On July 23, 2010, the government published rules implementing new internal claims and appeals and external review processes under health care reform. The rules are effective for plan or policy years beginning on or after September 23, 2010, although the rules do not apply to grandfathered plans.

The rules address new requirements for state external review processes that apply mainly to fully insured group health policies and individual insurance contracts. They also address new requirements for federal external review processes that apply to self-funded group health plans.

New External Review Process

For self-funded group health plans, a new federal external review process will generally apply. The federal review process will not include reviews of adverse benefit determinations involving failure to meet the eligibility requirements of a plan. The process will be similar to the process set forth in the NAIC Uniform Model Act and will meet standards issued by the government, including standards describing:

• How a claimant initiates external review
• Procedures for preliminary reviews to determine whether a claim is eligible for external review
• Minimum qualifications for review organizations
• Process for approving review organizations
• Process for random assignment of external reviews to approved reviewers
• Standards for review decision making and
• Rules for providing notice regarding the external review process and notice of a final external review decision

Expedited reviews will be available for claimants whose life or health would be seriously jeopardized by following the normal process and timeframes. Special standards require additional consumer protections to ensure that adequate clinical and scientific experience and protocols are taken into account for external reviews involving experimental or investigational treatments.

These regulations do not, however, address the specifics of the new standards. Instead, the regulations provide that the agencies will be issuing sub-regulatory guidance on how non-grandfathered self-funded group health plans may bring their existing internal appeal processes into compliance with the requirements of the new federal external review process in the very near future.

New Internal Claim and Appeal Process Requirements

The regulations also address internal claim and appeal process requirements. In addition to complying with existing Department of Labor claims regulations, self-funded group health plans must follow six new requirements:

• The definition of an adverse benefit determination has been broadened to include a rescission of coverage. Earlier regulations under health care reform defined a rescission as a retroactive cancellation or discontinuance of coverage other than for fraud, intentional misrepresentation of a material fact, or nonpayment of required premiums.
• The time for a plan to respond to a claim involving urgent care is shortened from 72 hours to 24 hours.
• The plan must provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan in connection with the claim. The evidence must be provided as soon as possible, and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided to give the claimant a reasonable opportunity to respond before that date. Also, before the plan can issue an adverse benefit determination on review based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale. The DOL views this language as an amplification of existing claims regulations, but many court cases have found no such requirement under existing claims rules.
• The plan must ensure that all claims and appeals are adjudicated in a manner designed to provide independence and impartiality of the persons involved in the decision making. Decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individuals, such as a claims adjudicator or medical expert, must not be made based upon the likelihood that the individual will support a denial of benefits.
• The plan must follow "culturally and linguistically appropriate" rules for communicating notices of adverse benefit determinations, and the notices must meet new content requirements, including date of service, the health care provider, the claim amount, the diagnosis, treatment and denial codes, an explanation of the codes, and a description of the plan's standard that was used in denying the claim. For final internal adverse benefit determinations, the plan must include a discussion of the decision and a description of available internal appeals and external review processes, including information regarding how to initiate an appeal, and information regarding the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman established under health care reform to assist enrollees with the internal claims and appeals and external review processes. The DOL plans to issue model notices that will include these requirements "in the very near future." The new cultural and linguistic requirements are based on similar requirements that currently apply to summary plan descriptions.
• If a plan fails to strictly adhere to all the requirements of the internal claims and appeals process with respect to a claim, the claimant is deemed to have exhausted the internal claims and appeals process, and is permitted to initiate external or judicial review, regardless of whether the plan asserts that it substantially complied, or any errors were de minimis.

New Requirement Regarding Coverage During Internal Appeal

In addition to these six new requirements, the regulations implement a new statutory requirement that a plan must provide continued coverage pending the outcome of an internal appeal. For this reason, individuals in urgent care situations and individuals receiving an ongoing course of treatment may be allowed to proceed with expedited external review at the same time as the internal appeals process.

Rules Effective for Plan Years Beginning on or After September 23

Since the new claims and appeal rules are effective for non-grandfathered, self-funded group health plans in plan years beginning on or after September 23, 2010, plans sponsors have little time to comply. Plan sponsors should promptly begin reviewing their internal claims process to ensure it meets the new requirements. They should also continue to watch for the model notices and additional external review guidance that are expected soon.