• Guidelines issued for appeals and external claims review

• Corralling unreasonable insurance cost increases will prove difficult
• Public opinion during reform process not as volatile as it appeared
• With dependent eligibility expansion looming, Mercer advises plan sponsors to take action

Guidelines issued for appeals and external claims review

Six new requirements have been added for internal claims procedures and appeals, including a 24-hour notice requirement for benefit determinations, according to new interim final rules issued jointly by the Internal Revenue Service, the Department of Labor's Employee Benefits Security Administration (EBSA), and the Department of Health and Human Services' Office of Consumer Information and Insurance Oversight (OCIIO).

The rules implement the claims appeals requirements in Public Health Service Act Sec. 2719, as added by the Patient Protection and Affordable Care Act (P.L. 111-148). The rules were published in the July 23 Federal Register.

Internal claims appeal. The interim final regulations set forth six new requirements in addition to those in the existing DOL claims procedure regulation in order to implement an effective internal claims and appeals process.

Adverse benefit determination. First, 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.

An adverse benefit determination eligible for internal claims and appeals processes under these regulations includes a denial, reduction, or termination of, or a failure to provide or make a payment for a benefit, including the following:

• 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.

24-Hour notice. Second, the regulations provide that a plan must notify a claimant of a benefit determination (whether adverse or not) with respect to a claim involving urgent care (as defined in exist DOL claims procedure regulations) as soon as possible, 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 benefits are covered or payable.

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.

Review, conflict of interest. Third, the regulations provide additional criteria to ensure that a claimant receives a full and fair review In addition to complying with the requirements of the existing DOL claims procedure regulation, a plan must provide the claimant, free of charge, with any new or additional evidence considered by the plan 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 adverse benefit determination on review is required to be provided to give the claimant a reasonable opportunity to respond. Additionally, before the plan can issue an adverse benefit determination based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale.

Fourth, new criteria are provided 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. Thus, decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be made based upon the likelihood that the individual will support a denial of benefits.

“Culturally appropriate.” Fifth, the statute and the regulations require a plan to provide a notice to enrollees “in a culturally and linguistically appropriate manner.” This provision applies to internal and external claims appeals processes. 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 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, the threshold is 25% of 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% of all plan participants.

In addition, a plan 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), as well as the diagnosis code, the treatment code, and the corresponding meanings of these codes.

Failure to comply. Sixth, if a plan fails to strictly adhere to all the requirements of the internal claims and appeals process, 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.” Upon such a such a failure, the claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review.

External review. The statute and the regulations provide that plans must comply with either a State external review process or the Federal external review process. The regulations provide a basis for determining when plans must comply with a 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 includes, at a minimum, the consumer protections in the NAIC Uniform Model Act in place on July 23, 2010, 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 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. According to the preamble to the regulations, “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.”

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.

State minimums. For a State external review to apply instead of the Federal process, the State external review process must include the several elements from the NAIC Uniform Model Act:

The interim final regulations are effective 60 days after publication in the Federal Register. However, the rules generally apply to group health plans and group health insurance issuers for plan years beginning on or after Sept. 23, 2010.

Comments on the interim rules, which must be received within 60 days after publication, may be submitted through the federal eRulemaking Portal at http://www.regulations.gov. Comments to EBSA should be identified by RIN 1210- AB45; comments to HHS should refer to file code OCIIO-9993-IFC; and comments to the IRS should be identified by REG-125592-10

For more information, contact the following: Amy Turner or Beth Baum, EBSA, (202) 693-8335; Karen Levin, IRS, (202) 622-6080; or Jim Mayhew, OCIIO, (410) 786-1565.

Corralling unreasonable insurance cost increases will prove difficult

It is unclear whether a national definition of “unreasonable premium increases” will actually prevent unreasonable insurance rate hikes, according to a recent paper in the New England Journal of Medicine.

In Truth and Consequences — Insurance-Premium Rate Regulation and the ACA, authors Ann Mills, Carolyn L. Engelhard, and Patricia M. Tereskerz note that “regulating health insurance is primarily a state activity, and the Patient Protection and Affordable Care Act (ACA) did not change the role of the states in overseeing rate increases. The 28 states that have some authority to identify such increases vary greatly in their powers to exercise that authority, and many other states lack any authority at all to block increases.

The ACA provides new authority to the Department of Health and Human Services to review any proposed rate increases, but it does not grant federal regulators the power to deny increases that are deemed unreasonable. This lack of explicit authority limits the government’s ability to mitigate unfair rating practices, according to the NEJM article: “At best, the articulation of a national standard defining unreasonable premium increases, along with a federal review process, may provide a template for states that already have rate-review laws on the books, but for the majority of states with weak or no rate-regulatory authority, the rollout of the new standard may make little difference, except insofar as federal regulators ban insurers with excessive premiums from participating in their exchanges.”

The article concludes, the “potential for disruption of patient care makes it all the more important that the quality-based improvements in the health care delivery system that are outlined in the ACA be realized….If successful, these reforms could help to reduce the tension among government regulators who are demanding lower increases in insurance premiums, health insurers who are placing limits on medical care to achieve savings, and providers who are pushing back against what they perceive as private-industry regulation of medical practice. Without a comprehensive approach to bending the cost curve of health care while improving the quality and safety of patient care, neither the promise of stabilization of premium rates nor the broader promises of the ACA as a whole will be realized.”

For more information, go to http://healthcarereform.nejm.org/.

Public opinion during reform process not as volatile as it appeared

During the year-long debate on health reform, public opinion polls seemed to show a volatile and divided American population. However, a closer examination of these polls and other surveys shows well-established patterns in public opinion that played out in this debate as they have in other debates, according to the study, Liking the Pieces, Not the Package: Contradictions in Public Opinion During Health Reform, published in the June 2010 issue of Health Affairs.

The study showed that while there was majority support for reforming the health care system, opinions did fluctuate on various aspects of the legislation. This mainly happened when individuals recognized that they would be impacted in some way. As the government goes forward with implementation of the Patient Protection and Affordable Care Act, the public’s judgment of the law is likely to be based less on political debate, and more on perceived impacts at the personal level as implementation proceeds, according to the researchers.

The study identified several long-standing attributes of public opinion and how they played out during the health reform debate, as follows:

Competing Issues. During the health reform debate, it was easy to forget that health reform is only one of the issues that the public cares about. Following the 2008 election, health care (43%) trailed the economy (73%) and terrorism (48%) as top priorities.

Partisan Contradictions. Public opinion polls throughout the health reform debate show that American’s views on health reform were sharply divided by party identification. A poll taken right before the legislation passed found that 75% of Democrats supported the bill, while 80% of Republicans opposed it. However, the study noted that these partisan divisions are nothing new. Polls taken during the 1993–94 health reform debate found that not only were Republicans the least likely to favor the Clinton plan, but they also were the least likely to believe that the health care system needed comprehensive reform.

Persistent Support For Health Reform. Historically, the study noted that Americans have favored addressing problems in the health care system since the mid-1980s. In October 1986, 66% of the public supported completely rebuilding or making major changes to the existing health care system. During the current debate, 54% of the public in January 2010 agreed that economic circumstances made it more important than ever to take on health reform.

Reform Components. The week of the final vote on the Affordable Care Act a poll found that 48% were opposed to the legislation as a whole, 37% were in favor, and 15% were still undecided. However, many were in favor of certain components of the law, such as health insurance reforms (76% said this was “extremely” or “very” important), tax credits for small businesses (72%), and helping close the Medicare drug coverage donut hole (71%).

Personal Impact. The study found that in both the Clinton and Obama health reform debates, Americans were unclear about how reform would affect their families. As the debate progressed, opponents tapped into fears and anxieties about how the proposed solutions might change the status quo, and people became increasingly negative about the perceived personal impact. During the Obama reform effort, those individuals not expecting that health reform would affect their family fell from 43% to 28% over the course of the debate, while those expecting to be harmed increased (from 11% to 32%), and those individuals who expected to benefit from the reforms hovered around 35%.

The study was based on more than fifty nationally representative public opinion polls that have been conducted since 1943. For more information, visit http://www.healthaffairs.org.

With dependent eligibility expansion looming, Mercer advises plan sponsors to take action

In preparation for the January 1, 2011 expansion of health care coverage to children up to age 26 (part of the comprehensive health care reform package recently enacted by Congress), Mercer is urging plan sponsors to review their current health plan for cost-saving opportunities. The influx of newly eligible dependents will on average increase total health care costs from 0.25% to 2%, Mercer estimates.

Because of this anticipated increase in the cost of providing coverage, Mercer believes it is important for plan sponsors to begin 2011 from the lowest cost base possible. By conducting a dependent eligibility audit before the end of the year, for example, plan sponsors may not only reduce their costs in the short term, but also identify data trends and issues for coming plan years that can be better managed and communicated to all plan stakeholders.

"We believe that, even without dependent eligibility expansion, dependent audits just make good business sense," explained Rich VanThournout, Health and Benefits Business Leader for Mercer’s US Outsourcing business. "Not only do they almost always lower total plan costs, they also give plan sponsors some much needed clarity as to the demographics of their participant community, which empowers both sound cost forecasts and strategic plan design."

Prior to the passage of health care reform, Mercer conservatively estimated that 3% to 8% of covered family members (spouses and dependents) could not produce valid verification of eligibility during an audit. Although this figure may decrease slightly with expanded dependent eligibility, ineligibles can still translate into a significant unnecessary expense to employers, who pay an average of $2,100* annually to cover a single dependent, according to an estimate based on data from Mercer’s National Survey of Employer-Sponsored Health Plans.

"With the recent economic volatility and difficult business environment, we have already seen a marked increase in clients conducting dependent eligibility audits," said Dan Priga, National Business Leader of Mercer's Performance Audit Group. "If costs do in fact increase in the ranges we estimate, this will further stress the budgets of plan sponsors. Our message to plan sponsors is this – find every dollar you can now to help minimize the likely cost spike that is just around the corner."

* Employers should consider their own cost per dependent when calculating their potential savings.

SOURCE: Mercer press release, July 13, 2010.