Guest Article

(From the October 11, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

PPACA's New Claims Review Procedures - A Recap of the Implementation Status

July 1, 2011 is now the big deadline for many of the new "claims review" requirements under the Patient Protection and Affordable Care Act as amended (the "Affordable Care Act"). A state's external review process must pass muster with the Department of Health and Human Services by that date or policies and plans in that state will be subject to federal external review procedures administered by the Office of Personnel Management. Also, certain "suspended" requirements for internal claims review (e.g., making urgent claims decisions within 24 hours, giving notices in a culturally and linguistically appropriate manner, including additional required content in claim denial notices, etc.) will become effective then.

Non-grandfathered group health plans, together with health insurance issuers in the group and individual markets, are subject to new claims procedures under the Affordable Care Act effective for plan and policy years beginning on and after September 23, 2010. Essentially, the new procedures require a beefed-up version of the existing ERISA claims review procedures, and add an external, second-level review process. The external review process is governed under state standards - or, if no state standards apply, federal standards.

General Requirements and Transition Relief

To satisfy the Affordable Care Act, the state external review standards must include the consumer protections of the National Association of Insurance Commissioners (NAIC) Uniform Model Act. However, a transition period was granted until the plan year beginning on or after July 1, 2011, during which a state's review standards in effect on March 23, 2010 (i.e., the date the Act was enacted) will be deemed to satisfy the requirements. 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. See Interim Final Rules issued by the enforcing agencies at 75 Federal Register 43330 (July 23, 2010).

The DHHS later extended this relief further, stating that during the transition period it would not take enforcement action against an issuer for following state laws that were passed between March 23 and September 23, 2010. See Guidance on the Interim Federal External Appeals Process for Insurers (Sept. 8, 2010), discussed below.

Separate transition relief was granted for the enhanced ERISA claims procedures that apply to the internal claims review process under the Act. Before July 1, 2011, enforcement action will not be taken by the Department of Labor against a group health plan (or by the DHHS against a self-funded, nonfederal governmental plan) that is acting in good faith to comply with the new requirements to decide urgent claims within 24 hours, to give notices in a culturally and linguistically appropriate manner, and to include additional required content in claim denial notices. See Department of Labor Technical Release 2010-02.

Options for Self-Insured Plans

Self-insured plans will typically not be subject to state review procedures, so would ordinarily fall within the category of plans subject to the federal external review procedures. Under Department of Labor Technical Release 2010-10, however, self-insured plans can avoid being subject to the federal review procedures if they voluntarily elect to comply with their state's external review procedures (where permitted), or if they comply with the procedures outlined in the Technical Release (which are based on the NAIC Model Act).

Insured Plans Not Subject to State Review Procedures

More recently, on September 8, 2010, the DHHS released Guidance on the Interim Federal External Appeals Process for Insurers. The federal procedures parallel those under the Technical Release and, ultimately, the NAIC Model Act. The procedures apply to health insurance issuers in the group and individual markets that are not subject to state review procedures (e.g., issuers in states that have not passed an external review law in effect on September 23, 2010, such as Alabama, Mississippi, and Nebraska). Under the procedures, the federal external reviews will be conducted by an independent third party through the Office of Personnel Management. The issuers are required to provide DHHS with copies of each of their notices that contain appeals information, to provide claimants with a Privacy Act Notice, and are subject to other requirements.

Self-Funded Non-Federal Governmental Plans

Rounding out the guidance to ensure all non-grandfathered group health plans are able to comply with the new claims review procedures, the DHHS recently released Technical Guidance on September 23, 2010, to address self-funded, non-federal governmental health plans that are not subject to state review procedures. It advised that, until further guidance is issued, no enforcement action will be taken against such plans if they comply with Department of Labor Technical Release 2010-10 (i.e., if the plans voluntarily elect to comply with the state procedures where permitted, or comply with the claims procedures in the Technical Release). For self-insured, non-federal governmental plans in states with no external review process, the plans must comply with the claims procedures in the Technical Release (i.e., contract with an independent review organization) or comply with the federal review procedures.

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.