I. INTRODUCTION

On November 21, 2000, the Department of Labor (DOL) issued final regulations establishing new claims procedures for private employer-sponsored health and disability benefits that are subject to the Employee Retirement Income Security Act (ERISA). 65 Fed. Reg. 70246 (Nov. 21, 2000), amending 29 U.S.C. ' 2560.503-1. DOL issued the regulations pursuant to 29 U.S.C. ' 1133, which requires every employee benefit plan, in accordance with regulations issued by DOL, to provide adequate notice, written in a manner to be understood by claimants, explaining the reasons why a benefit claim has been denied, and to provide claimants with a reasonable opportunity for a full and fair review of the denied claim. The regulations become effective for all claims filed on or after January 1, 2002.

The new claims procedure shortens time frames, provides for expedited review for claims involving urgent care, and increases notice requirements. The regulations clarify that no costs may be imposed upon claimants for filing of claims. They also provide guidance about the preemption of state law claims procedure requirements, including external review requirements.

While the final regulations make substantial and necessary changes to the claims procedure, they are more limited in scope than the proposed regulations. The majority of the reforms apply only to claims for health and disability benefits, and not to claims for pension or other employee welfare benefits. DOL determined that it did not have an adequate record to justify changing the claims process for pension benefit claims. However, DOL solicits additional public comments in order to develop an adequate record upon which to consider additional reforms.

II TIME FRAMES

In response to comments to the proposed claims regulations, DOL clarifies certain issues relating to time frames. First, the time limitations for each type of claim are to be considered maximum time frames. A plan may be found to be out of compliance with the regulations if circumstances require a more expeditious determination in a particular case, or if a particular claim may be decided in less time than the maximum time period. Second, in using the term Adays,@ DOL means calendar and not business days. Third, time frames begin to run from the date the claim is filed, regardless of whether it is complete. However, if time is extended due to a claimant=s failure to submit necessary information, the time frame is tolled from the date notification of the extension is sent until the date the claimant responds.

A. Initial Benefit Determinations

1. The time frame for initial benefit determinations for pension and other employee benefit claims has not changed. These claims must be decided within 90 days of filing the claim. The plan may extend the time period for an additional 90 days if it determines that special circumstances justify the extension and the plan notifies the claimant before the expiration of the first time period. NOTE DOL states that long-term care policies do not meet the definition of health plans, and so claims under long-term care policies are subject to the standard 90 day time frame for initial determinations.

2. Health claims are subject to different time frames, depending upon the type of claim.

a. Urgent care: Urgent care claims are those in which application of the longer time frame could jeopardize life or health or the ability to regain maximum function. They also include claims in which, in the opinion of a doctor knowledgeable about the claimant=s case, the delay would subject the claimant to severe pain that can=t be managed without the treatment in question. Urgent care claims must be decided as soon as possible given the medical exigencies of the case, but no later than 72 hours of filing the claim. If the plan determines the claim is incomplete, it must notify the claimant within 24 hours, and allow the claimant 48 hours to submit additional information.

The plan makes the determination of whether a claim involves urgent care, applying the judgement of a prudent layperson who possesses an average knowledge of health and medicine. However, if a doctor with knowledge of the claimant=s medical condition determines a claim involves urgent care, the plan must treat the claim as an urgent care claim.

b. Pre-service: Pre-service claims are those in which the plan requires prior authorization or approval. Initial benefit determinations of pre-service claims must be resolved within 15 days. The plan may seek a 15 day extension if, for reasons beyond its control, it cannot issue a decision within that time period, and it provides notice to the claimant of the need for the extension before the expiration of the initial 15 days. If the extension arises because the claimant has failed to submit information needed to resolve the claim, the notice of extension must specifically describe the missing information and give the claimant at least 45 days from receipt of the notice to provide the information.

c. Post-service: Post-service claims involve payment for services already received. They must be resolved within 30 days of receipt of the claim. The plan may seek a 15 day extension, for reasons beyond its control, if it notifies the claimant of the need for the extension before the end of the 15 days. Again, the plan must inform the claimant of information the claimant needs to provide, and give the claimant at least 45 days to provide the information.

d. Concurrent care - Where a plan has approved an ongoing course of treatment to be provided over a period of time or number of treatments, the plan must notify the claimant sufficiently in advance of a reduction or termination in the treatment to allow the claimant to appeal and obtain a determination before the action is taken. Requests to extend a treatment that involves urgent care must be decided within 24 hours if the claim is made within 24 hours before the termination or reduction. Other claims must be decided within the time frames for pre-service and post-service claims, as appropriate.

3. Disability claims must be decided within 45 days of the initial claim filing. The plan may have two 30- day extensions if it cannot comply with the 45 day requirement for reasons beyond its control. If the plan requires additional information from the claimant, it must give the claimant at least 45 days to provide the information.

B. Appeals of Adverse Benefit Determinations

1. An adverse benefit determination is a denial, reduction, or termination of, or a failure to provide or make payment for, a benefit, including a denial, reduction, or termination based on eligibility to participate in a plan. For group health plans, an adverse benefit determination includes a denial, reduction, or termination of, or failure to provide or pay for a benefit resulting from application of utilization review or a determination a service is experimental or investigational.

2. The time frames relating to adverse pension and other employee welfare benefit determinations are not changed from the old regulations. Claimants have 60 days in which to appeal. The plan has 60 days to decide the appeal, with the opportunity for an additional 60 day extension. The regulations also retain the exception for multi-employer plans, which allows those plans to consider the adverse determination at the next quarterly meeting of the board of trustees.

3. Claimants have 180 days in which to appeal from adverse health benefit determinations. The amount of time the plan has to respond again depends on the type of health claim.

a. 72 hours from receipt of appeals of urgent care claims;

b. 30 days after receipt of appeals of pre-service claims. Where the plan requires two levels of review, a determination must be made 15 days after the request for each level of review;

c. 60 days after receipt of appeals if post-service claims. Where the plan requires two levels of review, a determination must be made 30 days after the request for each level of review. The exception for multi-employer plans whose board of trustees hears adverse claims determinations applies also to post-service health claims.

4. Claimants have 60 days in which to appeal from adverse disability benefit determinations. The plan must respond within 45 days, regardless of whether the plan provides for one or two levels of review. The exception for multi-employer plans whose board of trustees hears adverse claims determinations applies also to disability claims.

III. NOTICE AND DISCLOSURE:

A. Notice of adverse benefit determination

1. A plan must provide written or electronic notice of any adverse benefit determination.

2. All notices must set forth, in a manner calculated to be understood by the claimant,

a. the specific reasons for the denial,

b. references to plan provisions relied upon,

c. any additional information needed to process the claim, and

d. a description of the review process, including a statement of the right to bring a civil action under ERISA=s remedy provisions.

3. For claims involving health or disability benefits, the plan must also disclose

a. whether it has relied on an internal rule, guideline, or protocol,

b. provide the rule or protocol, or

c. explain how the claimant may receive a free copy of the rule or protocol.

4. If the denial of a health or disability claim is based on lack of medical necessity or a determination that the service is experimental, the notice must explain the scientific or clinical judgment that forms the basis of the determination or explain how the claimant may get the information from the plan for free.

5. For claims involving urgent care, the notice:

a. May be given orally, provided a written or electronic notice is given within 3 days of oral notification;

b. Must also contain a description of the expedited review process

B. Notice of Adverse Determination Upon Review

1. A plan must provide written or electronic notice of an adverse determination upon review.

2. All notices must set forth, in a manner calculated to be understood by the claimant,

a. The specific reasons for the denial,

b. References to plan provisions relied upon,

c. A statement that the claimant is entitled to receive, upon request and free of charge, all documents, records and other information relevant to the claim. Relevant information is information relied on in making the decision; information submitted, considered or generated while making the determination, regardless of whether it was relied upon; or information that demonstrates compliance with the administrative process.

d. A statement describing any voluntary review procedures and a statement of the right to bring a civil action under ERISA=s remedy provisions.

3. Notices denying claims for health or disability benefits must also include

a. Any internal rule, guideline, protocol or other criterion relied upon in making the determination, or a statement that a rule was relied upon and can be obtained, free of charge, upon request;

b. For cases involving medical necessity or experimental treatment, either an explanation of the scientific or clinical judgment for the determination, or a statement that such explanation is available, free of charge, upon request.

c. The following statement: AYou and your plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.@

IV.    PROCEDURES

A. Obligation to Establish and Maintain Reasonable Claims Procedures

1. All plans are obligated to establish and maintain reasonable claims procedures, and to describe those procedures, including the procedure for obtain prior approval of a health benefit, in the plan=s summary plan description (SPD).

2. The claims procedures cannot be administered in such a way as to hamper initiation or processing of claims. For example, plans cannot require payment of a fee or costs as a condition of making or appealing a claim. Nor can they deny a claim for failure to obtain prior approval when circumstances make obtaining prior approval impossible or where application of the prior approval requirement could seriously jeopardize the life or health of the claimant.

3. Claimants must be allowed to submit evidence during the claims and appeals process.

4. Claims procedures must allow an authorized representative to act on behalf of a claimant. However, a plan may establish reasonable procedures for determining whether an individual has been authorized to act.

5. All plan procedures must include administrative safeguards to assure decisions are consistent with the plan and to assure the plan language is applied consistently.

6. In pre-service health claims, if the claimant fails to follow plan procedures in submitting the claim, the plan must notify the claimant within 5 days (or 24 hours if the claim involves urgent care). Notification may be oral. This provision applies a communication by a claimant or authorized representative, to a person or organization unit customarily responsible for handling benefit matters. The communication must identify the specific claimant, a specific medical condition or symptom, and a specific treatment, service or procedure.

7. If the plan does not meet the minimum standards for claims procedures, a claimant is deemed to have exhausted his or her administrative remedies and may proceed directly to court.

B. Role of the Fiduciary

1. The plan administrator is authorized to provide the required notice of the initial benefit determination and the determination upon review.

2. A fiduciary who made the initial decision may not make the decision upon appeal.

3. The fiduciary conducting the appeal cannot give deference to the initial decision, but must review all documents submitted in making the review decision.

4. Fiduciaries must consult with appropriate health care professionals if the initial denial was based on medical judgment.

C. The Appeal Process and Arbitration

1. A plan is permitted to have up to two levels of mandatory review of an adverse determination. However, regardless of whether the plan has one or two levels of review, the appeal must be decided within the same time frame.

2. A plan may require arbitration as one level of review. However, the arbitration must be conducted in accordance with the regulation, and must not foreclose the right to any further challenge, including judicial review.

3. A plan that offers additional voluntary levels of review must describe the procedures available sufficiently for a claimant to make an informed decision.. If a claimant chooses not to use a voluntary level of review, the claimant is considered to have exhausted administrative remedies, and may seek judicial review.

D. Preemption of State Laws:

1. ERISA=s broad preemption provision includes an exemption from preemption for state laws that regulate insurance. Because the preemption provision has been the subject of much litigation, DOL included in the final rules guidance on the preemption issue.

2. The claims regulations will not supersede state laws regulating insurance, even those laws with standards for claims procedures, unless state law prevents application of the requirements in the rules. For example, state laws that allow for oral claims or provide for shorter time frames for making claims decisions would not be preempted.

3. The rules also do not preempt state laws establishing external review procedures. DOL explains that external review procedures are not part of the procedures described in 29 U.S.C. ' 1133, and therefore are beyond the scope of the regulations. However, DOL also states that state external review procedures are voluntary; claimants cannot be forced to exhaust those procedures before seeking judicial review.

4. The claims procedures do not preempt state law remedies that may be available as a result of medical decisions, even where the decisions implicate eligibility for benefits under the plan.

Copyright © Center for Medicare Advocacy, Inc. 04/04/2008