[Federal Register: July 23, 2010 (Volume 75, Number 141)]
[Rules and Regulations]
[Page 43329-43364]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jy10-18]
[[Page 43329]]
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Part IV
Department of the Treasury
Internal Revenue Service
26 CFR Parts 54 and 602
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Department of Labor
Employee Benefits Security Administration
29 CFR Part 2590
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Department of Health and Human Services
45 CFR Part 147
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Interim Final Rules for Group Health Plans and Health Insurance Issuers
Relating to Internal Claims and Appeals and External Review Processes
Under the Patient Protection and Affordable Care Act; Interim Final
Rule
[[Page 43330]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 54 and 602
[TD 9494]
RIN 1545-BJ63
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB45
DEPARTMENT OF HEALTH AND HUMAN SERVICES
[OCIIO-9993-IFC]
45 CFR Part 147
RIN 0991-AB70
Interim Final Rules for Group Health Plans and Health Insurance
Issuers Relating to Internal Claims and Appeals and External Review
Processes Under the Patient Protection and Affordable Care Act
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Office of
Consumer Information and Insurance Oversight, Department of Health and
Human Services.
ACTION: Interim final rules with request for comments.
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SUMMARY: This document contains interim final regulations implementing
the requirements regarding internal claims and appeals and external
review processes for group health plans and health insurance coverage
in the group and individual markets under the Patient Protection and
Affordable Care Act. The regulations will generally affect health
insurance issuers; group health plans; and participants, beneficiaries,
and enrollees in health insurance coverage and in group health plans.
The regulations provide plans and issuers with guidance necessary to
comply with the law.
DATES: Effective date. These interim final regulations are effective on
September 21, 2010.
Comment date. Comments are due on or before September 21, 2010.
Applicability dates. These interim final regulations generally
apply to group health plans and group health insurance issuers for plan
years beginning on or after September 23, 2010. These interim final
regulations generally apply to individual health insurance issuers for
policy years beginning on or after September 23, 2010.
ADDRESSES: Written comments may be submitted to any of the addresses
specified below. Any comment that is submitted to any Department will
be shared with the other Departments. Please do not submit duplicates.
All comments will be made available to the public. Warning: Do not
include any personally identifiable information (such as name, address,
or other contact information) or confidential business information that
you do not want publicly disclosed. All comments are posted on the
Internet exactly as received, and can be retrieved by most Internet
search engines. No deletions, modifications, or redactions will be made
to the comments received, as they are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to the Department of Labor,
identified by RIN 1210-AB45, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: E-OHPSCA2719.EBSA@dol.gov.
Mail or Hand Delivery: Office of Health Plan Standards and
Compliance Assistance, Employee Benefits Security Administration, Room
N-5653, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Washington, DC 20210, Attention: RIN 1210--AB45.
Comments received by the Department of Labor will be posted without
change to http://www.regulations.gov and http://www.dol.gov/ebsa, and
available for public inspection at the Public Disclosure Room, N-1513,
Employee Benefits Security Administration, 200 Constitution Avenue,
NW., Washington, DC 20210.
Department of Health and Human Services. In commenting, please
refer to file code OCIIO-9993-IFC. Because of staff and resource
limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one of
the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions under
the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address only: Office of Consumer Information and Insurance Oversight,
Department of Health and Human Services, Attention: OCIIO-9993-IFC,
P.O. Box 8016, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address only: Office of Consumer Information and
Insurance Oversight, Department of Health and Human Services,
Attention: OCIIO-9993-IFC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--
Office of Consumer Information and Insurance Oversight, Department of
Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the OCIIO drop slots located in the main lobby of the building. A
stamp-in clock is available for persons wishing to retain a proof of
filing by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call (410) 786-7195 in advance to schedule your arrival with one
of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in
[[Page 43331]]
a comment. We post all comments received before the close of the
comment period on the following website as soon as possible after they
have been received: http://www.regulations.gov. Follow the search
instructions on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately
three weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. EST. To schedule an appointment to view public comments,
phone 1-800-743-3951.
Internal Revenue Service. Comments to the IRS, identified by REG-
125592-10, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: CC:PA:LPD:PR (REG-125592-10), Room 5205, Internal
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC
20044.
Hand or courier delivery: Monday through Friday between
the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-125592-10),
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue,
NW., Washington DC 20224.
All submissions to the IRS will be open to public inspection and
copying in Room 1621, 1111 Constitution Avenue, NW., Washington, DC
from 9 a.m. to 4 p.m.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Karen Levin, Internal Revenue Service, Department of the
Treasury, at (202) 622-6080; Ellen Kuhn, Office of Consumer Information
and Insurance Oversight, Department of Health and Human Services, at
(301) 492-4100.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://
www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the Centers for Medicare &
Medicaid Services (CMS) Web site (http://www.cms.hhs.gov/
HealthInsReformforConsume/01_Overview.asp) and information on health
reform can be found at http://www.healthreform.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable Care Act (the Affordable Care
Act), Public Law 111-148, was enacted on March 23, 2010; the Health
Care and Education Reconciliation Act (the Reconciliation Act), Public
Law 111-152, was enacted on March 30, 2010. The Affordable Care Act and
the Reconciliation Act reorganize, amend, and add to the provisions of
part A of title XXVII of the Public Health Service Act (PHS Act)
relating to group health plans and health insurance issuers in the
group and individual markets. The term ``group health plan'' includes
both insured and self-insured group health plans.\1\ The Affordable
Care Act adds section 715(a)(1) to the Employee Retirement Income
Security Act (ERISA) and section 9815(a)(1) to the Internal Revenue
Code (the Code) to incorporate the provisions of part A of title XXVII
of the PHS Act into ERISA and the Code, and make them applicable to
group health plans, and health insurance issuers providing health
insurance coverage in connection with group health plans. The PHS Act
sections incorporated by this reference are sections 2701 through 2728.
PHS Act sections 2701 through 2719A are substantially new, though they
incorporate some provisions of prior law. PHS Act sections 2722 through
2728 are sections of prior law renumbered, with some, mostly minor,
changes.
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\1\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
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Subtitles A and C of title I of the Affordable Care Act amend the
requirements of title XXVII of the PHS Act (changes to which are
incorporated into ERISA section 715). The preemption provisions of
ERISA section 731 and PHS Act section 2724 \2\ (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements of
part 7 of ERISA and title XXVII of the PHS Act, as amended by the
Affordable Care Act, are not to be ``construed to supersede any
provision of State law which establishes, implements, or continues in
effect any standard or requirement solely relating to health insurance
issuers in connection with group or individual health insurance
coverage except to the extent that such standard or requirement
prevents the application of a requirement'' of the Affordable Care Act.
Accordingly, State laws that impose on health insurance issuers
requirements that are stricter than those imposed by the Affordable
Care Act will not be superseded by the Affordable Care Act.
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\2\ Code section 9815 incorporates the preemption provisions of
PHS Act section 2724. Prior to the Affordable Care Act, there were
no express preemption provisions in chapter 100 of the Code.
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The Departments of Health and Human Services, Labor, and the
Treasury (the Departments) are issuing regulations in several phases
implementing the revised PHS Act sections 2701 through 2719A and
related provisions of the Affordable Care Act. The first phase in this
series was the publication of a Request for Information relating to the
medical loss ratio provisions of PHS Act section 2718, published in the
Federal Register on April 14, 2010 (75 FR 19297). The second phase was
interim final regulations implementing PHS Act section 2714 (requiring
dependent coverage of children to age 26), published in the Federal
Register on May 13, 2010 (75 FR 27122). The third phase was interim
final regulations implementing section 1251 of the Affordable Care Act
(relating to status as a grandfathered health plan), published in the
Federal Register on June 17, 2010 (75 FR 34538). The fourth phase was
interim final regulations implementing PHS Act sections 2704
(prohibiting preexisting condition exclusions), 2711 (regarding
lifetime and annual dollar limits on benefits), 2712 (regarding
restrictions on rescissions), and 2719A (regarding patient
protections), published in the Federal Register on June 28, 2010 (75 FR
37188). The fifth phase was interim final regulations implementing PHS
Act section 2713 (regarding preventive health services), published in
the Federal Register on July 19, 2010 (75 FR 41726). These interim
final regulations are being published to implement PHS Act section
2719, relating to internal claims and appeals and external review
processes. PHS Act section 2719 is generally effective for plan years
(in the individual market, policy years) beginning on or after
September 23, 2010, which is six months after the March 23, 2010 date
of enactment of the Affordable Care Act. The implementation of other
provisions of PHS Act sections 2701 through 2719A will be addressed in
future regulations.
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II. Overview of the Regulations: PHS Act Section 2719, Internal Claims
and Appeals and External Review Processes (26 CFR 54.9815-2719T, 29 CFR
2590.715-27109, 45 CFR 147.136)
a. Scope and Definitions
These interim final regulations set forth rules implementing PHS
Act section 2719 for internal claims and appeals and external review
processes for group health plans and health insurance coverage; these
requirements do not apply to grandfathered health plans under section
1251 of the Affordable Care Act. With respect to internal claims and
appeals processes for group health coverage, PHS Act section 2719
provides that plans and issuers must initially incorporate the internal
claims and appeals processes set forth in 29 CFR 2560.503-1 and update
such processes in accordance with standards established by the
Secretary of Labor. Similarly, with respect to internal claims and
appeals processes for individual health insurance coverage, issuers
must initially incorporate the internal claims and appeals processes
set forth in applicable State law and update such processes in
accordance with standards established by the Secretary of Health and
Human Services. These interim final regulations provide such updated
standards for compliance. The Department of Labor is also considering
further updates to 29 CFR 2560.503-1 and expects to issue future
regulations that will propose additional, more comprehensive updates to
the standards for plan internal claims and appeals processes.
With respect to external review, PHS Act section 2719 provides a
system for applicability of either a State external review process or a
Federal external review process. These regulations provide rules for
determining which process applies, as well as guidance regarding each
process. Consistent with the statutory structure, these interim final
regulations adopt an approach that builds on applicable State external
review processes. For plans and issuers subject to existing State
external review processes, the regulations include a transition period
until July 1, 2011. During this period, the State process applies and
the Departments will work individually with States on an ongoing basis
to assist in making any necessary changes to incorporate additional
consumer protections so that the State process will continue to apply
after the end of the transition period. For plans and issuers not
subject to an existing State external review process (including self-
insured plans), a Federal process will apply for plan years (in the
individual market, policy years) beginning on or after September 23,
2010. The Departments will be issuing more guidance in the near future
on the Federal external review process.
These interim final regulations also set forth rules related to the
form and manner of providing notices in connection with internal claims
and appeals and external review processes. The regulations also
reiterate and preserve the Departments' authority, pursuant to PHS Act
section 2719(c), to deem external review processes in operation on
March 23, 2010, to be in compliance with the requirements of PHS Act
section 2719, either permanently or temporarily.
Paragraph (a)(2) of 26 CFR 54.9815-2719T, 29 CFR 2590.715-2719, 45
CFR 147.136 sets forth definitions relevant for these interim final
regulations, including the definitions of an adverse benefit
determination and a final internal adverse benefit determination. An
adverse benefit determination is defined by incorporating the
definition under the Department of Labor's regulations governing claims
procedures at 29 CFR 2560.503-1 (DOL claims procedure regulation), and
also includes a rescission of coverage. A final internal adverse
benefit determination is the upholding of an adverse benefit
determination at the conclusion of the internal appeals process or an
adverse benefit determination with respect to which the internal
appeals process has been deemed exhausted.
b. Internal Claims and Appeals Process
Paragraph (b) of 26 CFR 54.9815-2719T, 29 CFR 2590.715-2719, 45 CFR
147.136 requires group health plans and health insurance issuers
offering group or individual health insurance coverage to implement an
effective internal claims and appeals process. The regulations set
forth separate rules for group health coverage and individual health
insurance coverage.
1. Group Health Plans and Health Insurance Issuers Offering Group
Health Insurance Coverage
A group health plan and a health insurance issuer offering group
health insurance coverage must comply with all the requirements
applicable to group health plans under the DOL claims procedure
regulation. Therefore, for purposes of compliance with these interim
final regulations, a health insurance issuer offering health insurance
coverage in connection with a group health plan is subject to the DOL
claims procedure regulation to the same extent as if it were a group
health plan.
These interim final regulations also set forth six new requirements
in addition to those in the DOL claims procedure regulation.
First, for purposes of these interim final regulations, the
definition of an adverse benefit determination is broader than the
definition in the DOL claims procedure regulation, in that an adverse
benefit determination for purposes of these interim final regulations
also includes a rescission of coverage. By referencing the DOL claims
procedure regulation, an adverse benefit determination 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 (in whole or in part) for a benefit can include both
pre-service claims (for example, a claim resulting from the application
of any utilization review), as well as post-service claims. Failure to
make a payment in whole or in part includes any instance where a plan
pays less than the total amount of expenses submitted with regard to a
claim, including a denial of part of the claim due to the terms of a
plan or health insurance coverage regarding copayments, deductibles, or
other cost-sharing requirements.\3\ Under these interim final
regulations, an adverse benefit determination also includes any
rescission of coverage as defined in the regulations restricting
rescissions (26 CFR 54.9815-2712T(a)(2), 29 CFR 2590.715-2712(a)(2),
and 45 CFR 147.128(a)(2)), whether or not there is an adverse effect on
any particular benefit at that time. The regulations restricting
rescissions generally define a rescission as a cancellation or
discontinuance of coverage that has
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retroactive effect, except to the extent it is attributable to a
failure to timely pay required premiums or contributions towards the
cost of coverage. Rescissions of coverage must also comply with the
requirements of the regulations restricting rescissions.\4\
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\3\ See the Department of Labor's Frequently Asked Questions
(FAQs) About the Benefit Claims Procedure Regulations, FAQ C-12, at
http://www.dol.gov/ebsa.
\4\ These regulations generally provide that a plan or issuer
must not rescind coverage with respect to an individual once the
individual is covered, except in the case of an act, practice, or
omission that constitutes fraud, or an intentional misrepresentation
of material fact, as prohibited by the terms of the plan or
coverage.
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Second, these interim final regulations provide that a plan or
issuer must notify a claimant of a benefit determination (whether
adverse or not) with respect to a claim involving urgent care (as
defined in the DOL claims procedure regulation) \5\ 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 or health
insurance coverage, 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.\6\ This
is a change from the requirements of the DOL claims procedure
regulation, which generally requires a determination not later than 72
hours after receipt of the claim by a group health plan for urgent care
claims. The Departments expect that electronic communication will
enable faster decision-making today than in the year 2000, when the
final DOL claims procedure regulation was issued.
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\5\ Under the DOL claims procedure regulation, a ``claim
involving urgent care'' is a claim for medical care or treatment
with respect to which the application of the time periods for making
non-urgent care determinations could seriously jeopardize the life
or health of the claimant or the ability of the claimant to regain
maximum function; or, in the opinion of a physician with knowledge
of the claimant's medical condition, would subject the claimant to
severe pain that cannot be adequately managed without the care or
treatment that is the subject of the claim.
\6\ In the case of a failure to provide sufficient information,
under the DOL claims procedure regulation the claimant must be
notified as soon as possible, but not later than 24 hours after
receipt of the claim, of the specific information necessary to
complete the claim. The claimant must be afforded a reasonable
amount of time, taking into account the circumstances, but not less
than 48 hours, to provide the specified information.
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Third, these interim final regulations provide additional criteria
to ensure that a claimant receives a full and fair review.
Specifically, in addition to complying with the requirements of the DOL
claims procedure regulation, the plan or issuer must provide the
claimant, free of charge, with any new or additional evidence
considered, relied upon, or generated by the plan or issuer (or at the
direction of the plan or issuer) in connection with the claim.\7\ Such
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 prior to that date. Additionally,
before the plan or issuer 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 rationale 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
prior to that date.
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\7\ This language underscores and is not inconsistent with the
scope of the disclosure requirement under the existing Department of
Labor claims procedure regulation. That is, the Department of Labor
interprets 29 USC 1133 and the DOL claims procedure regulation as
already requiring that plans provide claimants with new or
additional evidence or rationales upon request and an opportunity to
respond in certain circumstances. See Brief of amicus curiae
Secretary of the United States Department of Labor, Midgett v.
Washington Group International Long Term Disability Plan, 561 F.3d
887 (8th Cir. 2009) (No.08-2523) (expressing disagreement with cases
holding that there is no such requirement).
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Fourth, these interim final regulations provide new criteria with
respect to avoiding conflicts of interest. The plan or issuer 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. For example, a plan or issuer cannot
provide bonuses based on the number of denials made by a claims
adjudicator. Similarly, a plan or issuer cannot contract with a medical
expert based on the expert's reputation for outcomes in contested
cases, rather than based on the expert's professional qualifications.
Fifth, these interim final regulations provide new standards
regarding notice to enrollees. Specifically, the statute and these
interim final regulations require a plan or issuer to provide notice to
enrollees, in a culturally and linguistically appropriate manner
(standards for which are described later in this preamble). Plans and
issuers must comply with the requirements of paragraphs (g) and (j) of
the DOL claims procedure regulation, which detail requirements
regarding the issuance of a notice of adverse benefit determination.\8\
Moreover, for purposes of these interim final regulations, additional
content requirements apply for these notices. A plan or issuer must
ensure that any notice of adverse benefit determination or final
internal adverse benefit determination includes information sufficient
to identify the claim involved. This includes the date of service, the
health care provider, and the claim amount (if applicable) \9\, as well
as the diagnosis code (such as an ICD-9 code, ICD-10 code, or DSM-IV
code) \10\, the treatment code (such as a CPT code) \11\, and the
corresponding meanings of these codes. A plan or issuer must also
ensure that the reason or reasons for the adverse benefit determination
or final internal adverse benefit determination includes the denial
code (such as a CARC and RARC) \12\ and its corresponding meaning. It
must also include a description of the plan's or issuer's standard, if
any, that was used in denying the claim (for example, if a plan applies
a medical necessity standard in denying a claim, the notice must
include a description of the medical necessity standard). In the case
of a notice of final internal adverse benefit determination, this
description must include a discussion of the decision. Additionally,
the plan or issuer must provide a description of available internal
appeals and external review processes, including information regarding
how to initiate an appeal. Finally, the plan or issuer must disclose
the availability of, and contact information for, any applicable office
of health insurance consumer assistance or ombudsman established under
PHS Act section 2793 to assist enrollees with the
[[Page 43334]]
internal claims and appeals and external review processes. The
Departments intend to issue model notices that could be used to satisfy
all the notice requirements under these interim final regulations in
the very near future. These notices will be made available at http://
www.dol.gov/ebsa and http://www.hhs.gov/ociio/.
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\8\ Paragraph (g) of the DOL claims procedure regulation
requires that the notice must be written in a manner calculated to
be understood by the claimant and generally must include any
specific reasons for the adverse determination, reference to the
specific provision on which the determination is based, a
description of any additional information required to perfect the
claim, and a description of the internal appeal process. Paragraph
(i) of the DOL claims procedure regulation requires that the notice
must also be provided in accordance with specified timeframes for
urgent care claims, pre-service claims, and post-service claims.
\9\ The amount of the claim may not be knowable or available at
the time, such as in a case of preauthorization, or there may be no
specific claim, such as in a case of rescission.
\10\ ICD-9 and ICD-10 codes refer to the International
Classification of Diseases, 9th revision and 10th revision,
respectively. The DSM-IV codes refer to the Diagnostic and
Statistical Manual of Mental Disorders, Fourth Edition.
\11\ CPT refers to Current Procedural Terminology.
\12\ CARC refers to Claim Adjustment Reason Code and RARC refers
to Remittance Advice Remark Code.
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Sixth, these interim final regulations provide that, in the case of
a plan or issuer that 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 or issuer asserts that it
substantially complied with these requirements or that any error it
committed was de minimis. Accordingly, upon such a failure, the
claimant may initiate an external review and pursue any available
remedies under applicable law, such as judicial review.
In addition to the six new requirements, the statute and these
interim final regulations require a plan and issuer to provide
continued coverage pending the outcome of an internal appeal. For this
purpose, the plan or issuer must comply with the requirements of the
DOL claims procedure regulation, which, as applied under these interim
final regulations, generally prohibits a plan or issuer 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, under either a State
external review process or the Federal external review process, in
accordance with the Uniform Health Carrier External Review Model Act
promulgated by the National Association of Insurance Commissioners
(NAIC Uniform Model Act). The provision of the NAIC Uniform Model Act
requiring simultaneous internal appeals and external review is
discussed later in this preamble.
2. Health Insurance Issuers Offering Individual Health Insurance
Coverage
The statute requires the Secretary of Health and Human Services to
set forth processes for internal claims and appeals in the individual
market. Under these interim final regulations, the Secretary of Health
and Human Services has determined that a health insurance issuer
offering individual health insurance coverage must generally comply
with all the requirements for the internal claims and appeals process
that apply to group health coverage.\13\ The process and protections of
the group health coverage standards are also pertinent to the
individual health insurance market. Furthermore, many issuers in the
individual market also provide coverage in the group market. To
facilitate compliance, it is preferable to have similar processes in
the group and individual markets. Accordingly, an individual health
insurance issuer is subject to the DOL claims procedure regulation as
if the issuer were a group health plan. Moreover, an individual health
insurance issuer must also comply with the additional standards in
these interim final regulations imposed on group health insurance
coverage.
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\13\ The special rules in the DOL claims procedure regulation
applicable only to multiemployer plans (generally defined in section
3(37) of ERISA as plans maintained pursuant to one or more
collective bargaining agreements for the employees of two or more
employers) do not apply to health insurance issuers in the
individual market.
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To address certain relevant differences in the group and individual
markets, health insurance issuers offering individual health insurance
coverage must comply with three additional requirements. First, these
interim final regulations expand the scope of the group health coverage
internal claims and appeals process to cover initial eligibility
determinations for individual health insurance coverage. This
protection is important because eligibility determinations in the
individual market are frequently based on the health status of the
applicant, including preexisting conditions. With the prohibition
against preexisting condition exclusions taking effect for policy years
beginning on or after September 23, 2010 for children under 19 and for
all others for policy years beginning on or after January 1, 2014,
applicants in the individual market should have the opportunity for a
review of a denial of eligibility of coverage to determine whether the
issuer is complying with the new provisions in making the
determination.
Second, although the DOL claims procedure regulation permits plans
to have a second level of internal appeals, these interim final
regulations require that health insurance issuers offering individual
health insurance coverage have only one level of internal appeals. This
allows the claimant to seek either external review or judicial review
immediately after an adverse benefit determination is upheld in the
first level of the internal appeals process. There is no need for a
second level of an internal appeal in the individual market since the
issuer conducts all levels of the internal appeal, unlike in the group
market, where a third party administrator may conduct the first level
of the internal appeal and the employer may conduct a second level of
the internal appeal. Accordingly, after an issuer has reviewed an
adverse benefit determination once, the claimant should be allowed to
seek external review of the determination by an outside entity.
Finally, these interim final regulations require health insurance
issuers offering individual health insurance coverage to maintain
records of all claims and notices associated with their internal claims
and appeals processes. The records must be maintained for at least six
years, which is the same requirement for group health plans under the
ERISA recordkeeping requirements. An issuer must make such records
available for examination upon request. Accordingly, a claimant or
State or Federal agency official generally would be able to request and
receive such documents free of charge. Other Federal and State law
regarding disclosure of personally identifiable health information may
apply, including the HIPAA privacy rule.\14\
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\14\ See 45 CFR 164.500 et seq.
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c. State Standards for External Review
The statute and these interim final regulations provide that plans
and issuers must comply with either a State external review process or
the Federal external review process. These interim final regulations
provide a basis for determining when plans and issuers must comply with
an applicable State external review process and when they must comply
with the Federal external review process.
For health insurance coverage, if a State external review process
that applies to and is binding on an issuer includes, at a minimum, the
consumer protections in the NAIC Uniform Model Act in place on July 23,
2010,\15\ then the issuer must comply with the applicable State
external review process and not with the Federal external review
process. In such a case, to the extent that benefits under a group
health plan are provided through health insurance
[[Page 43335]]
coverage, the issuer is required to satisfy the obligation to provide
an external review process, so the plan itself is not required to
comply with either the State external review process or the Federal
external review process. The Departments encourage States to establish
external review processes that meet the minimum consumer protections of
the NAIC Uniform Model Act. The Departments prefer having States take
the lead role in regulating health insurance issuers, with Federal
enforcement only as a fallback measure.
---------------------------------------------------------------------------
\15\ These interim final regulations specify that the relevant
NAIC Uniform Model Act is the version in place on the date these
interim final regulations are published. If the NAIC Uniform Model
Act is later modified, the Departments will review the changes and
determine to what extent any additional requirements will be
incorporated into the minimum standards for State external review
processes by amending these regulations. This version of the NAIC
Uniform Model Act is available at http://www.dol.gov/ebsa and http:/
/www.hhs.gov/ociio/.
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These interim final regulations do not preclude a State external
review process from applying to and being binding on a self-insured
group health plan under some circumstances. While the preemption
provisions of ERISA ordinarily would prevent a State external review
process from applying directly to an ERISA plan, ERISA preemption does
not prevent a State external review process from applying to some self-
insured plans, such as nonfederal governmental plans and church plans
not covered by ERISA preemption, and multiple employer welfare
arrangements, which can be subject to both ERISA and State insurance
laws. A State external review process could apply to such plans if the
process includes, at a minimum, the consumer protections in the NAIC
Uniform Model Act.
Under these interim final regulations, any plan or issuer not
subject to a State external review process must comply with the Federal
external review process. (However, to the extent a plan provides health
insurance coverage that is subject to an applicable State external
review process that provides the minimum consumer protections in the
NAIC Uniform Model Act, the plan does not have to comply with the
Federal external review process.) A plan or issuer is subject to the
Federal external review process where the State external review process
does not meet, at a minimum, the consumer protections in the NAIC
Uniform Model Act, as well as where there is no applicable State
external review process.
For a State external review process to apply instead of the Federal
external review process, the Affordable Care Act provides that the
State external review process must include, at a minimum, the consumer
protections of the NAIC Uniform Model Act. Accordingly, the Departments
have determined that the following elements from the NAIC Uniform Model
Act are the minimum consumer protections that must be included for a
State external review process to apply. The State process must:
Provide for the external review of adverse benefit
determinations (and final internal adverse benefit determinations) that
are based on medical necessity, appropriateness, health care setting,
level of care, or effectiveness of a covered benefit.
Require issuers to provide effective written notice to
claimants of their rights in connection with an external review for an
adverse benefit determination.
To the extent the State process requires exhaustion of an
internal claims and appeals process, make exhaustion unnecessary if:
the issuer has waived the exhaustion requirement, the claimant has
exhausted (or is considered to have exhausted) the internal claims and
appeals process under applicable law, or the claimant has applied for
expedited external review at the same time as applying for an expedited
internal appeal.
Provide that the issuer against which a request for
external review is filed must pay the cost of an independent review
organization (IRO) for conducting the external review. While having the
issuer pay the cost of the IRO's review is reflected in the NAIC
Uniform Model Act, if the State pays this cost, the Departments would
treat the State process as meeting this requirement; this alternative
is just as protective to the consumer because the cost of the review is
not imposed on the consumer. Notwithstanding this requirement that the
issuer (or State) must pay the cost of the IRO's review, the State
process may require a nominal filing fee from the claimant requesting
an external review. For this purpose, to be considered nominal, a
filing fee must not exceed $25, it must be refunded to the claimant if
the adverse benefit determination is reversed through external review,
it must be waived if payment of the fee would impose an undue financial
hardship, and the annual limit on filing fees for any claimant within a
single year must not exceed $75.
Not impose a restriction on the minimum dollar amount of a
claim for it to be eligible for external review (for example, a $500
minimum claims threshold).
Allow at least four months after the receipt of a notice
of an adverse benefit determination or final internal adverse benefit
determination for a request for an external review to be filed.
Provide that an IRO will be assigned on a random basis or
another method of assignment that assures the independence and
impartiality of the assignment process (for example, rotational
assignment) by a State or independent entity, and in no event selected
by the issuer, plan, or individual.
Provide for maintenance of a list of approved IROs
qualified to conduct the review based on the nature of the health care
service that is the subject of the review. The State process must
provide for approval only of IROs that are accredited by a nationally
recognized private accrediting organization.
Provide that any approved IRO has no conflicts of interest
that will influence its independence.
Allow the claimant to submit to the IRO in writing
additional information that the IRO must consider when conducting the
external review and require that the claimant is notified of such right
to do so. The process must also require that any additional information
submitted by the claimant to the IRO must be forwarded to the issuer
within one business day of receipt by the IRO.
Provide that the decision is binding on the plan or
issuer, as well as the claimant, except to the extent that other
remedies are available under State or Federal law.
Provide that, for standard external review, within no more
than 45 days after the receipt of the request for external review by
the IRO, the IRO must provide written notice to the issuer and the
claimant of its decision to uphold or reverse the adverse benefit
determination.
Provide for an expedited external review in certain
circumstances and, in such cases, the State process must provide notice
of the decision as expeditiously as possible, but not later than 72
hours after the receipt of the request.
Require that issuers include a description of the external
review process in the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to claimants, substantially similar to what is set forth in
section 17 of the NAIC Uniform Model Act.
Require that IROs maintain written records and make them
available upon request to the State, substantially similar to what is
set forth in section 15 of the NAIC Uniform Model Act.
Follow procedures for external review of adverse benefit
determinations involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
The Departments invite comments on this list of minimum consumer
[[Page 43336]]
protections and whether other elements of the NAIC Uniform Model Act
should be included in the list.
The Department of Health and Human Services will determine whether
a State external review process meets these requirements (and thus
whether issuers (and, if applicable, plans) subject to the State
external review process must comply with the State external review
process rather than the Federal external review process). A transition
period will be provided, however, during which existing State external
review processes may be treated as satisfying these requirements.
Under PHS Act section 2719, if a State external review process does
not provide the minimum consumer protections of the NAIC Uniform Model
Act, health insurance issuers in the State must implement the Federal
external review process. The Departments' initial review of existing
State external review processes indicates that not all State external
review processes provide the minimum consumer protections of the NAIC
Uniform Model Act. Under PHS Act section 2719(c), the Departments are
provided with discretion to consider an external review process in
place on the date of enactment of the Affordable Care Act to be in
compliance with the external review requirement under section 2719(b)
``as determined appropriate.'' In order to allow States time to amend
their laws to meet or go beyond the minimum consumer protections of the
NAIC Uniform Model Act set forth in these interim final regulations,
the Departments are using their authority under PHS Act section 2719(c)
to treat existing State external review processes as meeting the
minimum standards during a transition period for plan years (in the
individual market, policy years) beginning before July 1, 2011.
Thus, for plan or policy years beginning before July 1, 2011, a
health insurance issuer subject to an existing State external review
process must comply with that State external review process and not the
Federal external review process. The applicable external review process
for plan or policy years beginning on or after July 1, 2011 depends on
the type of coverage and whether the State external review process has
been determined by the Department of Health and Human Services to
satisfy the minimum standards of the NAIC Uniform Model Act.
The applicable external review process for any particular claim is
based on the external review process applicable to the plan or issuer
at the time a final internal adverse benefit determination (or, in the
case of simultaneous internal appeals and external review, the adverse
benefit determination) is provided. For this purpose, the final
internal adverse benefit determination includes a deemed final internal
adverse benefit determination in which the internal claims and appeals
process is exhausted because of the failure by the plan or issuer to
comply with the requirements of the internal claims and appeals
process. Thus, for an issuer with a calendar year plan year in a State
in which the State external review process fails to meet the minimum
standards, external review of final internal adverse benefit
determinations provided prior to the first day of the first calendar
year on or after July 1, 2011 (that is, January 1, 2012) must comply
with the State external review process, while external reviews of final
internal adverse benefit determinations provided on or after January 1,
2012 must meet the alternative Federal external review requirements.
An additional provision of the NAIC Uniform Model Act not addressed
in the interim final regulations is the required scope of an applicable
State external review process. The NAIC Uniform Model Act applies to
all issuers in a State. The Departments' initial review of existing
State external review processes indicates that some States do not apply
the State external review process to all issuers in the State. For
example, some State external review processes only apply to HMOs and do
not apply to other types of health coverage. The Departments believe
that State external review processes are more effective, and thus more
protective, where the external review process is market-wide and
available to all claimants with insured coverage. As States with
external review processes decide whether to enact legislation amending
their laws to provide the consumer protections that would satisfy the
requirements of these interim final regulations, the Departments
encourage States to establish external review processes that are
available for all insured health coverage. This is consistent with the
Departments general approach of having States take a lead role in
providing consumer protections, with Federal enforcement only as a
fallback measure.
That said, these interim final regulations do not set a specific
standard for availability of the State external review process that is
considered to meet the minimum consumer protections of the NAIC Uniform
Model Act. If it is determined that market-wide application of the
State external review process is required, plans and issuers would be
subject to the Federal external review process in States that do not
apply the State external review process to all issuers in the State.
Alternatively, if it is determined that universal availability is not
required, those plans and issuers that are not subject to the State
external review process would be, as are self-insured plans, subject to
the Federal external review process. The Departments seek comments
whether the Federal external review process should apply to all plans
and issuers in a State if the State external review process does not
apply to all issuers in the State. After reviewing the comments, the
Departments expect to issue future guidance addressing the issue.
d. Federal External Review Process
PHS Act section 2719(b)(2) requires the Departments to establish
standards, ``through guidance,'' governing an external review process
that is similar to the State external appeals process that meets the
standards in these regulations. These interim final regulations set
forth the scope of claims eligible for review under the Federal
external review process. Specifically, under the Federal external
review process, the terms ``adverse benefit determination'' and ``final
internal adverse benefit determination'' are defined the same as they
are for purposes of internal claims and appeals (and, thus, include
rescissions of coverage). However, an adverse benefit determination or
final internal adverse benefit determination that relates to a
participant's or beneficiary's failure to meet the requirements for
eligibility under the terms of a group health plan (i.e., worker
classification and similar issues) is not within the scope of the
Federal external review process.
These interim final regulations set forth the standards that would
apply to claimants, plans, and issuers under this Federal external
review process, and the substantive standards that would be applied
under this process. They also reflect the statutory requirement that
the process established through guidance from the Departments be
similar to a State external review process that complies with the
standards in these regulations. They also provide that the Federal
external review process, like the State external review process, will
provide for expedited external review and additional consumer
protections with respect to external review for claims involving
experimental or investigational treatment. The
[[Page 43337]]
Departments will address in sub-regulatory guidance how non-
grandfathered self-insured group health plans that currently maintain
an internal appeals process that otherwise meets the Federal external
review standards may comply or be brought into compliance with the
requirements of the new Federal external review process.
e. Culturally and Linguistically Appropriate
The statute and these interim final regulations require that
notices of available internal claims and appeals and external review
processes be provided in a culturally and linguistically appropriate
manner. Plans and issuers are considered to provide relevant notices in
a culturally and linguistically appropriate manner if notices are
provided in a non-English language as described these interim final
regulations.\16\ Under these interim final regulations, the requirement
to provide notices in a non-English language is based on thresholds of
the number of people who are literate in the same non-English language.
In the group market, the threshold differs depending on the number of
participants in the plan. For a plan that covers fewer than 100
participants at the beginning of a plan year, the threshold is 25
percent of all plan participants being literate only in the same non-
English language. For a plan that covers 100 or more participants at
the beginning of a plan year, the threshold is the lesser of 500
participants, or 10 percent of all plan participants, being literate
only in the same non-English language. The thresholds are adapted from
the Department of Labor's regulations regarding style and format for a
summary plan description, at 29 CFR 2520.102-2(c). In the individual
market, the threshold is 10 percent of the population residing in the
county being literate only in the same non-English language.\17\ The
Department of Health and Human Services will publish guidance that
issuers may consult to establish these county level estimates on its
Web site at http://www.hhs.gov/ociio/ by September 23, 2010. The
Department of Health and Human Services welcomes comments on whether
the threshold should remain 10 percent and whether it should continue
to be applied on a county-by-county basis.
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\16\ For internal claims involving urgent care (for which the
claim is generally made by a health care provider), where paragraph
(g) of the DOL claims procedure regulation permits an initial oral
notice of determination must be made within 24 hours and follow-up
in written or electronic notification within 3 days of the oral
notification, it may not be reasonable, practicable, or appropriate
to provide notice in a non-English language within 24 hours. In such
situations, the requirement to provide notice in a culturally and
linguistically appropriate manner is satisfied if the initial notice
is provided in English and the follow-up notice is provided in the
appropriate non-English language.
\17\ The county-by-county approach is generally adapted from the
approach used under the Medicare Advantage program.
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If an applicable threshold is met, notice must be provided upon
request in the non-English language with respect to which the threshold
is met. In addition, the plan or issuer must also include a statement
in the English versions of all notices, prominently displayed in the
non-English language, offering the provision of such notices in the
non-English language. Once a request has been made by a claimant, the
plan or issuer must provide all subsequent notices to a claimant in the
non-English language. In addition, to the extent the plan or issuer
maintains a customer assistance process (such as a telephone hotline)
that answers questions or provides assistance with filing claims and
appeals, the plan or issuer must provide such assistance in the non-
English language.
f. Secretarial Authority
The statute provides the Departments with the authority to deem an
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, to be in compliance with PHS
Act section 2719. These interim final regulations provide the
Departments may determine that the external review process of a plan or
issuer, in operation as of March 23, 2010, is considered in compliance
with a State external review process or the Federal external review
process, as applicable.
g. Applicability Date
The requirements to implement effective internal and external
claims and appeals processes apply for plan years (in the individual
market, policy years) beginning on or after September 23, 2010. The
statute and these interim final regulations do not apply to
grandfathered health plans. See 26 CFR 54.9815-1251T, 29 CFR 2590.715-
1251, and 45 CFR 147.140 (75 FR 34538, June 17, 2010).
III. Interim Final Regulations and Request for Comments
Section 9833 of the Code, section 734 of ERISA, and section 2792 of
the PHS Act authorize the Secretaries of the Treasury, Labor, and HHS
(collectively, the Secretaries) to promulgate any interim final rules
that they determine are appropriate to carry out the provisions of
chapter 100 of the Code, part 7 of subtitle B of title I of ERISA, and
part A of title XXVII of the PHS Act, which include PHS Act sections
2701 through 2728 and the incorporation of those sections into ERISA
section 715 and Code section 9815.
In addition, under Section 553(b) of the Administrative Procedure
Act (APA) (5 U.S.C. 551 et seq.) a general notice of proposed
rulemaking is not required when an agency, for good cause, finds that
notice and public comment thereon are impracticable, unnecessary, or
contrary to the public interest. The provisions of the APA that
ordinarily require a notice of proposed rulemaking do not apply here
because of the specific authority granted by section 9833 of the Code,
section 734 of ERISA, and section 2792 of the PHS Act. However, even if
the APA were applicable, the Secretaries have determined that it would
be impracticable and contrary to the public interest to delay putting
the provisions in these interim final regulations in place until a full
public notice and comment process was completed. As noted above, the
internal claims and appeals and external review provisions of the
Affordable Care Act are applicable for plan years (in the individual
market, policy years) beginning on or after September 23, 2010, six
months after date of enactment. Had the Departments published a notice
of proposed rulemaking, provided for a 60-day comment period, and only
then prepared final regulations, which would be subject to a 60-day
delay in effective date, it is unlikely that it would have been
possible to have final regulations in effect before late September,
when these requirements could be in effect for some plans or policies.
Moreover, the requirements in these interim final regulations require
significant lead time in order to implement. These interim final
regulations require plans and issuers to provide internal claims and
appeals and external review processes and to notify participants,
beneficiaries, and enrollees of their rights to such processes. Plans
and issuers will presumably need to amend current internal claims and
appeals procedures, adopt new external review processes, and notify
participants, beneficiaries, and enrollees of these changes before they
go into effect. Moreover, group health plans and health insurance
issuers subject to these provisions will have to take these changes
into account in establishing their premiums, and in making other
changes to the designs of plan or policy benefits. In some cases,
[[Page 43338]]
issuers will need time to secure approval for these changes in advance
of the plan or policy year in question.
Accordingly, in order to allow plans and health insurance coverage
to be designed and implemented on a timely basis, regulations must be
published and available to the public well in advance of the effective
date of the requirements of the Affordable Care Act. It is not possible
to have a full notice and comment process and to publish final
regulations in the brief time between enactment of the Affordable Care
Act and the date regulations are needed.
The Secretaries further find that issuance of proposed regulations
would not be sufficient because the provisions of the Affordable Care
Act protect significant rights of plan participants and beneficiaries
and individuals covered by individual health insurance policies and it
is essential that participants, beneficiaries, insureds, plan sponsors,
and issuers have certainty about their rights and responsibilities.
Proposed regulations are not binding and cannot provide the necessary
certainty. By contrast, the interim final regulations provide the
public with an opportunity for comment, but without delaying the
effective date of the regulations.
For the foregoing reasons, the Departments have determined that it
is impracticable and contrary to the public interest to engage in full
notice and comment rulemaking before putting these interim final
regulations into effect, and that it is in the public interest to
promulgate interim final regulations.
IV. Economic Impact and Paperwork Burden
A. Summary--Department of Labor and Department of Health and Human
Services
As stated earlier in this preamble, these interim final regulations
implement PHS Act section 2719, which sets forth rules with respect to
internal claims and appeals and external appeals processes for group
health plans and health insurance issuers that are not grandfathered
health plans.\18\ This provision generally is effective for plan years
(in the individual market, policy years) beginning on or after
September 23, 2010, which is six months after the March 23, 2010 date
of enactment of the Affordable Care Act.
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\18\ The Affordable Care Act adds Section 715 to the Employee
Retirement Income Security Act (ERISA) and section 9815 to the
Internal Revenue Code (the Code) to make the provisions of part A of
title XXVII of the PHS Act applicable to group health plans, and
health insurance issuers providing health insurance coverage in
connection with group health plans, under ERISA and the Code as if
those provisions of the PHS Act were included in ERISA and the Code.
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The Departments have crafted these interim final regulations to
secure the protections intended by Congress in the most economically
efficient manner possible. In accordance with OMB Circular A-4, the
Departments have quantified the benefits and costs where possible and
provided a qualitative discussion of some of the benefits and costs
that may stem from these interim final regulations.
B. Executive Order 12866--Department of Labor and Department of Health
and Human Services
Under Executive Order 12866 (58 FR 51735), ``significant''
regulatory actions are subject to review by the Office of Management
and Budget (OMB). Section 3(f) of the Executive Order defines a
``significant regulatory action'' as an action that is likely to result
in a rule (1) Having an annual effect on the economy of $100 million or
more in any one year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. OMB has
determined that this rule is significant within the meaning of section
3(f)(1) of the Executive Order, because it is likely to have an effect
on the economy of $100 million in any one year. Accordingly, OMB has
reviewed these rules pursuant to the Executive Order. The Departments
provide an assessment of the potential costs and benefits of each
regulatory provision below, summarized in table 1.
Table 1--Accounting Table
Benefits:
Qualitative: A more uniform, rigorous, and consumer friendly system of
claims and appeals processing will provide a broad range of direct and
indirect benefits that will accrue to varying degrees to all of the
affected parties. These interim final regulations could improve the
extent to which employee benefit plans provide benefits consistent with
the established terms of individual plans. While payment of these
benefits will largely constitute transfers, the transfers will be
welfare improving, because incorrectly denied benefits will be paid.
Greater certainty and consistency in the handling of benefit claims and
appeals and improved access to information about the manner in which
claims and appeals are adjudicated should lead to efficiency gains in
the system, both in terms of the allocation of spending across plans
and enrollees as well as operational efficiencies among individual
plans. This certainty and consistency can also be expected to benefit,
to varying degrees, all parties within the system, particularly
consumers, and to lead to broader social welfare gains.
------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Estimate Year dollar Discount rate Period covered
----------------------------------------------------------------------------------------------------------------
Costs:
Annualized Monetized ($millions/year)........... 51.2 2010 7% 2011-2013
51.6 2010 3% 2011-2013
----------------------------------------------------------------------------------------------------------------
Qualitative: The Departments have quantified the primary source of costs associated with these interim final
regulations that will be incurred to (i) administer and conduct the internal and external review process, (ii)
prepare and distribute required disclosures and notices, and (iii) bring plan and issuers' internal and
external claims and appeals procedures into compliance with the new requirements. The Departments also have
quantified the start-up costs for issuers in the individual market to bring themselves into compliance.........
----------------------------------------------------------------------------------------------------------------
Reversals:
Annualized Monetized ($millions/year)........... 24.4 2010 7% 2011-2013
[[Page 43339]]
24.7 2010 3% 2011-2013
----------------------------------------------------------------------------------------------------------------
Qualitative: The Departments estimated the dollar amount of claim denials reversed in the external review
process. While this amount is a cost to plans, it represents a payment of benefits that should have previously
been paid to participants, but was denied. Part of this amount is a transfer from plans and issuers to those
now receiving payment for denied benefits. These transfers will improve equity, because incorrectly denied
benefits will be paid. Part of the amount could also be a cost if the reversal leads to services and hence
resources being utilized now that had been denied previously. The Departments are not able to distinguish
between the two types, but believe that most reversals are associated with a transfer..........................
----------------------------------------------------------------------------------------------------------------
1. Need for Regulatory Action
Before the enactment of the Affordable Care Act, health plan
sponsors and issuers were not uniformly required to implement claims
and appeals processes. For example, ERISA-covered group health plan
sponsors were required to implement internal claims and appeal
processes that complied with the DOL claims procedure regulation,\19\
while group health plans that were not covered by ERISA, such as plans
sponsored by State and local governments were not. Health insurance
issuers offering coverage in the individual insurance market were
required to comply with various applicable State internal appeals laws
but were not required to comply with the DOL claims procedure
regulation.
---------------------------------------------------------------------------
\19\ 29 CFR 2560.503-1.
---------------------------------------------------------------------------
With respect to external appeal processes, before the enactment of
the Affordable Care Act, sponsors of fully-insured ERISA-covered group
health plans, fully-insured State and local governmental plans, and
fully-insured church plans were required to comply with State external
review laws, while self-insured ERISA-covered group health plans were
not subject to such laws due to ERISA preemption.\20\ In the individual
health insurance market, issuers in States with external review laws
were required to comply with such laws. However, uniform external
review standards did not apply, because State external review laws vary
from State-to-State. Moreover, at least six States did not have
external review laws when the Affordable Care Act was enacted;
therefore, issuers in those States were not required to implement an
external review process.
---------------------------------------------------------------------------
\20\ To the extent that the ERISA preemption provisions do not
prevent a State external review process from applying to a self-
insured plan (for example, for self-insured nonfederal governmental
plans, self-insured church plans, and self-insured multiple employer
welfare arrangements) the State could make its external review
process applicable to them. The Departments are unaware of the
number of these plans that are subject to State external review
laws.
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Under this regulatory system, inconsistent claims and appeals
processes applied to plan sponsors and issuers and a patchwork of
consumer protections were provided to participants, beneficiaries, and
enrollees. The applicable processes and protections depended on several
factors including whether (i) Plans were subject to ERISA, (ii)
benefits were self-funded or financed by the purchase of an insurance
policy, (iii) issuers were subject to State internal claims and appeals
laws, and (iv) issuers were subject to State external review laws, and
if so, the scope of such laws (such as, whether the laws only apply to
one segment of the health insurance market, e.g., managed care or HMO
coverage). These uneven protections created an appearance of
unfairness, increased cost for issuers and plans operating in multiple
States, and may have led to confusion among consumers about their
rights.
Congress enacted new PHS Act section 2719 to ensure that plans and
issuers implemented more uniform internal and external claims and
appeals processes and to set a minimum standard of consumer protections
that are available to participants, beneficiaries, and enrollees. These
interim final regulations are necessary to provide rules that plan
sponsors and issuers can use to implement effective internal and
external claims and appeals processes that meet the requirements of new
PHS Act section 2719.
2. PHS Act Section 2719--Claims and Appeals Process (26 CFR 54.9815-
2719T, 29 CFR 2590.715-2719, 45 CFR 147.136)
a. Summary
As discussed earlier in this preamble, section 1001 of the
Affordable Care Act adds new PHS Act section 2719, which requires all
non-grandfathered group health plans and health insurance issuers
offering group or individual health coverage to implement uniform
internal claims and appeals and external appeals processes. Under PHS
Act section 2719 and these interim final regulations, all sponsors of
non-grandfathered group health plans and health insurance issuers
offering group or individual health insurance coverage must comply with
all requirements of the DOL claims procedures regulation \21\ as well
as the new standards that are established by the Secretary of Labor and
the Secretary of Health and Human Services in paragraphs (b)(2) and
(b)(3) of these interim final regulations.
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\21\ Please note that under these interim final regulations, the
individual health insurance market is not required to comply with
the requirements of the Department of Labor's claims and appeals
procedure regulation that apply to multiemployer plans.
---------------------------------------------------------------------------
On the external appeals side, all group health plans or health
insurance issuers offering group or individual health insurance
coverage that are not grandfathered must comply with an applicable
State external review process that, at a minimum, includes the consumer
protections set forth in the Uniform Heath Carrier External Review
Model Act promulgated by the National Association of Insurance
Commissioners (the ``NAIC Uniform Model Act'') and is binding on the
plan or issuer. If the State has not established an external review
process that meets the requirements of the NAIC Uniform Model Act or a
plan is not subject to State insurance regulation, (including a State
law that establishes an external review process) because it is a self-
insured plan, the plan or issuer must comply with the requirements of a
Federal external review process set forth in paragraph (d) of these
interim final regulations.
b. Estimated Number of Affected Entities
For purposes of the new requirements in the Affordable Care Act
that apply to group health plans and health insurance issuers in the
group and individual markets, the Departments have defined a large
group health plan as an employer plan with 100 or more workers and a
small group plan as an employer plan with fewer than 100 workers. The
Departments make the following estimates about plans and issuers
affected by these interim final regulations: (1) There are
approximately 72,000 large and 2.8 million small ERISA-covered group
health plans with
[[Page 43340]]
an estimated 97.0 million participants in large group plans and 40.9
million participants in small group plans; \22\ (2) there are 126,000
governmental plans with 36.1 million participants in large plans and
2.3 million participants in small plans; \23\ and (3) there are 16.7
million individuals under age 65 covered by individual health insurance
policies.\24\
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\22\ All participant counts and the estimates of individual
policies are from the U.S. Department of Labor, EBSA calculations
using the March 2009 Current Population Survey Annual Social and
Economic Supplement and the 2008 Medical Expenditure Panel Survey.
\23\ Estimate is from the 2007 Census of Government.
\24\ U.S. Census Bureau, Current Population Survey, March 2009.
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As described in the Departments' interim final regulations relating
to status as a grandfathered health plan,\25\ the Affordable Care Act
preserves the ability of individuals to retain coverage under a group
health plan or health insurance coverage in which the individual was
enrolled on March 23, 2010 (a grandfathered health plan). Group health
plans and individual health insurance coverage that are grandfathered
health plans do not have to meet the requirements of these interim
final regulations. Therefore, only plans and issuers offering group and
individual health insurance coverage that are not grandfathered health
plans will be affected by these interim final regulations.
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\25\ 75 FR 34538 (June 17, 2010).
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Plans can choose to make certain disqualifying changes and
relinquish their grandfather status.\26\ The Affordable Care Act
provides plans with the ability to maintain grandfathered status in
order to promote stability for consumers while allowing plans and
sponsors to make reasonable adjustments to lower costs and encourage
the efficient use of services. Based on an analysis of the changes
plans have made over the past few years, the Departments expect that
more plans will choose to make these changes over time and therefore
the number of grandfathered health plans is expected to decrease.
Correspondingly, the number of plans and policies affected by these
interim final regulations is likely to increase over time. In addition,
the number of individuals receiving the full benefits of the Affordable
Care Act is likely to increase over time. The Departments estimate that
18 percent of large employer plans and 30 percent of small employer
plans would relinquish grandfather status in 2011, increasing over time
to 45 percent and 66 percent respectively by 2013, although there is
substantial uncertainty surrounding these estimates.\27\ The
Departments also estimate that in 2011, roughly 31 million people will
be enrolled in group health plans subject to PHS Act section 2719 and
these interim final regulations, growing to approximately 78 million in
2013.\28\
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\26\ See 75 FR 34538 (June 17, 2010).
\27\ See 75 FR 34538 (June 17, 2010) for a detailed description
of the derivation of the estimates for the percentages of
grandfathered health plans. In brief, the Departments used data from
the 2008 and 2009 Kaiser Family Foundations/Health Research and
Educational Trust survey of employers to estimate the proportion of
plans that made changes in cost-sharing requirements that would have
caused them to relinquish grandfather status if those same changes
were made in 2011, and then applied a set of assumptions about how
employer behavior might change in response to the incentives created
by the grandfather regulations to estimate the proportion of plans
likely to relinquish grandfather status. The estimates of changes in
2012 and 2013 were calculated by using the 2011 calculations and
assuming that an identical percentage of plan sponsors will
relinquish grandfather status in each year.
\28\ To estimate the number of individuals covered in
grandfathered health plans, the Departments extended the analysis
described in 75 FR 34538, and estimated a weighted average of the
number of employees in grandfathered health plans in the large
employer and small employer markets separately, weighting by the
number of employees in each employer's plan. Estimates for the large
employer and small employer markets were then combined, using the
estimates supplied above that there are 133.1 million covered lives
in the large group market, and 43.2 million in the small group
market.
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In the individual market, one study estimated that 40 percent to 67
percent of individual policies terminate each year.\29\ Because newly
purchased individual policies are not grandfathered, the Departments
expect that a large proportion of individual policies will not be
grandfathered, covering up to and perhaps exceeding 10 million
individuals.
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\29\ Adele M. Kirk. The Individual Insurance Market: A Building
Block for Health Care Reform? Health Care Financing Organization
Research Synthesis. May 2008.
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Not all potentially affected individuals will be affected equally
by these interim final regulations. As stated in the Need for
Regulatory Action section above, sponsors of ERISA-covered group health
plans were required to implement an internal appeals process that
complied with the DOL claims procedure regulation before the Affordable
Care Act's enactment, and the Departments also understand that many
non-Federal governmental plans and church plans that are not subject to
ERISA nonetheless implement internal claims and appeals processes that
comply with the DOL claims procedure regulation.\30\ Therefore,
participants and beneficiaries covered by such plans only will be
affected by the new internal claims and appeals standards that are
provided by the Secretary of Labor in paragraph (b)(2)(ii) of these
interim final regulations.
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\30\ This understanding is based on the Departments'
conversations with industry experts. In addition, the Departments
understand that ERISA-covered plans, State and local government
plans, and non-ERISA covered church plans generally use the same
insurance issuers and service providers who apply the ERISA claims
and appeals requirements to all types of plans.
---------------------------------------------------------------------------
These interim final regulations will have the largest impact on
individuals covered in the individual health insurance market, because
as discussed earlier in this preamble, for the first time, these
issuers will be required to comply with the DOL claims procedure
regulation for internal claims and appeals as well as the additional
standards added by the Secretary of the Department of Health and Human
Services in paragraph (b)(3) of these interim final regulations that
are in some cases more protective than the ERISA standard.\31\
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\31\ To address certain relevant differences in the group and
individual markets, health insurance issuers offering individual
health insurance coverage must comply with the following three
additional requirements: (1) Expand the scope of the claims and
appeals process to cover initial eligibility determinations; (2)
provide only one level of internal appeal (although the DOL claims
procedure regulation permits group health plans to have a second
level of internal appeals), which allows claimants to seek either an
external appeal or judicial review immediately after an adverse
determination is upheld in the first level of internal appeal; and
(3) maintain records of all claims and notices associated with their
internal claims and appeals processes and make such records
available for examination upon request by claimants and Federal or
State regulatory officials.
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On the external appeals side, before the enactment of the
Affordable Care Act, issuers offering coverage in the group and
individual health insurance market already were required to comply with
State external review laws. At that time, all States except Alabama,
Mississippi, Nebraska, North Dakota, South Dakota, and Wyoming had
external review laws, and thirteen States had external review laws that
apply only to certain market segments (for example, managed care or
HMOs). Therefore, the extent to which enrollees covered by policies
issued by these issuers will be affected by these interim final
regulations depends on whether the applicable State external review law
complies with the minimum consumer protections set forth in the NAIC
Uniform Model Act, because if it does not, the policies will become
subject to the Federal external review process that applies to self-
insured plans that are not subject to State regulation \32\ and plans
[[Page 43341]]
and policies in States that do not have external review laws that meet
the minimum consumer protections set forth in the NAIC Uniform Model
Act.
---------------------------------------------------------------------------
\32\ To the extent that the ERISA preemption provisions do not
prevent a State external review process from applying to a self-
insured plan (for example, for self-insured nonfederal governmental
plans, self-insured church plans, and self-insured multiple employer
welfare arrangements) the State could make its external review
process applicable to such plans if it includes, at a minimum, the
consumer protections in the NAIC Uniform Model Act.
---------------------------------------------------------------------------
Individuals participating in ERISA-covered self-insured group
health plans will be among those most affected by the external review
requirements contained in these interim final regulations, because the
preemption provisions of ERISA prevent a State's external review
process from applying directly to an ERISA-covered self-insured
plan.\33\ These plans now will be required to comply with the Federal
external review process set forth under paragraph (d) of these interim
final regulations.
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\33\ While it is possible that some ERISA-covered self-insured
plans may have adopted external review procedures as a matter of
good business practice, the Departments are uncertain regarding the
level to which this has occurred.
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In summary, the number of affected individuals depends on several
factors, including whether (i) a health plan retains its grandfather
status, (ii) the plan is subject to ERISA, (iii) benefits provided
under the plan are self-funded or financed by the purchase of an
insurance policy, (iii) the applicable State has enacted an internal
claims and appeals law, and (iv) the applicable State has enacted an
external review law, and if so the scope of such law, and (v) the
number of new plans and enrollees in such plans.
c. Benefits
In developing these interim final regulations, the Departments
closely considered their potential economic effects, including both
costs and benefits. Because of data limitations and a lack of effective
measures, the Departments did not attempt to quantify expected
benefits. Nonetheless, the Departments were able to identify with
confidence several of the interim final regulation's major economic
benefits.
These interim final regulations will help transform the current,
highly variable health claims and appeals process into a more uniform
and structured process. As stated in the Need for Regulatory Action
above, before the enactment of the Affordable Care Act, inconsistent
internal and external claims and appeals standards applied to plan
sponsors and issuers, and a patchwork of consumer protections were
provided to participants, beneficiaries, and enrollees that depended on
several factors including whether (i) Plans were subject to ERISA, (ii)
benefits were self-funded or financed by the purchase of an insurance
policy, (iii) issuers were subject to State internal claims and appeals
laws, and (iv) issuers were subject to State external review laws, and
if so, the scope of such laws (such as, whether the laws only apply to
one segment of the health insurance market, e.g., managed care or HMO
coverage).
A more uniform, rigorous, and consumer friendly system of claims
and appeals processing will provide a broad range of direct and
indirect benefits that will accrue to varying degrees to all of the
affected parties. In general, the Departments expect that these interim
final regulations will improve the extent to which employee benefit
plans provide benefits consistent with the established terms of
individual plans. This will cause some participants to receive benefits
that, absent the fuller protections of the regulation, they might
otherwise have been incorrectly denied. In other circumstances,
expenditures by plans may be reduced as a fuller and fairer system of
claims and appeals processing helps facilitate enrollee acceptance of
cost management efforts. Greater certainty and consistency in the
handling of benefit claims and appeals and improved access to
information about the manner in which claims and appeals are
adjudicated may lead to efficiency gains in the system, both in terms
of the allocation of spending at a macro-economic level as well as
operational efficiencies among individual plans. This certainty and
consistency can also be expected to benefit, to varying degrees, all
parties within the system and to lead to broader social welfare gains,
particularly for consumers.
By making claims and appeals processes more uniform, these interim
final regulations will increase efficiency in the operation of employee
benefit plans and health care delivery as well as health insurance and
labor markets. These interim final regulations are expected to increase
efficiency by reducing complexity that arises when different market
segments are subject to varying claims and appeals standards.
Idiosyncratic requirements, time-frames, and procedures for claims
processing impose substantial burdens on participants, their
representatives, and service providers. By establishing a more uniform
and complete set of minimum requirements and consumer protections,
these interim final regulations will reduce the complexity of claims
and appeals processing requirements, thereby increasing efficiency.
The Departments expect that these interim final regulations also
will improve the efficiency of health plans by enhancing their
transparency and fostering participants' confidence in their fairness.
When information about the terms and conditions under which benefits
will be provided is unavailable to enrollees, they could discount the
value of benefits to compensate for the perceived risk. The enhanced
disclosure and notice requirements of these interim final regulations
will help participants, beneficiaries, and enrollees better understand
the reasons underlying adverse benefit determinations and their appeal
rights.
The Departments believe that excessive delays and inappropriate
denials of health benefits are relatively rare. Most claims are
approved in a timely fashion. Many claim denials and delays are
appropriate given the plan's terms and the circumstances at hand.
Nonetheless, to the extent that delays and inappropriate denials occur,
substantial harm can be suffered by participants, beneficiaries, and
enrollees, which can also lead to an associated loss of confidence in
the fairness and benefits of the system. A more timely and complete
review process required under these interim final rules regulations
should reduce the levels of delay and error in the system and improve
health outcomes.
The voluntary nature of the employment-based health benefit system
in conjunction with the open and dynamic character of labor markets
make explicit as well as implicit negotiations on compensation a key
determinant of the prevalence of employee benefits coverage. The
prevalence of benefits is therefore largely dependent on the efficacy
of this exchange. If workers perceive that there is the potential for
inappropriate denial of benefits or handling of appeals, they will
discount the value of such benefits to adjust for this risk. This
discount drives a wedge in compensation negotiation, limiting its
efficiency. With workers unwilling to bear the full cost of the
benefit, fewer benefits will be provided. To the extent that workers
perceive that these interim final regulations, supported by enforcement
authority, reduces the risk of inappropriate denials of benefits, the
differential between the employers' costs and workers' willingness to
accept wage offsets is minimized.
Effective claims procedures also can improve health care, health
plan quality, and insurance market efficiency by serving as a
communication channel, providing feedback from participants,
beneficiaries, and providers to plans
[[Page 43342]]
about quality issues. Aggrieved claimants are especially likely to
disenroll if they do not understand their appeal rights, or if they
believe that their plans' claims and appeals procedures will not
effectively resolve their difficulties. Unlike appeals, however,
disenrollments fail to alert plans to the difficulties that prompted
them. More uniform and effective appeals procedures can give
participants and beneficiaries an alternative way to respond to
difficulties with their plans. Plans in turn can use the information
gleaned from the appeals process to improve services.
The Departments also expect that these interim final regulations'
higher standard for more uniform internal and external claims appeals
adjudication will enhance some insurers' and group health plans'
abilities to effectively control costs by limiting access to
inappropriate care. Providing a more formally sanctioned framework for
internal and external review and consultation on difficult claims
facilitates the adoption of cost containment programs by employers who,
in the absence of a regulation providing some guidance, may have opted
to pay questionable claims rather than risk alienating participants or
being deemed to have breached a fiduciary duty.
In summary, the interim final regulations' more uniform standards
for handling health benefit claims and appeals will reduce the
incidence of excessive delays and inappropriate denials, averting
serious, avoidable lapses in health care quality and resultant injuries
and losses to participant, beneficiaries and enrollees. They also will
enhance enrollees' level of confidence in and satisfaction with their
health care benefits and improve plans' awareness of participant,
beneficiary, and provider concerns, prompting plan responses that
improve health care quality. Finally, by helping to ensure prompt and
precise adherence to contract terms and by improving the flow of
information between plans and enrollees, the interim final regulations
will bolster the efficiency of labor, health care, and insurance
markets. The Departments therefore conclude that the economic benefits
of these interim final regulations will justify their costs.
d. Costs and Transfers
The Departments have quantified the primary source of costs
associated with these interim final regulations that will be incurred
to (i) Administer and conduct the internal and external review process,
(ii) prepare and distribute required disclosures and notices, and (iii)
bring plan and issuers' internal and external claims and appeals
procedures into compliance with the new requirements. The Departments
also have quantified the start-up costs for issuers in the individual
market to bring themselves into compliance and the costs and the
transfers associated with the reversal of denied claims during the
external review process. These costs and the methodology used to
estimate them are discussed below.
i. Internal Claims and Appeals. As discussed above, these interim
final regulations require all group health plans and issuers offering
coverage in the group and individual health insurance market to comply
with the DOL claims procedure regulation. The ERISA-covered market,
with an estimated 2.8 million plans and 138 million covered
participants, already is required to comply with the DOL claims
procedure regulation and is far larger than either the non-Federal
governmental plan market, with an estimated 126,000 governmental plans
and 30 million participants, or the individual market, with 16.7
million participants. As stated in the Estimated Number of Affected
Entities section, the Departments understand that many non-Federal
governmental plans comply with the DOL claims procedure regulation,
because they use the same issuers and service providers as ERISA-
covered plans, and these issuers and service providers implement the
internal claims and appeals process for plans in both markets.
Therefore, for purposes of this regulatory impact analysis, the
Departments assume that 90 percent of the claims volume in the non-
Federal governmental group health plan market already complies with the
DOL claims procedure regulation.\34\
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\34\ The Departments are uncertain regarding the 90 percent
compliance rate for State and local government plans. Therefore, to
establish a range, the Departments estimated the cost assuming 75
percent State and local governmental plan compliance. Assuming 75
percent compliance, the cost of State and local plan internal review
compliance would increase from $2 million to $5 million in 2011,
$3.6 million to $9.1 million in 2012, and $5 million to $12.4
million in 2012.
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The Departments estimate that 170 issuers offer policies only in
the individual market.\35\ While the Departments believe that some
issuers are subject to applicable state laws governing internal appeals
processes, and have evidence that some issuers already comply with the
DOL claims procedure regulation, some issuers will have to change their
internal claims and appeals processes to comply with these interim
final regulations.\36\ The Departments estimate that issuers would
incur a start-up cost of $3.5 million in the first year to comply with
these interim final regulations by revising processes, creating or
revising forms, modifying systems, and training personnel. These costs
are mitigated by the model notice of initial benefit determination the
Departments will be issuing in subregulatory guidance. This notice will
not require any data to be provided that cannot be automatically
populated by plans and issuers.
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\35\ Source: Estimates are from NAIC 2007 financial statements
data and the California Department of Managed Healthcare (2009)
(http://wpso.dmhc.ca.gov/hpsearch/viewall.aspx).
\36\ Discussions with the National Association of Insurance
Commissioners suggest that three States require issuers in the
individual market to follow the NAIC internal grievance appeals
model. Eleven States have no set procedures in place, while the rest
have varying requirements. Some issuers voluntarily follow the ERISA
claims and appeals procedures.
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ii. Cost Required to Implement DOL Claims Procedure Regulation
Requirements. The Departments' estimates of the annual costs for plans
and issuers to comply with the DOL claims procedure regulation are
based on the methodology used for the Paperwork Reduction Act (PRA)
hour and cost burden analysis of DOL claims procedure regulation.\37\
The Department first estimated the number of individuals covered by
non-grandfathered plans using the March 2009 Current Population Survey
Annual Social and Economic Supplement and the 2008 Medical Expenditure
Panel Survey. Each covered individual was estimated to generate 10.2
claims on average per year,\38\ 82 percent of which were filed
electronically.\39\ The Departments then assumed that 15 percent of
these claims were denied.\40\ The Departments assume that three percent
of these claims were pre-service with the remaining being post-service
claims.\41\ The number of post-service claims extended was based on the
share
[[Page 43343]]
of ``clean'' claims that took more than 30 days to complete
processing.\42\ The share of denials expected to be appealed, 0.2
percent, was based on a RAND study.\43\ The Departments expect half of
these appeals to be reversed,\44\ and those not reversed were divided
between ``medical claims'' (28.9 percent) and ``administrative claims''
(71.1 percent).
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\37\ The OMB Control Number for the DOL procedure regulation is
1210-0053. OMB approved the three-year renewal of the Control Number
through May 31, 2013, on May 21, 2010.
\38\ Research at the time of the Claims Regulation as well as
responses to the Claims RFI reported a wide range of claims per
participant--between 5 and 18. The Department eventually settled on
10.2.
\39\ AHIP, ``Update: A Survey of Health Care Claims Receipt and
Processing Times, 2009,'' January 2010.
\40\ Health Insurance Association of America (HIAA, which later
merged with AHIP) reported a denial rate of 14 percent in ``Results
from an HIAA Survey on Claims Payment Process,'' March 2003. These
included duplicate claims as well as denied claims that were
appeals. RAND reported an increased trend in claim denials in,
``Inside the Black Box of Managed Care Decisions,'' Research Brief,
2004 from 3 percent to between 8 and 10 percent.
\41\ The assumption that 3 percent of claims are pre-service is
based on comments the Department received in response to the
proposed DOL claims procedure regulation in 2000.
\42\ AHIP, ``Update: A Survey of Health Care Claims Receipt and
Processing Times, 2009,'' January 2010.
\43\ ``Inside the Black Box of Managed Care Decisions,''
Research Brief, 2004.
\44\ The Department based this assumption on the number of
appealed Medicare pre-authorization denials. They received comments
for the proposed regulation arguing this estimate was either too
high or too low and so the Department chose to retain the
assumption.
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The Departments attributed costs to notifying individuals of denied
claims and processing appeals. Initial denials were assumed to only
take a few minutes for a clerical worker to draft and send an adverse
benefit determination notice based on the model notice that will be
issued by the Departments that does not require any information to be
included that cannot be auto-populated. Appealed denials deemed
``medical'' are assumed to require a physician, with an estimated labor
rate of $154.07 to review and was expected to take 4 \1/2\ hours to
decide and draft a response, regardless of outcome.\45\ Appealed
denials deemed ``administrative'' require a legal professional with an
estimated labor rate of $119.03, and a decision and response was
expected to take two minutes for a reversal and two hours for a
denial.\46\ Mailing costs for the notice of adverse determination and
notice of decision of internal appeal is estimated at 54 cents a notice
for material, printing, and postage costs.
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\45\ The Department in its initial claims regulation assumed
that an expert consultation would cost $500 which translated into
roughly 5 hours of a physician's time. EBSA has revised this
slightly downward based on the costs reported by IROs to review
medical claims.
\46\ The Departments' estimates of labor rates include wages,
other benefits, and overhead based on the National Occupational
Employment Survey (May 2008, Bureau of Labor Statistics) and the
Employment Cost Index June 2009, Bureau of Labor Statistics).
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Because ERISA-covered plans already are required to comply with the
DOL claims procedure regulation, the Departments did not attribute any
cost to these plans to comply with the rule. As stated above, the
Departments understand from consulting with industry experts that a
substantial majority of State and local government plans also currently
comply with the existing DOL claims procedure regulation; therefore,
the Departments assumed that only ten percent of the estimated claims
of individuals covered by these plans would constitute a new expense.
All claims in non-grandfathered plans in the individual market were
assumed to bear the full cost of compliance, because these policies are
being required to comply with the DOL claims procedure regulation for
the first time. Table 2 shows the estimated number of claims.
Table 2--Estimated Claims and Appeals in Non-Grandfathered Coverage
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 2012 2013
--------------------------------------------------------------------------------------------------------
Private Private Private
sector Government Individual sector Government Individual sector Government Individual
ESI sector ESI market ESI sector ESI market ESI sector ESI market
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Enrollees (millions)..................... 138.0 39.0 15.1 138.0 39.0 15.1 138.0 39.0 15.1
Non-Grandfathered Enrollees.................... 24.4 6.9 6.0 44.5 12.6 9.7 61.0 17.2 11.8
Total Claims (millions)........................ 248.9 70.4 61.5 453.8 128.3 98.5 622.4 175.9 120.6
Pre-Service:
Claim Approved............................. 6.3 1.8 1.6 11.6 3.3 2.5 15.9 4.5 3.1
Claim Denied............................... 1.1 0.3 0.3 2.0 0.6 0.4 2.8 0.8 0.5
Post-Service:
Claims Approved............................ 196.2 55.5 45.2 357.8 101.1 72.3 490.7 138.7 88.6
Claim Denied............................... 36.2 10.2 9.0 66.0 18.7 14.3 90.6 25.6 17.6
Claim Extended............................. 9.0 2.5 5.6 16.4 4.6 8.9 22.5 6.3 10.9
Total Internal Appeals (thousands)............. 85.4 24.1 52.8 155.7 44.0 84.5 213.6 60.4 103.5
Appeals Upheld............................. 34.2 9.7 21.1 62.3 17.6 33.8 85.4 24.1 41.4
Appeals Denied............................. 51.2 14.5 31.7 93.4 26.4 50.7 128.1 36.2 62.1
Medical subtotal....................... 24.7 7.0 15.3 45.0 12.7 24.4 61.7 17.4 29.9
Appeals Upheld..................... 9.9 2.8 6.1 18.0 5.1 9.8 24.7 7.0 12.0
Appeals Denied..................... 14.8 4.2 9.2 27.0 7.6 14.6 37.0 10.5 17.9
Administrative subtotal................ 60.7 17.2 37.5 110.7 31.3 60.1 151.8 42.9 73.6
Appeals Upheld..................... 24.3 6.9 15.0 44.3 12.5 24.0 60.7 17.2 29.4
Appeals Denied..................... 36.4 10.3 22.5 66.4 18.8 36.0 91.1 25.8 44.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New External Appeals (thousands)......... 2.0 0.6 0.2 3.7 1.1 0.3 5.0 1.5 0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
As shown in Table 3 below, the Departments estimate that the cost
of the internal process, including the costs of internal appeals and
notice distribution, is $1.5 million in 2011 and rises to $3.8 million
in 2013 as the number of non-grandfathered plans increases. The
Departments estimate that the cost for the internal review process for
the individual market is $28.8 million in 2011 and rises to $56.4
million in 2013.
iii. Additional Requirements for Group Health Plans. As discussed
earlier in this preamble, paragraph (b)(2)(i) of these interim final
regulations imposes additional requirements to the DOL claims procedure
regulation that must be satisfied by group health plans and issuers
offering group and individual coverage in the individual and group
health insurance markets. The Departments believe that the additional
requirements have modest costs associated with them, because they
merely clarify provisions of the DOL claims procedure regulation. These
requirements and their associated costs are discussed below.
Definition of adverse determination. These interim final
regulations expand the definition of adverse benefit determination to
include rescissions of coverage. While new, the methodology used to
estimate the burden for the internal appeals process already captures
this burden as most rescissions are associated with a claim and
therefore would already be accounted for. The requirement allows for
appeal of rescinded coverage that does not have
[[Page 43344]]
an associated claim. While the Departments lack data to estimate the
number of rescissions that occur without an associated claim for
benefits, the Departments believe this number is small.
Expedited notification of benefit determination involving urgent
care. The current DOL claims procedure regulation requires that a plan
or issuer provide notification in the case of an urgent care claim as
soon as possible taking into account the medical exigencies, but no
later than 72 hours after receipt of the claim by the plan. These
interim final regulations reduce the time limit to no later than 24
hours after the receipt of the claim by the plan or issuer. The
Departments are not able to quantify the costs of this requirement.
However, two factors could suggest this requirement does not impose
substantial cost. First, the DOL claims procedure regulation requires
urgent care notification to be made as soon as possible; therefore, it
is likely that some claims currently are handled in less than the 24
hours. In addition, the technological developments that have occurred
since the 72 hour standard was issued in the 2000 DOL claims procedure
regulation should facilitate faster notification at reduced costs.
However, plans and issuers would incur additional cost for urgent care
notices that take longer than the required 24 hours to produce.
Speeding up the notification process for these determinations might
necessitate incurring additional cost to add more employees or find
other ways to shorten the timeframe. Additional costs may be associated
with this requirement if a shorter timeframe results in claims being
denied that would not have been under a 72 hour standard or claims
being approved that would have been denied under a longer notification
period.
Full and fair review. These interim final regulations require the
plan or issuer to provide the claimant, free of charge, with any new or
additional evidence relied upon or generated by the plan or issuer and
the rationale used for a determination during the appeals process
sufficiently in advance of the due date of the response to an adverse
benefit determination. This requirement increases the administrative
burden on plans and issuers to prepare and deliver the new and
additional information to the claimant. The Departments are not aware
of data suggesting how often plans rely on new or additional evidence
during the appeals process or the volume of materials that are
received.
For purposes of this regulatory impact analysis, the Departments
assume, as an upper bound, that all appealed claims will involve a
reliance on additional evidence. The Departments assume that this
requirement will impose a cost of just under $1 million in 2013, the
year with the highest cost. The Departments estimated this cost by
assuming that it will require medical office staff with a labor rate of
$26.85 five minutes \47\ to collect and distribute the additional
evidence considered, relied on, or generated during the appeals
process. The Departments estimate that on average, material, printing
and postage costs will be $2.24 per mailing. The Departments further
assume that 38 percent of all mailings will be distributed
electronically with no associated material, printing or postage
costs.\48\
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\47\ EBSA estimates of labor rates include wages, other
benefits, and overhead based on the National Occupational Employment
Survey (May 2008, Bureau of Labor Statistics) and the Employment
Cost Index June 2009, Bureau of Labor Statistics).
\48\ This estimate is based on the methodology used to analyze
the cost burden for the DOL claims procedure regulation (OMB Control
Number 1210-0053).
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Eliminating conflicts of interest. As discussed earlier in this
preamble, these interim final regulations require plans and issuers to
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 or perceived
likelihood that the individual will support or tend to support the
denial of benefits.
This requirement could require plans or issuers to change policies
that currently create a conflict of interest and to discontinue
practices that create such conflicts. The Departments believe that many
plans and issuers already have such requirements in place as a matter
of good business practice, but do not have sufficient data to provide
an estimate. However, the Departments believe that the cost associated
with this requirement will be minimal.
Enhanced notice. These interim final regulations provide new
standards regarding notice to enrollees. Specifically, the statute and
these interim final regulations require a plan or issuer to provide
notice to enrollees, in a culturally and linguistically appropriate
manner (standards for which are described later in this preamble).
Plans and issuers must comply with the requirements of paragraphs (g)
and (j) of the DOL claims procedure regulation, which detail
requirements regarding the issuance of a notice of adverse benefit
determination. Moreover, for purposes of these interim final
regulations, additional content requirements apply for these notices. A
plan or issuer must ensure that any notice of adverse benefit
determination or final adverse benefit determination includes
information sufficient to identify the claim involved. This includes
the date of service, the health care provider, and the claim amount (if
applicable), as well as the diagnosis code (such as an ICD-9 code, ICD-
10 code, or DSM-IV code), the treatment code (such as a CPT code), and
the corresponding meanings of these codes. A plan or issuer must also
ensure that description of the reason or reasons for the denial
includes a description of the standard that was used in denying the
claim. In the case of a notice of final adverse benefit determination,
this description must include a discussion of the decision.
Additionally, the plan or issuer must provide a description of
available internal appeals and external review processes, including
information regarding how to initiate an appeal. Finally, the plan or
issuer must disclose the availability of, and contact information for,
any applicable office of health insurance consumer assistance or
ombudsman established under PHS Act section 2793 to assist such
enrollees with the internal claims and appeals and external review
process. The Departments intend to issue model notices that could be
used to satisfy all the notice requirements under these interim final
regulations in the very near future that will mitigate the cost
associated with providing them. These notices will be made available at
http://www.dol.gov/ebsa and http://www.hhs.gov/ociio/. The cost of
sending the notices is included in the costs of the internal and
external review process. The Departments were unable to estimate the
cost of providing the model notices in a linguistically and culturally
appropriate manner. However the Departments believe the overall costs
to be small as only a small number of plans are believed to be
affected. The Departments request comments that could help in
estimating these costs, particularly with respect to the individual
insurance market.
Deemed exhaustion of internal process. These interim final
regulations provide that, in the case of a plan or issuer that fails to
strictly adhere to all the requirements of the internal claims
[[Page 43345]]
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 or issuer asserts that it substantially complied with
these requirements or that the error was de minimis. Accordingly, under
such deemed exhaustion, the claimant may initiate an external review
and pursue any available remedies under applicable law, such as
judicial review. The Departments are unable to quantify the costs that
are associated with this requirement. While this provision possibly
could result in an increased number of external appeals it could reduce
overall costs if costly litigation is avoided.
Continued coverage. Finally, the statute and these interim final
regulations require a plan and issuer to provide continued coverage
pending the outcome of an internal appeal. For this purpose, the plan
or issuer must comply with the requirements of paragraph (f)(2)(ii) of
the DOL claims procedure regulation, which generally provide that a
plan or issuer cannot reduce or terminate an ongoing course of
treatment without providing advance notice and an opportunity for
advance review. Moreover, as described more fully earlier in this
preamble, the plan or issuer must also provide simultaneous external
review in advance of a reduction or termination of an ongoing course of
treatment.
This provision would not impose any additional cost on plans and
issuers that comply with the DOL claims procedure regulation; however,
costs would be incurred by issuers in the individual market. The
Departments are unable to quantify the cost associated with this
requirement, because they lack sufficient data on the number of
simultaneous reviews that are conducted.\49\
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\49\ The Departments do not have a basis to estimate this,
because the Departments do not know how often this denial takes
place or how often they are appealed. The costs should be minimal,
because the decisions will be made quickly, and the period of
coverage will be brief. The Departments expect the cost to be small
relative to the cost of reversals, which the Departments have
estimated.
---------------------------------------------------------------------------
iv. Additional Requirements for Issuers in the Individual Insurance
Market. To address certain relevant differences in the group and
individual markets, health insurance issuers offering individual health
insurance coverage must comply with three additional requirements.
First, these interim final regulations expand the scope of the group
health coverage internal claims and appeals process to cover initial
eligibility determinations. This protection is important since
eligibility determinations in the individual market are frequently
based on the health status of the applicant, including preexisting
conditions. The Departments do not have sufficient data to quantify the
costs associated with this requirement.\50\
---------------------------------------------------------------------------
\50\ However, the Departments believe this number to be small.
Approximately 10 to 15 percent of applicants are declined coverage
in the individual market, while the Departments do not know how many
of those denied coverage will appeal, using appeal rates for
internal and external appeals would result in only a few thousand
appeals. See ``Fundamentals of Underwriting in the nongroup Health
Insurance Market,'' pages 10-12, April 13, 2005.
---------------------------------------------------------------------------
Second, although the DOL claims procedure regulation permits group
health plans to have a second level of internal appeals, these interim
final regulations require health insurance issuers offering individual
health insurance coverage to have only one level of internal appeals.
This allows the claimant to seek either external review or judicial
review immediately after an adverse determination is upheld in the
first level of internal appeals. The Departments have factored this
cost into their estimate of the cost for issuers offering coverage in
the individual market to comply with requirement.
Finally, these interim final regulations require health insurance
issuers offering individual health insurance coverage to maintain
records of all claims and notices associated with their internal claims
and appeals processes. An issuer must make such records available for
examination upon request. Accordingly, a claimant or State or Federal
agency official generally would be able to request and receive such
documents free of charge. The Departments believe that minimal costs
are associated with this requirement, because most issuers retain the
required information in the normal course of their business operations.
v. External Appeals. The analysis of the cost associated with
implementing an external review process under these interim final
regulations focuses on the cost incurred by the following three groups
that were not required to implement an external review process before
the enactment of the Affordable Care Act: plans and participants in
ERISA-covered self-insured plans; plans and participants in States with
no external review laws, and plans and participants in States that have
State laws only covering specific market segment (usually HMOs or
managed care coverage).
The Departments estimate that there are about 76.9 million
participants in self-insured ERISA-covered plans and approximately 13.8
million participants in self-insured State and local governmental
plans. In the States which currently have no external review laws there
are an estimated 4.2 million participants (2.5 million participants in
ERISA-covered plans, 1.2 million participants in governmental plans and
0.6 million in individual with policies in the individual market). In
the States that currently have limited external review laws, there are
15.6 million participants (8.4 million participants in ERISA-covered
plans, 4.2 million participants in governmental plans and 3.0 million
individuals with individual health insurance in the individual market).
These estimates lead to a total of 110.5 million participants, however,
only the 44.2 million participants in non-grandfathered plans will be
newly covered by the external review requirement in 2011. As plans
relinquish their grandfather status in subsequent years, more
individuals will be covered.
The Departments assume that there are an estimated 1.3 external
appeals for every 10,000 participants,\51\ and that there will be
approximately 2,600 external appeals in 2011. As required by these
interim final regulations or applicable State law, plans or issuers are
required to pay for most of the cost of the external review while
claimants may be charged a modest filing fee. A recent report finds
that the average cost of a review was approximately $605.\52\ While the
actual cost per review will vary by state and also type of review
(standard or expedited), an older study covering many States suggests
this is a reasonable estimate.\53\ These estimates lead to an estimated
cost of the external review of $1.6 million (2,600 reviews * $605) in
2011. Using a similar method and adjusting for the number of non-
grandfathered plans in subsequent years, the Departments estimate that
the total cost for external review is $2.9 million in 2012 and $3.9
million in 2013.
---------------------------------------------------------------------------
\51\ AHIP Center for Policy and Research, ``An Update on State
External Review Programs, 2006,'' July 2008.
\52\ North Carolina Department of Insurance ``Healthcare Review
Program: Annual Report,'' 2008.
\53\ Pollitz, Karen, Jeff Crowley, Kevin Lucia, and Eliza Bangit
``Assessing State External Review Programs and the Effects of
Pending Federal Patient's Rights Legislation.'' Kaiser Family
Foundation (2002) page 27.
---------------------------------------------------------------------------
On average, about 40 percent of denials are reversed on external
appeal.\54\ An estimate of the dollar
[[Page 43346]]
amount per claim reversed in $12,400.\55\ This leads to $13.4 million
in additional claims being reversed by the external review process in
2011, which increases to $33.1 million in 2013. While this amount is a
cost to plans, it represents a payment of benefits that should have
previously been paid to participants, but was denied. Part of this
amount is a transfer from plans and issuers to those now receiving
payment for denied benefits. Part of the amount could also be a cost if
the reversal leads to services and hence resources being utilized now
that had been denied previously. The Departments are not able to
distinguish between the two types but believe that most reversals are
associated with a transfer.
---------------------------------------------------------------------------
\54\ AHIP Center for Policy and Research, ``An Update on State
External Review Programs, 2006,'' July 2008.
\55\ North Carolina Department of Insurance ``Healthcare Review
Program: Annual Report,'' 2008.
---------------------------------------------------------------------------
These interim final regulations also require claimants to receive a
notice informing them of the outcome of the appeal. The independent
review organization that conducts the external review is required to
prepare the notice; therefore, the cost of preparing and delivering
this notice is included in the fee paid them by the insurer to conduct
the review.
3. Summary
These interim final rules extend the protections of the DOL claims
procedure regulation to non-Federal governmental plans, and the market
for individual coverage. Additional protections are added that cover
these two markets and also the market for ERISA covered plans. These
interim final regulations also extend the requirement to provide an
independent external review. The Departments estimate that the total
costs for these interim final regulations is $50.4 million in 2011,
$78.8 million in 2012, and $101.1 million in 2013. The estimates are
summarized in table 3, below.
Table 3--Monetized Impacts of Interim Final Regulations
[In millions]
----------------------------------------------------------------------------------------------------------------
2011 2012 2013
----------------------------------------------------------------------------------------------------------------
ERISA Market.................................................... $1.4 $2.5 $3.5
External Review............................................. 1.2 2.2 3.1
Internal Review *........................................... 0.0 0.0 0.0
Fair and Full Review........................................ 0.2 0.3 0.4
State & Local Government Market................................. 2.4 4.3 6.0
External Review............................................. 0.4 0.6 0.9
Internal Review **.......................................... 2.0 3.6 5.0
Fair and Full Review........................................ 0.05 0.1 0.1
Individual Market............................................... 32.5 46.4 56.8
External Review............................................. 0.1 0.2 0.2
Internal Review............................................. 28.8 46.0 56.4
Fair and Full Review........................................ 0.1 0.2 0.2
Recordkeeping............................................... 0.1 0.1 0.1
Start-up Costs.............................................. 3.5 0.0 0.0
-----------------------------------------------
Total Costs............................................. 36.2 53.2 66.2
Amount of Reversals ***......................................... 14.2 25.6 34.9
ERISA Plans................................................. 10.3 18.7 25.7
State & Local Government Plans.............................. 3.0 5.4 7.4
Individual Market........................................... 0.9 1.5 1.9
----------------------------------------------------------------------------------------------------------------
* Assumes that ERISA plans already comply with ERISA claims and appeals regulations.
** Assumes that 90 percent of State and Local Government plans already comply with the ERISA claims and appeals
regulation.
*** This amount includes both transfers and costs with identical offsetting benefits.
C. Regulatory Flexibility Act--Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the APA (5
U.S.C. 551 et seq.) and that are likely to have a significant economic
impact on a substantial number of small entities. Section 9833 of the
Code, section 734 of ERISA, and section 2792 of the PHS Act authorize
the Secretaries to promulgate any interim final rules that they
determine are appropriate to carry out the provisions of chapter 100 of
the Code, part 7 of subtitle B or title I of ERISA, and part A of title
XXVII of the PHS Act, which include PHS Act sections 2701 through 2728
and the incorporation of those sections into ERISA section 715 and Code
section 9815.
Moreover, under Section 553(b) of the APA, a general notice of
proposed rulemaking is not required when an agency, for good cause,
finds that notice and public comment thereon are impracticable,
unnecessary, or contrary to the public interest. These interim final
regulations are exempt from APA, because the Departments made a good
cause finding that a general notice of proposed rulemaking is not
necessary earlier in this preamble. Therefore, the RFA does not apply
and the Departments are not required to either certify that the rule
would not have a significant economic impact on a substantial number of
small entities or conduct a regulatory flexibility analysis.
Nevertheless, the Departments carefully considered the likely
impact of the rule on small entities in connection with their
assessment under Executive Order 12866. Consistent with the policy of
the RFA, the Departments encourage the public to submit comments that
suggest alternative rules that accomplish the stated purpose of the
Affordable Care Act and minimize the impact on small entities.
D. Special Analyses--Department of the Treasury
Notwithstanding the determinations of the Department of Labor and
Department of Health and Human
[[Page 43347]]
Services, for purposes of the Department of the Treasury, it has been
determined that this Treasury decision is not a significant regulatory
action for purposes of Executive Order 12866. Therefore, a regulatory
assessment is not required. It has also been determined that section
553(b) of the APA (5 U.S.C. chapter 5) does not apply to these interim
final regulations. For the applicability of the RFA, refer to the
Special Analyses section in the preamble to the cross-referencing
notice of proposed rulemaking published elsewhere in this issue of the
Federal Register. Pursuant to section 7805(f) of the Code, these
temporary regulations have been submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on their
impact on small businesses.
E. Paperwork Reduction Act
1. Department of Labor and Department of the Treasury
As discussed above in the Department of Labor and Department of the
Treasury PRA section, these interim final regulations require group
health plans and health insurance issuers offering group or individual
health insurance coverage to comply with the DOL claims procedure
regulation with updated standards. They also require such plans and
issuers to implement an external review process.
Currently, the Departments are soliciting 60 days of public
comments concerning these disclosures. The Departments have submitted a
copy of these interim final regulations to OMB in accordance with 44
U.S.C. 3507(d) for review of the information collections. The
Departments and OMB are particularly interested in comments that:
Evaluate whether the collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
Evaluate the accuracy of the agency's estimate of the
burden of the collection of information, including the validity of the
methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, for example, by
permitting electronic submission of responses.
Comments should be sent to the Office of Information and Regulatory
Affairs, Attention: Desk Officer for the Employee Benefits Security
Administration either by fax to (202) 395-7285 or by e-mail to oira_
submission@omb.eop.gov. A copy of the ICR may be obtained by contacting
the PRA addressee: G. Christopher Cosby, Office of Policy and Research,
U.S. Department of Labor, Employee Benefits Security Administration,
200 Constitution Avenue, NW., Room N-5718, Washington, DC 20210.
Telephone: (202) 693-8410; Fax: (202) 219-4745. These are not toll-free
numbers. E-mail: ebsa.opr@dol.gov. ICRs submitted to OMB also are
available at reginfo.gov (http://www.reginfo.gov/public/do/PRAMain).
a. Department of Labor and Department of the Treasury: Affordable Care
Act Internal Claims and Appeals and External Review Disclosures for
Non-Grandfathered Plans
As discussed earlier in this preamble, under PHS Act section 2719
and these interim final regulations, all sponsors of non-grandfathered
group health plans and health insurance issuers offering group health
insurance coverage must comply with all requirements of the DOL claims
procedure regulation (29 CFR 2560.503-1) as well as the new standards
in paragraph (b)(2)(ii) of these interim final regulations.
Before the enactment of the Affordable Care Act, ERISA-covered
group health plans already were required to comply with the
requirements of the DOL claims procedure regulation. The DOL claims
procedure regulation requires, among other things, plans to provide a
claimant who is denied a claim with a written or electronic notice that
contains the specific reasons for denial, a reference to the relevant
plan provisions on which the denial is based, a description of any
additional information necessary to perfect the claim, and a
description of steps to be taken if the participant or beneficiary
wishes to appeal the denial. The regulation also requires that any
adverse decision upon review be in writing (including electronic means)
and include specific reasons for the decision, as well as references to
relevant plan provisions. The Departments are not soliciting comments
concerning an information collection request (ICR) pertaining to the
requirement for ERISA-covered group health plans to meet the disclosure
requirements of DOL's claims procedure regulation, because the costs
and burdens associated with complying with these previsions already are
accounted for under the Department of Labor's Employee Benefit Plan
Claims Procedure Under ERISA regulation (OMB Control Number 1210-0053).
Additional hour and cost burden is associated with paragraph
(b)(2)(ii)(C) of these interim final regulations, which requires non-
grandfathered ERISA-covered group health plans to provide the claimant,
free of charge, with any new or additional evidence considered relied
upon, or generated by the plan or issuer in connection with the
claim.\56\ This requirement increases the administrative burden on
plans and issuers to prepare and deliver the additional information to
the claimant.
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\56\ Such 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 prior to that date.
Additionally, before the plan or issuer 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
rationale 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 prior to that date.
---------------------------------------------------------------------------
Additional hour and cost burden also is associated with the
requirement in paragraphs (c) and (d) of the regulations which set
forth the external review requirements. The requirement for group
health plans to implement an external review process will impose an
hour and cost burden on plans that were not required to implement such
a process before the enactment of the Affordable Care Act, such as
self-insured plans, plans in states with no external review laws, and
plans in states with limited scope external review laws (such as laws
that only impact specific market segments like HMOs).
The Departments estimate that approximately 93 percent of large
benefit and all small benefit plans administer claims using a third-
party provider, or roughly 5 percent of covered individuals. In-house
administration burdens are accounted for as hours, while purchased
services are accounted for as dollar costs. Based on the foregoing,
total burden hours are estimated at 300 hours in 2011, 500 hours in
2012, and 700 hours in 2013. Equivalent costs are $11,000, $19,000, and
$26,000 respectively.
As stated in the preceding paragraph, the bulk of claims will be
processed by third-party service providers. Total cost is estimated by
multiplying the number of responses by the amount of time required to
prepare the documents and then multiplying this by the appropriate
hourly cost of either clerical workers
[[Page 43348]]
($26.14) or doctors ($154.07),\57\ and then adding the cost of copying
and mailing responses ($0.54 each for those not sent electronically).
Based on the foregoing, the Departments estimate that the total
estimated cost burden for those plans that use service providers,
including the cost of mailing all responses (including mailing costs
for those prepared in-house listed in Table 2), is $243,000 in 2011,
$443,000 in 2012, and $607,000 in 2013.
---------------------------------------------------------------------------
\57\ EBSA estimates of labor rates include wages, other
benefits, and overhead based on the National Occupational Employment
Survey (May 2008, Bureau of Labor Statistics) and the Employment
Cost Index June 2009, Bureau of Labor Statistics).
---------------------------------------------------------------------------
Type of Review: New collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Affordable Care Act Internal Claims and Appeals and External
Review Disclosures for Non-Grandfathered Plans.
OMB Number: 1210-0144; 1545-2182.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 607,000.
Total Responses: 62,000.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours: 150 hours (Employee Benefits
Security Administration); 150 hours (Internal Revenue Service).
Estimated Total Annual Burden Cost: $121,500 (Employee Benefits
Security Administration); $121,500 (Internal Revenue Service).
2. Department of Health and Human Services
As discussed above in the Department of Labor and Department of the
Treasury PRA section, these interim final regulations require group
health plans and health insurance issuers offering group or individual
health insurance coverage to comply with the DOL claims procedure
regulation with updated standards. They also require such plans and
issuers to implement an external review process.
a. ICR Regarding Affordable Care Act Internal Claims and Appeals and
External Review Disclosures for Non-Grandfathered Plans
As discussed earlier in the preamble, paragraph (b)(2) and (b)(3)
of these interim final regulations require all group health plan
sponsors and health insurance issuers offering coverage in the group
and individual health insurance markets to comply with the requirements
of DOL's claims procedure regulation for their internal claims and
appeals processes. Plan sponsors and issuers offering coverage in the
group market also are required to satisfy the additional standards that
are imposed on group health plans and issuers in paragraph (b)(2)(ii)
of these interim final regulations, while issuers offering coverage in
the individual health insurance market are required to satisfy the
additional standards set forth in paragraph (b)(3)(ii) of these interim
final regulations.
On the external review side, for purposes of this PRA analysis, the
Department estimates the hour and cost burden for plans that were not
previously subject to any external review requirements (self-insured
plans, plans in states with no external review programs, and non-
managed care plans in states that require external review only for
managed care plans) to implement an external review process.
Based on the foregoing, the Department estimates that state and
local governmental plans and issuers offering coverage in the
individual market will incur a total hour burden hours of 566,000 hours
in 2011, 989,000 hours in 2012, and 1.2 million hours in 2013 to comply
with equivalent costs of $28.1 million in 2011, $57.1 million in 2012,
and $70.1 million in 2013. The total estimated cost burden for those
plans that use service providers, including the cost of mailing all
responses is estimated to be $20.7 million in 2011, $37.4 million in
2012, and $51.1 million in 2013
The hour and cost burden is summarized below:
Type of Review: New collection.
Agency: Department of Health and Human Services.
Title: Affordable Care Act Internal Claims and Appeals and External
Review Disclosures.
OMB Number: 0938-1098.
Affected Public: Business; State, Local, or Tribal Governments.
Respondents: 27,829.
Responses: 132,035,000.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours: 566,000 hours.
Estimated Total Annual Burden Cost: $20,700,000.
b. ICR Regarding Affordable Care Act Recordkeeping Requirement for Non-
Grandfathered Plans
As discussed earlier in this preamble, a health insurance issuer
offering individual health insurance coverage must generally comply
with all the requirements for the internal claims and appeals process
that apply to group health coverage.\58\ In addition to these
standards, paragraph (b)(3)(ii)(H) of 45 CFR 147.136 requires health
insurance issuers offering individual health insurance coverage to
maintain records of all claims and notices associated with their
internal claims and appeals processes. The records must be maintained
for at least six years, which is the same requirement for group health
plans under the ERISA recordkeeping requirements. An issuer must make
such records available for examination upon request. Accordingly, a
claimant or State or Federal agency official generally would be able to
request and receive such documents free of charge.
---------------------------------------------------------------------------
\58\ The special rules in the DOL claims procedure regulation
applicable only to multiemployer plans, as described earlier in this
preamble, do not apply to health insurance issuers in the individual
market.
---------------------------------------------------------------------------
The Department assumes that most of these records will be kept in
the ordinary course of the issuers' business. Therefore, the Department
estimates that the recordkeeping burden imposed by this ICR will
require five minutes of a legal professional's time (with a rate of
$119.03/hour) to determine the relevant documents that must be retained
and ten minutes of clerical staff time (with a labor rate of $26.14/
hour) to organize and file the required documents to ensure that they
are accessible to claimants and Federal and State governmental agency
officials. As shown in Table 4, below, overall, the Department
estimates that there to be a total annual hour burden of 1,800 hours
with an equivalent cost of $105,000.
Table 4--Total Hour Burden and Equivalent Cost
----------------------------------------------------------------------------------------------------------------
Hourly labor Equivalent
Number Hours cost Hour burden cost
(A) (B) (C) A*B A*B*C
----------------------------------------------------------------------------------------------------------------
Record Keeping (attorney): 7,350 0.08 $119 613 $72,906
Individual.....................
[[Page 43349]]
Record Keeping (clerical): 7,350 0.17 26 1,225 32,022
Individual.....................
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Total....................... .............. .............. .............. 1,838 104,927
----------------------------------------------------------------------------------------------------------------
Because this burden is borne solely by the insurers offering
coverage in the individual health insurance market, and these issuers
are assumed to process all claims in-house, there is no annual cost
burden associated with this collection of information.
These paperwork burden estimates are summarized as follows:
Type of Review: New collection.
Agency: Department of Health and Human Services.
Title: Affordable Care Act Recordkeeping Requirements.
OMB Number: 0938-1098.
Affected Public: For Profit Business.
Respondents: 490.
Responses: 7,350.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours: 1,800 hours.
Estimated Total Annual Burden Cost: $0.
If you comment on any of these information collection requirements,
please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget:
Attention: CMS Desk Officer, OCIIO-9994-IFC.
Fax: (202) 395 6974; or
E-mail: OIRA_submission@omb.eop.gov.
F. Congressional Review Act
These interim final regulations are subject to the Congressional
Review Act provisions of the Small Business Regulatory Enforcement
Fairness Act of 1996 (5 U.S.C. 801 et seq.) and have been transmitted
to Congress and the Comptroller General for review.
G. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires
agencies to prepare several analytic statements before proposing any
rules that may result in annual expenditures of $100 million (as
adjusted for inflation) by State, local and tribal governments or the
private sector. These interim final regulations are not subject to the
Unfunded Mandates Reform Act because they are being issued as interim
final regulations. However, consistent with the policy embodied in the
Unfunded Mandates Reform Act, the regulation has been designed to be
the least burdensome alternative for State, local and tribal
governments, and the private sector, while achieving the objectives of
the Affordable Care Act.
H. Federalism Statement--Department of Labor and Department of Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific criteria by Federal
agencies in the process of their formulation and implementation of
policies that have ``substantial direct effects'' on the States, the
relationship between the national government and States, or on the
distribution of power and responsibilities among the various levels of
government. Federal agencies promulgating regulations that have
federalism implications must consult with State and local officials,
and describe the extent of their consultation and the nature of the
concerns of State and local officials in the preamble to the
regulation.
In the Departments' view, these interim final regulations have
federalism implications, because they have direct effects on the
States, the relationship between the national government and States, or
on the distribution of power and responsibilities among various levels
of government. However, in the Departments' view, the federalism
implications of these interim final regulations are substantially
mitigated because, with respect to health insurance issuers, the
Departments expect that the majority of States will enact laws or take
other appropriate action to implement an internal and external appeals
process that will meet or exceed Federal standards.
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating a plan as an insurance or
investment company or bank, the preemption provisions of section 731 of
ERISA and section 2724 of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the HIPAA requirements
(including those of the Affordable Care Act) are not to be ``construed
to supersede any provision of State law which establishes, implements,
or continues in effect any standard or requirement solely relating to
health insurance issuers in connection with group health insurance
coverage except to the extent that such standard or requirement
prevents the application of a requirement'' of a Federal standard. The
conference report accompanying HIPAA indicates that this is intended to
be the ``narrowest'' preemption of State laws. (See House Conf. Rep.
No. 104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News
2018.) States may continue to apply State law requirements except to
the extent that such requirements prevent the application of the
Affordable Care Act requirements that are the subject of this
rulemaking. State insurance laws that are more stringent than the
Federal requirements are unlikely to ``prevent the application of ''
the Affordable Care Act, and be preempted. Accordingly, States have
significant latitude to impose requirements on health insurance issuers
that are more restrictive than the Federal law. Furthermore, the
Departments have opined that, in the instance of a group health plan
providing coverage through group health insurance, the issuer will be
required to follow the external review procedures established in State
law (assuming the State external review procedure meets the minimum
standards set out in these interim final rules).
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments have engaged in
[[Page 43350]]
efforts to consult with and work cooperatively with affected State and
local officials, including attending conferences of the National
Association of Insurance Commissioners, meeting with NAIC staff counsel
on issues arising from these interim final regulations and consulting
with State insurance officials on an individual basis. It is expected
that the Departments will act in a similar fashion in enforcing the
Affordable Care Act requirements, including the provisions of section
2719 of the PHS Act. Throughout the process of developing these interim
final regulations, to the extent feasible within the specific
preemption provisions of HIPAA as it applies to the Affordable Care
Act, the Departments have attempted to balance the States' interests in
regulating health insurance issuers, and Congress' intent to provide
uniform minimum protections to consumers in every State. By doing so,
it is the Departments' view that they have complied with the
requirements of Executive Order 13132.
V. Statutory Authority
The Department of the Treasury temporary regulations are adopted
pursuant to the authority contained in sections 7805 and 9833 of the
Code.
The Department of Labor interim final regulations are adopted
pursuant to the authority contained in 29 U.S.C. 1027, 1059, 1135,
1161-1168, 1169, 1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec.
401(b), Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Public Law 110-343, 122 Stat. 3881; sec. 1001, 1201, and
1562(e), Public Law 111-148, 124 Stat. 119, as amended by Public Law
111-152, 124 Stat. 1029; Secretary of Labor's Order 6-2009, 74 FR 21524
(May 7, 2009).
The Department of Health and Human Services interim final
regulations are adopted pursuant to the authority contained in sections
2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg
through 300gg-63, 300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Approved: July 19, 2010.
Michael F. Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
Signed this 16th day of July 2010.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: July 19, 2010.
Jay Angoff,
Director, Office of Consumer Information and Insurance Oversight.
Dated: July 19, 2010.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter 1
0
Accordingly, 26 CFR parts 54 and 602 are amended as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 is amended by adding an
entry for Sec. 54.9815-2719T in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 54.9815-2719T also issued under 26 U.S.C. 9833.
0
Par. 2. Section 54.9815-2719T is added to read as follows:
Sec. 54.9815-2719T Internal claims and appeals and external review
processes (temporary).
(a) Scope and definitions--(1) Scope. This section sets forth
requirements with respect to internal claims and appeals and external
review processes for group health plans and health insurance issuers
that are not grandfathered health plans under Sec. 54.9815-1251T.
Paragraph (b) of this section provides requirements for internal claims
and appeals processes. Paragraph (c) of this section sets forth rules
governing the applicability of State external review processes.
Paragraph (d) of this section sets forth a Federal external review
process for plans and issuers not subject to an applicable State
external review process. Paragraph (e) of this section prescribes
requirements for ensuring that notices required to be provided under
this section are provided in a culturally and linguistically
appropriate manner. Paragraph (f) of this section describes the
authority of the Secretary to deem certain external review processes in
existence on March 23, 2010 as in compliance with paragraph (c) or (d)
of this section. Paragraph (g) of this section sets forth the
applicability date for this section.
(2) Definitions. For purposes of this section, the following
definitions apply--
(i) Adverse benefit determination. An adverse benefit determination
means an adverse benefit determination as defined in 29 CFR 2560.503-1,
as well as any rescission of coverage, as described in Sec. 54.9815-
2712T(a)(2) (whether or not, in connection with the rescission, there
is an adverse effect on any particular benefit at that time).
(ii) Appeal (or internal appeal). An appeal or internal appeal
means review by a plan or issuer of an adverse benefit determination,
as required in paragraph (b) of this section.
(iii) Claimant. Claimant means an individual who makes a claim
under this section. For purposes of this section, references to
claimant include a claimant's authorized representative.
(iv) External review. External review means a review of an adverse
benefit determination (including a final internal adverse benefit
determination) conducted pursuant to an applicable State external
review process described in paragraph (c) of this section or the
Federal external review process of paragraph (d) of this section.
(v) Final internal adverse benefit determination. A final internal
adverse benefit determination means an adverse benefit determination
that has been upheld by a plan or issuer at the completion of the
internal appeals process applicable under paragraph (b) of this section
(or an adverse benefit determination with respect to which the internal
appeals process has been exhausted under the deemed exhaustion rules of
paragraph (b)(2)(ii)(F) of this section).
(vi) Final external review decision. A final external review
decision, as used in paragraph (d) of this section, means a
determination by an independent review organization at the conclusion
of an external review.
(vii) Independent review organization (or IRO). An independent
review organization (or IRO) means an entity that conducts independent
external reviews of adverse benefit determinations and final internal
adverse benefit determinations pursuant to paragraph (c) or (d) of this
section.
[[Page 43351]]
(viii) NAIC Uniform Model Act. The NAIC Uniform Model Act means the
Uniform Health Carrier External Review Model Act promulgated by the
National Association of Insurance Commissioners in place on July 23,
2010.
(b) Internal claims and appeals process--(1) In general. A group
health plan and a health insurance issuer offering group health
insurance coverage must implement an effective internal claims and
appeals process, as described in this paragraph (b).
(2) Requirements for group health plans and group health insurance
issuers. A group health plan and a health insurance issuer offering
group health insurance coverage must comply with all the requirements
of this paragraph (b)(2). In the case of health insurance coverage
offered in connection with a group health plan, if either the plan or
the issuer complies with the internal claims and appeals process of
this paragraph (b)(2), then the obligation to comply with this
paragraph (b)(2) is satisfied for both the plan and the issuer with
respect to the health insurance coverage.
(i) Minimum internal claims and appeals standards. A group health
plan and a health insurance issuer offering group health insurance
coverage must comply with all the requirements applicable to group
health plans under 29 CFR 2560.503-1, except to the extent those
requirements are modified by paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b), with respect to health insurance
coverage offered in connection with a group health plan, the group
health insurance issuer is subject to the requirements in 29 CFR
2560.503-1 to the same extent as the group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(2)(i) of this section, the internal claims and appeals
processes of a group health plan and a health insurance issuer offering
group health insurance coverage must meet the requirements of this
paragraph (b)(2)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(2), an ``adverse benefit determination''
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as the other provisions of this paragraph (b)(2), a
plan or issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) as an adverse benefit determination. (Rescissions of coverage are
subject to the requirements of Sec. 54.9815-2712T.)
(B) Expedited notification of benefit determinations involving
urgent care. Notwithstanding the rule of 29 CFR 2560.503-1(f)(2)(i)
that provides for notification in the case of urgent care claims not
later than 72 hours after the receipt of the claim, for purposes of
this paragraph (b)(2), a plan and issuer 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 or issuer, 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. The requirements of 29 CFR 2560.503-1(f)(2)(i) other than the
rule for notification within 72 hours continue to apply to the plan and
issuer. For purposes of this paragraph (b)(2)(ii)(B), a claim involving
urgent care has the meaning given in 29 CFR 2560.503-1(m)(1).
(C) Full and fair review. A plan and issuer must allow a claimant
to review the claim file and to present evidence and testimony as part
of the internal claims and appeals process. Specifically, in addition
to complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The plan or issuer must provide the claimant, free of charge,
with any new or additional evidence considered, relied upon, or
generated by the plan or issuer (or at the direction of the plan or
issuer) 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 final internal adverse benefit determination is required to
be provided under 29 CFR 2560.503-1(i) to give the claimant a
reasonable opportunity to respond prior to that date; and
(2) Before the plan or issuer can issue a final internal adverse
benefit determination 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 final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
plan and issuer 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 the denial of benefits.
(E) Notice. A plan and issuer must provide notice to individuals,
in a culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The plan and issuer must also comply with
the additional requirements of this paragraph (b)(2)(ii)(E).
(1) The plan and issuer must ensure that any notice of adverse
benefit determination or final internal adverse benefit determination
includes information sufficient to identify the claim involved
(including the date of service, the health care provider, the claim
amount (if applicable), the diagnosis code and its corresponding
meaning, and the treatment code and its corresponding meaning).
(2) The plan and issuer must ensure that the reason or reasons for
the adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the plan's or issuer's standard, if any,
that was used in denying the claim. In the case of a notice of final
internal adverse benefit determination, this description must include a
discussion of the decision.
(3) The plan and issuer must provide a description of available
internal appeals and external review processes, including information
regarding how to initiate an appeal.
(4) The plan and issuer must disclose the availability of, and
contact information for, any applicable office of health insurance
consumer assistance or ombudsman established under PHS Act section 2793
to assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes. In
the case of a plan or issuer that fails to strictly adhere to all the
requirements of this paragraph (b)(2) with respect to a claim, the
claimant is deemed to have exhausted the internal claims and appeals
process of this paragraph (b), regardless of whether the plan or issuer
asserts that it substantially complied
[[Page 43352]]
with the requirements of this paragraph (b)(2) or that any error it
committed was de minimis. Accordingly the claimant may initiate an
external review under paragraph (c) or (d) of this section, as
applicable. The claimant is also entitled to pursue any available
remedies under section 502(a) of ERISA or under State law, as
applicable, on the basis that the plan or issuer has failed to provide
a reasonable internal claims and appeals process that would yield a
decision on the merits of the claim. If a claimant chooses to pursue
remedies under section 502(a) of ERISA under such circumstances, the
claim or appeal is deemed denied on review without the exercise of
discretion by an appropriate fiduciary.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. A plan and issuer subject to the requirements of this
paragraph (b)(2) are required to provide continued coverage pending the
outcome of an appeal. For this purpose, the plan and issuer must comply
with the requirements of 29 CFR 2560.503-1(f)(2)(ii), which generally
provides that benefits for an ongoing course of treatment cannot be
reduced or terminated without providing advance notice and an
opportunity for advance review.
(c) State standards for external review--(1) In general. (i) If a
State external review process that applies to and is binding on a
health insurance issuer offering group health insurance coverage
includes at a minimum the consumer protections in the NAIC Uniform
Model Act, then the issuer must comply with the applicable State
external review process and is not required to comply with the Federal
external review process of paragraph (d) of this section. In such a
case, to the extent that benefits under a group health plan are
provided through health insurance coverage, the group health plan is
not required to comply with either this paragraph (c) or the Federal
external review process of paragraph (d) of this section.
(ii) To the extent that a group health plan provides benefits other
than through health insurance coverage (that is, the plan is self-
insured) and is subject to a State external review process that applies
to and is binding on the plan (for example, is not preempted by ERISA)
and the State external review process includes at a minimum the
consumer protections in the NAIC Uniform Model Act, then the plan must
comply with the applicable State external review process and is not
required to comply with the Federal external review process of
paragraph (d) of this section.
(iii) If a plan or issuer is not required under paragraph (c)(1)(i)
or (c)(1)(ii) of this section to comply with the requirements of this
paragraph (c), then the plan or issuer must comply with the Federal
external review process of paragraph (d) of this section, except to the
extent, in the case of a plan, the plan is not required under paragraph
(c)(1)(i) of this section to comply with paragraph (d) of this section.
(2) Minimum standards for State external review processes. An
applicable State external review process must meet all the minimum
consumer protections in this paragraph (c)(2). The Department of Health
and Human Services will determine whether State external review
processes meet these requirements.
(i) The State process must provide for the external review of
adverse benefit determinations (including final internal adverse
benefit determinations) by issuers (or, if applicable, plans) that are
based on the issuer's (or plan's) requirements for medical necessity,
appropriateness, health care setting, level of care, or effectiveness
of a covered benefit.
(ii) The State process must require issuers (or, if applicable,
plans) to provide effective written notice to claimants of their rights
in connection with an external review for an adverse benefit
determination.
(iii) To the extent the State process requires exhaustion of an
internal claims and appeals process, exhaustion must be unnecessary
where the issuer (or, if applicable, the plan) has waived the
requirement, the issuer (or the plan) is considered to have exhausted
the internal claims and appeals process under applicable law (including
by failing to comply with any of the requirements for the internal
appeal process, as outlined in paragraph (b)(2) of this section), or
the claimant has applied for expedited external review at the same time
as applying for an expedited internal appeal.
(iv) The State process provides that the issuer (or, if applicable,
the plan) against which a request for external review is filed must pay
the cost of the IRO for conducting the external review. Notwithstanding
this requirement, the State external review process may require a
nominal filing fee from the claimant requesting an external review. For
this purpose, to be considered nominal, a filing fee must not exceed
$25, it must be refunded to the claimant if the adverse benefit
determination (or final internal adverse benefit determination) is
reversed through external review, it must be waived if payment of the
fee would impose an undue financial hardship, and the annual limit on
filing fees for any claimant within a single plan year must not exceed
$75.
(v) The State process may not impose a restriction on the minimum
dollar amount of a claim for it to be eligible for external review.
Thus, the process may not impose, for example, a $500 minimum claims
threshold.
(vi) The State process must allow at least four months after the
receipt of a notice of an adverse benefit determination or final
internal adverse benefit determination for a request for an external
review to be filed.
(vii) The State process must provide that IROs will be assigned on
a random basis or another method of assignment that assures the
independence and impartiality of the assignment process (such as
rotational assignment) by a State or independent entity, and in no
event selected by the issuer, plan, or the individual.
(viii) The State process must provide for maintenance of a list of
approved IROs qualified to conduct the external review based on the
nature of the health care service that is the subject of the review.
The State process must provide for approval only of IROs that are
accredited by a nationally recognized private accrediting organization.
(ix) The State process must provide that any approved IRO has no
conflicts of interest that will influence its independence. Thus, the
IRO may not own or control, or be owned or controlled by a health
insurance issuer, a group health plan, the sponsor of a group health
plan, a trade association of plans or issuers, or a trade association
of health care providers. The State process must further provide that
the IRO and the clinical reviewer assigned to conduct an external
review may not have a material professional, familial, or financial
conflict of interest with the issuer or plan that is the subject of the
external review; the claimant (and any related parties to the claimant)
whose treatment is the subject of the external review; any officer,
director, or management employee of the issuer; the plan administrator,
plan fiduciaries, or plan employees; the health care provider, the
health care provider's group, or practice association recommending the
treatment that is subject to the external review; the facility at which
the recommended treatment would be provided; or the developer or
manufacturer of the principal drug, device, procedure, or other therapy
being recommended.
(x) The State process allows the claimant at least five business
days to submit to the IRO in writing additional information that the
IRO must consider
[[Page 43353]]
when conducting the external review and it requires that the claimant
is notified of the right to do so. The process must also require that
any additional information submitted by the claimant to the IRO must be
forwarded to the issuer (or, if applicable, the plan) within one
business day of receipt by the IRO.
(xi) The State process must provide that the decision is binding on
the issuer (or, if applicable, the plan), as well as the claimant
except to the extent that other remedies are available under State or
Federal law.
(xii) The State process must require, for standard external review,
that the IRO provide written notice to the claimant and the issuer (or,
if applicable, the plan) of its decision to uphold or reverse the
adverse benefit determination (or final internal adverse benefit
determination) within no more than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide for an expedited external
review if the adverse benefit determination (or final internal adverse
benefit determination) concerns an admission, availability of care,
continued stay, or health care service for which the claimant received
emergency services, but has not been discharged from a facility; or
involves a medical condition for which the standard external review
time frame would seriously jeopardize the life or health of the
claimant or jeopardize the claimant's ability to regain maximum
function. As expeditiously as possible but within no more than 72 hours
after the receipt of the request for expedited external review by the
IRO, the IRO must make its decision to uphold or reverse the adverse
benefit determination (or final internal adverse benefit determination)
and notify the claimant and the issuer (or, if applicable, the plan) of
the determination. If the notice is not in writing, the IRO must
provide written confirmation of the decision within 48 hours after the
date of the notice of the decision.
(xiv) The State process must require that issuers (or, if
applicable, plans) include a description of the external review process
in or attached to the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants, beneficiaries, or enrollees, substantially
similar to what is set forth in section 17 of the NAIC Uniform Model
Act.
(xv) The State process must require that IROs maintain written
records and make them available upon request to the State,
substantially similar to what is set forth in section 15 of the NAIC
Uniform Model Act.
(xvi) The State process follows procedures for external review of
adverse benefit determinations (or final internal adverse benefit
determinations) involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
(3) Transition period for existing external review processes--(i)
For plan years beginning before July 1, 2011, an applicable State
external review process applicable to a health insurance issuer or
group health plan is considered to meet the requirements of this
paragraph (c). Accordingly, for plan years beginning before July 1,
2011, an applicable State external review process will be considered
binding on the issuer or plan (in lieu of the requirements of the
Federal external review process). If there is no applicable State
external review process, the issuer or plan is required to comply with
the requirements of the Federal external review process in paragraph
(d) of this section.
(ii) For final internal adverse benefit determinations (or, in the
case of simultaneous internal appeal and external review, adverse
benefit determinations) provided after the first day of the first plan
year beginning on or after July 1, 2011, the Federal external review
process will apply unless the Department of Health and Human Services
determines that a State law meets all the minimum standards of
paragraph (c)(2) of this section as of the first day of the plan year.
(d) Federal external review process. A plan or issuer not subject
to an applicable State external review process under paragraph (c) of
this section must provide an effective Federal external review process
in accordance with this paragraph (d) (except to the extent, in the
case of a plan, the plan is described in paragraph (c)(1)(i) of this
section as not having to comply with this paragraph (d)). In the case
of health insurance coverage offered in connection with a group health
plan, if either the plan or the issuer complies with the Federal
external review process of this paragraph (d), then the obligation to
comply with this paragraph (d) is satisfied for both the plan and the
issuer with respect to the health insurance coverage.
(1) Scope. The Federal external review process established pursuant
to this paragraph (d) applies to any adverse benefit determination or
final internal adverse benefit determination as defined in paragraphs
(a)(2)(i) and (a)(2)(v) of this section, except that a denial,
reduction, termination, or a failure to provide payment for a benefit
based on a determination that a participant or beneficiary fails to
meet the requirements for eligibility under the terms of a group health
plan is not eligible for the external review process under this
paragraph (d).
(2) External review process standards. The Federal external review
process established pursuant to this paragraph (d) will be similar to
the process set forth in the NAIC Uniform Model Act and will meet
standards issued by the Secretary. These standards will comply with all
of the requirements described in this paragraph (d)(2).
(i) These standards will describe how a claimant initiates an
external review, procedures for preliminary reviews to determine
whether a claim is eligible for external review, minimum qualifications
for IROs, a process for approving IROs eligible to be assigned to
conduct external reviews, a process for random assignment of external
reviews to approved IROs, standards for IRO decision-making, and rules
for providing notice of a final external review decision.
(ii) These standards will provide an expedited external review
process for--
(A) An adverse benefit determination, if the adverse benefit
determination involves a medical condition of the claimant for which
the timeframe for completion of an expedited internal appeal under
paragraph (b) of this section would seriously jeopardize the life or
health of the claimant, or would jeopardize the claimant's ability to
regain maximum function and the claimant has filed a request for an
expedited internal appeal under paragraph (b) of this section; or
(B) A final internal adverse benefit determination, if the claimant
has a medical condition where the timeframe for completion of a
standard external review pursuant to paragraph (d)(3) of this section
would seriously jeopardize the life or health of the claimant or would
jeopardize the claimant's ability to regain maximum function, or if the
final internal adverse benefit determination concerns an admission,
availability of care, continued stay, or health care service for which
the claimant received emergency services, but has not been discharged
from a facility.
(iii) With respect to claims involving experimental or
investigational treatments, these standards will also provide
additional consumer protections to ensure that adequate clinical and
scientific experience and protocols are taken into account as part of
the external review process.
[[Page 43354]]
(iv) These standards will provide that an external review decision
is binding on the plan or issuer, as well as the claimant, except to
the extent other remedies are available under State or Federal law.
(v) These standards may establish external review reporting
requirements for IROs.
(vi) These standards will establish additional notice requirements
for plans and issuers regarding disclosures to participants and
beneficiaries describing the Federal external review procedures
(including the right to file a request for an external review of an
adverse benefit determination or a final internal adverse benefit
determination in the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants or beneficiaries).
(vii) These standards will require plans and issuers to provide
information relevant to the processing of the external review,
including, but not limited to, the information considered and relied on
in making the adverse benefit determination or final internal adverse
benefit determination.
(e) Form and manner of notice. (1) For purposes of this section, a
group health plan and health insurance issuer offering group health
insurance coverage are considered to provide relevant notices in a
culturally and linguistically appropriate manner--
(i) For a plan that covers fewer than 100 participants at the
beginning of a plan year, if the plan and issuer provide notices upon
request in a non-English language in which 25 percent or more of all
plan participants are literate only in the same non-English language;
or
(ii) For a plan that covers 100 or more participants at the
beginning of a plan year, if the plan and issuer provide notices upon
request in a non-English language in which the lesser of 500 or more
participants, or 10 percent or more of all plan participants, are
literate only in the same non-English language.
(2) If an applicable threshold described in paragraph (e)(1) of
this section is met, the plan and issuer must also--
(i) Include a statement in the English versions of all notices,
prominently displayed in the non-English language, offering the
provision of such notices in the non-English language;
(ii) Once a request has been made by a claimant, provide all
subsequent notices to the claimant in the non-English language; and
(iii) To the extent the plan or issuer maintains a customer
assistance process (such as a telephone hotline) that answers questions
or provides assistance with filing claims and appeals, the plan or
issuer must provide such assistance in the non-English language.
(f) Secretarial authority. The Secretary may determine that the
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, is considered in compliance
with the applicable process established under paragraph (c) or (d) of
this section if it substantially meets the requirements of paragraph
(c) or (d) of this section, as applicable.
(g) Applicability/effective date. The provisions of this section
apply for plan years beginning on or after September 23, 2010. See
Sec. 54.9815-1251T for determining the application of this section to
grandfathered health plans (providing that these rules regarding
internal claims and appeals and external review processes do not apply
to grandfathered health plans).
(h) Expiration date. The applicability of this section expires on
July 22, 2013 or on such earlier date as may be provided in final
regulations or other action published in the Federal Register.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
0
Par. 3. The authority citation for part 602 continues to read in part
as follows:
Authority: 26 U.S.C. 7805.
0
Par. 4. Section 602.101(b) is amended by adding the following entry in
numerical order to the table to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------
* * * * *
54.9815-2719T.............................................. 1545-2182
* * * * *
------------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
0
29 CFR part 2590 is amended as follows:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
1. The authority citation for part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b), Pub. L.
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029;
Secretary of Labor's Order 6-2009, 74 FR 21524 (May 7, 2009).
Subpart C--Other Requirements
0
2. Section 2590.715-2719 is added to subpart C to read as follows:
Sec. 2590.715-2719 Internal claims and appeals and external review
processes.
(a) Scope and definitions--(1) Scope. This section sets forth
requirements with respect to internal claims and appeals and external
review processes for group health plans and health insurance issuers
that are not grandfathered health plans under Sec. 2590.715-1251 of
this part. Paragraph (b) of this section provides requirements for
internal claims and appeals processes. Paragraph (c) of this section
sets forth rules governing the applicability of State external review
processes. Paragraph (d) of this section sets forth a Federal external
review process for plans and issuers not subject to an applicable State
external review process. Paragraph (e) of this section prescribes
requirements for ensuring that notices required to be provided under
this section are provided in a culturally and linguistically
appropriate manner. Paragraph (f) of this section describes the
authority of the Secretary to deem certain external review processes in
existence on March 23, 2010 as in compliance with paragraph (c) or (d)
of this section. Paragraph (g) of this section sets forth the
applicability date for this section.
(2) Definitions. For purposes of this section, the following
definitions apply--
(i) Adverse benefit determination. An adverse benefit determination
means an adverse benefit determination as defined in 29 CFR 2560.503-1,
as well as any rescission of coverage, as described in Sec. 2590.715-
2712(a)(2) of this part (whether or not, in connection with the
rescission, there is an adverse effect on any particular benefit at
that time).
(ii) Appeal (or internal appeal). An appeal or internal appeal
means review
[[Page 43355]]
by a plan or issuer of an adverse benefit determination, as required in
paragraph (b) of this section.
(iii) Claimant. Claimant means an individual who makes a claim
under this section. For purposes of this section, references to
claimant include a claimant's authorized representative.
(iv) External review. External review means a review of an adverse
benefit determination (including a final internal adverse benefit
determination) conducted pursuant to an applicable State external
review process described in paragraph (c) of this section or the
Federal external review process of paragraph (d) of this section.
(v) Final internal adverse benefit determination. A final internal
adverse benefit determination means an adverse benefit determination
that has been upheld by a plan or issuer at the completion of the
internal appeals process applicable under paragraph (b) of this section
(or an adverse benefit determination with respect to which the internal
appeals process has been exhausted under the deemed exhaustion rules of
paragraph (b)(2)(ii)(F) of this section).
(vi) Final external review decision. A final external review
decision, as used in paragraph (d) of this section, means a
determination by an independent review organization at the conclusion
of an external review.
(vii) Independent review organization (or IRO). An independent
review organization (or IRO) means an entity that conducts independent
external reviews of adverse benefit determinations and final internal
adverse benefit determinations pursuant to paragraph (c) or (d) of this
section.
(viii) NAIC Uniform Model Act. The NAIC Uniform Model Act means the
Uniform Health Carrier External Review Model Act promulgated by the
National Association of Insurance Commissioners in place on July 23,
2010.
(b) Internal claims and appeals process--(1) In general. A group
health plan and a health insurance issuer offering group health
insurance coverage must implement an effective internal claims and
appeals process, as described in this paragraph (b).
(2) Requirements for group health plans and group health insurance
issuers. A group health plan and a health insurance issuer offering
group health insurance coverage must comply with all the requirements
of this paragraph (b)(2). In the case of health insurance coverage
offered in connection with a group health plan, if either the plan or
the issuer complies with the internal claims and appeals process of
this paragraph (b)(2), then the obligation to comply with this
paragraph (b)(2) is satisfied for both the plan and the issuer with
respect to the health insurance coverage.
(i) Minimum internal claims and appeals standards. A group health
plan and a health insurance issuer offering group health insurance
coverage must comply with all the requirements applicable to group
health plans under 29 CFR 2560.503-1, except to the extent those
requirements are modified by paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b), with respect to health insurance
coverage offered in connection with a group health plan, the group
health insurance issuer is subject to the requirements in 29 CFR
2560.503-1 to the same extent as the group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(2)(i) of this section, the internal claims and appeals
processes of a group health plan and a health insurance issuer offering
group health insurance coverage must meet the requirements of this
paragraph (b)(2)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(2), an ``adverse benefit determination''
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as the other provisions of this paragraph (b)(2), a
plan or issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) as an adverse benefit determination. (Rescissions of coverage are
subject to the requirements of Sec. 2590.715-2712 of this part.)
(B) Expedited notification of benefit determinations involving
urgent care. Notwithstanding the rule of 29 CFR 2560.503-1(f)(2)(i)
that provides for notification in the case of urgent care claims not
later than 72 hours after the receipt of the claim, for purposes of
this paragraph (b)(2), a plan and issuer 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 or issuer, 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. The requirements of 29 CFR 2560.503-1(f)(2)(i) other than the
rule for notification within 72 hours continue to apply to the plan and
issuer. For purposes of this paragraph (b)(2)(ii)(B), a claim involving
urgent care has the meaning given in 29 CFR 2560.503-1(m)(1).
(C) Full and fair review. A plan and issuer must allow a claimant
to review the claim file and to present evidence and testimony as part
of the internal claims and appeals process. Specifically, in addition
to complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The plan or issuer must provide the claimant, free of charge,
with any new or additional evidence considered, relied upon, or
generated by the plan or issuer (or at the direction of the plan or
issuer) 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 final internal adverse benefit determination is required to
be provided under 29 CFR 2560.503-1(i) to give the claimant a
reasonable opportunity to respond prior to that date; and
(2) Before the plan or issuer can issue a final internal adverse
benefit determination 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 final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
plan and issuer 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 the denial of benefits.
(E) Notice. A plan and issuer must provide notice to individuals,
in a culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The plan and issuer must also comply with
the additional requirements of this paragraph (b)(2)(ii)(E).
(1) The plan and issuer must ensure that any notice of adverse
benefit
[[Page 43356]]
determination or final internal adverse benefit determination includes
information sufficient to identify the claim involved (including the
date of service, the health care provider, the claim amount (if
applicable), the diagnosis code and its corresponding meaning, and the
treatment code and its corresponding meaning).
(2) The plan and issuer must ensure that the reason or reasons for
the adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the plan's or issuer's standard, if any,
that was used in denying the claim. In the case of a notice of final
internal adverse benefit determination, this description must include a
discussion of the decision.
(3) The plan and issuer must provide a description of available
internal appeals and external review processes, including information
regarding how to initiate an appeal.
(4) The plan and issuer must disclose the availability of, and
contact information for, any applicable office of health insurance
consumer assistance or ombudsman established under PHS Act section 2793
to assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes. In
the case of a plan or issuer that fails to strictly adhere to all the
requirements of this paragraph (b)(2) with respect to a claim, the
claimant is deemed to have exhausted the internal claims and appeals
process of this paragraph (b), regardless of whether the plan or issuer
asserts that it substantially complied with the requirements of this
paragraph (b)(2) or that any error it committed was de minimis.
Accordingly the claimant may initiate an external review under
paragraph (c) or (d) of this section, as applicable. The claimant is
also entitled to pursue any available remedies under section 502(a) of
ERISA or under State law, as applicable, on the basis that the plan or
issuer has failed to provide a reasonable internal claims and appeals
process that would yield a decision on the merits of the claim. If a
claimant chooses to pursue remedies under section 502(a) of ERISA under
such circumstances, the claim or appeal is deemed denied on review
without the exercise of discretion by an appropriate fiduciary.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. A plan and issuer subject to the requirements of this
paragraph (b)(2) are required to provide continued coverage pending the
outcome of an appeal. For this purpose, the plan and issuer must comply
with the requirements of 29 CFR 2560.503-1(f)(2)(ii), which generally
provides that benefits for an ongoing course of treatment cannot be
reduced or terminated without providing advance notice and an
opportunity for advance review.
(c) State standards for external review--(1) In general. (i) If a
State external review process that applies to and is binding on a
health insurance issuer offering group health insurance coverage
includes at a minimum the consumer protections in the NAIC Uniform
Model Act, then the issuer must comply with the applicable State
external review process and is not required to comply with the Federal
external review process of paragraph (d) of this section. In such a
case, to the extent that benefits under a group health plan are
provided through health insurance coverage, the group health plan is
not required to comply with either this paragraph (c) or the Federal
external review process of paragraph (d) of this section.
(ii) To the extent that a group health plan provides benefits other
than through health insurance coverage (that is, the plan is self-
insured) and is subject to a State external review process that applies
to and is binding on the plan (for example, is not preempted by ERISA)
and the State external review process includes at a minimum the
consumer protections in the NAIC Uniform Model Act, then the plan must
comply with the applicable State external review process and is not
required to comply with the Federal external review process of
paragraph (d) of this section.
(iii) If a plan or issuer is not required under paragraph (c)(1)(i)
or (c)(1)(ii) of this section to comply with the requirements of this
paragraph (c), then the plan or issuer must comply with the Federal
external review process of paragraph (d) of this section, except to the
extent, in the case of a plan, the plan is not required under paragraph
(c)(1)(i) of this section to comply with paragraph (d) of this section.
(2) Minimum standards for State external review processes. An
applicable State external review process must meet all the minimum
consumer protections in this paragraph (c)(2). The Department of Health
and Human Services will determine whether State external review
processes meet these requirements.
(i) The State process must provide for the external review of
adverse benefit determinations (including final internal adverse
benefit determinations) by issuers (or, if applicable, plans) that are
based on the issuer's (or plan's) requirements for medical necessity,
appropriateness, health care setting, level of care, or effectiveness
of a covered benefit.
(ii) The State process must require issuers (or, if applicable,
plans) to provide effective written notice to claimants of their rights
in connection with an external review for an adverse benefit
determination.
(iii) To the extent the State process requires exhaustion of an
internal claims and appeals process, exhaustion must be unnecessary
where the issuer (or, if applicable, the plan) has waived the
requirement, the issuer (or the plan) is considered to have exhausted
the internal claims and appeals process under applicable law (including
by failing to comply with any of the requirements for the internal
appeal process, as outlined in paragraph (b)(2) of this section), or
the claimant has applied for expedited external review at the same time
as applying for an expedited internal appeal.
(iv) The State process provides that the issuer (or, if applicable,
the plan) against which a request for external review is filed must pay
the cost of the IRO for conducting the external review. Notwithstanding
this requirement, the State external review process may require a
nominal filing fee from the claimant requesting an external review. For
this purpose, to be considered nominal, a filing fee must not exceed
$25, it must be refunded to the claimant if the adverse benefit
determination (or final internal adverse benefit determination) is
reversed through external review, it must be waived if payment of the
fee would impose an undue financial hardship, and the annual limit on
filing fees for any claimant within a single plan year must not exceed
$75.
(v) The State process may not impose a restriction on the minimum
dollar amount of a claim for it to be eligible for external review.
Thus, the process may not impose, for example, a $500 minimum claims
threshold.
(vi) The State process must allow at least four months after the
receipt of a notice of an adverse benefit determination or final
internal adverse benefit determination for a request for an external
review to be filed.
(vii) The State process must provide that IROs will be assigned on
a random basis or another method of assignment that assures the
independence and impartiality of the assignment process (such as
rotational assignment) by a State or independent entity, and in no
event selected by the issuer, plan, or the individual.
[[Page 43357]]
(viii) The State process must provide for maintenance of a list of
approved IRO qualified to conduct the external review based on the
nature of the health care service that is the subject of the review.
The State process must provide for approval only of IROs that are
accredited by a nationally recognized private accrediting organization.
(ix) The State process must provide that any approved IRO has no
conflicts of interest that will influence its independence. Thus, the
IRO may not own or control, or be owned or controlled by a health
insurance issuer, a group health plan, the sponsor of a group health
plan, a trade association of plans or issuers, or a trade association
of health care providers. The State process must further provide that
the IRO and the clinical reviewer assigned to conduct an external
review may not have a material professional, familial, or financial
conflict of interest with the issuer or plan that is the subject of the
external review; the claimant (and any related parties to the claimant)
whose treatment is the subject of the external review; any officer,
director, or management employee of the issuer; the plan administrator,
plan fiduciaries, or plan employees; the health care provider, the
health care provider's group, or practice association recommending the
treatment that is subject to the external review; the facility at which
the recommended treatment would be provided; or the developer or
manufacturer of the principal drug, device, procedure, or other therapy
being recommended.
(x) The State process allows the claimant at least five business
days to submit to the IRO in writing additional information that the
IRO must consider when conducting the external review and it requires
that the claimant is notified of the right to do so. The process must
also require that any additional information submitted by the claimant
to the IRO must be forwarded to the issuer (or, if applicable, the
plan) within one business day of receipt by the IRO.
(xi) The State process must provide that the decision is binding on
the issuer (or, if applicable, the plan), as well as the claimant
except to the extent the other remedies are available under State or
Federal law.
(xii) The State process must require, for standard external review,
that the IRO provide written notice to the issuer (or, if applicable,
the plan) and the claimant of its decision to uphold or reverse the
adverse benefit determination (or final internal adverse benefit
determination) within no more than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide for an expedited external
review if the adverse benefit determination (or final internal adverse
benefit determination) concerns an admission, availability of care,
continued stay, or health care service for which the claimant received
emergency services, but has not been discharged from a facility; or
involves a medical condition for which the standard external review
timeframe would seriously jeopardize the life or health of the claimant
or jeopardize the claimant's ability to regain maximum function. As
expeditiously as possible but within no more than 72 hours after the
receipt of the request for expedited external review by the IRO, the
IRO must make its decision to uphold or reverse the adverse benefit
determination (or final internal adverse benefit determination) and
notify the claimant and the issuer (or, if applicable, the plan) of the
determination. If the notice is not in writing, the IRO must provide
written confirmation of the decision within 48 hours after the date of
the notice of the decision.
(xiv) The State process must require that issuers (or, if
applicable, plans) include a description of the external review process
in or attached to the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants, beneficiaries, or enrollees, substantially
similar to what is set forth in section 17 of the NAIC Uniform Model
Act.
(xv) The State process must require that IROs maintain written
records and make them available upon request to the State,
substantially similar to what is set forth in section 15 of the NAIC
Uniform Model Act.
(xvi) The State process follows procedures for external review of
adverse benefit determinations (or final internal adverse benefit
determinations) involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
(3) Transition period for existing external review processes--(i)
For plan years beginning before July 1, 2011, an applicable State
external review process applicable to a health insurance issuer or
group health plan is considered to meet the requirements of this
paragraph (c). Accordingly, for plan years beginning before July 1,
2011, an applicable State external review process will be considered
binding on the issuer or plan (in lieu of the requirements of the
Federal external review process). If there is no applicable State
external review process, the issuer or plan is required to comply with
the requirements of the Federal external review process in paragraph
(d) of this section.
(ii) For final internal adverse benefit determinations (or, in the
case of simultaneous internal appeal and external review, adverse
benefit determinations) provided after the first day of the first plan
year beginning on or after July 1, 2011, the Federal external review
process will apply unless the Department of Health and Human Services
determines that a State law meets all the minimum standards of
paragraph (c)(2) of this section as of the first day of the plan year.
(d) Federal external review process. A plan or issuer not subject
to an applicable State external review process under paragraph (c) of
this section must provide an effective Federal external review process
in accordance with this paragraph (d) (except to the extent, in the
case of a plan, the plan is described in paragraph (c)(1)(i) of this
section as not having to comply with this paragraph (d)). In the case
of health insurance coverage offered in connection with a group health
plan, if either the plan or the issuer complies with the Federal
external review process of this paragraph (d), then the obligation to
comply with this paragraph (d) is satisfied for both the plan and the
issuer with respect to the health insurance coverage.
(1) Scope. The Federal external review process established pursuant
to this paragraph (d) applies to any adverse benefit determination or
final internal adverse benefit determination as defined in paragraphs
(a)(2)(i) and (a)(2)(v) of this section, except that a denial,
reduction, termination, or a failure to provide payment for a benefit
based on a determination that a participant or beneficiary fails to
meet the requirements for eligibility under the terms of a group health
plan is not eligible for the external review process under this
paragraph (d).
(2) External review process standards. The Federal external review
process established pursuant to this paragraph (d) will be similar to
the process set forth in the NAIC Uniform Model Act and will meet
standards issued by the Secretary. These standards will comply with all
of the requirements described in this paragraph (d)(2).
(i) These standards will describe how a claimant initiates an
external review, procedures for preliminary reviews to determine
whether a claim is eligible for external review, minimum qualifications
for IROs, a process for
[[Page 43358]]
approving IROs eligible to be assigned to conduct external reviews, a
process for random assignment of external reviews to approved IROs,
standards for IRO decisionmaking, and rules for providing notice of a
final external review decision.
(ii) These standards will provide an expedited external review
process for--
(A) An adverse benefit determination, if the adverse benefit
determination involves a medical condition of the claimant for which
the timeframe for completion of an expedited internal appeal under
paragraph (b) of this section would seriously jeopardize the life or
health of the claimant, or would jeopardize the claimant's ability to
regain maximum function and the claimant has filed a request for an
expedited internal appeal under paragraph (b) of this section; or
(B) A final internal adverse benefit determination, if the claimant
has a medical condition where the timeframe for completion of a
standard external review pursuant to paragraph (d)(3) of this section
would seriously jeopardize the life or health of the claimant or would
jeopardize the claimant's ability to regain maximum function, or if the
final internal adverse benefit determination concerns an admission,
availability of care, continued stay or health care service for which
the claimant received emergency services, but has not been discharged
from a facility.
(iii) With respect to claims involving experimental or
investigational treatments, these standards will also provide
additional consumer protections to ensure that adequate clinical and
scientific experience and protocols are taken into account as part of
the external review process.
(iv) These standards will provide that an external review decision
is binding on the plan or issuer, as well as the claimant, except to
the extent other remedies are available under State or Federal law.
(v) These standards may establish external review reporting
requirements for IROs.
(vi) These standards will establish additional notice requirements
for plans and issuers regarding disclosures to participants and
beneficiaries describing the Federal external review procedures
(including the right to file a request for an external review of an
adverse benefit determination or a final internal adverse benefit
determination in the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants or beneficiaries.
(vii) These standards will require plans and issuers to provide
information relevant to the processing of the external review,
including, but not limited to, the information considered and relied on
in making the adverse benefit determination or final internal adverse
benefit determination.
(e) Form and manner of notice. (1) For purposes of this section, a
group health plan and health insurance issuer offering group health
insurance coverage are considered to provide relevant notices in a
culturally and linguistically appropriate manner--
(i) For a plan that covers fewer than 100 participants at the
beginning of a plan year, if the plan and issuer provide notices upon
request in a non-English language in which 25 percent or more of all
plan participants are literate only in the same non-English language;
or
(ii) For a plan that covers 100 or more participants at the
beginning of a plan year, if the plan and issuer provide notices upon
request in a non-English language in which the lesser of 500 or more
participants, or 10 percent or more of all plan participants, are
literate only in the same non-English language.
(2) If an applicable threshold described in paragraph (e)(1) of
this section is met, the plan and issuer must also--
(i) Include a statement in the English versions of all notices,
prominently displayed in the non-English language, offering the
provision of such notices in the non-English language;
(ii) Once a request has been made by a claimant, provide all
subsequent notices to the claimant in the non-English language; and
(iii) To the extent the plan or issuer maintains a customer
assistance process (such as a telephone hotline) that answers questions
or provides assistance with filing claims and appeals, the plan or
issuer must provide such assistance in the non-English language.
(f) Secretarial authority. The Secretary may determine that the
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, is considered in compliance
with the applicable process established under paragraph (c) or (d) of
this section if it substantially meets the requirements of paragraph
(c) or (d) of this section, as applicable.
(g) Applicability date. The provisions of this section apply for
plan years beginning on or after September 23, 2010. See Sec.
2590.715-1251 of this part for determining the application of this
section to grandfathered health plans (providing that these rules
regarding internal claims and appeals and external review processes do
not apply to grandfathered health plans).
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Subtitle A
0
For the reasons stated in the preamble, the Department of Health and
Human Services amends 45 CFR part 147 as follows:
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
1. The authority citation for part 147 continues to read as follows:
Authority: Sections 2701 through 2763, 2791, and 2792 of the
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.
0
2. Add Sec. 147.136 to read as follows:
Sec. 147.136 Internal claims and appeals and external review
processes.
(a) Scope and definitions--(1) Scope. This section sets forth
requirements with respect to internal claims and appeals and external
review processes for group health plans and health insurance issuers
that are not grandfathered health plans under Sec. 147.140 of this
part. Paragraph (b) of this section provides requirements for internal
claims and appeals processes. Paragraph (c) of this section sets forth
rules governing the applicability of State external review processes.
Paragraph (d) of this section sets forth a Federal external review
process for plans and issuers not subject to an applicable State
external review process. Paragraph (e) of this section prescribes
requirements for ensuring that notices required to be provided under
this section are provided in a culturally and linguistically
appropriate manner. Paragraph (f) of this section describes the
authority of the Secretary to deem certain external review processes in
existence on March 23, 2010 as in compliance with paragraph (c) or (d)
of this section. Paragraph (g) of this section sets forth the
applicability date for this section.
(2) Definitions. For purposes of this section, the following
definitions apply--
(i) Adverse benefit determination. An adverse benefit determination
means an adverse benefit determination as defined in 29 CFR 2560.503-1,
as well as any rescission of coverage, as described in Sec. 147.128
(whether or not, in connection with the rescission, there is an adverse
effect on any particular benefit at that time).
[[Page 43359]]
(ii) Appeal (or internal appeal). An appeal or internal appeal
means review by a plan or issuer of an adverse benefit determination,
as required in paragraph (b) of this section.
(iii) Claimant. Claimant means an individual who makes a claim
under this section. For purposes of this section, references to
claimant include a claimant's authorized representative.
(iv) External review. External review means a review of an adverse
benefit determination (including a final internal adverse benefit
determination) conducted pursuant to an applicable State external
review process described in paragraph (c) of this section or the
Federal external review process of paragraph (d) of this section.
(v) Final internal adverse benefit determination. A final internal
adverse benefit determination means an adverse benefit determination
that has been upheld by a plan or issuer at the completion of the
internal appeals process applicable under paragraph (b) of this section
(or an adverse benefit determination with respect to which the internal
appeals process has been exhausted under the deemed exhaustion rules of
paragraph (b)(2)(ii)(F) or (b)(3)(ii)(F) of this section).
(vi) Final external review decision. A final external review
decision, as used in paragraph (d) of this section, means a
determination by an independent review organization at the conclusion
of an external review.
(vii) Independent review organization (or IRO). An independent
review organization (or IRO) means an entity that conducts independent
external reviews of adverse benefit determinations and final internal
adverse benefit determinations pursuant to paragraph (c) or (d) of this
section.
(viii) NAIC Uniform Model Act. The NAIC Uniform Model Act means the
Uniform Health Carrier External Review Model Act promulgated by the
National Association of Insurance Commissioners in place on July 23,
2010.
(b) Internal claims and appeals process--(1) In general. A group
health plan and a health insurance issuer offering group or individual
health insurance coverage must implement an effective internal claims
and appeals process, as described in this paragraph (b).
(2) Requirements for group health plans and group health insurance
issuers. A group health plan and a health insurance issuer offering
group health insurance coverage must comply with all the requirements
of this paragraph (b)(2). In the case of health insurance coverage
offered in connection with a group health plan, if either the plan or
the issuer complies with the internal claims and appeals process of
this paragraph (b)(2), then the obligation to comply with this
paragraph (b)(2) is satisfied for both the plan and the issuer with
respect to the health insurance coverage.
(i) Minimum internal claims and appeals standards. A group health
plan and a health insurance issuer offering group health insurance
coverage must comply with all the requirements applicable to group
health plans under 29 CFR 2560.503-1, except to the extent those
requirements are modified by paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b), with respect to health insurance
coverage offered in connection with a group health plan, the group
health insurance issuer is subject to the requirements in 29 CFR
2560.503-1 to the same extent as the group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(2)(i) of this section, the internal claims and appeals
processes of a group health plan and a health insurance issuer offering
group health insurance coverage must meet the requirements of this
paragraph (b)(2)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(2), an ``adverse benefit determination''
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as the other provisions of this paragraph (b)(2), a
plan or issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) as an adverse benefit determination. (Rescissions of coverage are
subject to the requirements of Sec. 147.128 of this part.)
(B) Expedited notification of benefit determinations involving
urgent care. Notwithstanding the rule of 29 CFR 2560.503-1(f)(2)(i)
that provides for notification in the case of urgent care claims not
later than 72 hours after the receipt of the claim, for purposes of
this paragraph (b)(2), a plan and issuer 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 or issuer, 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. The requirements of 29 CFR 2560.503-1(f)(2)(i) other than the
rule for notification within 72 hours continue to apply to the plan and
issuer. For purposes of this paragraph (b)(2)(ii)(B), a claim involving
urgent care has the meaning given in 29 CFR 2560.503-1(m)(1).
(C) Full and fair review. A plan and issuer must allow a claimant
to review the claim file and to present evidence and testimony as part
of the internal claims and appeals process. Specifically, in addition
to complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The plan or issuer must provide the claimant, free of charge,
with any new or additional evidence considered, relied upon, or
generated by the plan or issuer (or at the direction of the plan or
issuer) 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 final internal adverse benefit determination is required to
be provided under 29 CFR 2560.503-1(i) to give the claimant a
reasonable opportunity to respond prior to that date; and
(2) Before the plan or issuer can issue a final internal adverse
benefit determination 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 final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
plan and issuer 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 the denial of benefits.
(E) Notice. A plan and issuer must provide notice to individuals,
in a culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The plan and issuer must also comply with
the additional
[[Page 43360]]
requirements of this paragraph (b)(2)(ii)(E).
(1) The plan and issuer must ensure that any notice of adverse
benefit determination or final internal adverse benefit determination
includes information sufficient to identify the claim involved
(including the date of service, the health care provider, the claim
amount (if applicable), the diagnosis code and its corresponding
meaning, and the treatment code and its corresponding meaning).
(2) The plan and issuer must ensure that the reason or reasons for
the adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the plan's or issuer's standard, if any,
that was used in denying the claim. In the case of a notice of final
internal adverse benefit determination, this description must include a
discussion of the decision.
(3) The plan and issuer must provide a description of available
internal appeals and external review processes, including information
regarding how to initiate an appeal.
(4) The plan and issuer must disclose the availability of, and
contact information for, any applicable office of health insurance
consumer assistance or ombudsman established under PHS Act section 2793
to assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes. In
the case of a plan or issuer that fails to strictly adhere to all the
requirements of this paragraph (b)(2) with respect to a claim, the
claimant is deemed to have exhausted the internal claims and appeals
process of this paragraph (b), regardless of whether the plan or issuer
asserts that it substantially complied with the requirements of this
paragraph (b)(2) or that any error it committed was de minimis.
Accordingly the claimant may initiate an external review under
paragraph (c) or (d) of this section, as applicable. The claimant is
also entitled to pursue any available remedies under section 502(a) of
ERISA or under State law, as applicable, on the basis that the plan or
issuer has failed to provide a reasonable internal claims and appeals
process that would yield a decision on the merits of the claim. If a
claimant chooses to pursue remedies under section 502(a) of ERISA under
such circumstances, the claim or appeal is deemed denied on review
without the exercise of discretion by an appropriate fiduciary.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. A plan and issuer subject to the requirements of this
paragraph (b)(2) are required to provide continued coverage pending the
outcome of an appeal. For this purpose, the plan and issuer must comply
with the requirements of 29 CFR 2560.503-1(f)(2)(ii), which generally
provides that benefits for an ongoing course of treatment cannot be
reduced or terminated without providing advance notice and an
opportunity for advance review.
(3) Requirements for individual health insurance issuers. A health
insurance issuer offering individual health insurance coverage must
comply with all the requirements of this paragraph (b)(3).
(i) Minimum internal claims and appeals standards. A health
insurance issuer offering individual health insurance coverage must
comply with all the requirements of the ERISA internal claims and
appeals procedures applicable to group health plans under 29 CFR
2560.503-1 except for the requirements with respect to multiemployer
plans, and except to the extent those requirements are modified by
paragraph (b)(3)(ii) of this section. Accordingly, under this paragraph
(b), with respect to individual health insurance coverage, the issuer
is subject to the requirements in 29 CFR 2560.503-1 as if the issuer
were a group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(3)(i) of this section, the internal claims and appeals
processes of a health insurance issuer offering individual health
insurance coverage must meet the requirements of this paragraph
(b)(3)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(3), an adverse benefit determination
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as other provisions of this paragraph (b)(3), an
issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) and any decision to deny coverage in an initial eligibility
determination as an adverse benefit determination. (Rescissions of
coverage are subject to the requirements of 45 CFR 147.128.)
(B) Expedited notification of benefit determinations involving
urgent care. Notwithstanding the rule of 29 CFR 2560.503-1(f)(2)(i)
that provides for notification in the case of urgent care claims not
later than 72 hours after the receipt of the claim, for purposes of
this paragraph (b)(3), an issuer 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 issuer, unless the claimant fails to provide
sufficient information to determine whether, or to what extent,
benefits are covered or payable under the health insurance coverage.
The requirements of 29 CFR 2560.503-1(f)(2)(i) other than the rule for
notification within 72 hours continue to apply to the issuer. For
purposes of this paragraph (b)(3)(ii)(B), a claim involving urgent care
has the meaning given in 29 CFR 2560.503-1(m)(1).
(C) Full and fair review. An issuer must allow a claimant to review
the claim file and to present evidence and testimony as part of the
internal claims and appeals process. Specifically, in addition to
complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The issuer must provide the claimant, free of charge, with any
new or additional evidence considered, relied upon, or generated by the
issuer (or at the direction of the issuer) 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 final
internal adverse benefit determination is required to be provided under
29 CFR 2560.503-1(i) to give the claimant a reasonable opportunity to
respond prior to that date; and
(2) Before the issuer can issue a final internal adverse benefit
determination 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 final internal adverse benefit determination is
required to be provided under 29 CFR 2560.503-1(i) to give the claimant
a reasonable opportunity to respond prior to that date.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
issuer 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
[[Page 43361]]
the likelihood that the individual will support the denial of benefits.
(E) Notice. An issuer must provide notice to individuals, in a
culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The issuer must also comply with the
additional requirements of this paragraph (b)(2)(ii)(E).
(1) The issuer must ensure that any notice of adverse benefit
determination or final internal adverse benefit determination includes
information sufficient to identify the claim involved (including the
date of service, the health care provider, the claim amount (if
applicable), the diagnosis code and its corresponding meaning, and the
treatment code and its corresponding meaning).
(2) The issuer must ensure that the reason or reasons for the
adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the issuer's standard, if any, that was
used in denying the claim. In the case of a notice of final internal
adverse benefit determination, this description must include a
discussion of the decision.
(3) The issuer must provide a description of available internal
appeals and external review processes, including information regarding
how to initiate an appeal.
(4) The issuer must disclose the availability of, and contact
information for, any applicable office of health insurance consumer
assistance or ombudsman established under PHS Act section 2793 to
assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes. In
the case of an issuer that fails to strictly adhere to all the
requirements of this paragraph (b)(3) with respect to a claim, the
claimant is deemed to have exhausted the internal claims and appeals
process of this paragraph (b), regardless of whether the issuer asserts
that it substantially complied with the requirements of this paragraph
(b)(3) or that any error it committed was de minimis. Accordingly the
claimant may initiate an external review under paragraph (c) or (d) of
this section, as applicable. The claimant is also entitled to pursue
any available remedies under applicable State law on the basis that the
issuer has failed to provide a reasonable internal claims and appeals
process that would yield a decision on the merits of the claim.
(G) One level of internal appeal. Notwithstanding the requirements
in 29 CFR Sec. 2560.503-1(c)(3), a health insurance issuer offering
individual health insurance coverage must provide for only one level of
internal appeal before issuing a final determination.
(H) Recordkeeping requirements. A health insurance issuer offering
individual health insurance coverage must maintain for six years
records of all claims and notices associated with the internal claims
and appeals process, including the information detailed in paragraph
(b)(3)(ii)(E) of this section and any other information specified by
the Secretary. An issuer must make such records available for
examination by the claimant or State or Federal oversight agency upon
request.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. An issuer subject to the requirements of this paragraph
(b)(3) is required to provide continued coverage pending the outcome of
an appeal. For this purpose, the issuer must comply with the
requirements of 29 CFR 2560.503-1(f)(2)(ii) as if the issuer were a
group health plan, so that the issuer cannot reduce or terminate an
ongoing course of treatment without providing advance notice and an
opportunity for advance review.
(c) State standards for external review--(1) In general. (i) If a
State external review process that applies to and is binding on a
health insurance issuer offering group or individual health insurance
coverage includes at a minimum the consumer protections in the NAIC
Uniform Model Act, then the issuer must comply with the applicable
State external review process and is not required to comply with the
Federal external review process of paragraph (d) of this section. In
such a case, to the extent that benefits under a group health plan are
provided through health insurance coverage, the group health plan is
not required to comply with either this paragraph (c) or the Federal
external review process of paragraph (d) of this section.
(ii) To the extent that a group health plan provides benefits other
than through health insurance coverage (that is, the plan is self-
insured) and is subject to a State external review process that applies
to and is binding on the plan (for example, is not preempted by ERISA)
and the State external review process includes at a minimum the
consumer protections in the NAIC Uniform Model Act, then the plan must
comply with the applicable State external review process and is not
required to comply with the Federal external review process of
paragraph (d) of this section.
(iii) If a plan or issuer is not required under paragraph (c)(1)(i)
or (c)(1)(ii) of this section to comply with the requirements of this
paragraph (c), then the plan or issuer must comply with the Federal
external review process of paragraph (d) of this section, except to the
extent, in the case of a plan, the plan is not required under paragraph
(c)(1)(i) of this section to comply with paragraph (d) of this section.
(2) Minimum standards for State external review processes. An
applicable State external review process must meet all the minimum
consumer protections in this paragraph (c)(2). The Department of Health
and Human Services will determine whether State external review
processes meet these requirements.
(i) The State process must provide for the external review of
adverse benefit determinations (including final internal adverse
benefit determinations) by issuers (or, if applicable, plans) that are
based on the issuer's (or plan's) requirements for medical necessity,
appropriateness, health care setting, level of care, or effectiveness
of a covered benefit.
(ii) The State process must require issuers (or, if applicable,
plans) to provide effective written notice to claimants of their rights
in connection with an external review for an adverse benefit
determination.
(iii) To the extent the State process requires exhaustion of an
internal claims and appeals process, exhaustion must be unnecessary
where the issuer (or, if applicable, the plan) has waived the
requirement, the issuer (or the plan) is considered to have exhausted
the internal claims and appeals process under applicable law (including
by failing to comply with any of the requirements for the internal
appeal process, as outlined in paragraph (b)(2) or (b)(3) of this
section), or the claimant has applied for expedited external review at
the same time as applying for an expedited internal appeal.
(iv) The State process provides that the issuer (or, if applicable,
the plan) against which a request for external review is filed must pay
the cost of the IRO for conducting the external review. Notwithstanding
this requirement, the State external review process may require a
nominal filing fee from the claimant requesting an external review. For
this purpose, to be considered nominal, a filing fee must not exceed
$25, it must be refunded to the claimant if the adverse benefit
determination (or final internal adverse benefit determination) is
reversed through external review, it must be waived if
[[Page 43362]]
payment of the fee would impose an undue financial hardship, and the
annual limit on filing fees for any claimant within a single plan year
(in the individual market, policy year) must not exceed $75.
(v) The State process may not impose a restriction on the minimum
dollar amount of a claim for it to be eligible for external review.
Thus, the process may not impose, for example, a $500 minimum claims
threshold.
(vi) The State process must allow at least four months after the
receipt of a notice of an adverse benefit determination or final
internal adverse benefit determination for a request for an external
review to be filed.
(vii) The State process must provide that IROs will be assigned on
a random basis or another method of assignment that assures the
independence and impartiality of the assignment process (such as
rotational assignment) by a State or independent entity, and in no
event selected by the issuer, plan, or the individual.
(viii) The State process must provide for maintenance of a list of
approved IRO qualified to conduct the external review based on the
nature of the health care service that is the subject of the review.
The State process must provide for approval only of IROs that are
accredited by a nationally recognized private accrediting organization.
(ix) The State process must provide that any approved IRO has no
conflicts of interest that will influence its independence. Thus, the
IRO may not own or control, or be owned or controlled by a health
insurance issuer, a group health plan, the sponsor of a group health
plan, a trade association of plans or issuers, or a trade association
of health care providers. The State process must further provide that
the IRO and the clinical reviewer assigned to conduct an external
review may not have a material professional, familial, or financial
conflict of interest with the issuer or plan that is the subject of the
external review; the claimant (and any related parties to the claimant)
whose treatment is the subject of the external review; any officer,
director, or management employee of the issuer; the plan administrator,
plan fiduciaries, or plan employees; the health care provider, the
health care provider's group, or practice association recommending the
treatment that is subject to the external review; the facility at which
the recommended treatment would be provided; or the developer or
manufacturer of the principal drug, device, procedure, or other therapy
being recommended.
(x) The State process allows the claimant at least five business
days to submit to the IRO in writing additional information that the
IRO must consider when conducting the external review and it requires
that the claimant is notified of the right to do so. The process must
also require that any additional information submitted by the claimant
to the IRO must be forwarded to the issuer (or, if applicable, the
plan) within one business day of receipt by the IRO.
(xi) The State process must provide that the decision is binding on
the issuer (or, if applicable, the plan), as well as the claimant
except to the extent the other remedies are available under State or
Federal law.
(xii) The State process must require, for standard external review,
that the IRO provide written notice to the claimant and the issuer (or,
if applicable, the plan) of its decision to uphold or reverse the
adverse benefit determination (or final internal adverse benefit
determination) within no more than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide for an expedited external
review if the adverse benefit determination (or final internal adverse
benefit determination) concerns an admission, availability of care,
continued stay, or health care service for which the claimant received
emergency services, but has not been discharged from a facility; or
involves a medical condition for which the standard external review
time frame would seriously jeopardize the life or health of the
claimant or jeopardize the claimant's ability to regain maximum
function. As expeditiously as possible but within no more than 72 hours
after the receipt of the request for expedited external review by the
IRO, the IRO must make its decision to uphold or reverse the adverse
benefit determination (or final internal adverse benefit determination)
and notify the claimant and the issuer (or, if applicable, the plan) of
the determination. If the notice is not in writing, the IRO must
provide written confirmation of the decision within 48 hours after the
date of the notice of the decision.
(xiv) The State process must require that issuers (or, if
applicable, plans) include a description of the external review process
in or attached to the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants, beneficiaries, or enrollees, substantially
similar to what is set forth in section 17 of the NAIC Uniform Model
Act.
(xv) The State process must require that IROs maintain written
records and make them available upon request to the State,
substantially similar to what is set forth in section 15 of the NAIC
Uniform Model Act.
(xvi) The State process follows procedures for external review of
adverse benefit determinations (or final internal adverse benefit
determinations) involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
(3) Transition period for existing external review processes--(i)
For plan years (in the individual market, policy years) beginning
before July 1, 2011, an applicable State external review process
applicable to a health insurance issuer or group health plan is
considered to meet the requirements of this paragraph (c). Accordingly,
for plan years (in the individual market, policy years) beginning
before July 1, 2011, an applicable State external review process will
be considered binding on the issuer or plan (in lieu of the
requirements of the Federal external review process). If there is no
applicable State external review process, the issuer or plan is
required to comply with the requirements of the Federal external review
process in paragraph (d) of this section.
(ii) For final internal adverse benefit determinations (or, in the
case of simultaneous internal appeal and external review, adverse
benefit determinations) provided after the first day of the first plan
year (in the individual market, policy year) beginning on or after July
1, 2011, the Federal external review process will apply unless the
Department of Health and Human Services determines that a State law
meets all the minimum standards of paragraph (c)(2) of this section as
of the first day of the plan year (in the individual market, policy
year).
(d) Federal external review process--A plan or issuer not subject
to an applicable State external review process under paragraph (c) of
this section must provide an effective Federal external review process
in accordance with this paragraph (d) (except to the extent, in the
case of a plan, the plan is described in paragraph (c)(1)(i) of this
section as not having to comply with this paragraph (d)). In the case
of health insurance coverage offered in connection with a group health
plan, if either the plan or the issuer complies with the Federal
external review process of this paragraph (d), then the obligation to
comply with this paragraph (d) is satisfied for both the plan and the
issuer
[[Page 43363]]
with respect to the health insurance coverage.
(1) Scope. The Federal external review process established pursuant
to this paragraph (d) applies to any adverse benefit determination or
final internal adverse benefit determination as defined in paragraphs
(a)(2)(i) and (a)(2)(v) of this section, except that a denial,
reduction, termination or, or a failure to provide payment for a
benefit based on a determination that a participant or beneficiary
fails to meet the requirements for eligibility under the terms of a
group health plan is not eligible for the external review process under
this paragraph (d).
(2) External review process standards. The Federal external review
process established pursuant to this paragraph (d) will be similar to
the process set forth in the NAIC Uniform Model Act and will meet
standards issued by the Secretary. These standards will comply with all
of the requirements described in this paragraph (d)(2).
(i) These standards will describe how a claimant initiates an
external review, procedures for preliminary reviews to determine
whether a claim is eligible for external review, minimum qualifications
for IROs, a process for approving IROs eligible to be assigned to
conduct external reviews, a process for random assignment of external
reviews to approved IROs, standards for IRO decision-making, and rules
for providing notice of a final external review decision.
(ii) These standards will provide an expedited external review
process for--
(A) An adverse benefit determination, if the adverse benefit
determination involves a medical condition of the claimant for which
the timeframe for completion of an expedited internal appeal under
paragraph (b) of this section would seriously jeopardize the life or
health of the claimant, or would jeopardize the claimant's ability to
regain maximum function and the claimant has filed a request for an
expedited internal appeal under paragraph (b) of this section; or
(B) A final internal adverse benefit determination, if the claimant
has a medical condition where the timeframe for completion of a
standard external review pursuant to paragraph (d)(3) of this section
would seriously jeopardize the life or health of the claimant or would
jeopardize the claimant's ability to regain maximum function, or if the
final internal adverse benefit determination concerns an admission,
availability of care, continued stay or health care service for which
the claimant received emergency services, but has not been discharged
from a facility.
(iii) With respect to claims involving experimental or
investigational treatments, these standards will also provide
additional consumer protections to ensure that adequate clinical and
scientific experience and protocols are taken into account as part of
the external review process.
(iv) These standards will provide that an external review decision
is binding on the plan or issuer, as well as the claimant, except to
the extent other remedies are available under State or Federal law.
(v) These standards may establish external review reporting
requirements for IROs.
(vi) These standards will establish additional notice requirements
for plans and issuers regarding disclosures to participants,
beneficiaries, and enrollees describing the Federal external review
procedures (including the right to file a request for an external
review of an adverse benefit determination or a final internal adverse
benefit determination in the summary plan description, policy,
certificate, membership booklet, outline of coverage, or other evidence
of coverage it provides to participants, beneficiaries, or enrollees.
(vii) These standards will require plans and issuers to provide
information relevant to the processing of the external review,
including, but not limited to, the information considered and relied on
in making the adverse benefit determination or final internal adverse
benefit determination.
(e) Form and manner of notice--(1) Group health coverage--(i) For
purposes of this section, a group health plan and health insurance
issuer offering group health insurance coverage are considered to
provide relevant notices in a culturally and linguistically appropriate
manner--
(A) For a plan that covers fewer than 100 participants at the
beginning of a plan year, if the plan and issuer provide notices upon
request in a non-English language in which 25 percent or more of all
plan participants are literate only in the same non-English language;
or
(B) For a plan that covers 100 or more participants at the
beginning of a plan year, if the plan and issuer provides notices upon
request in a non-English language in which the lesser of 500 or more
participants, or 10 percent or more of all plan participants, are
literate only in the same non-English language.
(ii) If an applicable threshold described in paragraph (e)(1)(i) of
this section is met, the plan and issuer must also--
(A) Include a statement in the English versions of all notices,
prominently displayed in the non-English language, offering the
provision of such notices in the non-English language;
(B) Once a request has been made by a claimant, provide all
subsequent notices to the claimant in the non-English language; and
(C) To the extent the plan or issuer maintains a customer
assistance process (such as a telephone hotline) that answers questions
or provides assistance with filing claims and appeals, the plan or
issuer must provide such assistance in the non-English language.
(2) Individual health insurance coverage--(i) For purposes of this
section, a health insurance issuer offering individual health insurance
coverage is considered to provide relevant notices in a culturally and
linguistically appropriate manner if the issuer provides notices upon
request in a non-English language in which 10 percent or more of the
population residing in the claimant's county are literate only in the
same non-English language, determined in guidance published by the
Secretary of Health and Human Services.
(ii) If the threshold described in paragraph (e)(2)(i) of this
section is met, the issuer must also--
(A) Include a statement in the English versions of all notices,
prominently displayed in the non-English language, offering the
provision of such notices in the non-English language;
(B) Once a request has been made by a claimant, provide all
subsequent notices to the claimant in the non-English language; and
(C) To the extent the issuer maintains a customer assistance
process (such as a telephone hotline) that answers questions or
provides assistance with filing claims and appeals, the issuer must
provide such assistance in the non-English language.
(f) Secretarial authority. The Secretary may determine that the
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, is considered in compliance
with the applicable process established under paragraph (c) or (d) of
this section if it substantially meets the requirements of paragraph
(c) or (d) of this section, as applicable.
[[Page 43364]]
(g) Applicability date. The provisions of this section apply for
plan years (in the individual market, policy years) beginning on or
after September 23, 2010. See Sec. 147.140 of this part for
determining the application of this section to grandfathered health
plans (providing that these rules regarding internal claims and appeals
and external review processes do not apply to grandfathered health
plans).
[FR Doc. 2010-18043 Filed 7-22-10; 8:45 am]
BILLING CODE 4830-01-P, 4510-29-P, 4120-01-P