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Guest Article

Deloitte logo

(From the August 2, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

New Internal and External Claims Procedures for Group Health Plans


Effective for plan years beginning on and after September 23, 2010, non-grandfathered group health plans and group health issuers will be providing enhanced internal claims review procedures, and claimants with adverse internal decisions will be entitled to an external review by an independent review organization under either a State or Federal process.

On July 23, 2010, the Departments of Labor, Treasury, and Health and Human Services issued interim final regulations to implement the new procedures required under the Patient Protection and Affordable Care Act. Although the new requirements are generally effective for plan years beginning on and after September 23, 2010, some transition is provided for the establishment of state external review processes. The Departments request comments on the new rules by September 21, 2010.

Internal Review Process: ERISA Claims Procedures Amplified

The new standard amplifies upon the existing ERISA claims procedures under Labor Regulation § 2560.503-1. Plans are required to comply with the current ERISA procedures, modified with regard to:

  • Adverse Benefit Determinations. A rescission of coverage is now included as an adverse benefit determination.
  • Expedited Notice for Urgent Care. In the case of urgent care claims, a notice of benefit determination must be made within 24 instead of 72 hours.
  • Full and Fair Review. Where new or additional evidence is considered - or a new or additional rationale is the basis for a decision - it must be provided to the claimant as soon as possible, free of charge, and sufficiently in advance of the final internal adverse benefit determination to give the claimant an opportunity to respond.
  • Notice. New requirements are imposed on notices of adverse benefit determinations, including the required inclusion of the denial code and its meaning (if applicable), a discussion of the decision, and the contact information for any health insurance consumer assistance ombudsman established under the Public Health Services Act to assist individuals with the claims review process. The notice must also be given in a "culturally and linguistically appropriate" manner as defined in the regulation. For plans covering at least 100 participants, this means that the notices must be provided on request in a non-English language in which 10 percent - or, if less, 500 - of the participants are literate, and customer assistance help that is provided must also be available in that language.
  • Exhaustion of Remedy. The internal claims review process is deemed exhausted - and the claimant can proceed to the external claims review - if the plan or issuer fails to strictly adhere to the enhanced requirements.

The new rule explicitly requires the plan or issuer to provide continued coverage pending the outcome of the appeal. As under the current regulations, advance notice and an opportunity for an advance review must be provided before benefits for an ongoing course of treatment can be reduced or terminated.

State Standards for External Review: NAIC Model Act and Some Transition

If a health insurance issuer is bound by a State external review process that includes the consumer protections of the National Association of Insurance Commissioners (NAIC) Uniform Model Act, then the issuer is bound to comply with that State external review process. Similarly, if a self-insured plan is bound by a State external review process meeting the NAIC requirements (i.e., where ERISA does not preempt that process), the plan is required to comply with it. Otherwise, the plan or issuer is required to comply with the Federal review process.

Among other requirements, a State external review process must at least include.

  • Certain Adverse Benefit Determinations. The State process must allow for review of adverse benefit determinations based on requirements for medical necessity, appropriateness, health care setting, level of care, and effectiveness of a covered benefit.
  • Expedited Review. Exhaustion of the internal claims review cannot be required if the claimant applies for expedited external review at the same time as for expedited internal review.
  • Plan Bears Cost. The plan or issuer must bear the cost of the independent review organization (IRO) that conducts the review.
  • Four-Month Period to Appeal. Claimants must be given at least four months after receipt of the internal adverse benefit determination to request an external review.
  • Independent Review Organization. The IRO must be assigned at random, be nationally accredited, and have no conflict of interest that will influence its decision.
  • Binding Decision. The decision must be binding on the claimant and the plan (or issuer).
  • Maximum Decision Making Period. The decision must be issued no more than 45 days after the request for review is received by the IRO - and no more than 72 hours in the case of expedited review.

A transition period is provided until the plan year beginning on or after July 1, 2011, by which existing State external review processes will be deemed to comply with the minimum requirements. Therefore, as a result, for plan years beginning before July 1, 2011, where a plan or issuer is bound to use a State's external review process, the process will be deemed to satisfy the minimum standards of the regulation. Where the State has no external claims review, the Federal process will apply. For plan years beginning on or after July 1, 2011, unless the Department of Health and Human Services certifies that the State external review process meets the required standards, plans and issuers will be bound to use the Federal external review process.

Federal Standards for External Review: Yet to Be Released

The Federal external review standards are yet to be released, but the new rule states they will be similar to the NAIC Uniform Model Act.

More Information

More information on the new requirements is available on the Department of Labor Web, including a Fact Sheet, News Release, and the NAIC Model Act.


Deloitte logoThe information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact:

Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955.

Copyright 2010, Deloitte.


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