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On July 23, 2010, the Departments of the Treasury, Labor and Health and Human Services (collectively, the “Departments”) jointly published interim final rules for group health plans and health insurance issuers relating to internal claims and appeals and external review processes under Section 2719 of the Public Health Service Act (as added by the Patient Protection and Affordable Care Act (“PPACA”)). These interim final rules generally apply for plan years beginning on or after September 23, 2010 (January 1, 2011, for calendar-year plans and policies). Notably, the new requirements effectively apply to all private-sector and public-sector group health plans and individual policies other than grandfathered group health plans and policies.

The interim final rules have three essential components. First, the interim final rules will require all internal claims and appeal processes (other than those of grandfathered plans and policies) to comply with the existing Department of Labor claims regulations (located in 29 CFR 2560.503-1), and in addition, satisfy six additional requirements. These additional requirements:

1. Expand the definition of “adverse benefit determination” to include rescissions of coverage;
2. Reduce the timeframe for urgent care benefit determinations to 24 hours (from 72 hours) after the receipt of the claim by the plan or issuer;
3. Expand the requirements for a “full and fair review” to compel a plan or issuer that considers or relies upon new and additional evidence or rationale when making its benefit determination to provide claimants, free of charge, with the evidence or rationale in advance of the adverse benefit determination so the claimant has an opportunity to respond;
4. Mandate that plans and issuers avoid conflicts of interest by ensuring that decisions regarding the hiring, compensation, termination, promotion or other similar matters of persons involved in the claim adjudication process are not made based on the likelihood that such an individual will support benefit denials;
5. Mandate that plans and issuers provide notices of adverse benefit determinations to enrollees in a culturally and linguistically appropriate manner (including in languages other than English if the plan population meets certain demographic thresholds) and in a manner that sufficiently identifies the claim involved (including the date of service, the provider, the claim amount, the diagnosis code, the treatment code, the denial code, the corresponding meanings of these codes, the plan or issuer’s rationale for the adverse benefit determination, available internal and external appeal procedures and consumer assistance contact information). The Departments intend to issue model notices that can be used to satisfy these notice requirements; and
6. Provide that if a plan or issuer fails to strictly adhere to its obligations under 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 may initiate an external review and/or pursue any other available remedies under applicable law.

Second, the interim final rules elaborate on PPACA’s requirement that plans and issuers provide continued coverage pending the outcome of an internal appeal. Generally, under the interim final rules, plans and issuers may not reduce or terminate an ongoing or continued course of treatment without providing advance notice and an opportunity for advance review. Claimants in an urgent care situation or those receiving an ongoing course of treatment may proceed with an internal review and an expedited external review concurrently.

Third and finally, the interim final rules provide guidance on external review processes. The rules identify which plans and issuers must comply with State external review processes, which plans and issuers must comply with Federal external review processes and partial guidance on the standards such State and Federal external review processes must meet. The interim final rules specify that, eventually, State external review processes will need to meet certain consumer protection standards set forth in the National Association of Insurance Commissioners’ Uniform Health Carrier External Review Model Act (the “Model Act”). The interim final rules provide a transition period to give State external review processes an opportunity to become compliant with the standards set forth in the Model Act.

The interim final rules for internal claims and appeals and external review processes may be accessed online. If you have any questions concerning these interim final rules or any other provisions under the Health Care Reform Act, please contact John W. Boyd (216.861.7910 or ), Susan Whittaker Hughes (216.761.7841 or ) or any member of Baker Hostetler’s Health Care Reform Team.

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