In November 2000, the Department of Labor issued regulations creating a new claims procedure for workers, retirees, and their dependents covered by health plans offered by private employers and unions.¹ These individuals are now able to take advantage of the claims procedure reforms. The new procedure becomes effective the first day of a health plan’s fiscal year that begins on or after July 1, 2002; implementation may not be delayed past January 1, 2003.

This fact sheet describes the new process and added protections for workers, retirees and their dependents.²

WHAT IS A HEALTH CLAIM?

A health claim involves a request by a claimant or the claimant’s provider for health benefits or payment for services already provided. The regulations identify three categories of health claims.³

• Urgent care claim is a claim for which the application of standard time frames could seriously jeopardize the life or health of the claimant or the ability of the claimant to regain maximum function, or, in the opinion of a doctor knowledgeable about the claimant’s case, would subject the claimant to severe pain that cannot be managed without the treatment at issue.
  

• Pre-service claim is a claim for which, under the terms of the health plan, the claimant must get plan approval before the medical care is provided.
  

• Post-service claim is a claim for which prior approval is not required.

The regulations establish minimum standards for claims procedures for all employee benefit plans offered by private employers. They also include specific requirements that are targeted to health plans. These requirements are as follows:

• Each plan must establish and maintain reasonable procedures for filing claims, notifying claimants about the decision on their claims, and appealing adverse decisions.
  

• The summary plan description (SDP) must describe the claims process, including the process for getting prior approval of a claim.
  

• A claims procedure cannot create barriers to the filing of a health claim. For example, a plan may not:

• impose a fee or costs for filing a claim or an appeal, or
  

• deny a claim for failure to seek prior approval if the circumstances make it impossible for the individual to seek prior approval.
  

• The health plan may establish reasonable procedures for determining whether someone is a representative authorized to act on behalf of the claimant, however, a health care professional knowledgeable about the claimant’s medical condition can act for the claimant in urgent care claims.
  

• On appeal the plan cannot require a claimant to go through more than two levels of review, including non-binding arbitration. A plan my offer additional levels of review, including binding arbitration, but those levels must be voluntary.

Generally, the health plan must make a decision on the claim within 30 days after the claim is received. The plan may get a one-time 15-day extension if the plan determines that an extension is needed due to matters beyond its control and if the plan notifies the claimant of the extension. The claimant has 45 days from receipt of the notice to submit additional information requested by the plan. The time frame is shorter for claims that must be decided more quickly.

• Urgent care claims must be decided within a reasonable period of time appropriate to the medical circumstances, but no later than 72 hours after receipt of the claim. The plan must notify the claimant within 24 hours if additional information is required, and afford him or her a minimum of 48 hours to respond. The plan must notify the claimant of its decision within 48 hours of receipt of the additional information.
  

• Pre-service claims must be decided within a reasonable period of time appropriate to the medical circumstances, but no later than 15 days after receipt of the claim. The plan may extend the period for 15 days, and a claimant has 45 days to provide the plan with the specified additional information required by the plan.
  

• Concurrent care decisions involve claims for on-going care or treatment already approved by the plan. If a plan decides to reduce or terminate the number of treatments or the period of time for the care or treatment, the claimant must be notified sufficiently in advance of the reduction or termination to allow the claimant to get a decision on appeal. If a claimant requests an extension of a course of treatment at least 24 hours before expiration of the approved time period or number of treatments, the plan must make a decision within 24 hours of receipt of the claim.

A plan must provide written notice of an adverse determination on an initial claim. Notice may be provided orally for urgent care claims as long as written notice is also provided. A plan may send the notice electronically in accordance with federal guidelines for electronic notification to workers. All notices must contain:

• Specific reasons for the denial.
  

• Reference to the part of the plan, the guideline, protocol, or other criteria upon which the denial is based, and a statement that the plan will provide the information to the claimant, free of charge, upon request.
  

• A description of the specific information needed to perfect the claim and the reasons why the material is needed.
  

• A description of the general review process and the expedited review process, including the right to go to federal court after the administrative process is exhausted.
  

• If the denial was based on "medical necessity" or experimental treatment, the medical or scientific explanations relied upon, and a statement that the plan will provide the information to the claimant, free of charge, upon request.

Every health plan must have a full and fair internal review process. If no appeals process is available, or if the appeals process does not meet the requirements of the regulation, then the claimant may go directly to court to challenge denial of the claim. The internal health plan appeals process must have the following elements.

• The claimant must have at least 180 days to file an appeal.
  

• The appeal must be reviewed by a fiduciary who:

  • did not review the initial claim; and

  • who is not a subordinate of the initial claims reviewer.
    

• Where the claim involves a medical issue, the reviewer must consult with a medical expert who is identified, regardless of whether the advice is followed.
  

• The decision on appeal must be made within 60 days if the plan provides for one level of review; or within 30 days per level of appeal if the plan provides for two appeals levels.
  

• If the claim involves urgent care, the appeal must be decided within 72 hours.
  

• The decision on appeal of a pre-service claim must be made within 30 days if the plan provides for one level of review; or within 15 days per level of review if the plan provides for two appeals levels.
  

A plan must provide written or electronic notice of an adverse determination on appeal. All notices must contain:

• Specific reasons for the denial.
  

• Reference to the part of the plan and other internal policies and guidelines upon which the adverse decision was based, and a statement that the plan will provide the information to the claimant, free of charge, upon request.
  

• A statement that the claimant may receive copies of all information available to the reviewer in making the decision, regardless of whether the reviewer relied on the information.
  

• If medical and/or scientific information were relied on in making the determination, an explanation of why the medical and scientific information applied to the claim.
  

• A description of any other mandatory or voluntary appeals levels.
  

• An explanation of the right to seek judicial review and the remedies available.
  

• A statement explaining that the claimant may contact the Department of Labor or state insurance regulatory agency to find out about other voluntary alternative dispute resolution options, such as mediation.

Some states have enacted their own requirements for health plan claims and appeals processes. These laws only apply to health plans offered by a private employer if the health plans are offered through an insurance company, including an HMO. They do not apply to health plans that are self-insured, i.e., the employer sponsoring the plan bears the risk of paying health claims. In addition, the state law requirements must be consistent with the federal rules and not prevent the application of a requirement of the federal regulations. As long as a claimant completes the appeals process described in the federal rules, he or she can go directly to court, even if he or she has not completed the state law procedure.

The United States Supreme Court recently upheld an Illinois state law establishing an independent review procedure when an HMO and a treating physician disagree over whether a treatment is medically necessary. The law requires the HMO to provide or pay for the treatment if the independent reviewer finds the treatment to be medically necessary.
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1. 65 Fed. Reg. 70246 (Nov. 21, 2000), modifying 29 C.F.R. § 2560.503-1. Implementation was delayed by a notice published July 9, 2001. 66 Fed. Reg. 35886 (July 9, 2001). The regulations apply to plans covered by the Employee Retirement Income Security Act (ERISA) 29 U.S.C. §§ 1001 et. seq.

2. The regulations also set forth new procedures for claims involving disability plans. 29 C.F.R. § 2560.503-1.

3. 29 C.F.R.§ 2560.503-1(m).

4. 29 C.F.R.§ 2560.503-1 (b), (c).

5. 29 C.F.R. § 2560.503-1(f)(2).

6. 29 C.F.R. § 2560.503-1(g).

7. 29 C.F.R. § 2560.503-1(h).

8. 29 C.F.R. § 2560.503-1(j).

9. 29 C.F.R. § 2560.503-1(k).

10. Rush Prudential HMO, Inc. v. Moran, 2002 US LEXIS 4644 (June 20, 2002).