNE Plans comply with this requirement.
2.	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.	Plan Years beginning on or after January 1, 2012	HNE will revise our policies as needed.
3.	Full and fair review: Plans are required to provide the claimant (free of charge) with evidence used by the plan 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.	Plan Years beginning on or after September 23, 2010	All HNE Plans comply with this requirement.
4.	Conflicts of interest: Decisions regarding employment of 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.	Plan Years beginning on or after September 23, 2010	All HNE Plans comply with this requirement.
5.	Notices must be provided in a culturally and linguistically appropriate manner	Plan Years beginning on or after January 1, 2012	All HNE Plans comply with this requirement.
6.	Notice Form and Content
6.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 meaning, and the treatment code and its meaning.	Plan Years beginning on or after January 1, 2012	HNE will revise our notices as needed.
6.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.	Plan Years beginning on or after July 1, 2011	HNE will revise our notices as needed.
6.c.	The plan must provide a description of internal appeals and external review processes, including information regarding how to initiate an appeal.	Plan Years beginning on or after July 1, 2011	HNE will revise our notices as needed.
6.d.	The plan must disclose contact information for an applicable office of health insurance consumer assistance or ombudsman established under PHS Act section 2793.	Plan Years beginning on or after July 1, 2011	HNE will revise our notices as needed.
7.	If a plan fails to strictly adhere to all the requirements of the 2010 interim final regulations, the claimant is deemed to have exhausted the plan’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.	Plan Years beginning on or after January 1, 2012	HNE will revise our policies as needed.

 

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[1] Self-insured plans that are not subject to ERISA, such as church plans and non-federal governmental plans, may be subject to state external review processes, because ERISA preemption provisions do not apply to such plans. HNE’s processes for self-insured plans not subject to ERISA are the same as for our fully-insured line of business.