Benefits In Brief

As explained in our August 2010 article, “interim final regulations” issued under the Affordable Care Act (“ACA”) will require group health plans (other than those that are “grandfathered”) to comply with a number of internal claims and appeals procedures that go beyond those previously required under ERISA. Although these new requirements are generally effective for plan years beginning on or after September 23, 2010, the Department of Labor (“DOL") granted a limited extension of this compliance deadline in late 2010. Then in March of this year, the compliance deadline was further extended for certain of these requirements.

Responding to questions and comments from health plan sponsors and insurers, the agencies charged with enforcing the Affordable Care Act (the “Act”) have answered several frequently asked questions concerning the Act’s implementation. The bulk of these FAQs involve the Act’s more stringent claims and appeals procedures for non-grandfathered health plans. Collectively, these FAQs provide welcome — though still limited — relief to plan sponsors who are scrambling to comply with these new claims and appeals requirements within the next few months.

When the agencies responsible for administering the new claims and appeals procedures mandated under the Affordable Care Act issued their first round of guidance on this subject (as summarized in our August 2010 article), they noted that additional guidance on the Act’s new external review procedures would be coming out soon.

The health care reform provisions of the Affordable Care Act (the “Act”) will require significant changes in the procedures followed by most employer health plans when processing claims for benefits, as well as appeals from denials of those claims.  The only plans that need not comply with these new claims and appeals procedures are those that are “grandfathered” under pre-Act law (in accordance with the guidance addressed in our June 2010 article).  All non-grandfathered plans must comply with these expanded claims and appeals procedures as of the first plan year beginning on or after September 23, 2010.

We are occasionally reminded that the claims and appeals procedures carefully spelled out in ERISA plans have real meaning. Although the regulatory deadlines within which plan fiduciaries must render decisions on benefit claims and appeals may appear arbitrary – and although many plan administrators treat them as mere “guidelines” – the failure to abide by those deadlines can have disastrous consequences in court. A recent decision by the 10th U.S. Circuit Court of Appeals illustrates that those deadlines do have teeth. (Rasenack v. AIG Life Insurance Co.)

Changes to the federal rules governing civil litigation will affect the way that benefit claims and appeals are processed. While third-party claims administrators will be most directly affected, plan sponsors and their human resources staff should also be aware of the new rules. Failure to abide by them could make it more difficult to succeed if claim decisions are challenged in court.