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U.S. Federal ERISA Reform

Information and Questionnaire

Federal Register: September 8, 1997 (Volume 62, Number 173)] [Proposed Rules] [Page 47261-47266] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr08se97-21] [[Page 47261]]

Part III Department of Labor

Pension and Welfare Benefits Administration

29 CFR Part 2560 Claims Procedures for Employee Benefit Plans; Proposed Rule [[Page 47262]] DEPARTMENT OF LABOR Pension and Welfare Benefits Administration 29 CFR Part 2560

Claims Procedures for Employee Benefit Plans AGENCY: Pension and Welfare Benefits Administration, Labor. ACTION: Request for information.

SUMMARY: This document requests information from the public concerning the advisability of amending the existing regulation under the Employee Retirement Income Security Act of 1974 (ERISA) that establishes minimum requirements for employee benefit plan claims procedures. The term "claims procedure" refers to the process that employee benefit plans must provide for participants and beneficiaries who seek to obtain pension or welfare plan benefits, including requests for medical treatment or services, consideration of claims, and review of denials of claims by plans. The primary purpose of this notice is to obtain information to assist the Department of Labor (the Department) in evaluating (1) The extent to which the current claims procedure regulation assures that group health plan participants and beneficiaries are provided with effective and timely means to file and resolve claims for health care benefits, and (2) whether and in what way the existing minimum requirements should be amended with respect to group health plans covered by ERISA. The furnished information also will assist the Department in determining whether the regulation should be amended with respect to pension plans covered by ERISA and in developing legislative proposals to address any identified deficiencies relating to the claims procedures that cannot be addressed by amending the current regulation.

DATES: Written comments must be submitted to the Department of Labor on or before November 7, 1997.

ADDRESSES: Comments (preferably, at least six copies) should be addressed to the
Office of Regulations and Interpretations
Pension and Welfare Benefits Administration
Room N-5669
U.S. Department of Labor
Washington, D.C. 20210.
Attention: Claims Procedure RFI. All comments received will be available for public inspection at the Public Disclosure Room, Pension and Welfare Benefits Administration, U.S. Department of Labor, Room N-5638, 200 Constitution Ave., N.W., Washington, D.C. 20210.

FOR FURTHER INFORMATION CONTACT: Jeffrey J. Turner or Susan G. Lahne, Office of Regulations and Interpretations, Pension and Welfare Benefits Administration, U.S. Department of Labor, Washington, D.C. 20210, telephone (202) 219-7461, or Cynthia Caldwell Weglicki, Plan Benefits Security Division, Office of the Solicitor, U.S. Department of Labor, Washington, D.C., telephone (202) 219-4600, ext. 106. These are not toll-free numbers. Go directly to the patient committee response.


A. Background

The Department's regulation, published in 1977, was drafted in response to concerns about plan practices prior to the enactment of ERISA, particularly with respect to participants' lack of information about claims procedures generally. This regulation makes no distinction between pension and health care plans. In the intervening years, dramatic changes in health care delivery have raised many issues concerning access, coverage, and quality of care and have resulted in various legislative responses. In addition to numerous initiatives at the State government level, a number of Federal laws have been enacted to address these issues. The Health Insurance Portability and Accountability Act of 1996, the Newborns and Mothers Health Protection Act of 1996, and the Mental Health Parity Act of 1996 are recent examples. In addition, on September 5, 1996, President Clinton signed Executive Order 13017 establishing the Advisory Commission on Consumer Protection and Quality in the Health Care Industry. More recently, the Balanced Budget Act of 1997 (P.L. 105-33) contains a number of provisions relating to managed care in connection with the Medicare and Medicaid programs.

One of the most important changes to occur has been the growth of managed health care delivery systems.\1\ These arrangements adopt various measures to control costs and increase efficiency. For example, they may impose limits or conditions on an individual's choice of physicians and often require prior approval before an individual can obtain, or obtain reimbursement for, hospital care or medical services provided by a specialist. Both fee-for-service and health maintenance organizations (HMOs), as well as preferred provider and other types of delivery systems, may rely on managed care measures. As a result of the prevalence of managed care measures, fair and expeditious resolution of benefits disputes has become an increasingly important issue. Managed care measures magnify the significance of the procedures that surround the decision whether medical services will be made available to a participant or beneficiary, and suggest that the Department should consider whether its current regulatory minimum standards for such procedures are sufficient to ensure that decisions on the availability of medical care are made in a manner that adequately protects the interests of the individual seeking benefits.

\1\ As used in this document, the term "managed care delivery systems" includes any measures taken by medical practitioners, insurers, or group health plans to control costs by limiting access to medical services.
At the same time, technological advances in business communications in the last twenty years facilitate more rapid communications and decision-making by plans and participants. The Department's regulation may no longer reflect current plan practices with respect to these aspects of filing and reviewing benefit claims. The Department seeks information about current practices in this area. Along the same lines, market practices such as accreditation by various professional and consumer groups have become important private regulatory forces in the managed care arena. Publication of model acts, such as the Utilization Review Model Act and the Health Carrier Grievance Procedure Model Act developed by the National Association of Insurance Commissioners (NAIC), reflect the importance of time-sensitive review procedures. The NAIC model acts have served as the basis for State legislation to provide procedural protections, including expedited review of claims, to individuals who receive medical benefits through health insurance contracts that incorporate managed care arrangements.

The Department is not alone in its concern for timely resolution of requests for medical treatment from group health plans. The Health Care Financing Administration (HCFA) has recently published a final regulation establishing an expedited process in certain circumstances for Medicare beneficiaries enrolled in managed care entities such as health maintenance organizations.\2\ The HCFA regulation requires that managed care entities establish an expedited review process in situations where the time required for [[Page 47263]] the standard review process could seriously jeopardize the life or health of the Medicare beneficiary or the beneficiary's ability to regain maximum function. The rule also provides that a decision to discontinue services that are currently being provided may also be subject to the expedited review process. In the preamble to the regulation, HCFA indicates that it has drawn on the NAIC model grievance act in developing the provisions of the review procedure. As discussed below in section C., Issues Under Consideration, the Department believes that the HCFA regulation and the NAIC model acts may serve as the basis for considering whether, and in what respects, the minimum standards set forth in the ERISA benefit claims procedure regulation should be amended.

\2\ This regulation was published as a final rule with a request for comments, 62 FR 23368 (April 30, 1997). The regulation amends a prior regulation codified at 42 CFR Sec. 417.600-620.

B. Current ERISA Regulation

Section 503 of ERISA, 29 U.S.C. Sec. 1133, provides that, in accordance with regulations promulgated by the Secretary of Labor (the Secretary), each employee benefit plan must provide "adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied." The notice must set forth the specific reasons for the denial and must be written in a manner calculated to be understood by the claimant. Each plan must also afford "a reasonable opportunity" for any participant or beneficiary whose claim has been denied to obtain "a full and fair review" of the denial by the appropriate named fiduciary of the plan."

The Department has issued a regulation pursuant to the above authority that establishes "certain minimum requirements for employee benefit plan procedures pertaining to claims." 29 CFR Sec. 2560.503- 1(a). Generally speaking, the following requirements apply. The claims procedure of an employee benefit plan covered by ERISA (hereinafter referred to as an ERISA plan) must be described in the plan's summary plan description. The procedure must not contain any provision or be administered in any way that would unduly inhibit the initiation or processing of claims. Participants must be informed in writing and in a timely fashion of applicable time limits for appeals and responses.

More specifically, the regulation provides that claimants must be informed in writing "within a reasonable period of time" if a claim is partially or wholly denied. 29 CFR Sec. 2560.503-1(e)(1). For this purpose, the regulation defines a period of time in excess of 90 days after receipt of the claim as unreasonable, unless "special circumstances" require an extension of time for processing. In that case, an extension of an additional 90-day period is available provided that the claimant receives notice of the extension describing the special circumstances prior to the end of the original 90-day period. The notice of a denial of a claim for benefits must be written in a manner calculated to be understood by the claimant and must contain (1) specific reason(s) for the denial, (2) reference to plan provisions on which the denial is based, (3) a description of any additional material necessary to perfect the claim and why it is necessary, and (4) information about how to submit the claim for review. If the notice is not provided in this manner, the claim for benefits is deemed to be denied.

The regulation also requires that every plan establish a review procedure providing a "reasonable opportunity" to appeal denied claims to an appropriate named fiduciary or designee. The appeal must afford "a full and fair review of the claim and its denial." 29 CFR Sec. 2560.503-1(g)(1). Minimum requirements for the review procedure include the right to request a review by a written application from the claimant, the right to review pertinent documents, and the right to submit issues and comments in writing. A claimant must have at least 60 days after receipt of the denial in which to request a review. A decision on the review must ordinarily be made within 60 days after the request for a review, unless special circumstances (such as the need to hold a hearing if the plan provides for a hearing) require an extension of time. However, the decision may not be delayed more than 120 days after receipt of the request for review. Special rules provide longer periods of time for plans whose named fiduciary is a group, such as a board of trustees, that holds regularly scheduled meetings at least quarterly. In that case, the review decision must be made by the scheduled time of the next meeting, unless the request for review is received within 30 days prior to that scheduled meeting, in which case the decision is due no later than the date of the group's second successive meeting, with a possible extension to the date of the third meeting if there are special circumstances. 29 CFR Sec. 2560.503- 1(h)(1)(ii). As with the initial denial, the decision on review must be in writing, include specific reasons for the decision and references to plan provisions on which the decision is based, and be written in a manner calculated to be understood by the claimant. If no review decision is provided within the time frames specified, the claim is deemed denied.

Under the regulations, plans established pursuant to collective bargaining agreements are not treated differently from other plans, except that they are deemed to comply with the regulatory standards for reviewing denied claims if the collective bargaining agreement pursuant to which the plan is established either contains or incorporates by reference provisions concerning the filing and disposition of benefit claims and a grievance and arbitration procedure for handling denied claims. Participants in plans under which benefits are provided or administered by State-regulated insurance organizations may file claims for benefits, obtain decisions and obtain review of denials through those organizations, but the minimum standards otherwise remain the same. The regulation excludes from its scope employee benefit plans providing only apprenticeship training benefits.

Claims procedures with respect to benefits provided through a qualified HMO, as defined in the Public Health Service Act, 42 U.S.C. Sec. 300e-9(d), are deemed to satisfy the minimum ERISA regulatory requirements if they satisfy section 1301 of the Public Health Service Act (42 U.S.C. Sec. 300e) and the regulations thereunder. 29 CFR Sec. 2560.503-1(j). The regulation addressing claims procedures for federally qualified HMOs is codified in 42 CFR Sec. 417.124.\3\ The pertinent provisions of the Public Health Service Act regulations require that each qualified HMO prepare a written description of, among other things, the procedures to be followed in obtaining benefits, a description of circumstances under which benefits may be denied, and grievance procedures. 42 CFR Sec. 417.124(b). Grievance procedures must be "meaningful" and must ensure that complaints are transmitted in a timely manner to appropriate decision makers who have authority to take corrective action. Appropriate action in response to grievances is to be taken promptly, with notice to concerned parties of the [[Page 47264]] results of the HMO's investigation. 42 CFR Sec. 417.124(g).

\3\ 42 CFR Sec. 417.124 does not relate to the requirements HMOs must meet in order to maintain a contract with the Health Care Financing Administration through which health care benefits are provided to Medicare beneficiaries. Section 1876 of title XVIII of the Social Security Act (42 U.S.C. 1395mm) lists those requirements. Regulations implementing the benefit request and benefit review rights of Medicare beneficiaries who participate in managed care delivery systems are found at 42 CFR Sec. 417.600 through Sec. 417.638. This RFI does not involve benefit review procedures for Medicare beneficiaries.

C. Issues Under Consideration

Questions have been raised with respect to whether the minimum standards provided in the Department's regulation adequately assure timely and appropriate recourse for employee benefit plan participants and beneficiaries making requests for benefits, or seeking review of benefit claims that have been denied in whole or in part. Although issues that have arisen in the context of group health plans have provided the primary impetus to these questions, section 503 of ERISA and the Department's regulation at 29 CFR Sec. 2560.503-1 apply to both employee welfare benefit plans (the category that includes group health plans) and employee pension benefit plans. The Department is seeking comments concerning the nature of existing benefit determination and review practices of plans and whether the Department's current regulation is adequate to protect the interests of both pension and welfare benefit plan participants and beneficiaries.

The Department is aware that, under current practices, entities that are involved in providing health care employ a variety of terms to describe the process by which an individual eligible for health care services seeks benefits or seeks review of a decision to limit or deny health care treatment or services. Even where the procedural steps are similar, entities may use different terminology for the same procedural step.\4\ As part of this RFI, the Department is seeking information as to whether and how it should address the diversity in terminology that is used to describe the procedural protections afforded individuals.

\4\ The Public Health Service Act regulations applicable to federally qualified HMOs require written descriptions of circumstances under which benefits may be denied and written grievance procedures. 42 CFR Sec. 417.124. Regulations promulgated by the Office of Personnel Management relating to both fee-for- service and managed care providers participating in the Federal Employees Health Benefits Plan (FEHBP) use terms such as filing claims for payment or services, reconsideration of claims that have been denied, and review of decisions to deny claims. 5 CFR Sec. 890.105. HCFA's Medicare regulations provide an appeals procedure for Medicare beneficiaries contesting an ?organization determination," which, generally speaking, is a decision by a health care provider to deny, terminate, or not pay for medical services that the beneficiary believes are covered under the plan. A "reconsidered determination" is the result of a review of the organization determination. The NAIC Health Carrier Grievance Model Act (October 1966) uses the term "adverse determination" for a carrier's decision that medical services will be denied, reduced or terminated. The Model Act provides for an appeals procedure to review an adverse determination. The term grievance is defined as a written complaint about the availability or quality of health care services, including, but not limited to adverse determinations. State insurance laws and regulations dealing with health care insurance carriers display a similar variety of terms.
In order to assist interested parties in responding, this document contains a list of specific questions designed to elicit information that the Department believes would be especially helpful in determining whether and how to develop a notice of proposed rulemaking. The Department requests that, in addressing the specific questions in this document, responses refer to the question number as listed in the RFI. The questions listed by the Department may not address all issues relevant to claims procedures. The Department further invites interested parties to submit comments on other aspects of the claims process that they believe are pertinent to the Department's consideration of claims procedures in employee benefit plans covered by title I of ERISA.

In the individual questions below, the following terms have specific meanings. A "claim" is a request for a plan benefit by a participant or beneficiary. A "claimant" is a participant or beneficiary who has or intends to file a claim. A "claims procedure" is the set of rules or requirements by which a claim is filed and resolved under the plan. A "review" or "appeal is the next level or levels of claims resolution under the plan after the initial decision occurs or is deemed to have occurred.

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