PPACA: Internal Claims and Appeals and External Review Part I

As we continue to unpack the various provisions of the Patient Protection Affordable Care Act (PPACA), this particular post will focus on the new regulations regarding the processes for internal claims and appeals, as well as external review processes, for group health plans and group health insurance insurers. The Internal Revenue Service (IRS), Department of Labor (DOL) and the Department of Health and Human Services (HHS) published the interim final regulations implementing new Sec. 2719 of the Public Health Service Act (PHS Act), as added by Sec. 1001 of the PPACA regarding internal claim and appeal processes and external review processes on July 23, 2010. These regulations became effective on September 21, 2010 and apply to the group health plans for plan years beginning on or after September 23, 2010. The regulations do not apply to grandfathered health plans. Under these new regulations, a group health plan sponsor is required to implement an effective internal claim and appeal process for beneficiaries to challenge adverse benefit decisions, a denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit. In addition to incorporating the internal claims and appeals procedures set forth in 29 CFR 2560.503-1, a group health plan must comply with the following six new standards:

1. A rescission of coverage is now treated as an adverse benefit determination for purposes of applying to the internal appeals requirements.
2. A plan or issuer must now 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 medical exigencies, but not later than 24 hours after the receipt of the claim.
3. Additional criteria are required to ensure that claimant receives full and fair review. Plans or insurers must provide, free of charge, any new or additional evidence considered, relied upon or generated by the plan or insurer in connection with the claim. In addition, the plan or insurer must make the claimant aware of any new or additional rationale before the rationale can be used to issue a final internal adverse benefit determination so as to allow the claimant notice of the new rationale and a reasonable opportunity to respond to the new evidence or reasoning.
4. Plans and insurers must take steps to avoid conflicts of interest in the appeals process and ensure independence and impartiality of the individuals making claims decisions. For example, decisions involving hiring, compensation and other similar matters must be made without regard to the likelihood that an individual would support benefit denials.
5. Notice to claimants must be provided in a culturally and linguistically appropriate manner and the notice must sufficiently identify the claim involved.
6. If a plan or insurer fails to strictly adhere to all the regulatory requirements applicable to a claim, a claimant will be deemed to have exhausted the internal claims and appeals process. If that occurs, a claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review.

In addition to these six new requirements, a plan or issuer must provide continued coverage pending the outcome of an internal appeal. Stay tuned for our next post which will discuss the external review process. –Katie G. Davenport