Even though final regulations regarding claim determinations and rights of appeal were issued several years ago by the Department of Labor’s Employee Benefits Security Administration (formerly the Pension and Welfare Benefits Association), I continue to receive questions concerning permissible timing for handling claim determinations by plan administrators and the timing of appeal procedures by claimants.
The claim regulations relate to health claims, including those for medical, dental, vision, prescription drug, and certain employee assistance programs that provide medical benefits, and for disability claims. The primary reason for the regulations is to facilitate and expedite decision-making on medical issues. It is important to note that both health reimbursement arrangements (HRAs) and health flexible spending accounts are considered health plans and, thus, are subject to these regulations.
Typically, administrators of Section 125 flexible spending accounts and health reimbursement arrangements adjudicate and pay “post-service claims” for plan participants. These claims, as well as the others listed below, are specifically covered by these regulations.
Four Categories of Claims
The regulations divide claims into four categories:
1. Urgent Care Claims. A claim for urgent care is one that would substantially impact the life or health of the claimant or would subject the claimant to severe pain that cannot be managed without treatment.
2. Pre-Service Claims. Pre-service claims are those that require pre-certification before services are rendered.
3. Post-Service Claims. Post-service claims are for payment after services have been rendered.
4. Disability Claims payments.
Time Frame for Responding
The regulations set time limits in which the initial claims must receive a response. It’s important to note that these time limits are not safe harbors. All claims described above must be responded to as soon as is reasonably possible, but in no event can the response be later than the time frame described below.
Administrators of post-service claims have up to 30 days in which to respond to any health flexible spending account claims, with a one-time 15-day extension allowed. If the extension is due to insufficient information, the notice of the extension must specifically describe the required information and the claimant has 45 days to provide information.
Claims Determination
The written claim determination can be delivered either electronically or in paper format and must include the following:
• The specific reason for the denial.
• The specific reference to relevant plan provisions.
• A description of, and rationale for, any additional information that would be needed to perfect the claim.
• A description of the plan procedures, time limits and the right to take legal action.
The claimant must be provided with the rules, guidelines, or other protocols relied upon in making the determination or the claimant must be advised that such information is available free of charge. If the denial is based on merit, medical necessity, or the experimental nature of the treatment, the denial must explain the scientific or clinical basis for the denial, or state that such information is available at no charge.
Time Frame for Appeal of Denied Claims
Previous regulations allowed a claimant 60 days in which to file an appeal. But final regulations allow claimants 180 days in which to file an appeal. Post-service claims administrators then have 60 days in which to respond to the appeal.
Remember, this appeal time frame is not based on the underlying plan’s period of coverage. If a claim is denied on the last day of the plan year or even the last day of the run-out period, participants still have a full 180 days in which to file an appeal or perfect their claim and resubmit.
Full and Fair Review
According to the regulations, claimants must receive a full and fair review. This simply means that the review cannot be made by the same person who made the initial determination—nor any of his subordinates.
On appeal, claimants can submit additional documentation supporting their position. They must have access to all relevant documents relied upon in the review. The review must take into account all newly submitted information and cannot be based solely on information relied upon in the initial determination.
If the appeal is based on medical necessity or the experimental nature of a treatment, the person reviewing the appeal must consult with a medical professional who has the appropriate expertise and training.
Review Current Documents and Processes
When reviewing a claim and making a claim determination, it’s a good idea for plan administrators to review the applicable plan documents, including third party administration agreements, insurance contracts and all other related documents. These documents must uphold the claim and appeal procedures outlined by the Department of Labor to ensure compliance with these regulations.
The cafeteria plan document and summary plan description needs to contain an accurate description of the claims denial and appeal processes, and the plan sponsor must ensure that this information is communicated to plan participants and their beneficiaries.
The plan sponsor is responsible for inquiring into the procedures used by any third party administrators relied upon. In most cases, it is the employer’s ultimate responsibility to make certain that the plan adheres to prevailing guidelines.
The information contained in this article is not intended to be legal, accounting, or other professional advice. We assume no liability whatsoever in connection with its use, nor are these comments directed to specific situations.
