Insurers will be required to Standardize Appeals Procedures


July 27, 2010 – Appeals of denied claims and insurance policy rescissions may soon become easier and more standardized under provisions of the Patient Protection and Affordable Care Act (ACA) that take effect for plan years beginning after September 23, 2010. With one major exception, the new appeals rules apply to all plans uniformly, including self-insured employer plans that fall under the Employee Retirement Income Security Act (ERISA). Previously, ERISA plans were exempt from certain State regulations that applied to other types of insurance plans. This change represents a significant benefit for patients insured under an ERISA plan.

The new regulations give patients in new health plans in every State the right to appeal decisions made by their plan through the plan’s internal process (which is not new). However, for the first time, patients will have the right to appeal decisions made by their health plan to an outside, independent reviewer, no matter what State they live in or what type of health coverage they have. Currently, not all States mandate the use of an outside reviewer, and ERISA plans are often exempt from requirements such as this.

The regulations standardize internal appeals procedures for all new payors. Under the new rules, each plan must have an internal appeals process that, at a minimum:

  • Allows patients to appeal when a health plan denies a claim for a covered service or rescinds coverage;
  • Gives patients detailed reasons why the denial was made;
  • Requires plans to notify patients about their right to appeal and how to begin the appeals process;
  • Ensures a full and fair review of the denial; and
  • Provides patients with an expedited appeals process in urgent cases.

If a patient’s internal appeal is denied, he or she will have the right to appeal to an independent reviewer not employed by the health plan, regardless of the type of health plan. Currently, most States require non-ERISA plans to use an independent reviewer, but rules in the States vary widely. In some States, for example, external review requirements apply only to HMOs. In addition, there are currently five States that do not already require any access to some form of external review (including North and South Dakota, Nebraska, Alabama and Mississippi, according to the Kaiser Family Foundation).

The new regulations will help standardize the process across the States and implement a process in those States where one does not currently exist. For example, all independent reviewers in every State must comply with standards established by the National Association of Insurance Commissioners. If State laws do not meet these standards, patients in those States will be protected by comparable Federal external appeals standards. In addition, people in health plans that are not subject to State law (e.g., ERISA plans) will be protected by the Federal standards. All decisions by the independent reviewer will be binding on the health plan, which is currently not the case in every State.

This regulation applies to new plans and to existing plans that lose their “grandfathered” status under ACA. An existing health plan is considered “grandfathered” until it makes changes in plan structure or benefits, at which point the plan will lose its grandfathered status and be classified as a “new” plan subject to all ACA provisions. Existing plans may lose grandfathered status if, for example, they make major increases in premiums, modest increases in co-payments or significantly cut benefits. The White House estimates that half of all employers, including two-thirds of small employers, could lose their grandfathered status by 2013.

These regulations were jointly issued as an interim final rule with comment period by the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services, the Department of Labor in the July 23, 2010 Federal Register. Comments will be accepted from the public on or before September 21, 2010.

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