Administering Your Group Health and Disability Plans in Compliance With the Department of Labor s Final Regulations on Claims Procedures and SPDs

Transcription

1 Administering Your Group Health and Disability Plans in Compliance With the Department of Labor s Final Regulations on Claims Procedures and SPDs Background On November 21, 2000, the Department of Labor ( DOL ) issued final regulations governing the claims and appeals procedures applicable to health plans and plans providing disability benefits governed by the Employee Retirement Income Security Act of 1974, as amended ( ERISA ). 1 These new regulations under Section 503 of ERISA represent the first major revision of claims and appeals procedures since The claims and appeals procedures will apply with respect to claims for benefits filed on or after January 1, Also on November 21, 2000, the DOL amended the regulations governing the content of summary plan descriptions ( SPDs ) for employee benefit plans. SPDs must be amended to comply with the regulation by the first day of the second plan year beginning on or after January 20, General Guidelines on Claims and Appeals Procedures The claims procedures set forth in the final regulation must be followed closely. If a plan fails to establish or follow claims procedures consistent with the regulations, the claimant is deemed to have exhausted the plan s administrative remedies and is entitled to pursue any available remedies under Section 502(a) of ERISA. All employee benefit plans are required to establish and maintain reasonable procedures for deciding claims and notifying participants of initial benefit determinations and decisions on appeal. These procedures, as well as any procedures for obtaining prior approval in order to receive a benefit under the plan (such as pre-authorization or utilization review), and the applicable timeframes must be part of the SPD or provided along with the SPD. The procedures must not unduly inhibit initiating or processing claims and must not prohibit an authorized representative from acting on a claimant s behalf. The claims procedures must include administrative safeguards to ensure that determinations are made in accordance with the plan documents and are applied consistently for similarly situated individuals. 1 2 To a more limited extent, the final regulations also apply to other types of employee benefit plans. The timeframes for processing claims apply only to group health plans and plans providing disability benefits, and not other types of plans, such as pension plans, at this time. However, the DOL has asked for public comment on whether claims processing reforms should be extended to other types of plans. This memorandum focuses on group health plans and plans providing disability benefits where the regulations will have the greatest impact for most employers. The final regulations amend DOL Reg

2 Further, group health plans and disability plans must give claimants at least 180 days to appeal a claim and the appeals procedures must not require a claimant to file more than two levels of appeal before bringing a civil action under Section 502(a) of ERISA. If a plan offers voluntary levels of appeal, including voluntary arbitration, the claims procedures must provide that (1) the plan waives any right to assert that the claimant did not exhaust his or her administrative remedies because the claimant did not submit to a voluntary level of appeal; (2) the plan agrees that any statute of limitations is tolled while the voluntary appeal is pending; (3) the claimant may elect a voluntary level of appeal only after exhausting the mandatory level or levels of appeal under the plan; (4) the plan provides sufficient information to the claimant regarding the voluntary appeals procedures; and (5) no fees are imposed on the claimant as part of the voluntary level of appeal. Lastly, the claims procedures may contain provisions for mandatory arbitration only if (1) the arbitration is conducted as one of the two levels of appeal and within the timeframes applicable to the appeal and (2) the claimant is not precluded from challenging the decision under Section 502(a) of ERISA. An appeal must be conducted by a named fiduciary who was not directly involved in making the initial determination that is on appeal. The party reviewing the claim must not afford deference to the initial adverse benefit determination. If an adverse benefit determination by a group health plan was based on medical judgment, the plan must consult with a health care professional with an appropriate level of training and expertise in the field of medicine involved who was not involved in the initial adverse determination. The names of any medical or vocational experts whose advice was obtained must be disclosed. Lastly, state laws that regulate insurance are not preempted by this regulation, except to the extent the state law prevents application of the regulation. A state law that provides for an internal claims procedure will not be considered to prevent application of the regulation, and therefore will not be preempted, so long as the review process is conducted by an independent third party other than the insurer, the plan, the plan fiduciaries, the employer or any employee or agent of theses entities. Content of Notice of Adverse Benefit Determination. The plan administrator of a group health plan or disability plan must provide a claimant with written or electronic notice of any adverse benefit determination. Oral notification is permitted for a claim involving urgent care so long as the written or electronic confirmation is furnished to the claimant within 3 days after the oral notification. The notification of the adverse benefit decision of an initial claim must include the following: 3 the specific reason or reasons for the adverse determination; reference to the specific plan provisions on which the determination is based; a description of any additional information needed for the claimant to perfect the claim and an explanation of why such information is needed; 3 All employee benefit plans must include the first four items. Only group health plans and plans providing disability benefits are required to include the final three items as well. Administering Your Group Health and Disability Plans 2

3 a description of the plan s review procedures, including the claimant s right to bring a civil action under Section 502(a) of ERISA; a copy of any internal rule, guideline, protocol or other similar criteria relied on in making the adverse determination or a statement that it will be provided without charge upon request; if the adverse determination is based on medical necessity or experimental treatment or a similar exclusion or limit, either an explanation of the scientific or clinical judgment, applying the terms of the plan to the claimant s medical circumstances, or a statement that this will be provided without charge upon request; and in the case of an adverse determination involving urgent care, a description of the expedited review process available to such claims. Content of Notice of Decision on Appeal. The plan administrator of a group health plan or disability plan must provide a claimant with written or electronic notice of the plan s benefit determination on review. The notification of the decision on review must include the following: 4 the specific reason or reasons for the adverse determination; reference to the specific plan provisions on which the determination is based; a statement that the claimant is entitled to receive without charge reasonable access to any document (1) relied on in making the determination; (2) submitted, considered or generated in the course of making the benefit determination; (3) that demonstrates compliance with the administrative processes and safeguards required in making the determination; or (4) in the case of a group health plan or disability plan, constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment without regard to whether the statement was relied on; a statement of any voluntary appeals procedures and the claimant s right to receive information about the procedures as well as the claimant s right to bring a civil action under Section 502(a) of ERISA; a copy of any internal rule, guideline, protocol or other similar criteria relied on in making the adverse determination or a statement that it will be provided without charge upon request; if the adverse determination is based on medical necessity or experimental treatment or a similar exclusion or limit, either an explanation of the scientific or clinical judgment, applying the terms of the plan to the claimant s medical 4 All employee benefit plans must include the first four items. Only group health plans and plans providing disability benefits are required to include the final three items as well. 3

4 circumstances, or a statement that this will be provided without charge upon request; and the following statement: You and your plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency. Timeframes for Notifying Claimants of Benefit Determinations and Decisions on Appeal Benefit claims under a group health plan or plan providing disability benefits are divided into four different categories. The timeframe for processing the claim and any subsequent appeal of an adverse decision depends on the type of claim submitted. Below is a summary of the timeframes for the four types of claims. 1. Urgent Care Claims. 5 Initial claim review: A claim involving urgent care must be decided as soon as possible, but no later than 72 hours after the claim is received by the plan administrator. If the claimant has not followed the plan s procedures for filing an urgent care claim, the claimant must be notified of the failure and the proper procedures to be followed within 24 hours. If the plan cannot render a decision within 72 hours because the claimant has not provided sufficient information to determine whether, or to what extent, benefits are covered or payable under the plan, the plan administrator must notify the claimant within 24 hours of the specific information needed to complete the claim. The claimant must be given at least 48 hours to provide the required information. Within 48 hours after the earlier of (1) the plan s receiving the required information or (2) the expiration of the period afforded to the claimant to provide the information, the plan administrator must notify the claimant of the plan s benefit determination. Appeal: An appeal of an adverse benefit determination by a claimant must be decided as soon as possible, but no later than 72 hours after the receiving the request for review or appeal. 5 A claim involving urgent care is any claim for medical care or treatment with respect to which the application of the time periods for making non-urgent care determinations (a) could jeopardize the life or health of the claimant or the ability of the claimant to regain maximum function, or (b) in the opinion of a physician with knowledge of the claimant s medical condition, would subject the claimant to severe pain that cannot be adequately managed without the care or treatment that is the subject of the claim. Any claim that a physician with knowledge of the claimant s medical condition determines is a claim involving urgent care under this definition must be treated as an urgent care claim by the plan. Absent a determination by the claimant s physician, the determination of whether a claim involves urgent care is to be made by an individual acting on behalf of the plan applying the judgment of a prudent layperson who possesses an average knowledge of health and medicine. Administering Your Group Health and Disability Plans 4

5 2. Pre-Service Claims. 6 Initial claim review: A pre-service claim must be decided within 15 days after receipt of the claim by the plan. The plan administrator may extend the review period for an additional 15 days if necessary due to circumstances beyond the control of the plan. The plan administrator must notify the claimant within the timeframe of the reason for the extension and the date the plan expects to render its decision. If the claimant has not followed the plan s procedures for filing a pre-service claim, the plan must notify the claimant within 5 days of the proper procedures to be followed in order to complete the claim. If the plan cannot render a decision within 15 days because the claimant has not provided sufficient information to determine whether, or to what extent, benefits are covered or payable under the plan, the notice of extension must describe the specific information needed to complete the claim. The claimant must be given at least 45 days from receipt of the notice to provide the required information. The plan has 15 days from the date of receiving the claimant s information to render its decision. Appeal: An appeal of a denial of a pre-service claim must be decided by the plan within 30 days after receiving the request for review. If the plan requires two levels of appeal, the decision of any one level must be made within 15 days after receipt of the claimant s request for review. 3. Concurrent Care Claims. 7 Initial claim review: An adverse benefit determination involving concurrent care must be made sufficiently in advance of any reduction or termination in treatment to allow the participant to appeal the adverse benefit determination. If a course of treatment involves urgent care, a request by the claimant to extend the course of treatment must be decided as soon as possible, but not later than 24 hours after receipt of the request by the plan, provided that the request is made at least 24 hours prior to the expiration of treatment. Appeal: An appeal of an adverse benefit determination regarding concurrent care must be decided within 72 hours for urgent care claims, 30 days for pre-service claims (15 days for each level of any two-level appeals process), or 60 days for post-service claims (30 days for each level of any two-level appeals process). 6 7 A pre-service claim is any claim for a benefit under a group health plan with respect to which the terms of the plan condition receipt of the benefit, in whole or in part, on approval of the benefit in advance of obtaining medical care. A concurrent care claim involves a claim for an ongoing course of treatment to be provided over a period of time or number of treatments. Any reduction or termination by the plan of the course of treatment (other than by plan amendment or termination) before the end of the period of time or number of treatments originally prescribed is considered an adverse benefit determination. 5

6 4. Post-Service Claims. Initial claim review: A post-service claim must be decided within 30 days after receipt of the claim by the plan. The plan administrator may extend the review period for an additional 15 days if necessary due to circumstances beyond the control of the plan. The plan administrator must notify the claimant within the timeframe of the reason for the extension and the date by which the plan expects to render its decision. If the plan cannot render a decision within 30 days because the claimant has not provided sufficient information to determine whether, or to what extent, benefits are covered or payable under the plan, the notice of extension must describe the specific information needed to complete the claim. The claimant must be given at least 45 days from receipt of the notice to provide the required information. The plan has 30 days from the date of receiving the claimant s information to render its decision. Appeal: An appeal by a claimant involving a post-service claim must be decided by the plan within 60 days after receiving the request for review. If the plan requires two levels of appeal, the decision of any one level must be made within 30 days after receipt of the claimant s request for review. Disability Plans. Decisions regarding claims under disability plans must also be rendered within specified timeframes. In particular, an initial claim for disability benefits must be decided within 45 days after receipt of the claim by the plan, which may be extended for up to two 30-day periods if needed due to circumstances beyond the control of the plan. The plan administrator must notify the claimant within the 45 day-period of the reason for the extension and the date the plan expects to render its decision. An appeal of a claim for disability benefits must be decided within 45 days after receipt of the request for review, which may be extended for another 45 days if necessary. Content of Summary Plan Descriptions Summary plan descriptions of group health plans and plans providing disability benefits must be revised to include the following additional information by the first day of the second plan year beginning on or after January 20, the type of welfare plan being administered; a description of the plan s claims procedures, which may be furnished in a separate document that accompanies the SPD as long as the SPD notifies participants that this is available; 8 The first five criteria must be included in the SPDs of all employee benefit plans. Where appropriate, the SPD must describe the plan s provisions for qualified domestic relations order ( QDROs ). The final eight criteria apply only to group health plans and disability plans. Separately, the limited exemption that narrowed the disclosure required for plans that provide benefits through a health maintenance organization ( HMO ) has been repealed; such plans must now provide the same disclosure required of other group health plans. Administering Your Group Health and Disability Plans 6

7 a description of the plan s procedures for qualified medical child support orders ( QMCSOs ) or a statement that a description is available upon request without charge; a summary of the plan s termination provisions and the effect of a plan termination or amendment on participants; a summary of any provisions on allocation and disposition of plan assets upon the plan s termination; any cost-sharing provisions, including premiums, deductibles and co-payments; any annual or lifetime maximums or other limits on benefits under the plan; the level of coverage for existing and new drugs; the level of coverage for medical tests, devices and procedures; provisions governing the use of network providers, the composition of the provider network and the level of coverage for out-of-network providers; any conditions or limits on selecting primary care or specialty providers or using emergency medical care; any requirement of pre-authorization or utilization review as a condition to obtaining a benefit or service under the plan; and a summary of the participants right to health care continuation coverage under a group health plan. Model language is provided in the regulations for required disclosure under the Consolidated Omnibus Budget Reconciliation Act of 1986 ( COBRA ), ERISA, and the Newborns and Mothers Health Protection Act. Susan P. Serota sserota@pillsburywinthrop.com Deene Goodlaw dgoodlaw@pillsburywinthrop.com Erin E. Raccah eraccah@pillsburywinthrop.com 7

8

9

10 Administering Your Group Health and Disability Plans in Compliance With the Department of Labor s Final Regulations on Claims Procedures and SPDs June Hong Kong London Los Angeles New York Northern Virginia Orange County Palm Beach Sacramento San Diego San Francisco Silicon Valley Singapore Stamford Sydney Tokyo Washington DC This is a general review of the subjects covered and does not constitute an opinion or legal advice Pillsbury Winthrop LLP