PPACA Regulatory Update
July, 27, 2010

As reported by SIIA’s Government Relations Staff, Federal agencies will be continually issuing regulations and notices of guidance pertaining to how provisions of the newly enacted Patient Protection and Affordable Care Act will be implemented. SIIA staff will develop summaries of these and distribute along with the full documents as soon as they are released.

Departments of Treasury, Labor and Health and Human Services Jointly Release Interim Final Rules on Mandated Appeals and Review Processes

Federal Departments released an interim final rule providing for uniform guidelines for internal claims and appeals processes and external review processes.

Background on Internal Claims Appeals and External Review Processes:

The PPACA requires all non-grandfathered group health plans to implement an external review process in addition to the internal claims appeal process already mandated under ERISA.

Final Interim Rule:
These interim final regulations make additional requirements and add additional standards to the internal claims and appeals process and external review processes.

Internal Claims and Appeals Process:

The DOL’s definition of a denial is expanded to also include a rescission of coverage.

A denial eligible for internal claims and appeals processes under these interim final regulations includes a denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit, including any such denial, reduction, termination, or failure to provide or make a payment that is based on:

• A determination of an individual’s eligibility to participate in a plan or health insurance coverage;
• A determination that a benefit is not a covered benefit;
• The imposition of a preexisting condition exclusion, source-of-injury exclusion, network exclusion, or other limitation on otherwise covered benefits; or
• A determination that a benefit is experimental, investigational, or not medically necessary or appropriate.

A denial, reduction, or termination of, or a failure to provide or make a payment for a benefit can include both pre-service claims.

Plans must 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 the medical exigencies, but not later than 24 hours after the receipt of the claim by the plan unless the claimant fails to provide sufficient information to determine whether, or to what extent, benefits are covered or payable under the plan or health insurance coverage.

In addition to complying with the requirements of the DOL claims appeal procedure, 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. Such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of denial on review is required to be provided to give the claimant a reasonable opportunity to respond prior to that date. Additionally, before the plan can issue an denial on review based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale. The rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of denial on review is required to be provided to give the claimant a reasonable opportunity to respond prior to that date.

To avoid any conflicts of interest, the plan must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Accordingly, decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (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.

Plans are required to provide notice to enrollees, in a culturally and linguistically appropriate manner. A plan must ensure that any notice of denial or final internal denial includes information sufficient to identify the claim involved. This includes the date of service, the healthcare provider, and the claim amount (if applicable), as well as the diagnosis code, the treatment code and the corresponding meanings of these codes. A plan must also ensure that the reason or reasons for the denial or final internal denial includes the denial code and its corresponding meaning. It must also include a description of the plan’s standard, if any, that was used in denying the claim.

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, regardless of whether the plan asserts that it substantially complied with these requirements. Accordingly, upon such a failure, the claimant may initiate an external review and pursue any available remedies under applicable law.

Plans are required to provide continued coverage pending the outcome of an internal appeal. Specifically, plans are prohibited from reducing or terminating an ongoing course of treatment without providing advance notice and an opportunity for advance review. Additionally, 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.

Federal External Review Process:

Issued Federal external review process standards apply to all plans subject to ERISA. The final interim rule stated that there could be additional guidance issued on how self-insured plans specifically should maintain their external review process.

The Federal external review process applies to all benefit denials, including rescissions. However, the Federal external review process is not available for a plan’s denial, reduction, termination, or a failure to provide payment for a benefit based on a determination that a participant or beneficiary is not eligible for benefits under the terms of a group health plan.

Plans must provide participants who have exhausted their internal appeals with a description of how they may initiate the external review, including; procedures for how to initiate a preliminary review, minimum qualifications for independent reviews and standards for their decision making process and rules for providing notice of the review decision.

Plans must have in place a process for an emergency external review in cases of urgent care.

Plans must acknowledge and disclose that any decision is binding for both the plan and the claimant.

For plans that lose their grandfathered status, but had an external review process in place on 3/23/10, it may be deemed acceptable upon Federal review.