PPACA's Impact on Claim and Appeal Procedures

PPACA imposes new requirements on both insured and self-insured plans regarding their claim and appeal procedures, including a new requirement for an external appeal. The Departments of Labor, Treasury and HHS jointly issued interim final regulations on July 23 providing guidance on the new requirements (140 PBD, 7/23/10).

For self-insured plans, most of the internal review and appeal procedures remain the same as under current DOL ERISA Section 503 regulations (with a number of specified changes). Insured plans become subject to the Section 503 ERISA claims procedures even if they are not currently.

Both insured and self-insured ERISA plans (as well as government and church plans) are subject to the external review procedures. Insured plans will generally follow state NAIC processes (except for states that haven't adopted such or something equivalent) and self-insured ERISA plans will follow a new federal process (the details of which have not yet been published). State procedures will be deemed consistent with NAIC for a transition year (2011). The external review will be binding on sponsors and plans, but participants retain the right to sue if the external appeal is decided against them. Failure to strictly adhere to the ERISA internal review and appeal procedures will be deemed a denial with no right of deference in the event of subsequent litigation. It appears deference does not apply in the ordinary external review and it is not clear if there is any deference in litigation following an external review denial.

(The new rules do not apply to grandfathered plans as long as they retain that status.)

The regulations raise a number of issues/concerns for sponsors/plan administrators:

1. How will the strict adherence standard apply (e.g. will a minor failure to include some relatively immaterial matter in a denial letter result in loss of deference)?
2. When will deference apply in general?
3. Will plans require more detail/specificity in order to result in third party appeal reviewers upholding internal review decisions?
4. Will there be a new increase in claims and appeals, especially regarding such matters as preventive services (given the new rules on that) and experimental treatments?
5. Do sponsors feel this is another reason to try to retain grandfathered status (or are the new requirements a relative non-event)?
6. Do the new procedures apply to plan wide claims (e.g. plan wide failure to cover some treatment that actually or arguably seems to be covered by the plan or to pay for some type service at a specified rate)?
7. If the claim/appeal is decided in favor of the participant(s), would PPACA penalties also apply if it is considered a violation of a new PPACA requirement (e.g. failure to cover a required preventive measure)?

There are presumably a number of other issues raised by the regulations (even in the absence of details regarding the new federal external review standards (including such things as how will new federal standards deal with selection of reviewers, costs of review, etc.). What are some of these various other issues and concerns?