The New Rules for Insurance Appeals Under PPACA

On July 22, the Obama Administration released interim final rules that allow patient appeals of health insurance coverage decisions as required under the Patient Protection and Affordable Care Act (”PPACA”) and Health Care and Education Reconciliation Act (”Reconciliation Act”).  Published by the departments of Health and Human Services, Treasury, and Labor, these rules create standards for the internal and external processes by which patients can appeal adverse benefits decisions.

Prior to these rules, coverage appeals were governed by contract and State law.  Forty-four States have created some form of external appeal process for insurance coverage decisions; however, their coverage is limited and the processes vary greatly.  Effective January 1, 2003, changes to the Employee Retirement Income Security Act of 1976 (”ERISA”) regulations provided standards for internal appeals processes.  However, these standards only apply to employer-sponsored group health insurance.

As stated in the Obama Administration fact sheet entitled, “Appealing Health Plan Decisions,”

Today, if your health plan tells you it won’t cover a treatment your doctor recommends, or it refuses to pay the bill for your child’s last trip to the emergency room, you may not know where to turn. Most health plans have a process that lets you appeal the decision within the plan through an “internal appeal” — but depending on your State’s laws and your type of coverage, there’s no guarantee that the process will be swift and objective. Moreover, if you lose your internal appeal, you may not be able to ask for an “external appeal” to an independent reviewer.

Internal Appeals Process

Under the rules, new health plans beginning on or after Sept. 23, 2010, must have an internal appeals process for beneficiaries to challenge “adverse benefits decisions” — a “denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.”  Such adverse benefits decisions may be based on individual eligibility, benefit coverage, limitations on otherwise covered benefits (such as preexisting condition exclusions, source-of-injury exclusions, and network exclusions), and a determination that a benefit is experimental or not medically necessary.

In addition, health plans must do the following:

  • Notify a claimant of a benefit determination as soon as possible;
  • Provide claimants, free of charge, with the evidence relied upon and the rationale for the decision;
  • Avoid conflicts of interest by making decisions regarding hiring, compensation, termination, and promotion independent of a claims adjustor or medical experts record of denial of benefits; and
  • Meet additional requirements for notice, including information on internal appeals and external review processes.

However, these requirements do not pertain to so-called “grandfathered health plans” — those health plans that were in existence before March 23, 2010 when PPACA was enacted.  In the individual market, health insurance providers must meet the foregoing requirements as well as the following three:

  • Applicants for individual insurance must be allowed to appeal initial eligibility determinations;
  • Internal review must be limited to a single level, allowing claimants to appeal to external or judicial review immediately; and
  • Insurers must maintain all claims and notices for a minimum of six years, which is already required of employer-sponsored health plans under ERISA.

External Appeals Process

If the internal appeal is denied, patients may choose to have the claim reviewed by an independent reviewer.   According to Appealing Health Plan Decisions, States are encouraged to adopt the National Association of Insurance Commissioners (NAIC) standards in “their external appeals laws to adopt these standards before July 1, 2011.”

The NAIC standards call for:

  • External review of plan decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.
  • Clear information for consumers about their right to both internal and external appeals — both in the standard plan materials, and at the time the company denies a claim.
  • Expedited access to external review in some cases — including emergency situations, or cases where their health plan did not follow the rules in the internal appeal.
  • Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.
  • Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflicts of interest.
  • Emergency processes for urgent claims, and a process for experimental or investigational treatment.
  • Final decisions must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.

If State laws don’t meet these standards, consumers in those States will be protected by comparable Federal external appeals standards.

As Kaiser Health News reported, “This is a regulation that benefits everyone — consumers get protections, business and providers get more certainty in the rules and the need for litigation to settle these issues should be dramatically minimized,” Phyllis Borzi, assistant secretary of the Department of Labor, said at a briefing for reporters Thursday.

Consumer Assistance Grants

However, procedural rights for consumers are not sufficient to ensure proper appeals.  “Not enough consumers know this is an option that they have,” said Angel Robinson, the consumer advocate in the Iowa Insurance Division, according to Kaiser Health News.

In addition to the new requirements for internal and external appeals processes under the interim final rules, the federal government is offering nearly $30 million in resources to States and Territories to strengthen and establish consumer assistance programs.  Specifically, these programs are charged with:

  • Helping consumers enroll in health coverage;
  • Helping consumers file complaints and appeals against health plans;
  • Educating consumers about their rights and empowering them to take action; and
  • Tracking consumer complaints to help identify problems and strengthen enforcement.

Katherine Matos is a 3rd year student at Seton Hall Law and a regular blogger at Health Reform Watch.com. [http://www.healthreformwatch.com/] She is the principle inventor on a patent application in the field of medical imaging, resulting from her research as a student at Stevens Institute of Technology. After graduating with degrees in biomedical engineering and history in 2008, she volunteered with the Irish government in the Health Services Executive. At Seton Hall Law, Katherine has researched federal oversight of nanotechnology with Professor Jordan Paradise and non-profit governance with Professor Melanie DiPietro. She worked as a summer associate at Fitzpatrick, Cella, Harper & Scinto in 2009 and at Robinson & Cole in 2010.

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