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July 26, 2010

HRB 11 - Internal Claims and Appeals, and External Review Process

Released July 26, 2010I Download as a PDF

July 26, 2010 --On July 23, 2010, the Departments of HHS, Labor, and Treasury issued interim final regulations relating to the internal claims and appeal, and external review process provisions of the health reform law (PPACA).  These rules provide for both a standardized internal process, as well as an external process, that individuals can use to appeal decisions made by their health plan.

These regulations apply to plans on the first day of the first plan year beginning on or after September 23, 2010.  The rules apply to non-grandfathered plans, and plans that lose grandfathered status.  

Internal Claims and Appeals Process

In general, insured and self-funded group health plans, subject to ERISA, have been required to comply with a structured claims and appeals process, as set forth by the Department of Labor.  The new interim rules extend these rules to plans exempt from ERISA, and add the following six requirements:

  1. Clarification of Adverse Determinations.  The regulations broaden the definition of an ‘adverse benefit determination’ to include a rescission of coverage.  An adverse benefit determination is eligible for an internal claims and appeals process when there is a benefit denial, reduction, or termination, or a failure to make payment for a benefit, when based on:
  • Eligibility;
  • A non-covered benefit;
  • A preexisting condition exclusion, source-of-injury exclusion, network exclusion, or other limitation; or
  • A benefit that is experimental, investigational, or not medically necessary or appropriate.
  1. Expedited Notification of Urgent Care Claims.  These rules require urgent care matters to be addressed as soon as possible, but, in no event, longer than 24 hours. 
  2. Full and fair review. Claimants must be allowed to review their claim file, and to present evidence and testimony as part of the internal claims and appeals process.  Plans must provide the claimant, free of charge, with any new or additional evidence relied upon, or generated by the plan, as well as the rationale used to make the determination.
  3. Avoiding conflicts of interest.  The rules specify standards that must be satisfied to avoid a conflict of interest between all parties involved in the claims and appeals process. 
  4. Notice of Adverse Determinations. Plans must provide its notice of adverse determination in a culturally and linguistically appropriate manner (see Disclosure and Notices, below).  What this means is that plans must ensure that the adverse determination notice provided to a claimant includes:

  • Information sufficient to identify the claim involved;
  • The reason/rationale for the adverse benefit determination;
  • A description of any available internal or external review process; and
  • Contact information for any consumer assistance or ombudsman office to assist individuals with their claim review.
  1. Deemed exhaustion of internal claims and appeals processes.  If a plan fails to follow the explicit requirements of the law, a claimant will have the right to proceed to the next level of appeal.

External Review Process

In the event of an adverse determination, an individual will have the right to appeal to an independent third party through an external appeal process.  Currently, many states have external appeals processes in place.  States will be given one year to bring their processes into compliance with this law.  States that do not currently offer an external review will have the right to adopt compliant procedures. 

In the event that a state does not require insurers to follow an external review process, a federal external review procedure will be required.  The federal procedure will also govern self-funded plans exempt from state law and subject to ERISA.

Continuance of Benefits during an Internal or External Claim Review

Plans are required to continue coverage pending the outcome of an appeal. Benefits for an ongoing course of treatment cannot be reduced or terminated without providing advance notice, and an opportunity for advance review.

Disclosure and Notices

Both the internal and external review processes must be described in the summary plan description, or other description of coverage. 

Model claim and appeal notices will be developed by the DOL.  These notices must be provided in a ‘culturally and linguistically appropriate manner’, depending on the number and majority language of the participants: 

  • For plans covering fewer than 100 participants at the beginning of a plan year, the insurer/plan must provide notices upon request in a non-English language in which 25% or more of all plan participants are literate only in the same non-English language; or
  • For a plan that covers 100 or more participants at the beginning of a plan year, the insurer/plan must provide notices upon request in a non-English language in which the lesser of 500 or more participants, or 10% or more of all plan participants, are literate only in the same non-English language.

In any English versions of notice required to be provided, a plan must also include a statement, in non-English, that its notices can be obtained in the non-English language.  Once a request has been made by a claimant, the plan must provide all subsequent notices to the claimant in the non-English language.  To the extent the insurer/plan maintains a customer assistance process, such as a telephone hotline, that answers questions or provides assistance with filing claims and appeals, the insurer/plan must provide such assistance in the non-English language.

Additional information:



About the Author:  Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc.  She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law.  Ms. McLeese is based in the CBIZ Leawood, Kansas office.



The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations.

This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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