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July 11, 2011

HRB 36 - Modifications to Claims and Appeals, and External Review

Released July 11, 2011I Download as a PDF

July 11, 2011 -- The Patient Protection and Affordable Care Act (PPACA) includes rules relating to health claims and appeals, and the right to an external review.  These rules, applicable to non-grandfathered plans, are effective for plan years beginning on or after September 23, 2010; however, the Agencies provide for non-enforcement periods applicable to certain provisions (see CBIZ Health Reform Bulletin, Delay in Claims and Appeals Enforcement). 

For plans subject to ERISA, these rules expand the currently applicable claim and appeal rules.  For plan excepted from ERISA, these provisions are, in large part, new.  A variety of guidance related to these rules has been issued thus far (see Background CBIZ Health Bulletins, below).

Most recently, regulations and a technical bulletin have been issued making some important changes to the previously issued guidance.  Summarized below is some of the guidance most important to employer-sponsored health plans. 

Urgent Care:  Expedited Notification of Benefit Determinations

Originally, the law would have required that urgent claims be addressed within 24 hours, which is more restrictive than ERISA requirement of 72 hours.  These regulations restore the 72-hour response requirement, but make it clear that urgent care claims must be addressed as soon as possible, but in no event later than 72 hours.

Inclusion of Diagnosis and Treatment Codes

The original law would have required that diagnosis and treatment codes be included in the denial letter.  Due to privacy concerns, among other things, these regulations provide that diagnosis and treatment codes need not be included in the denial letter, but must be provided upon request.

Culturally and Linguistically Appropriate Notices

The law requires that denial information be provided in a culturally and linguistically appropriate manner.  These regulations temper the rules a bit, as follows. 

The non-English requirement is now based on the number of non-English speakers residing in a geographic area, rather than by the number of non-English speakers in the plan.  The regulations include a county-by-county determination of this requirement; this information will be updated annually.  Four languages, Spanish, Tagalog, Chinese and Navajo, are included in this determination/calculation. 

According to the county chart included in the regulations, the following states have counties for which the foreign language requirement would apply:

States with County Population(s) that speak a particular Non-English Language and speak English less than “very well”



North Carolina














New Jersey



New Mexico



New York

Puerto Rico

For individuals in need of non-English communications, plans subject to the language requirement must provide oral communications in the relevant language in the form of a telephone hotline or similar customer assistance process, with the ability to provide written translation, upon request. 

The law would have required that all subsequent communications be provided in the relevant language.  Although this provision has been eliminated, plans are required to provide subsequent communications in the appropriate language when requested by the claimant.

Inclusion of Available Consumer Assistance or Ombudsman Programs

Plans are required to disclose the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman to inform participants with the internal claims and appeals and external review processes.  To assist plans with this disclosure, the Agencies provide a list of available Consumer Assistance Programs. Periodic updates of this list will be posted on EBSA’s website, as well as the HHS’ Center for Consumer Information & Insurance Oversight’s website.  In addition to the CAP list, EBSA also encourages plans to include EBSA’s contact information in their notices as well (1-866-444-EBSA, extension 3272, or www.askebsa.dol.gov).

Revised Model Notices

The Agencies have issued revised model notices to include a one-sentence statement in the language(s) required in a particular county about the availability of translation services:

Adherence to the Strict Compliance Standard

The law suggests that strict adherence to the internal claim appeal and review process is necessary to reserve the right to bring further legal action.  Generally, if there is a failure to comply with the claims and appeals process, an individual would immediately be allowed to proceed to an external review.  These regulations provide that insignificant or minor errors will not allow the claimant to immediately proceed to an external review.

External Review

Matters Subject to External Review

These regulations limit the matters subject to external review under a self-funded plan, sought on or after September 20, 2011, to medical judgment and rescission.  The governing Agencies reserve the right to broaden the playing field with regard to other matters that could be subject to external review; but, have indicated that any expansion will be imposed prospectively.

Independent Review Organizations- Safe Harbor for Self-Funded Plans

One of the components of the external review is the use of an independent review organization (IRO). The regulations provide a safe harbor for self-funded plans, as follows.  Plans will be required to contract with at least two IROs by January 1, 2012, and with at least three IROs by July 1, 2012, and to rotate assignments among them.  While this is a safe harbor, plans not choosing to rotate their IROs in this manner will likely be subject to DOL and IRS scrutiny to ensure that the independent IRO requirement is satisfied.

State Compliance

States that currently have external review process will have until December 31, 2011 to bring their process into conformity with the 16 consumer protection standards listed in the NAIC’s Uniform Health Carrier External Review Model Act.  If a state’s external review process is not compliant for plan years beginning on or after December 31, 2011, then the state will have to follow the federal external review process.  Self-funded plans subject to ERISA, and certain other plans, must follow the federal external review process.

Links to DOL EBSA’s PPACA Internal Claims and Appeals and External Review Regulations and Technical Release, issued 6/24/11:

Background CBIZ Health Reform Bulletins relating to Claims and Appeals and External Review:



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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