The Health Reform legislation added a requirement that group health plans, other than "grandfathered" group health plans, provide for an external review of claims after application of the internal claims review procedures.  The requirements vary, with one set for insured plans and one set for self-insured plans.  Effective dates have varied with most applying to plan years on or after July 1, 2011 and with many applying to plan years on or after January 1, 2012.  It is important to start now understanding the new system for external review and where your group health plan fits.  Be ready to explain the new process in this fall's open enrollment materials. 

For the past year, standards and guidance for external claims procedures have been issued by the Departments of Health and Human Services (HHS), Labor (DOL) and Treasury (IRS).  June 2011 guidance extended enforcement periods and modified some standards.  

What kinds of external review processes are there? 

1. State external review process – NAIC parallel
2. State external review process – NIAC similar
3. Federally-administered external review process – HHS administered
4. Private accredited IRO process

The National Association of Insurance Commissioners (NAIC) issued the Uniform Health Carrier External Review Model Act with 16 consumer protection standards.  The NAIC parallel process meets these standards.  HHS has announced that by July 31, 2011, it will announce its determination of the state external review processes which meet these standards.  States may appeal the determination, but HHS pledges to have final determinations in place no later than October 1, 2011 so that plans and insurers will have at least 3 months to transition. 

States may also use similar procedures that are subject to somewhat lesser standards established by HHS regulations. The NAIC similar procedures are based on July 2010 regulations, which have now been modified by a set of temporary standards, applying until January 1, 2014.  As of that date, the state external review process must be a NAIC parallel process or the state can choose to be under the Federally-administered process. 

HHS and the Office of Personnel Management (OPM) have issued rules under which health claims are reviewed by an independent third party reviewer.  Regular and expedited reviews are available.  The Federally administered process can be elected by submitting information to HHS at externalappeals@cms.hhs.gov by January 1, 2012. 

Under the auspices of the DOL, the private accredited independent review officer (IRO) process allows the plan or the plan's third party administrator (TPA) to contract with IROs to provide an independent review of health claims.

Which process applies to my plan?

For insured group health plans, the NAIC parallel process is the ultimate goal.  Each state may eventually have a NAIC parallel process which is designed to coordinate with the state's insurance laws governing group health plans.  The insurance company providing the health insurance should coordinate with the state law process.  If the state law does not comply with either NAIC parallel or NAIC similar processes, the insurer must use the Federally administered process and can choose between the HHS administered process and a private accredited IRO process.  If your plan is insured, on or after July 31, 2011, check with the insurance company providing the health coverage and find out which external review process will be used for your plan. 

For self-insured group health plans, the private accredited IRO process provides the external review process.  Initially, the regulations required that a plan have access by contract with at least 3 IROs but the June 2011 guidance reduced that to 2 IROs by January 1, 2012 and 3 IROs by July 1, 2012.  Assignment of claims review among the IROs must be rotated.  Recognizing the logistical nightmare of each plan contracting with multiple IROs, the DOL permits the TPA to contract on behalf of plans and thus aggregate the contracts and terms among plans.  As an alternative, a plan may voluntarily elect to use a state external review process.  If your plan is self-insured, you should ask your TPA if it will supply the IROs and whether in its contract with your plan it will confirm compliance with the external claims review. 

Self-insured nonfederal governmental plans that are not covered by ERISA are treated like insured plans and may be subject to state external review procedures and HHS process if not compliant with the new NAIC parallel or similar procedures.

Quick Summary 

Getting started on compliance 

First, determine whether your group health plan is "grandfathered" under the health reform laws and will continue to be grandfathered in 2012.  If the plan is grandfathered, then an external claims review is not required.  

Next, determine whether your plan is insured or self-insured so you recognize your options. 

Contact your insurer or TPA and ask what external review procedure they plan to provide for your plan, whether they will offer you any choices, or whether they expect you to select the external review procedure. 

Review with legal counsel the contract you have with your insurer or TPA and consider whether there should be new provisions for external review procedures, representations of legal compliance, and indemnification added to your contract. 

Review with your insurer or TPA the forms, or new forms, to be used in the claims review process and the summary plan description (SPD) for adequate description of the external review process.  Note: updated model forms were issued by DOL on June 22, 2011. 

Create a compliance timeline so you are ready for January 1, 2012.