Bringing group health plans into compliance with the health reform changes for internal claims and appeals under PPACA will now be a three-stage process, as outlined by the Department of Labor (DOL) in their recent Technical Release 2011-01.   Last July, the DOL issued interim final regulations.  In September, the DOL issued a technical release (2010-02) announcing an enforcement grace period [1]until July 1, 2011.  Now, the DOL's technical release extends the enforcement grace period until plan years starting on or after January 1, 2012, with two exceptions.  These changes do not apply to grandfathered health plans under PPACA.

Compliance Now

The interim final regulations are effective for plan years beginning after September 31, 2010, or January 1, 2011 for calendar year plans.  Three changes are not subject to the DOL grace period and should be included in group health plans now:

1. The scope of adverse benefit determinations must include rescission of coverage (retroactive cancellation of coverage).
2. Claimants are entitled, free of charge, to new or additional evidence considered, relied upon, or generated by the plan or insurer with respect to the claim or denial and a reasonable opportunity for the claimant to respond.
3. Conflict of interest considerations must include the notion that employment actions such as hiring, termination, compensation or promotion for individuals, such as claims adjudicators or medical experts, cannot be based on the likelihood that the individual will support denials.

Compliance for Plan Years beginning on or after July 1, 2011

Although for calendar year plans, January 1, 2012 will the effective date, for non-calendar year plans, the following changes will become effective on a rolling basis with the first day of the first plan year starting on or after July 1, 2011:

1. Notices of adverse benefit determination, initial or final, must provide information sufficient to identify a claim (other than treatment and diagnosis codes), the reasons for the adverse benefit determination, and a description of internal appeals and external review processes. 
2. For plans in states with an office of health consumer assistance program or ombudsman, disclosure of the availability of, and contact information for, the program is required.  A list of these programs can be found at www.dol.gov/ebsa/healthreform  and should be checked annually to update information for participants.

Compliance for Plan Years beginning on or after January 1, 2012

PPACA changes with an extended enforcement date of the first day of the first plan year starting on or after January 1, 2012 include the following:

1. Urgent care claims must be given a benefit determination (adverse or not) within 24 hours after receipt by the plan or insurer instead of the current 72 hour requirement.
2. Notices must be provided in a culturally and linguistically appropriate manner.  This means provision in a non-English language based on a threshold of the lesser of 500 participants or 10% of all plan participants for plans with at least 100 participants.  Non-English language customer assistance hotlines may also be required.
3. Notices must include diagnosis codes and treatment codes (and their corresponding meanings).
4. A new standard that deems internal claims and appeals to be exhausted if the plan or insurer fails to strictly adhere to the updated claims and appeals processes will become effective.  This may be applied whether the plan or insurer asserts substantial compliance with the procedures.  Upon deemed exhaustion, the claimant is entitled to initiate state or federal external review and pursue available remedies in court.

2011 is a good year for employers to examine their group health plan claims and appeals procedures in detail to determine current compliance and to plan for new PPACA changes for the next plan year in consultation with any third party administrator. Plan sponsors should also take care to review administrative services agreements carefully with an eye to liability for compliance in the claims arena. The risk of non-compliance goes up when failure to strictly adhere to requirements gives a participant an express ticket to external appeals and courts.

[1] Caveat: the DOL enforcement grace period is merely the DOL's announcement that it will not take enforcement action.  It does not address the rights of private parties in private litigation.