External Review Procedures under the Patient Protection Affordable Care Act – increased costs for employers, no benefit for workers covered by self-insured employer plans

Primum non nocere 

“Given an existing problem, it may be better to do nothing than to do something that risks causing more harm than good.” Wikipedia 

It is too bad that Congress and federal regulators do not hold to that maxim.  As has happened so many times in the past, Congress has addressed a limited problem with the broadest brush possible.  In this case, the new claim appeal rules for health benefit plans create new, complex and costly procedures that apply to all health plans, including employer self-funded plans not currently grandfathered under PPACA. [i] 

New guidance issued by the Department of Labor goes beyond reviewing medical claim denials based on medical necessity and into the realm of legal interpretation of a plan’s provisions. In short, an external review conducted by an Independent Review Organization (IRO) could require a plan to change its provisions based on the IROs reading of a plan document.  Unlike current appeal procedures such external review may also serve to set precedence for other claims. The IRO used by an employer must be accredited by the URAC (Formerly the “Utilization Review Accreditation Commission.”) 

What makes this situation worse is that the Independent Review Organization must look at the claim de novo that is anew, from the start. 

Self-insured employers have long followed federal regulations for handling claim appeals.  Many have delegated this process to plan administrators and others have retained the final appeal within the employer sponsoring the plan. That system works, but no matter, these employers are now subject to new rules including the requirement to turn over final decisions to an outside organization.  Keep in mind that in the case of self-insured plans there is no insurance company, no profits, but only employer costs and the cost for employees who contribute to the plan.   Employers are already required to act solely in the interest of plan participants under ERISA, so what was broken that needed to be fixed?  In the case of large employer plans, nothing was broken but more regulation was applied, more costs added to providing health benefits and another reason for employers to abandon health benefits was generated – all in the name of health care reform.  

Employers will have to amend their plans, rethink their entire appeals process, contract with at least three IROs (of which there are very few in the United States) and possibly deal with a rash of new appeals generated by government-sponsored publicity.  There are seventy million Americans covered by self-insured employer plans, none of them will benefit from these new rules.  On the other hand, the added cost and administration may well prevent a new worker from being hired, money being spent more productively and likely will increase the health benefits payroll deduction for employees. 

This effort goes beyond reform and into scapegoating, especially when it lumps all health benefit plans into the same category.  Consider this from a HHS press release:  

WASHINGTON – Today, the Obama Administration is announcing both new regulations to empower consumers to appeal decisions made by their health plans or insurance companies and the availability of resources that will be used to help give consumers more control of their health care decisions.  These provisions of the Affordable Care Act will help support and protect consumers and help end some of the worst insurance company abuses.  

 “The Affordable Care Act puts patients in control of their healthcare,” said HHS Secretary Kathleen Sebelius.  “Today, if your health plan tells you it won’t cover a treatment your doctor recommends, or it refuses to pay the bill for your child’s last trip to the emergency room, you may not know where to turn.  The Affordable Care Act provisions announced today will provide patients with new important new rights and resources that will help ensure they get the care they need.”  

“The appeals rules today will extend important protections and simplify the system for consumers,” said Labor Secretary Hilda Solis. “And they will ensure that consumers in new health plans have access to internal and external appeals processes that are clearly defined, impartial, and designed to ensure that, when health care is needed and covered, consumers get it.” 

Those of us who administered employer health plans for many years including hearing claim appeals already know that “when health care is needed and covered, consumers get it.”  There is no point bemoaning this shameless kind of rhetoric, it seems to be standard fare in Washington these days. 

Do large employers who do not use insurance  “abuse” their employees and their families?  I think not, the typical appeal deals with medical necessity, the fee allowance (usually because a non-participating provider charges a high fee), or the extent of coverage under a plan (which more often than not is clearly defined even if not liked by participants). 

These rules and this rhetoric also enforce the false notion that if the doctor orders it, then it must be covered by the plan and must be paid.  Not only is that not true, in some cases it is not even good health care. 

Self-insured employer must have a good talk with their plan administrator to assure that there is 100% compliance with internal appeal procedures (and initial adjudication of claims).  

For employer plans that do not maintain their grandfathering status these new rules are effective for plan years beginning after September 23, 2010.  

The National Association of Independent Review Organizations lists 19 active accredited members of its organization.  Although there may be other accredited IROs,  it will be difficult for employers to find three such organizations to deal with given the number of affected health benefit plans.  There is a very real question as to whether there are a sufficient number of IROs to handle the demand or which are qualified to perform both clinical and legal review. 

Technical Release 2010-01 on External Review Procedures for non grandfathered Plans  

Here is a short summary of the new requirements:  

Plan must permit request for external review if filed within 4 months after the date of receipt of a notice of adverse benefit determination or final internal adverse benefit determination   

Adverse benefit determination when plan fails to strictly adhere to internal claims and appeal rules and  claimant is deemed to have exhausted the internal process and can initiate external review of the denied claim   

Within 5 business days after receipt of the external review request, plan must complete a preliminary review of the request   

Within 1 business day after completion of the preliminary review, plan must notify the claimant in writing if the request is not eligible for external review or if it is incomplete   

Claimant has remainder of 4-month filing period or 48 hours from notice, whichever is greater, to cure defect   

Plan must contract with at least 3 IROs that are accredited by URAC or similar organization  

If IRO reverses plan’s denial, plan must immediately provide coverage or payment for the claim  

IRO must notify claimant of his/her request’s eligibility and acceptance for external review and that claimant may submit in writing within 10 business days additional information, which the IRO must consider during its review  

Plan must provide to IRO within 5 business days after IRO’s assignment the documents and information considered in the plan’s denial of the claim  

IRO must complete its review and provide notice of decision to plan and claimant within 45 days  

Claimant must be allowed to request an expedited external review – claim must be resolved in 72 hours 

  

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[i] Grandfathering rules are so onerous and restrictive it is unlikely that many existing employer plans will be able to retain their grandfathered status for long