Healthcare Reform: Interim Final Regulations for Internal Claims and Appeals; External Review Processes for Group Health Plans and Health Insurance Coverage

Author:Proskauers Health Care Reform Task Force
Profession:Proskauer Rose LLP

Group health plans and health insurance issuers (other than "grandfathered health plans" [Click here for client alert] must begin complying with new internal claims and appeals and external review procedures for plan years commencing on or after September 23, 2010.  The new procedures were issued under authority created by the Patient Protection and Affordable Care Act ("PPACA"), in the form of interim final regulations jointly issued July 22, 2010, by the Department of Treasury's Internal Revenue Service, the Department of Labor's Employee Benefits Security Administration ("EBSA"), and the Department of Health and Human Services ("HHS").1  Unlike proposed regulations, interim final regulations are binding upon the effective date.2  The agencies have requested comments regarding the new claims review procedures by September 21, 2010, but any changes to these procedures likely would be prospective only.  Accordingly, plan sponsors likely need to update their claims review procedures before their next plan year begins.

PPACA requires group health plans and health insurance issuers offering group or individual health insurance coverage to implement an effective internal claims and appeals process for the determination of benefit claims, and also requires the establishment of state and federal external review processes to review benefit claim denials.  The new claims procedure regulations set forth separate, although similar, rules for group health coverage and individual health insurance coverage for internal claims and appeals, and standards for state and federal external review processes.  The rules applicable to the internal claims and appeals for group health plans, both insured and self-insured, are addressed in this alert.

EBSA has previously promulgated claims procedures designed to ensure "full and fair" review of claims under ERISA-covered plans by establishing procedures for the organized flow of information between plans and claimants.3  For example, at the claimant's request, plans must provide all documents, records, and other information relied upon or generated during the consideration of a claim.  The purpose of ERISA's internal review process is to reduce litigation and thereby reduce the cost of benefit claim disputes.  Courts generally require claimants to exhaust internal administrative claims procedures as a prerequisite to seeking judicial review of their claims....

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