The Departments of Labor, Health & Human Services and Internal Revenue Service are extending a previously announced enforcement grace period under which the agencies will not take enforcement against health plans or health insurers that attempt to operate in good faith compliance with, but fail to meet certain new requirements for handing medical claims and appeals enacted as part of the Patient Protection and Affordable Care Act (Affordable Care Act). While health plans and insurers working in good faith to comply with the new requirements may find the enforcement relief helpful for dealing with some areas of uncertainty about the interpretation of certain requirements, it is important to keep in mind that the enforcement grace period provides only limited and somewhat imperfect relief. As a result, health plans, health insurers and those responsible for their design and administration are encouraged to continue to move forward on efforts to comply with the new requirement in thoughtful and well-documented manners despite the announced grace period extension.
New Claims & Appeals Requirements & Enforcement Grace Period
As signed into law on March 23, 2010, the Affordable Care Act generally requires that health plans and health insurance policies that are not “grandfathered” to begin complying with a series of new requirements by the first day of the first plan year that begins after September 22, 2010. These new requirements include a number of new requirements about the way that nongrandfathered health plans and health insurance policies handle medical claims and appeals. For instance, the Affordable Care Act as construed by the agencies in interim final regulations published by the agencies on July 23, 201 will require that non-grandfathered group health plans and insurers issuing non-grandfathered health insurance plans and policies:
- Implement specified internal and external review procedures that among other things mandate independent external review of medical judgment based decisions in accordance with the regulations for reviews of appeals of medical judgment based denials;
- Provide a broad range of new information in notices regarding claims and do so in a culturally and linguistically appropriate manner;
- Provide continued coverage pending the outcome of an internal appeal; and
- Comply with a laundry list of additional criteria for ensuring that a claimant receives a full and fair review in addition to complying with the requirements of existing Labor Department claims and appeals procedures.
After the agencies jointly published interim final regulations defining and implementing these requirements on July 23, 2010, last September the agencies announced that they would not enforce certain elements (but not all) of the new requirements set forth in the interim final regulations against covered health plans or health insurers seeking to comply in good faith with the new requirements through July 1, 2011. In the March 18, 2011 announcement, the Department of Labor said that the agencies now have agreed to extend this reprieve from agency enforcement of the requirements listed in the guidance against plans seeking to comply in good faith with the new requirements until plan years beginning on or after January 1, 2012.
While offering welcome relief, covered health plans and insurers, their sponsors and issuers should not over-estimate the reach and protection provided by this new guidance. For instance:
- First, in order to qualify for the enforcement grace period, efforts must be made to administer the health plan or health insurance policy in good faith compliance with the new requirements during the enforcement grace period.
- Second, the enforcement grace period provides only limited relief. The extension to 2012 only four of a series of new requirements set forth in the interim final regulations. Nongrandfathered plans and their administrators and insurers remain accountable for prudently administering claims and appeals in accordance with all other requirements of the Affordable Care Act as well as pre-existing claims and appeals regulations set forth in 2000 claims regulations issued by the Department of Labor pursuant to the Employee Retirement Income Security Act.
- Third, the enforcement grace period guidance only means that the agencies will not exercise their power to take action against a non-compliant plan. It does not prevent plan members, health care providers with benefit assignments or other plan beneficiaries from bringing lawsuits against health plans, health insurers or their administrators for failing to comply with the new requirements during post- September 22, 2010 plan years even if the enforcement grace period otherwise protects the plan or insurer from agency enforcement action. This means that health insurers and health plans may still run the risk that plan members or beneficiaries will ask courts to reverse claims or appeals denials or impose other penalties and sanctions against plans or their fiduciaries for failing to meet the new requirements for post-September 22, 2010 plan years.
- Finally, and perhaps most significantly, the grace period guidance requires nongrandfathered plans and insurers to make “good faith” efforts to comply with the requirements covered by the relief during the grace period in order to be eligible to claim the relief offered by the enforcement grace period guidance.
Consequently, despite the relief announced March 18, nongrandfathered health plans still have significant work to do to comply with the new Affordable Care Act claims and appeals requirements even during the announced enforcement grace period.
For Help With Affordable Care Act or Other Employee Benefits or HR Needs
If you have any questions or need help responding to the Affordable Care Act or other any other health plan or insurance employee benefit, compensation, workforce or internal control concerns, please contact the author of this update, Cynthia Marcotte Stamer here or at (469)767-8872.
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