Guest Article

(From the August 30, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

More Guidance Is Issued on PPACA-Mandated Claims Review Procedures

Guidance on the new claims procedures required of non-grandfathered, self-funded group health plans as of the first plan year beginning on or after September 23, 2010, is now available. The Departments of Labor and Health and Human Services also released model forms by which group health plans will be able to provide claimants with notice of adverse benefit determinations consistent with the interim final regulations issued in July 2010.

July 2010 Regulations Provide the Background

The Departments of Labor, Treasury, and Health and Human Services issued interim final regulations that outline the new claims procedures imposed by the Patient Protection and Affordable Care Act (PPACA) on non-grandfathered group health plans and group health issuers effective with the first plan year beginning on or after September 23, 2010. Essentially, the PPACA amplifies the existing ERISA claims procedures (e.g., by imposing more rigorous deadlines for urgent care decisions, new notice requirements for adverse benefit decisions, etc.) and adds an external, second-level review process. The external review process is governed under state standards - or, if no state standards apply, federal standards.

To pass muster, a state's external review process must include the consumer protections of the National Association of Insurance Commissioners (NAIC) Uniform Model Act. A state's external review procedure will apply as provided under the state law (e.g., to group health plan issuers, and/or to self-funded plans to the extent not preempted by ERISA, etc.). If a state external review process does not apply to the plan, then the federal external review process will apply.

Facing an impending September 23, 2010, effective date for implementing the new PPACA claims procedures, the regulations provide the states with a "transition period" by which a state's external review process will be deemed to satisfy the minimum standards of the regulation (e.g., NAIC requirements, etc.) until the plan year beginning on or after July 1, 2011. For plan years beginning on or after that date, a state's external review procedures must be approved by the Department of Health and Human Services (DHHS) or the federal process will apply.

The July 2010 regulations promised that future guidance would be issued on the federal external review process, and also that model forms would be provided for plans to use in satisfying the notice requirements for adverse benefit determinations.

Notice of Interim Procedures and Safe Harbor for Self-Funded Plans

As promised, a Notice of Interim Procedures was recently released. Among other things it announced the issuance of EBSA Technical Release No. 2010-01, which provides a temporary means by which non-grandfathered self-insured group health plans that are not subject to a state external review process can comply with the federal external review process. Under this safe harbor, for plan years beginning on or after September 23, 2010 - and until superseded by future guidance - the Department of Labor and the Internal Revenue Service will not take any enforcement action against a self-insured group health plan that complies with either of the following interim compliance methods:

The Notice states that a similar temporary safe harbor will be provided to group health issuers. For plan years beginning on or after September 23, 2010 and until superseded by future guidance, the DHHS will not take enforcement action against an issuer that complies with an interim compliance method that will be detailed by the DHHS on its Office of Consumer Information and Insurance Oversight website at http://www.hhs.gov/ociio. According to the Notice, the method will either involve use of a state external appeals process or a temporary process established by DHHS.

External Review Procedures under Technical Release 2010-01

As described above, Technical Release 2010-01 provides one of the two acceptable methods by which non-grandfathered, self-funded group health plans that are not subject to a state external review process can comply with the PPACA mandate to follow a federal external review process. (Alternatively, such plans can elect to voluntarily comply with a state review process if that option is available to them.) The Technical Release spells out the requirements for standard external reviews, expedited external reviews, and the contract between the plan and an independent review organization (IRO).

Similar to the requirements for the state external review procedures (which were outlined in the July 2010 regulations), the standard external review process under the Technical Release requires, among other things, that:

The Technical Release provides that claimants must be allowed to request an expedited external review in two circumstances:

In the case of an expedited external review, a final decision must be provided as expeditiously as the claimant's medical condition or circumstances require but in no event more than 72 hours after the IRO receives the request for expedited review.

The contract between the plan and an IRO must include various provisions, including that the IRO will utilize legal experts where appropriate to make a determination, will review the claim de novo and not be bound by any decision or conclusion reached during the plan's internal claims process, will provide written notice of the final external review decision within 45 days after it receives the request, and will maintain records for 6 years.

Model Notices for Adverse Benefit Determinations

The July 2010 regulations impose new requirements on notices of adverse benefit determination. Failure to strictly adhere to the new notice and other requirements can result in a claimant being deemed to have exhausted the appeals process and, therefore, able to proceed directly to an independent external review or file a lawsuit, as appropriate. The July 2010 regulations promised that the Departments would provide the model notices necessary for plans to comply with the regulations, and that the models would be structured so they could be readily populated with the necessary information (and thereby reduce the cost of plan compliance). In this regard, three model notices are now available on the Department of Labor's Web site: Model Notice of Adverse Benefit Determination, Model Notice of Final Internal Adverse Benefit Determination, and Model Notice of Final External Review Decision.

The 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.