Updates to Health Care Reform’s Mini-Med Waiver Processes and External Claims Review Requirements

June 27, 2011

This is part of our series of alerts intended to help guide employers and plan sponsors through their new obligations under the recently-enacted health care reform laws and related guidance. 

In the past two weeks, new guidance has been released simplifying the process for group health plans to seek a waiver of annual limits through the end of 2013 and easing some of the requirements relating to external claims and appeals for group health plans.

Waiver Process.  The new guidance modifies the program under which group health plans and insurance companies may obtain a waiver from the minimum annual limit requirements contained in health care reform (for background, see our prior client alert). The program provided that plans and issuers of limited benefit programs (sometimes called “mini-med” plans) could apply for a waiver of the annual limits for a plan year if they could show that compliance with the annual limits would result in a significant increase in participant premiums or a significant decrease in access to benefits. The waiver was only available for years prior to January 1, 2014, and a new application was required to be submitted prior to the start of each year.

The new guidance changes the waiver program as follows:

If you miss the September 22, 2011 deadline, you will need to comply with the annual limit requirements starting with the plan or policy year beginning on or after September 23, 2011.

If you sponsor a fully-insured “mini-med” insurance policy, you should check with your insurance carrier before filing your own waiver application or extension request. The insurance carrier may have already obtained the necessary waivers (and extensions) for its insurance products, thus saving you the time and expense of individual applications.  

External Claims and Appeals.   The new guidance (1) modifies the safe harbor requirements for self-insured plans contracting with IROs, (2) provides transition relief to states implementing Federally compliant external review processes for insured plans, (3) extends the notification period for urgent care benefit determinations, (4) eases content requirements for adverse benefit determination notices, (5) amends the automatic determination that a claimant has exhausted administrative remedies if the claims procedures’ failure to strictly adhere to applicable law was minor, (6) simplifies the standard for determining when a non-English notice is to be provided, and (7) temporarily narrows the scope of claims eligible for the Federal external review process.  (The new guidance can be accessed here).

For a general overview of the external claims and appeals requirements, see our prior client alert. Note that grandfathered group health plans are not subject to these requirements.

(1 & 2) Changes to External Review Processes

The health care reform rules require non-grandfathered group health plans to use a state external review process or a Federal external review process to review denied claims. 

Insured.  Insured plans must use a state external review process that meets the consumer protection requirements in the health care reform legislation and guidance. If the state does not meet the Federal standard, the insured plan is required to use the external review process administered by HHS, but transitional rules provided that an insured plan could use any existing state external review process whether or not it met the Federal standard for plan years beginning prior to July 1, 2011. To afford states more time to implement Federally compliant external review processes, the new guidance extends the transition period until December 31, 2011. The new guidance also sets forth temporary standards similar to the Federal standards under which a state may choose to operate its external review process until January 1, 2014.  

Self-Insured.  Self-insured plans are subject to a Federal external review process supervised by the DOL and Treasury, which generally allows self-insured plans to contract with private accredited IROs to perform reviews.  Self-insured plans may use the state’s similar external review process (as modified by the recent guidance as described above) if it is approved by HHS as meeting the temporary standards. The new guidance also clarifies previously issued guidance regarding the requirements for a self-insured plan to establish that its external review process is independent and without bias. Among the standards set forth in previous guidance was that a plan contract with at least 3 IROs and randomly assign claims among them. This requirement was later eased as the sudden influx of group health plans seeking contracts with IROs overwhelmed the marketplace. In light of adjustments in the marketplace and concerns about large group health plans contracting with only one IRO, to be eligible for a safe harbor from enforcement, self-insured plans must contract with at least two IROs by January 1, 2012 and at least three IROs by July 1, 2012.

(3) Extended Notification Period for Urgent Care Benefit Determinations

The health care reform rules generally provide that a plan must notify a claimant of a benefit determination with respect to an urgent care claim as soon as possible, but no later than 24 hours after receipt of the claim (this was a change from the prior claims procedure requirements that set the outside limit at 72 hours). The new guidance permits plans to follow the original DOL claims procedure regulation for urgent care claims (as soon as possible, but setting the outside limit at 72 hours) provided the plan defers to the attending provider with respect to the decision as to whether the claim constitutes “urgent care.”

(4) Eased Content Requirements for Adverse Benefit Determination Notices

In an effort to ensure that notices of adverse or final adverse benefit determinations contain sufficient information to identify the claim involved, the health care reform rules require plans to provide the following additional information over and above what was required by prior law: 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. Public comments have raised concerns about patient privacy, interference with the doctor-patient relationship, and the high costs for plans to comply. The new guidance eliminates the requirement to automatically provide the diagnosis and treatment codes as part of a notice of adverse benefit determination and instead requires plans and issuers to provide notification of the opportunity to request the diagnosis and treatment codes (and their meanings) in all notices of adverse benefit determination (and notices of final internal adverse benefit determination) and to provide this information upon request. Revised model notices of Adverse Benefit Determination, Final Internal Adverse Benefit Determination and Final External Review Decision have been released and are available at:.

(5) Minor Errors Do Not Violate Strict Adherence Rule

Prior law generally required claimants to exhaust administrative proceedings before going to court to seek external review. The health care reform rules provided that a claimant did not need to exhaust the claims procedures offered under a group health plan if those procedures do not “strictly adhere” to the law.  The new guidance provides an exception to the strict compliance standard for errors that are minor and meet other standards such as being non-prejudicial and beyond the control of the claims administrator. 

(6) Simplification of Standard for Providing Non-English Notices

The health care reform rules require a plan to provide relevant notices in a culturally and linguistically appropriate manner, which has been interpreted to mean that plans must provide non-English notices based on separate thresholds of the number of people who speak the same language and also based on the number of plan participants. To simplify the requirement, the new guidance provides that a non-English notice must be provided only if 10% or more of the population in the claimant’s county are only literate in the same non-English language. The new guidance includes a chart of affected counties, which will be updated periodically. 

(7) Narrowing the Scope of Claims Eligible for the Federal External Review Process

The health care reform rules provided for a broad scope of claims that are eligible for external review under the Federal external review process. They generally covered any adverse benefit determination unless it related to a participant’s or beneficiary’s failure to meet eligibility requirements. The new guidance temporarily narrows the scope of eligible claims to those that involve (1) a medical judgment, as determined by the external reviewer, or (2) rescissions of coverage. The purpose of the new guidance is to limit the number of claims subject to review so that IROs in the marketplace will have time to adjust to the volume. It is expected that the broader scope of eligible claims will be reinstated no later than January 1, 2014.  

You should speak with your insurance carrier or third-party administrator for your group health plans to make sure that their processes and written notices are appropriately revised to reflect the above changes. In addition, you should consider whether you wish to take advantage of the longer urgent claims response deadline and, if so, make any necessary changes to your plan documents, procedures and notices.

With a team of attorneys who are highly experienced in the employee benefits field, MLA can provide answers to questions and assistance in complying with these requirements.

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