Health reform rule regulates insurance appeals process

Meanwhile, legislators from both political parties work to amend the new reform law.

By Doug Trapp — Posted Aug. 2, 2010

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The Depts. of Health and Human Services, Labor, and Treasury announced on July 22 an interim final rule creating a new federal appeals process for people who unsuccessfully have challenged their health plans' coverage denials or rescissions. The rule applies only to health plans created or significantly amended after Sept. 22, which HHS estimated initially would cover 41 million people.

"This is a powerful new tool in the hands of regular people that will empower them if we see continued rascality from the insurance companies," said Rep. John Dingell (D, Mich.).

Many health plans have internal appeals, but the process may not be swift or objective, HHS said. The rule standardizes internal appeals and offers a new external appeal for people whose initial challenge was denied.

Forty-four states offer external appeals of health plan decisions, but these state laws vary widely as well, according to HHS. The rule requires health plans to explain their decisions in detail, notify subscribers about their rights to appeal and expedite appeals of urgent care. External appeals will be judged by an independent third party appointed by the state and will be paid for by health plans.

America's Health Insurance Plans is reviewing the rule to compare it with existing state appeals standards, said AHIP spokesman Robert Zirkelbach. "Health plans have a long track record of supporting third-party review to give patients greater peace of mind about their health care coverage."

The law encourages states to adopt the rule's external appeals standards by July 1, 2011. If they do not, subscribers will be protected by the federal standards. The federal rule also will apply to self-insured plans.

Public option returns

Meanwhile, House Democrats have reintroduced a federally funded health insurance option. A version of this public option was in the House-adopted health reform bill, but it was not included in the final overhaul.

The new bill would make the federal health plan available in forthcoming health insurance exchanges in 2014. It would reduce the net federal deficit by $53 billion by 2019, according to a July 22 letter from Congressional Budget Office Director Douglas Elmendorf, PhD, to Rep. Pete Stark (D, Calif.), chair of the House Ways and Means health subcommittee. Rep. Lynn Woolsey (D, Calif.) introduced the legislation on July 22.

The bill would reduce the deficit by collecting more taxes due to declining employer-sponsored coverage rates, according to the CBO. It also would reduce subsidies for private plans in the health insurance exchanges.

The CBO estimated that the public plan's premiums would be 5% to 7% lower than premiums for private plans in health insurance exchanges. The difference is due in part to the public plan's lower administrative costs and pay rates compared with private plans.

"The result is more competition, better coverage and lower premiums for millions of Americans," said Stark, one of the bill's co-sponsors.

However, the public plan would not decrease the net number of uninsured. About 750,000 more people would get individual health coverage due to the public option, but a similar number no longer would be covered under employer-sponsored plans. About 13 million of the 38 million obtaining coverage in the exchanges would choose the public plan, the CBO concluded.

GOP targets tax reporting provision

Republicans, meanwhile, want to repeal a requirement for businesses to file a form 1099 with the Internal Revenue Service each time the business spends $600 or more on a single vendor. Businesses already file the form for some services, but the health reform law seeks to increase tax collections by expanding it to all purchases starting Jan. 1, 2012.

Sen. Mike Johanns (R, Neb.) -- sponsor of a bill to repeal the reporting requirement -- said the Obama administration talks about helping small businesses but claimed its actions do not follow the rhetoric. "Washington is saying one thing and doing the absolute opposite," he said at a July 26 U.S. Chamber of Commerce event on the issue in Washington, D.C.

Adding the 1099 reporting requirement will increase businesses' administrative work significantly, especially for small firms, Johanns said.

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New rules for health plan appeals

Millions of health plan subscribers will have standardized internal and external appeals processes to challenge health plans' decisions, according to an interim final rule unveiled July 22 by the Depts. of Health and Human Services, Labor, and Treasury. The rule will:

  • Require subscribers first to launch an internal appeal of any disputed health plan coverage denials, rescissions and other decisions.
  • Provide a standard external appeals process with an "independent decision-maker" to subscribers whose internal appeals have been denied.
  • Encourage states to adopt the federal external appeals standards by July 1, 2011. The federal government will provide an appeals process for residents of states that do not offer one.
  • Require health plans to pay the cost of external appeals, with subscribers paying nominal fees. Insurers also will be required to expedite appeals for urgent claims, such as those for emergency care.
  • Apply to plans created or significantly changed after Sept. 22, which will cover an estimated 41 million people initially and 88 million people by 2013.

Source: Dept. of Health and Human Services

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