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New Regulations for Preventive Services and Appeals Processes Released

August 2, 2010

This is the seventh in a series of advisories on Health Care Reform and other recent developments in health care. This advisory summarizes the most recent interim final regulations jointly released by the Treasury Department, the Department of Labor and Health and Human Services relating to coverage of preventive care and new claims and appeals procedures under the Patient Protection and Affordable Care Act (the “Act”). 

Coverage of Preventive Care

On July 19, 2010, the Departments of Treasury, Labor and Health and Human Services jointly released interim final regulations relating to the coverage of preventive services under the Act. The Act requires that non-grandfathered group health plans and insurers offering group or individual health insurance provide coverage for certain preventive health services and not impose cost-sharing requirements (co-payments, co-insurance or deductibles) for such services. The regulations define preventive services and provide rules for distinguishing preventive services to be provided at no cost to the insured from other health services delivered at the same time or in conjunction with preventive services for which the insured bears some financial responsibility.

The preventive care requirements do not apply to grandfathered plans. For more information about grandfathered status, click here.

Preventive Services Defined.  Preventive services are defined by reference to published health recommendations and guidelines from (1) the United States Preventive Services Task Force, (2) the Centers for Disease Control and Prevention Advisory Committee on Immunization Practices, and (3) the Health Resources and Services Administration. The current complete list of such recommendations and guidelines is available by clicking here. The list will be updated on an ongoing basis and will include the date on which the recommendation or guideline was accepted or adopted.

Plan sponsors should review the list carefully as there are services required to be provided at no cost that might not otherwise be covered by the health plan or included in the scope of preventive services, such as:

  • intensive behavioral counseling and intervention for weight and obesity issues;
  • intensive behavioral dietary counseling for adult patients with known risk factors for cardiovascular and diet-related chronic disease delivered by primary care clinicians or by referral to other specialists, such as nutritionists or dietitians;
  • screening and behavioral counseling interventions to reduce alcohol misuse;
  • screening for depression in adults and major depressive disorders in adolescents; and
  • tobacco cessation intervention. 

It is unclear whether further guidance will be issued addressing the scope of the listed services. 

The regulations provide that if a recommendation or guideline does not specify the frequency, method, treatment or setting for the provision of that service, the health plan or issuer can use “reasonable medical management techniques” to determine any coverage limitations. The use of reasonable medical management techniques allows plans and issuers to adapt these recommendations and guidelines to coverage of specific items and services where cost-sharing must be waived. Thus, a health plan or issuer may rely on established techniques and relevant evidence to determine the frequency, method, treatment, or setting for which a recommended preventive service will be available without cost-sharing requirements.

The regulations override the November 2009 recommendations of the United States Preventive Services Task Force specifically relating to breast cancer screening. The recommendations regarding the frequency of breast cancer screening, mammography and prevention in effect prior to November 2009 are considered current. 

The regulations clarify that a health plan or issuer has the option to cover preventive services in addition to the recommended preventive services and may impose cost-sharing requirements for these additional services at its discretion. A plan or issuer also may impose cost-sharing requirements for a treatment that is not a recommended preventive service, even if the treatment results from a recommended preventive service. A plan or issuer is not required to provide coverage or waive cost-sharing requirements for any item or service that has ceased to be a recommended preventive service although 60-day advance notice to enrollees of this material modification to benefits is required.

A non-grandfathered health plan or insurer must provide coverage for recommended preventive services without cost-sharing for plan or policy years beginning on or after September 23, 2010, or, if later, for plan or policy years beginning on or after the date that is one year after the applicable recommendation or guideline is issued. For example, for calendar year plans, coverage for recommended preventive services addressed in recommendations or guidelines issued prior to January 1, 2011, must be provided in the 2012 plan year. 

Distinguishing Between Preventive and Other Health Services During Office Visits. The regulations clarify the cost-sharing requirements when a recommended preventive service is provided during an office visit. Generally, if a recommended preventive service is billed separately (or is tracked separately as “individual encounter data”) from an office visit, then a health plan or issuer may impose cost-sharing requirements with respect to the office visit. However, if a recommended preventive service is not billed separately (or is not tracked separately as individual encounter data) from an office visit, the “primary purpose” of the office visit determines the nature of the service. If the primary purpose is to receive the preventive service, then a plan or issuer may not impose cost-sharing requirements with respect to the office visit. If the primary purpose of the visit is not the delivery of a preventive service, then a plan or issuer may impose cost-sharing requirements with respect to the office visit. The regulations provide four examples illustrating the office visit rules. 

  • If an individual visiting an in-network provider receives a cholesterol screening (a recommended preventive service) and the provider bills the plan for an office visit and for the lab work for the screening, the plan may not impose any cost-sharing for the lab work but may impose a cost-sharing requirement for the office visit because the cholesterol screening was billed separately. 
  • If as a result of the screening described above the individual is diagnosed with a condition requiring treatment, the plan is not prohibited from imposing a cost-sharing requirement for the treatment, if the treatment is not itself a recommended preventive service.
  • If an individual receives blood pressure screening (a recommended preventive service) that is not billed separately during an in-network office visit to discuss recurring abdominal pain, the plan may impose a cost-sharing requirement for the office visit because the primary reason for the visit was not the delivery of the recommended preventive service. 
  • If an individual visits an in-network provider to receive an annual physical exam described in the comprehensive list of preventive services, but receives additional items and services not included on the list and that are not billed separately, the office visit is not subject to cost-sharing because the primary purpose was to deliver preventive services.  

Therefore, how the providers bill services and characterize office visits will determine whether cost-sharing is permissible. 

Out-of-Network Providers. The regulations also make clear that a health plan or issuer is not required to provide coverage for recommended preventive services delivered by an out-of-network provider. A health plan or issuer also may impose cost-sharing requirements for recommended preventive services delivered by an out-of-network provider.

Claims and Appeals Procedures

On July 22, 2010, the Departments of Treasury, Labor and Health and Human Services jointly released interim final regulations relating to internal claims and appeals and external review processes for non-grandfathered plans under the Act. The regulations build upon existing ERISA claims regulations by adding six new requirements to the existing internal appeals process. In addition, the regulations describe the new external appeals process mandated by the Act. Plan documents will need to be amended to reflect these updated claims review procedures. 

The new internal claims and appeals and external review requirements do not apply to grandfathered plans. Thus, if a health plan sponsor plans on maintaining grandfathered status, no changes to the plan appeal process is required.

Internal Review. Group health plans and issuers must satisfy six new requirements in addition to those requirements set forth in the existing ERISA claims procedures. In general, the new requirements for the internal appeals process include the following:

  • A broader definition of adverse benefit including the following:
    • An eligibility determination;
    • A determination that a benefit is not a covered benefit;
    • The imposition of a pre-existing condition or source of injury exclusion or network exclusion;
    • A determination that a benefit is experimental, investigational or not medically necessary;
    • A failure resulting from the application of a utilization review or case management process; or
    • A rescission of coverage;
  • A plan or issuer must notify a claimant of a benefit determination (whether adverse or not) with respect to an urgent claim (as defined in the ERISA claims procedure regulation) as soon as possible, but not later than 24 hours after the receipt of the claim. This is a change from the existing ERISA claims procedures, which generally requires a determination not later than 72 hours after receipt of the claim;
  • Additional criteria to ensure that a claimant receives a full and fair review, such as the requirement that the plan or issuer provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan in connection with the claim and any new or additional rationale relied upon. This information must be provided in advance of the adverse determination to give the claimant a reasonable opportunity to respond.  This is a change from the existing ERISA claims procedure, which required any such information to be provided upon request;
  • New conflict of interest criteria to ensure that the claim or appeal are adjudicated by independent and impartial persons, including the requirement that decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical expert) cannot be made based upon the likelihood that the individual will support a denial of benefits. For example, a plan or issuer cannot provide bonuses based on the number of denials made by a claims adjudicator. Similarly, the plan cannot contract with an expert based on the outcomes of contested cases;
  • New standards regarding notice to enrollees. Specifically, a plan or issuer is required to provide notice in a culturally and linguistically appropriate manner, containing sufficient information to identify the claim involved and a discussion of the reason or reasons for the adverse benefit determination. The new standards include a specific foreign language requirement depending on the make up of the covered group and a detailed list of information that must be provided, including, among other things, a diagnosis code, treatment code and denial code. Because the notice must include specific health information, such as the diagnosis and treatment codes, plans and issuers that send the explanations of benefits to the named insured or employee for all family members should be aware of potential HIPAA violations resulting from the impermissible disclosure of protected health information. A model notice satisfying these requirements will be made available in the near future; and
  • A rule that failure to strictly adhere to the requirements of the internal claims and appeals process will result in the claimant being deemed to have exhausted the internal claims and appeals process. Accordingly, the claimant may initiate an external review and pursue judicial review. This provision of the regulation overturns language in the existing ERISA claims procedures and recent case law that had held that a health plan’s substantial compliance with the claims review procedure prevented a claimant from being deemed to have exhausted the internal claims process. It is unclear what effect this will have on the standard of review to be applied in a judicial review.

In addition to these six new requirements, the regulations prevent a plan from reducing or terminating a course of treatment without advance notice and opportunity for advance review. Individuals in urgent care situations receiving ongoing treatment may be allowed to proceed with expedited external review at the same time as the internal appeals process while continuing treatment.
 
External Review. The regulations provide that plans, including self-insured plans, and issuers must comply with either a state external review process or the new Federal external review process. An issuer is subject to the Federal external review process if (1) the state external review process does not meet, at a minimum, the consumer protections in the National Association of Insurance Carriers (“NAIC”) Uniform Health Carrier External Review Model Act (known as the “NAIC Uniform Model Act”), or (2) where there is no applicable state external review process. In the case of a fully insured plan, the issuer is subject to the applicable external review requirements, so the fully insured health plan itself is not required to separately comply. Entities not subject to the state law preemption under ERISA, such as nonfederal government health plans, church plans and multiple employer welfare arrangements, may be subject to the state external review procedures if the state law so provides.

The Federal external review process will apply to all final internal adverse claim determinations by self-funded group health plans (other than a determination that the claimant failed to meet the eligibility requirements). The Federal external review will be based on the NAIC Uniform Model Act. Additional guidance actually establishing the standards themselves will be issued at a later date and the regulations simply provide the framework for the additional guidance.

The standards for the Federal external review to be issued will describe:

  • how a claimant initiates an external review;
  • the procedures for a preliminary review to determine if the claim is eligible for external review (i.e., not an eligibility based claim);
  • the minimum qualifications for an independent review organization (“IRO”);
  • a process for approving the IROs eligible to conduct the reviews;
  • a process for random assignment of reviews to the approved IROs;
  • standards for IRO decision making; and
  • rules for providing notice of the decision.  

In addition, the regulations provide that:

  • The standards will include expedited external review for i) an internal adverse benefit determination or ii) a final internal adverse determination if the medical condition is so serious that the expedited internal appeal or standard external review would jeopardize life or health or ability to regain maximum function.  
  • The standards will provide consumer protections to insure that adequate clinical scientific experience and protocols are taken into account if the external review involves experimental or investigational treatments.
  • The standards will provide the external review is binding on the plan as well as the claimant except to the extent that other remedies are available under state or Federal law.
  • The standards may establish external review reporting requirements for the IRO. 
  • The standards will establish additional notice requirements describing the external procedures (including the right to request the external review in the SPD, membership booklet outline of coverage, etc.).
  • The standards will require that information relevant to the external review, such as information considered and relied upon, be provided to the claimant.   

As noted above, the final external review procedures are not stated in the regulations. Additional guidance is expected to be released and should include guidance on how self-insured plans that currently maintain an internal review process that otherwise meets the Federal external standards may comply or be brought into compliance with the new Federal process.   

Language Requirements for Notices. A plan or issuer is considered to provide the notices in a culturally and linguistically appropriate manner if:

  • In the case of a plan that covers fewer than 100 participants at the beginning of the year, and 25% or more of the participants are literate only in the same non-English language, the notice is provided in that language.
  • In the case of a plan that covers 100 or more participants at the beginning of the year, and the lesser of 500 participants or 10% or more of the participants are literate only in the same non-English language, the notice is provided in that language.

All notices must include a statement prominently displayed in the non-English language offering to provide the notice in the non-English language. Once a participant has request a non-English statement, all subsequent notices must be provided in the non-English language. To the extent the plan or issuer has a customer assistance process that answers questions or provides assistance in filing claims, the plan or issuer must also provide assistance in the non-English language. This requirement is consistent with existing ERISA requirements to provide non-English summary plan descriptions and summary annual reports.

Effective Date. The regulations apply to non-grandfathered group health plans and issuers for plan or policy years beginning on or after September 23, 2010, which is January 1, 2011, for calendar year plans.
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