ERISA Plan Claims and Appeals:
In November, 2000, the U.S. Department of Labor issued new regulations governing claims and appeals for ERISA plans. The regulations generally shorten the time within which claims and appeals must be decided, lengthen the time within which a participant may file an appeal, impose new disclosure requirements, and emphasize consistency in deciding claims and appeals.
1. When did the new regulations go into effect for pension and disability claims?
The new regulations governing ERISA plan claims and appeals went into effect on January 1, 2002 for pension claims and disability claims.
2. When do the new regulations go into effect for health plan claims?
The new regulations will go into effect for health plan claims beginning on the first day of the first plan year on or after July 1, 2002, but not later than January 1, 2003. For calendar year plans, this means compliance will be required for claims filed on and after January 1, 2003. However, plans that have plan years that begin between July 1 and December 31 will have to comply on the first day of the plan year that begins in 2002.
3. What are the new time limits for deciding claims?
In general, the time allowed to decide an initial claim depends on the type of claim.
- Health Plan Urgent Care Claims: Must be decided not more than 72 hours after the claim is received. If information is missing when the claim is first submitted, the plan must notify the participant within 24 hours, must give the participant at least 48 hours to supply the missing information, and must make a decision not more than 48 hours after the earlier of the receipt of the missing information or passage of the time to submit the missing information.
An Urgent Care Claim is defined as a Pre-Service Claim for medical care or treatment if application of the longer time periods for making decisions on other types of claims (1) could seriously jeopardize the claimant's life or health or ability to regain maximum function or (2) would subject the claimant to severe pain that cannot be adequately managed without the care or treatment in question. If a physician with knowledge of the claimant's medical condition says a claim is an Urgent Care Claim, the plan must treat it as such. Otherwise, the decision as to whether a claim is an Urgent Care Claim is to be made by an individual acting on behalf of the plan, applying the judgment of a prudent layperson who has an average knowledge of health and medicine.
- Health Plan Pre-Service Claims: Must be decided not more than 15 days after the claim is received. One extension of not more than 15 days is allowed, subject to certain conditions.
A Pre-Service Claim is defined as any claim as to which the terms of the plan condition receipt of the benefit, in whole or in part, on approval of the benefit in advance of obtaining medical care.
- Health Plan Post-Service Claims: Must be decided not more than 30 days after the claim is received. One extension of not more than 15 days is allowed, subject to certain conditions.
A Post-Service Claim is defined as any claim that is not a Pre-Service Claim.
- Disability Claims: Must be decided not more than 45 days after the claim is received. Two extensions of not more than 30 days each are allowed, subject to certain conditions.
According to DOL guidance, a Disability Claim is a claim for a benefit for which the claimant must make a showing of disability, and the plan makes the disability determination. If the plan relies on a disability determination that is made by a third-party, for a purpose other than the claim for benefits under the plan, the Disability Claim rules do not apply.
- Other Claims: Must be decided within 90 days after the claim is received. One extension of not more than 90 days is allowed, subject to certain conditions.
Other Claims would include, e.g., pension claims (that are not Disability Claims), life insurance plan claims, severance plan claims, etc.
For Health Plan Claims and for Disability Claims, the participant must be allowed at least 180 days to appeal. For Other Claims, the participant must be allowed at least 60 days.
5. How long does a plan have to decide an appeal?
In general, the time allowed to decide an appeal depends on the type of claim.
- Health Plan Urgent Care Claim Appeals: Must be decided not more than 72 hours after the appeal is received.
- Health Plan Pre-Service Claim Appeals: Must be decided not more than 30 days after the appeal is received if there is only one level of appeal, and not more than 15 days after the appeal is received if there are two levels of appeal.
- Health Plan Post-Service Claim Appeals: Must be decided not more than 60 days after the appeal is received if there is only one level of appeal, and not more than 30 days after the appeal is received if there are two levels of appeal.
- Disability Claim Appeals: Must be decided not more than 45 days after the appeal is received. One extension of not more than 45 days is allowed, subject to certain conditions.
- Other Claim Appeals: Must be decided within 60 days after the appeal is received. One extension of not more than 60 days is allowed, subject to certain conditions.
6. Are there other time limits?
Yes. Special time limits apply if a health plan proposes to reduce or terminate an approved course of treatment, or if a participant requests an extension of an approved course of treatment.
7. Are there requirements relating to who makes plan decisions and who must be consulted?
Yes. The decision maker on an appeal cannot be the same person who decided the initial claim, or a subordinate of that person. Similarly, if a decision involves medical judgment, the decision maker on appeal must consult an appropriate medical professional, who cannot be the same one who was consulted when the claim was initially denied, or a subordinate of that person.
8. Are there new disclosure requirements?
Yes, many. For example, if an internal rule, guideline, or protocol was relied upon in denying a claim or an appeal, the notice to the participant must identify the rule, guideline, or protocol and either include it or state that a copy will be provided free upon request. Similarly, if a determination is based on a medical necessity requirement, the notice must explain the scientific or clinical judgment for the determination and apply the terms of the plan to the participant's medical circumstances, or must state that the explanation will be provided free upon request.
Also, a participant is entitled to copies of all "relevant" documents, records, and other information, free upon request. The new regulations define "relevant" very broadly, to include anything that was relied upon in making the determination; anything that was submitted, considered, or generated in the course of making the determination, even if it was not relied upon; anything that demonstrates compliance with the administrative processes and safeguards required by the regulations; and, for health plans and disability claims, anything that constitutes a statement of policy or guidance as to a denied treatment option or benefit for the participant's diagnosis, even if it was not relied upon in making the determination.
9. Do plans need to rewrite their internal claims and appeals procedures and rewrite the claims and appeals sections in their Summary Plan Descriptions (SPDs)?
Almost certainly. The new time limits must be incorporated into the internal procedures and the SPDs. In addition, the new regulations include several requirements relating to information that must be disclosed to participants, safeguards to ensure consistency in decision making, designation of authorized representatives, and other features that must be included in order for the plan's claims and appeals procedures to be considered reasonable.
10. Are there decisions that a plan sponsor must make about how to comply with the new regulations, or are the requirements cut-and-dried?
There are many decisions that a plan sponsor must make. For example, the time limits stated in the regulations are maximums and minimums, and a plan is free to impose a limit that is shorter than a maximum specified by the regulations, or longer than a minimum. In addition, a plan sponsor is free to decide whether to have one required level of appeal or two; whether to offer additional, voluntary levels of appeal (subject to restrictions set forth in the regulations); whether to use non-binding arbitration as an appeal mechanism; how to ensure consistency in decision making; how to define a claim and when a claim is properly filed; whether to require a written designation of an authorized representative; etc.
11. How much will it cost to comply with the new regulations?
It depends on the size and nature of the employer and its ERISA plans. It will probably be less expensive to bring an insured plan into compliance than a self-funded plan, but all employers that sponsor ERISA plans will incur some expense. The attorneys in the Gordon Feinblatt Employee Benefits Group are already advising employers and ERISA plans on the new claims and appeals regulations, and are "up-to-speed" on what the new regulations require.