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Health Insurance Appeals Under the Affordable Care Act Effective June 22, 2011
By Jennifer C. Jaff, Esq. The health reform law the Patient Protection and Affordable Care Act (ACA) provided consumers with many new protections, including strengthened rights related to appealing denials of coverage. It created a federal right to appeal coverage denials, providing some uniformity where such a right already existed under state law, and for the first time, required self-funded plans (also sometimes called ERISA plans) to provide a right of external appeal. This was a huge win for patients. Self-funded plans are plans sponsored usually by large employers in which the plan itself pays for the health care, and the insurance company or other entity serves as a third-party administrator to administer the plan. If youve ever been in a self-funded plan, you know that if you got a denial of coverage, you could appeal, but once you used up your appeals to the plan (internal appeals), the plans word was final. Nobody looked over the plans shoulder to see if the decisions that were made were correct. External appeals have existed for quite some time in most states. An external appeal allows you to go to an independent review organization (IRO) and ask them to review the plans decision. They are completely independent of the insurer or the plan. They can overturn the insurer or plans decision, and their decision is binding on the insurer or plan. External appeals are essential consumer protections because they ensure that an unbiased medical professional reviews your appeal. Thus, adding external appeals of decisions by self-funded plans is a major victory for consumers. On July 23, 2010, the three federal agencies involved in health reform Health and Human Services, Department of Labor, and Treasury (IRS) issued interim final rules (IFR) for appeals. They were very consumer friendly. And so they became the subject of fierce lobbying by both insurers and employers with self-funded plans. The agencies focused in on a handful of points. After delaying implementation of some of the internal and external appeal protections, on June 22, 2011, the agencies issued amendments to the IFR which undermine some of the consumer protections that we were so excited about, despite our best efforts at urging the agencies to stand firm. The result is disappointing but still far better than before health reform.

Here are the highlights: about. First, with respect to internal appeals, there are a few new rules you should know Urgent care claims will be decided in 72 hours. The IFR said 24 hours, but the amending regulations go back to the old 72 hour rule. Under the IFR, in a denial notice, insurers/plans had to give a diagnosis code and procedure code with an explanation of what they mean so that you would know exactly what was denied. Some consumer organizations raised a concern about patient privacy under the IFR. Sometimes, an insurer will mail an explanation of benefits (EOB) to the named insured (the employee) rather than the patient. So there was a concern that if the wrong person opened up the envelope, they would be getting too much personal information. The amending regulations provide that diagnosis and procedure codes will not be included in notices automatically, but that the notice will advise you that you may request that information and the plan will give it to you and they cant treat your request for this information as the initiation of your appeal. Third, the IFR said that a plan had to strictly comply with the rules on appeals, and if they failed to do so, you could go directly to external appeal. The amendments say that a (1) de minimis (minimal) violation of a rule that (2) did not prejudice or harm you, and that (3) was for good cause or due to matters beyond the insurer or plans control and (4) took place in the context of good faith exchange of information and (5) was not part of a pattern or practice of violations is not enough to excuse a consumer from completing the internal appeal process before seeking external review. Fourth and this is very important the IFR said that all notices had to be translated into any language spoken by at least 10 percent of the members of a large firm or 25 percent of a small firm (for a group plan) were literate only in a language other than English. Once a consumer requested non-English language notices, every notice then had to be in that other language. The amendments severely limit this. Instead of looking at a percentage of a firm, the amended rules look at a percentage of residents in a county. If there are more than 10 percent of residents in a county who speak a non-English language, the insurer must tell consumers in notices that they can request translation into that other language. However, the consumer will have to request this every time they get a notice. There are 255 counties in the United States in which more than 10 percent of residents are literate in Spanish (78 of which are in Puerto Rico), but only six counties in which 10 percent of the people are literate in any other language, including two in the Aleutian Islands where Tagalog is the primary language for more than 10 percent of residents; one county in California where Chinese is spoken by more than 10 percent of people; and three counties (one in Utah, one in New Mexico, and one in Arizona) where Navajo is spoken by many. Nobody else is entitled to translation period.

Those are the changes to the rules pertaining to internal appeals. The amending regulations also affect external appeals. Hang in with me; this gets a little complicated. As already noted, there are some plans that are self-funded, and some that are not. Plans that are not self-funded are called fully-funded plans. Fully-funded plans are all

individual plans as well as group plans that are not self-funded, which usually includes all small groups. For legal purposes, there are two categories of self-funded plans: private self-funded plans, and nonfederal governmental plans i.e., state, county, school district, etc. There also are several different external appeal procedures, for fully-funded plans, self-funded plans, and nonfederal governmental self-funded plans. I will review each in turn. For fully-funded plans, the external appeals are governed by state law. The IFR required that state law external appeals had to comply with 16 minimum consumer protections. HHS will decide by July 1, 2011 whether a states external appeal standards meets the 16 consumer protections. If the states procedure meets those minimum consumer protections, the state law will govern the external appeal. Because some states were trying to come into compliance but could not get their process completed by now, the new rules set forth 13 minimum consumer protections which are slightly less consumer friendly than the 16 minimum consumer protections. For example, the IFR allowed consumers 120 days to file an external appeal; the amendment changes that to 60 days. IROs do not have to be accredited under the amendments, and its not entirely clear what conflict of interest rules will apply to them or even how they will be chosen. These relaxed standards are temporary; they apply only until January 1, 2014, after which all state external appeals have to meet the 16 minimum consumer protections. If a state fails to meet even this relaxed standard of 13 consumer protections, then all insurers in the state are subject to the federal external review process. (See below). For private, self-funded plans, there are two options. They can, if they and the state are willing, use a state external appeal process. In the alternative, they can contract directly with IROs and conduct their own external appeals. You can bet that they will choose the second alternative since they will be able to choose the IROs they contract with. They must have contracts in place with two IROs by January 1, 2012 and three IROs by July 1, 2012. Letting self-funded plans choose their own IROs may be like having the fox guard the henhouse, but still, some external review is better than none. For fully-funded plans in states that do not meet at least the 13 consumer protections and for nonfederal government plans, there is a federal external review process. The federal external review process offers two alternatives: first, the Office of Policy and Management already operates an external review process for the federal employee health insurance plan, so plans can simply adopt that procedure for external review; or, in the alternative, plans can you guessed it contract with IROs on their own, just like the private self-funded plans, with all of the concerns about whether those IROs really will be independent of the plans. There is one other important change under the federal external review process. Under the IFR, virtually any decision a plan made could be appealed. However, under the amendments, at least until January 1, 2014, external appeals are limited to decisions involving the exercise of medical judgment and rescissions (retroactive cancellations of insurance policies). We know that the exercise of medical judgment will be present in any decision involving medical necessity, whether something is experimental or investigational, appropriateness, health care setting, level of care, and effectiveness. But what about coding errors? What about whether a procedure required prior authorization? We dont

know. It appears, though, that an external reviewer makes the decision about whether a decision involved the exercise of medical judgment. In all cases, though, external review decisions are binding. Even if the plan intends to challenge the IROs decision in court, they have to pay for the service in the meantime if they lose the external appeal. So how is a consumer supposed to navigate this incredibly complicated system? Well, the IFR, in provisions that have not been changed, requires the insurer or plan to tell you what the appeal process is in every denial notice you receive. In addition, they are required to give you the contact information for your states Consumer Assistance Program (CAP), which you can call and ask questions at no charge. And when all else fails, call us at Advocacy for Patients with Chronic Illness!