43330 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 54 and 602 

[TD 9494] 

RIN 1545–BJ63 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB45 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

[OCIIO–9993–IFC] 

45 CFR Part 147 

RIN 0991–AB70 

Interim Final Rules for Group Health 

Plans and Health Insurance Issuers 

Relating to Internal Claims and 

Appeals and External Review 

Processes Under the Patient 

Protection and Affordable Care Act 

AGENCY: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Office of 

Consumer Information and Insurance 

Oversight, Department of Health and 

Human Services. 

ACTION: Interim final rules with request 

for comments. 

SUMMARY: This document contains 

interim final regulations implementing 

the requirements regarding internal 

claims and appeals and external review 

processes for group health plans and 

health insurance coverage in the group 

and individual markets under the 

Patient Protection and Affordable Care 

Act. The regulations will generally 

affect health insurance issuers; group 

health plans; and participants, 

beneficiaries, and enrollees in health 

insurance coverage and in group health 

plans. The regulations provide plans 

and issuers with guidance necessary to 

comply with the law. 

DATES: Effective date. These interim 

final regulations are effective on 

September 21, 2010. 

Comment date. Comments are due on 

or before September 21, 2010. 

Applicability dates. These interim 

final regulations generally apply to 

group health plans and group health 

insurance issuers for plan years 

beginning on or after September 23, 

2010. These interim final regulations 

generally apply to individual health 

insurance issuers for policy years 

beginning on or after September 23, 

2010. 

ADDRESSES: Written comments may be 

submitted to any of the addresses 

specified below. Any comment that is 

submitted to any Department will be 

shared with the other Departments. 

Please do not submit duplicates. 

All comments will be made available 

to the public. Warning: Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments are 

posted on the Internet exactly as 

received, and can be retrieved by most 

Internet search engines. No deletions, 

modifications, or redactions will be 

made to the comments received, as they 

are public records. Comments may be 

submitted anonymously. 

Department of Labor. Comments to 

the Department of Labor, identified by 

RIN 1210–AB45, by one of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: EOHPSCA2719.EBSA@dol.gov. 

• Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210, 

Attention: RIN 1210—AB45. 

Comments received by the 

Department of Labor will be posted 

without change to 

http://www.regulations.gov and http:// 

www.dol.gov/ebsa, and available for 

public inspection at the Public 

Disclosure Room, N–1513, Employee 

Benefits Security Administration, 200 

Constitution Avenue, NW., Washington, 

DC 20210. 

Department of Health and Human 

Services. In commenting, please refer to 

file code OCIIO–9993–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address only: Office of Consumer 

Information and Insurance Oversight, 

Department of Health and Human 

Services, Attention: OCIIO–9993–IFC, 

P.O. Box 8016, Baltimore, MD 21244– 

1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Office of 

Consumer Information and Insurance 

Oversight, Department of Health and 

Human Services, Attention: OCIIO– 

9993–IFC, Mail Stop C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Office of Consumer Information and 

Insurance Oversight, Department of 

Health and Human Services, Room 

445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the OCIIO drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244– 

1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this document. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43331 

1The term ‘‘group health plan’’ is used in title 

XXVII of the PHS Act, part 7 of ERISA, and chapter 

100 of the Code, and is distinct from the term 

‘‘health plan,’’ as used in other provisions of title I 

of the Affordable Care Act. The term ‘‘health plan’’ 

does not include self-insured group health plans. 

2Code section 9815 incorporates the preemption 

provisions of PHS Act section 2724. Prior to the 

Affordable Care Act, there were no express 

preemption provisions in chapter 100 of the Code. 

a comment. We post all comments 

received before the close of the 

comment period on the following 

website as soon as possible after they 

have been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately three weeks after 

publication of a document, at the 

headquarters of the Centers for Medicare 

& Medicaid Services, 7500 Security 

Boulevard, Baltimore, Maryland 21244, 

Monday through Friday of each week 

from 8:30 a.m. to 4 p.m. EST. To 

schedule an appointment to view public 

comments, phone 1–800–743–3951. 

Internal Revenue Service. Comments 

to the IRS, identified by REG–125592– 

10, by one of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: CC:PA:LPD:PR (REG–125592– 

10), Room 5205, Internal Revenue 

Service, P.O. Box 7604, Ben Franklin 

Station, Washington, DC 20044. 

• Hand or courier delivery: Monday 

through Friday between the hours of 8 

a.m. and 4 p.m. to: CC:PA:LPD:PR 

(REG–125592–10), Courier’s Desk, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington 

DC 20224. 

All submissions to the IRS will be 

open to public inspection and copying 

in Room 1621, 1111 Constitution 

Avenue, NW., Washington, DC from 9 

a.m. to 4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Beth Baum, Employee 

Benefits Security Administration, 

Department of Labor, at (202) 693–8335; 

Karen Levin, Internal Revenue Service, 

Department of the Treasury, at (202) 

622–6080; Ellen Kuhn, Office of 

Consumer Information and Insurance 

Oversight, Department of Health and 

Human Services, at (301) 492–4100. 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws may call the EBSA 

Toll-Free Hotline at 1–866–444–EBSA 

(3272) or visit the Department of Labor’s 

Web site (http://www.dol.gov/ebsa). In 

addition, information from HHS on 

private health insurance for consumers 

can be found on the Centers for 

Medicare & Medicaid Services (CMS) 

Web site (http://www.cms.hhs.gov/ 

HealthInsReformforConsume/ 

01_Overview.asp) and information on 

health reform can be found at http:// 

www.healthreform.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Patient Protection and Affordable 

Care Act (the Affordable Care Act), 

Public Law 111–148, was enacted on 

March 23, 2010; the Health Care and 

Education Reconciliation Act (the 

Reconciliation Act), Public Law 111– 

152, was enacted on March 30, 2010. 

The Affordable Care Act and the 

Reconciliation Act reorganize, amend, 

and add to the provisions of part A of 

title XXVII of the Public Health Service 

Act (PHS Act) relating to group health 

plans and health insurance issuers in 

the group and individual markets. The 

term ‘‘group health plan’’ includes both 

insured and self-insured group health 

plans.1 The Affordable Care Act adds 

section 715(a)(1) to the Employee 

Retirement Income Security Act (ERISA) 

and section 9815(a)(1) to the Internal 

Revenue Code (the Code) to incorporate 

the provisions of part A of title XXVII 

of the PHS Act into ERISA and the 

Code, and make them applicable to 

group health plans, and health 

insurance issuers providing health 

insurance coverage in connection with 

group health plans. The PHS Act 

sections incorporated by this reference 

are sections 2701 through 2728. PHS 

Act sections 2701 through 2719A are 

substantially new, though they 

incorporate some provisions of prior 

law. PHS Act sections 2722 through 

2728 are sections of prior law 

renumbered, with some, mostly minor, 

changes. 

Subtitles A and C of title I of the 

Affordable Care Act amend the 

requirements of title XXVII of the PHS 

Act (changes to which are incorporated 

into ERISA section 715). The 

preemption provisions of ERISA section 

731 and PHS Act section 2724 2

(implemented in 29 CFR 2590.731(a) 

and 45 CFR 146.143(a)) apply so that the 

requirements of part 7 of ERISA and 

title XXVII of the PHS Act, as amended 

by the Affordable Care Act, are not to be 

‘‘construed to supersede any provision 

of State law which establishes, 

implements, or continues in effect any 

standard or requirement solely relating 

to health insurance issuers in 

connection with group or individual 

health insurance coverage except to the 

extent that such standard or 

requirement prevents the application of 

a requirement’’ of the Affordable Care 

Act. Accordingly, State laws that 

impose on health insurance issuers 

requirements that are stricter than those 

imposed by the Affordable Care Act will 

not be superseded by the Affordable 

Care Act. 

The Departments of Health and 

Human Services, Labor, and the 

Treasury (the Departments) are issuing 

regulations in several phases 

implementing the revised PHS Act 

sections 2701 through 2719A and 

related provisions of the Affordable Care 

Act. The first phase in this series was 

the publication of a Request for 

Information relating to the medical loss 

ratio provisions of PHS Act section 

2718, published in the Federal Register 

on April 14, 2010 (75 FR 19297). The 

second phase was interim final 

regulations implementing PHS Act 

section 2714 (requiring dependent 

coverage of children to age 26), 

published in the Federal Register on 

May 13, 2010 (75 FR 27122). The third 

phase was interim final regulations 

implementing section 1251 of the 

Affordable Care Act (relating to status as 

a grandfathered health plan), published 

in the Federal Register on June 17, 2010 

(75 FR 34538). The fourth phase was 

interim final regulations implementing 

PHS Act sections 2704 (prohibiting 

preexisting condition exclusions), 2711 

(regarding lifetime and annual dollar 

limits on benefits), 2712 (regarding 

restrictions on rescissions), and 2719A 

(regarding patient protections), 

published in the Federal Register on 

June 28, 2010 (75 FR 37188). The fifth 

phase was interim final regulations 

implementing PHS Act section 2713 

(regarding preventive health services), 

published in the Federal Register on 

July 19, 2010 (75 FR 41726). These 

interim final regulations are being 

published to implement PHS Act 

section 2719, relating to internal claims 

and appeals and external review 

processes. PHS Act section 2719 is 

generally effective for plan years (in the 

individual market, policy years) 

beginning on or after September 23, 

2010, which is six months after the 

March 23, 2010 date of enactment of the 

Affordable Care Act. The 

implementation of other provisions of 

PHS Act sections 2701 through 2719A 

will be addressed in future regulations. 

mstockstill on DSKH9S0YB1PROD with RULES2

43332 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

3See the Department of Labor’s Frequently Asked 

Questions (FAQs) About the Benefit Claims 

Procedure Regulations, FAQ C–12, at http:// 

www.dol.gov/ebsa. 

II. Overview of the Regulations: PHS 

Act Section 2719, Internal Claims and 

Appeals and External Review Processes 

(26 CFR 54.9815–2719T, 29 CFR 

2590.715–27109, 45 CFR 147.136) 

a. Scope and Definitions 

These interim final regulations set 

forth rules implementing PHS Act 

section 2719 for internal claims and 

appeals and external review processes 

for group health plans and health 

insurance coverage; these requirements 

do not apply to grandfathered health 

plans under section 1251 of the 

Affordable Care Act. With respect to 

internal claims and appeals processes 

for group health coverage, PHS Act 

section 2719 provides that plans and 

issuers must initially incorporate the 

internal claims and appeals processes 

set forth in 29 CFR 2560.503–1 and 

update such processes in accordance 

with standards established by the 

Secretary of Labor. Similarly, with 

respect to internal claims and appeals 

processes for individual health 

insurance coverage, issuers must 

initially incorporate the internal claims 

and appeals processes set forth in 

applicable State law and update such 

processes in accordance with standards 

established by the Secretary of Health 

and Human Services. These interim 

final regulations provide such updated 

standards for compliance. The 

Department of Labor is also considering 

further updates to 29 CFR 2560.503–1 

and expects to issue future regulations 

that will propose additional, more 

comprehensive updates to the standards 

for plan internal claims and appeals 

processes. 

With respect to external review, PHS 

Act section 2719 provides a system for 

applicability of either a State external 

review process or a Federal external 

review process. These regulations 

provide rules for determining which 

process applies, as well as guidance 

regarding each process. Consistent with 

the statutory structure, these interim 

final regulations adopt an approach that 

builds on applicable State external 

review processes. For plans and issuers 

subject to existing State external review 

processes, the regulations include a 

transition period until July 1, 2011. 

During this period, the State process 

applies and the Departments will work 

individually with States on an ongoing 

basis to assist in making any necessary 

changes to incorporate additional 

consumer protections so that the State 

process will continue to apply after the 

end of the transition period. For plans 

and issuers not subject to an existing 

State external review process (including 

self-insured plans), a Federal process 

will apply for plan years (in the 

individual market, policy years) 

beginning on or after September 23, 

2010. The Departments will be issuing 

more guidance in the near future on the 

Federal external review process. 

These interim final regulations also 

set forth rules related to the form and 

manner of providing notices in 

connection with internal claims and 

appeals and external review processes. 

The regulations also reiterate and 

preserve the Departments’ authority, 

pursuant to PHS Act section 2719(c), to 

deem external review processes in 

operation on March 23, 2010, to be in 

compliance with the requirements of 

PHS Act section 2719, either 

permanently or temporarily. 

Paragraph (a)(2) of 26 CFR 54.9815– 

2719T, 29 CFR 2590.715–2719, 45 CFR 

147.136 sets forth definitions relevant 

for these interim final regulations, 

including the definitions of an adverse 

benefit determination and a final 

internal adverse benefit determination. 

An adverse benefit determination is 

defined by incorporating the definition 

under the Department of Labor’s 

regulations governing claims procedures 

at 29 CFR 2560.503–1 (DOL claims 

procedure regulation), and also includes 

a rescission of coverage. A final internal 

adverse benefit determination is the 

upholding of an adverse benefit 

determination at the conclusion of the 

internal appeals process or an adverse 

benefit determination with respect to 

which the internal appeals process has 

been deemed exhausted. 

b. Internal Claims and Appeals Process 

Paragraph (b) of 26 CFR 54.9815– 

2719T, 29 CFR 2590.715–2719, 45 CFR 

147.136 requires group health plans and 

health insurance issuers offering group 

or individual health insurance coverage 

to implement an effective internal 

claims and appeals process. The 

regulations set forth separate rules for 

group health coverage and individual 

health insurance coverage. 

1. Group Health Plans and Health 

Insurance Issuers Offering Group Health 

Insurance Coverage 

A group health plan and a health 

insurance issuer offering group health 

insurance coverage must comply with 

all the requirements applicable to group 

health plans under the DOL claims 

procedure regulation. Therefore, for 

purposes of compliance with these 

interim final regulations, a health 

insurance issuer offering health 

insurance coverage in connection with a 

group health plan is subject to the DOL 

claims procedure regulation to the same 

extent as if it were a group health plan. 

These interim final regulations also 

set forth six new requirements in 

addition to those in the DOL claims 

procedure regulation. 

First, for purposes of these interim 

final regulations, the definition of an 

adverse benefit determination is broader 

than the definition in the DOL claims 

procedure regulation, in that an adverse 

benefit determination for purposes of 

these interim final regulations also 

includes a rescission of coverage. By 

referencing the DOL claims procedure 

regulation, an adverse benefit 

determination eligible for internal 

claims and appeals processes under 

these interim final regulations includes 

a denial, reduction, or termination of, or 

a failure to provide or make a payment 

(in whole or in part) for a benefit, 

including any such denial, reduction, 

termination, or failure to provide or 

make a payment that is based on: 

• A determination of an individual’s 

eligibility to participate in a plan or 

health insurance coverage; 

• A determination that a benefit is not 

a covered benefit; 

• The imposition of a preexisting 

condition exclusion, source-of-injury 

exclusion, network exclusion, or other 

limitation on otherwise covered 

benefits; or 

• A determination that a benefit is 

experimental, investigational, or not 

medically necessary or appropriate. 

A denial, reduction, or termination of, 

or a failure to provide or make a 

payment (in whole or in part) for a 

benefit can include both pre-service 

claims (for example, a claim resulting 

from the application of any utilization 

review), as well as post-service claims. 

Failure to make a payment in whole or 

in part includes any instance where a 

plan pays less than the total amount of 

expenses submitted with regard to a 

claim, including a denial of part of the 

claim due to the terms of a plan or 

health insurance coverage regarding 

copayments, deductibles, or other costsharing requirements.3 Under these 

interim final regulations, an adverse 

benefit determination also includes any 

rescission of coverage as defined in the 

regulations restricting rescissions (26 

CFR 54.9815–2712T(a)(2), 29 CFR 

2590.715–2712(a)(2), and 45 CFR 

147.128(a)(2)), whether or not there is 

an adverse effect on any particular 

benefit at that time. The regulations 

restricting rescissions generally define a 

rescission as a cancellation or 

discontinuance of coverage that has 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43333 

4These regulations generally provide that a plan 

or issuer must not rescind coverage with respect to 

an individual once the individual is covered, except 

in the case of an act, practice, or omission that 

constitutes fraud, or an intentional 

misrepresentation of material fact, as prohibited by 

the terms of the plan or coverage. 

5Under the DOL claims procedure regulation, a 

‘‘claim involving urgent care’’ is a claim for medical 

care or treatment with respect to which the 

application of the time periods for making nonurgent care determinations could seriously 

jeopardize the life or health of the claimant or the 

ability of the claimant to regain maximum function; 

or, in the opinion of a physician with knowledge 

of the claimant’s medical condition, would subject 

the claimant to severe pain that cannot be 

adequately managed without the care or treatment 

that is the subject of the claim. 

6 In the case of a failure to provide sufficient 

information, under the DOL claims procedure 

regulation the claimant must be notified as soon as 

possible, but not later than 24 hours after receipt 

of the claim, of the specific information necessary 

to complete the claim. The claimant must be 

afforded a reasonable amount of time, taking into 

account the circumstances, but not less than 48 

hours, to provide the specified information. 

7This language underscores and is not 

inconsistent with the scope of the disclosure 

requirement under the existing Department of Labor 

claims procedure regulation. That is, the 

Department of Labor interprets 29 USC 1133 and 

the DOL claims procedure regulation as already 

requiring that plans provide claimants with new or 

additional evidence or rationales upon request and 

an opportunity to respond in certain circumstances. 

See Brief of amicus curiae Secretary of the United 

States Department of Labor, Midgett v. Washington 

Group International Long Term Disability Plan, 561 

F.3d 887 (8th Cir. 2009) (No.08–2523) (expressing 

disagreement with cases holding that there is no 

such requirement). 

8Paragraph (g) of the DOL claims procedure 

regulation requires that the notice must be written 

in a manner calculated to be understood by the 

claimant and generally must include any specific 

reasons for the adverse determination, reference to 

the specific provision on which the determination 

is based, a description of any additional 

information required to perfect the claim, and a 

description of the internal appeal process. 

Paragraph (i) of the DOL claims procedure 

regulation requires that the notice must also be 

provided in accordance with specified timeframes 

for urgent care claims, pre-service claims, and postservice claims. 

9The amount of the claim may not be knowable 

or available at the time, such as in a case of 

preauthorization, or there may be no specific claim, 

such as in a case of rescission. 10 ICD–9 and ICD–10 codes refer to the 

International Classification of Diseases, 9th revision 

and 10th revision, respectively. The DSM–IV codes 

refer to the Diagnostic and Statistical Manual of 

Mental Disorders, Fourth Edition. 11CPT refers to Current Procedural Terminology. 12CARC refers to Claim Adjustment Reason Code 

and RARC refers to Remittance Advice Remark 

Code. 

retroactive effect, except to the extent it 

is attributable to a failure to timely pay 

required premiums or contributions 

towards the cost of coverage. 

Rescissions of coverage must also 

comply with the requirements of the 

regulations restricting rescissions.4

Second, these interim final 

regulations provide that a plan or issuer 

must notify a claimant of a benefit 

determination (whether adverse or not) 

with respect to a claim involving urgent 

care (as defined in the DOL claims 

procedure regulation) 5 as soon as 

possible, taking into account the 

medical exigencies, but not later than 24 

hours after the receipt of the claim by 

the plan or health insurance coverage, 

unless the claimant fails to provide 

sufficient information to determine 

whether, or to what extent, benefits are 

covered or payable under the plan or 

health insurance coverage.6 This is a 

change from the requirements of the 

DOL claims procedure regulation, 

which generally requires a 

determination not later than 72 hours 

after receipt of the claim by a group 

health plan for urgent care claims. The 

Departments expect that electronic 

communication will enable faster 

decision-making today than in the year 

2000, when the final DOL claims 

procedure regulation was issued. 

Third, these interim final regulations 

provide additional criteria to ensure that 

a claimant receives a full and fair 

review. Specifically, in addition to 

complying with the requirements of the 

DOL claims procedure regulation, the 

plan or issuer must provide the 

claimant, free of charge, with any new 

or additional evidence considered, 

relied upon, or generated by the plan or 

issuer (or at the direction of the plan or 

issuer) in connection with the claim.7

Such evidence must be provided as 

soon as possible and sufficiently in 

advance of the date on which the notice 

of adverse benefit determination on 

review is required to be provided to give 

the claimant a reasonable opportunity to 

respond prior to that date. Additionally, 

before the plan or issuer can issue an 

adverse benefit determination on review 

based on a new or additional rationale, 

the claimant must be provided, free of 

charge, with the rationale. The rationale 

must be provided as soon as possible 

and sufficiently in advance of the date 

on which the notice of adverse benefit 

determination on review is required to 

be provided to give the claimant a 

reasonable opportunity to respond prior 

to that date. 

Fourth, these interim final regulations 

provide new criteria with respect to 

avoiding conflicts of interest. The plan 

or issuer must ensure that all claims and 

appeals are adjudicated in a manner 

designed to ensure the independence 

and impartiality of the persons involved 

in making the decision. Accordingly, 

decisions regarding hiring, 

compensation, termination, promotion, 

or other similar matters with respect to 

any individual (such as a claims 

adjudicator or medical expert) must not 

be made based upon the likelihood that 

the individual will support a denial of 

benefits. For example, a plan or issuer 

cannot provide bonuses based on the 

number of denials made by a claims 

adjudicator. Similarly, a plan or issuer 

cannot contract with a medical expert 

based on the expert’s reputation for 

outcomes in contested cases, rather than 

based on the expert’s professional 

qualifications. 

Fifth, these interim final regulations 

provide new standards regarding notice 

to enrollees. Specifically, the statute and 

these interim final regulations require a 

plan or issuer to provide notice to 

enrollees, in a culturally and 

linguistically appropriate manner 

(standards for which are described later 

in this preamble). Plans and issuers 

must comply with the requirements of 

paragraphs (g) and (j) of the DOL claims 

procedure regulation, which detail 

requirements regarding the issuance of a 

notice of adverse benefit 

determination.8 Moreover, for purposes 

of these interim final regulations, 

additional content requirements apply 

for these notices. A plan or issuer must 

ensure that any notice of adverse benefit 

determination or final internal adverse 

benefit determination includes 

information sufficient to identify the 

claim involved. This includes the date 

of service, the health care provider, and 

the claim amount (if applicable) 9, as 

well as the diagnosis code (such as an 

ICD–9 code, ICD–10 code, or DSM–IV 

code) 10, the treatment code (such as a 

CPT code) 11, and the corresponding 

meanings of these codes. A plan or 

issuer must also ensure that the reason 

or reasons for the adverse benefit 

determination or final internal adverse 

benefit determination includes the 

denial code (such as a CARC and 

RARC) 12 and its corresponding 

meaning. It must also include a 

description of the plan’s or issuer’s 

standard, if any, that was used in 

denying the claim (for example, if a plan 

applies a medical necessity standard in 

denying a claim, the notice must 

include a description of the medical 

necessity standard). In the case of a 

notice of final internal adverse benefit 

determination, this description must 

include a discussion of the decision. 

Additionally, the plan or issuer must 

provide a description of available 

internal appeals and external review 

processes, including information 

regarding how to initiate an appeal. 

Finally, the plan or issuer must disclose 

the availability of, and contact 

information for, any applicable office of 

health insurance consumer assistance or 

ombudsman established under PHS Act 

section 2793 to assist enrollees with the 

mstockstill on DSKH9S0YB1PROD with RULES2

43334 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

13The special rules in the DOL claims procedure 

regulation applicable only to multiemployer plans 

(generally defined in section 3(37) of ERISA as 

plans maintained pursuant to one or more 

collective bargaining agreements for the employees 

of two or more employers) do not apply to health 

insurance issuers in the individual market. 

14See 45 CFR 164.500 et seq. 

15These interim final regulations specify that the 

relevant NAIC Uniform Model Act is the version in 

place on the date these interim final regulations are 

published. If the NAIC Uniform Model Act is later 

modified, the Departments will review the changes 

and determine to what extent any additional 

requirements will be incorporated into the 

minimum standards for State external review 

processes by amending these regulations. This 

version of the NAIC Uniform Model Act is available 

at http://www.dol.gov/ebsa and http:// 

www.hhs.gov/ociio/. 

internal claims and appeals and external 

review processes. The Departments 

intend to issue model notices that could 

be used to satisfy all the notice 

requirements under these interim final 

regulations in the very near future. 

These notices will be made available at 

http://www.dol.gov/ebsa and http:// 

www.hhs.gov/ociio/. 

Sixth, these interim final regulations 

provide that, in the case of a plan or 

issuer that fails to strictly adhere to all 

the requirements of the internal claims 

and appeals process with respect to a 

claim, the claimant is deemed to have 

exhausted the internal claims and 

appeals process, regardless of whether 

the plan or issuer asserts that it 

substantially complied with these 

requirements or that any error it 

committed was de minimis. 

Accordingly, upon such a failure, the 

claimant may initiate an external review 

and pursue any available remedies 

under applicable law, such as judicial 

review. 

In addition to the six new 

requirements, the statute and these 

interim final regulations require a plan 

and issuer to provide continued 

coverage pending the outcome of an 

internal appeal. For this purpose, the 

plan or issuer must comply with the 

requirements of the DOL claims 

procedure regulation, which, as applied 

under these interim final regulations, 

generally prohibits a plan or issuer from 

reducing or terminating an ongoing 

course of treatment without providing 

advance notice and an opportunity for 

advance review. Additionally, 

individuals in urgent care situations and 

individuals receiving an ongoing course 

of treatment may be allowed to proceed 

with expedited external review at the 

same time as the internal appeals 

process, under either a State external 

review process or the Federal external 

review process, in accordance with the 

Uniform Health Carrier External Review 

Model Act promulgated by the National 

Association of Insurance Commissioners 

(NAIC Uniform Model Act). The 

provision of the NAIC Uniform Model 

Act requiring simultaneous internal 

appeals and external review is 

discussed later in this preamble. 

2. Health Insurance Issuers Offering 

Individual Health Insurance Coverage 

The statute requires the Secretary of 

Health and Human Services to set forth 

processes for internal claims and 

appeals in the individual market. Under 

these interim final regulations, the 

Secretary of Health and Human Services 

has determined that a health insurance 

issuer offering individual health 

insurance coverage must generally 

comply with all the requirements for the 

internal claims and appeals process that 

apply to group health coverage.13 The 

process and protections of the group 

health coverage standards are also 

pertinent to the individual health 

insurance market. Furthermore, many 

issuers in the individual market also 

provide coverage in the group market. 

To facilitate compliance, it is preferable 

to have similar processes in the group 

and individual markets. Accordingly, an 

individual health insurance issuer is 

subject to the DOL claims procedure 

regulation as if the issuer were a group 

health plan. Moreover, an individual 

health insurance issuer must also 

comply with the additional standards in 

these interim final regulations imposed 

on group health insurance coverage. 

To address certain relevant 

differences in the group and individual 

markets, health insurance issuers 

offering individual health insurance 

coverage must comply with three 

additional requirements. First, these 

interim final regulations expand the 

scope of the group health coverage 

internal claims and appeals process to 

cover initial eligibility determinations 

for individual health insurance 

coverage. This protection is important 

because eligibility determinations in the 

individual market are frequently based 

on the health status of the applicant, 

including preexisting conditions. With 

the prohibition against preexisting 

condition exclusions taking effect for 

policy years beginning on or after 

September 23, 2010 for children under 

19 and for all others for policy years 

beginning on or after January 1, 2014, 

applicants in the individual market 

should have the opportunity for a 

review of a denial of eligibility of 

coverage to determine whether the 

issuer is complying with the new 

provisions in making the determination. 

Second, although the DOL claims 

procedure regulation permits plans to 

have a second level of internal appeals, 

these interim final regulations require 

that health insurance issuers offering 

individual health insurance coverage 

have only one level of internal appeals. 

This allows the claimant to seek either 

external review or judicial review 

immediately after an adverse benefit 

determination is upheld in the first level 

of the internal appeals process. There is 

no need for a second level of an internal 

appeal in the individual market since 

the issuer conducts all levels of the 

internal appeal, unlike in the group 

market, where a third party 

administrator may conduct the first 

level of the internal appeal and the 

employer may conduct a second level of 

the internal appeal. Accordingly, after 

an issuer has reviewed an adverse 

benefit determination once, the claimant 

should be allowed to seek external 

review of the determination by an 

outside entity. 

Finally, these interim final regulations 

require health insurance issuers offering 

individual health insurance coverage to 

maintain records of all claims and 

notices associated with their internal 

claims and appeals processes. The 

records must be maintained for at least 

six years, which is the same 

requirement for group health plans 

under the ERISA recordkeeping 

requirements. An issuer must make 

such records available for examination 

upon request. Accordingly, a claimant 

or State or Federal agency official 

generally would be able to request and 

receive such documents free of charge. 

Other Federal and State law regarding 

disclosure of personally identifiable 

health information may apply, 

including the HIPAA privacy rule.14

c. State Standards for External Review 

The statute and these interim final 

regulations provide that plans and 

issuers must comply with either a State 

external review process or the Federal 

external review process. These interim 

final regulations provide a basis for 

determining when plans and issuers 

must comply with an applicable State 

external review process and when they 

must comply with the Federal external 

review process. 

For health insurance coverage, if a 

State external review process that 

applies to and is binding on an issuer 

includes, at a minimum, the consumer 

protections in the NAIC Uniform Model 

Act in place on July 23, 2010,15 then the 

issuer must comply with the applicable 

State external review process and not 

with the Federal external review 

process. In such a case, to the extent 

that benefits under a group health plan 

are provided through health insurance 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43335 

coverage, the issuer is required to satisfy 

the obligation to provide an external 

review process, so the plan itself is not 

required to comply with either the State 

external review process or the Federal 

external review process. The 

Departments encourage States to 

establish external review processes that 

meet the minimum consumer 

protections of the NAIC Uniform Model 

Act. The Departments prefer having 

States take the lead role in regulating 

health insurance issuers, with Federal 

enforcement only as a fallback measure. 

These interim final regulations do not 

preclude a State external review process 

from applying to and being binding on 

a self-insured group health plan under 

some circumstances. While the 

preemption provisions of ERISA 

ordinarily would prevent a State 

external review process from applying 

directly to an ERISA plan, ERISA 

preemption does not prevent a State 

external review process from applying 

to some self-insured plans, such as 

nonfederal governmental plans and 

church plans not covered by ERISA 

preemption, and multiple employer 

welfare arrangements, which can be 

subject to both ERISA and State 

insurance laws. A State external review 

process could apply to such plans if the 

process includes, at a minimum, the 

consumer protections in the NAIC 

Uniform Model Act. 

Under these interim final regulations, 

any plan or issuer not subject to a State 

external review process must comply 

with the Federal external review 

process. (However, to the extent a plan 

provides health insurance coverage that 

is subject to an applicable State external 

review process that provides the 

minimum consumer protections in the 

NAIC Uniform Model Act, the plan does 

not have to comply with the Federal 

external review process.) A plan or 

issuer is subject to the Federal external 

review process where the State external 

review process does not meet, at a 

minimum, the consumer protections in 

the NAIC Uniform Model Act, as well as 

where there is no applicable State 

external review process. 

For a State external review process to 

apply instead of the Federal external 

review process, the Affordable Care Act 

provides that the State external review 

process must include, at a minimum, 

the consumer protections of the NAIC 

Uniform Model Act. Accordingly, the 

Departments have determined that the 

following elements from the NAIC 

Uniform Model Act are the minimum 

consumer protections that must be 

included for a State external review 

process to apply. The State process 

must: 

• Provide for the external review of 

adverse benefit determinations (and 

final internal adverse benefit 

determinations) that are based on 

medical necessity, appropriateness, 

health care setting, level of care, or 

effectiveness of a covered benefit. 

• Require issuers to provide effective 

written notice to claimants of their 

rights in connection with an external 

review for an adverse benefit 

determination. 

• To the extent the State process 

requires exhaustion of an internal 

claims and appeals process, make 

exhaustion unnecessary if: the issuer 

has waived the exhaustion requirement, 

the claimant has exhausted (or is 

considered to have exhausted) the 

internal claims and appeals process 

under applicable law, or the claimant 

has applied for expedited external 

review at the same time as applying for 

an expedited internal appeal. 

• Provide that the issuer against 

which a request for external review is 

filed must pay the cost of an 

independent review organization (IRO) 

for conducting the external review. 

While having the issuer pay the cost of 

the IRO’s review is reflected in the 

NAIC Uniform Model Act, if the State 

pays this cost, the Departments would 

treat the State process as meeting this 

requirement; this alternative is just as 

protective to the consumer because the 

cost of the review is not imposed on the 

consumer. Notwithstanding this 

requirement that the issuer (or State) 

must pay the cost of the IRO’s review, 

the State process may require a nominal 

filing fee from the claimant requesting 

an external review. For this purpose, to 

be considered nominal, a filing fee must 

not exceed $25, it must be refunded to 

the claimant if the adverse benefit 

determination is reversed through 

external review, it must be waived if 

payment of the fee would impose an 

undue financial hardship, and the 

annual limit on filing fees for any 

claimant within a single year must not 

exceed $75. 

• Not impose a restriction on the 

minimum dollar amount of a claim for 

it to be eligible for external review (for 

example, a $500 minimum claims 

threshold). 

• Allow at least four months after the 

receipt of a notice of an adverse benefit 

determination or final internal adverse 

benefit determination for a request for 

an external review to be filed. 

• Provide that an IRO will be 

assigned on a random basis or another 

method of assignment that assures the 

independence and impartiality of the 

assignment process (for example, 

rotational assignment) by a State or 

independent entity, and in no event 

selected by the issuer, plan, or 

individual. 

• Provide for maintenance of a list of 

approved IROs qualified to conduct the 

review based on the nature of the health 

care service that is the subject of the 

review. The State process must provide 

for approval only of IROs that are 

accredited by a nationally recognized 

private accrediting organization. 

• Provide that any approved IRO has 

no conflicts of interest that will 

influence its independence. 

• Allow the claimant to submit to the 

IRO in writing additional information 

that the IRO must consider when 

conducting the external review and 

require that the claimant is notified of 

such right to do so. The process must 

also require that any additional 

information submitted by the claimant 

to the IRO must be forwarded to the 

issuer within one business day of 

receipt by the IRO. 

• Provide that the decision is binding 

on the plan or issuer, as well as the 

claimant, except to the extent that other 

remedies are available under State or 

Federal law. 

• Provide that, for standard external 

review, within no more than 45 days 

after the receipt of the request for 

external review by the IRO, the IRO 

must provide written notice to the 

issuer and the claimant of its decision 

to uphold or reverse the adverse benefit 

determination. 

• Provide for an expedited external 

review in certain circumstances and, in 

such cases, the State process must 

provide notice of the decision as 

expeditiously as possible, but not later 

than 72 hours after the receipt of the 

request. 

• Require that issuers include a 

description of the external review 

process in the summary plan 

description, policy, certificate, 

membership booklet, outline of 

coverage, or other evidence of coverage 

it provides to claimants, substantially 

similar to what is set forth in section 17 

of the NAIC Uniform Model Act. 

• Require that IROs maintain written 

records and make them available upon 

request to the State, substantially 

similar to what is set forth in section 15 

of the NAIC Uniform Model Act. 

• Follow procedures for external 

review of adverse benefit 

determinations involving experimental 

or investigational treatment, 

substantially similar to what is set forth 

in section 10 of the NAIC Uniform 

Model Act. 

The Departments invite comments on 

this list of minimum consumer 

mstockstill on DSKH9S0YB1PROD with RULES2

43336 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

protections and whether other elements 

of the NAIC Uniform Model Act should 

be included in the list. 

The Department of Health and Human 

Services will determine whether a State 

external review process meets these 

requirements (and thus whether issuers 

(and, if applicable, plans) subject to the 

State external review process must 

comply with the State external review 

process rather than the Federal external 

review process). A transition period will 

be provided, however, during which 

existing State external review processes 

may be treated as satisfying these 

requirements. 

Under PHS Act section 2719, if a State 

external review process does not 

provide the minimum consumer 

protections of the NAIC Uniform Model 

Act, health insurance issuers in the 

State must implement the Federal 

external review process. The 

Departments’ initial review of existing 

State external review processes 

indicates that not all State external 

review processes provide the minimum 

consumer protections of the NAIC 

Uniform Model Act. Under PHS Act 

section 2719(c), the Departments are 

provided with discretion to consider an 

external review process in place on the 

date of enactment of the Affordable Care 

Act to be in compliance with the 

external review requirement under 

section 2719(b) ‘‘as determined 

appropriate.’’ In order to allow States 

time to amend their laws to meet or go 

beyond the minimum consumer 

protections of the NAIC Uniform Model 

Act set forth in these interim final 

regulations, the Departments are using 

their authority under PHS Act section 

2719(c) to treat existing State external 

review processes as meeting the 

minimum standards during a transition 

period for plan years (in the individual 

market, policy years) beginning before 

July 1, 2011. 

Thus, for plan or policy years 

beginning before July 1, 2011, a health 

insurance issuer subject to an existing 

State external review process must 

comply with that State external review 

process and not the Federal external 

review process. The applicable external 

review process for plan or policy years 

beginning on or after July 1, 2011 

depends on the type of coverage and 

whether the State external review 

process has been determined by the 

Department of Health and Human 

Services to satisfy the minimum 

standards of the NAIC Uniform Model 

Act. 

The applicable external review 

process for any particular claim is based 

on the external review process 

applicable to the plan or issuer at the 

time a final internal adverse benefit 

determination (or, in the case of 

simultaneous internal appeals and 

external review, the adverse benefit 

determination) is provided. For this 

purpose, the final internal adverse 

benefit determination includes a 

deemed final internal adverse benefit 

determination in which the internal 

claims and appeals process is exhausted 

because of the failure by the plan or 

issuer to comply with the requirements 

of the internal claims and appeals 

process. Thus, for an issuer with a 

calendar year plan year in a State in 

which the State external review process 

fails to meet the minimum standards, 

external review of final internal adverse 

benefit determinations provided prior to 

the first day of the first calendar year on 

or after July 1, 2011 (that is, January 1, 

2012) must comply with the State 

external review process, while external 

reviews of final internal adverse benefit 

determinations provided on or after 

January 1, 2012 must meet the 

alternative Federal external review 

requirements. 

An additional provision of the NAIC 

Uniform Model Act not addressed in the 

interim final regulations is the required 

scope of an applicable State external 

review process. The NAIC Uniform 

Model Act applies to all issuers in a 

State. The Departments’ initial review of 

existing State external review processes 

indicates that some States do not apply 

the State external review process to all 

issuers in the State. For example, some 

State external review processes only 

apply to HMOs and do not apply to 

other types of health coverage. The 

Departments believe that State external 

review processes are more effective, and 

thus more protective, where the external 

review process is market-wide and 

available to all claimants with insured 

coverage. As States with external review 

processes decide whether to enact 

legislation amending their laws to 

provide the consumer protections that 

would satisfy the requirements of these 

interim final regulations, the 

Departments encourage States to 

establish external review processes that 

are available for all insured health 

coverage. This is consistent with the 

Departments general approach of having 

States take a lead role in providing 

consumer protections, with Federal 

enforcement only as a fallback measure. 

That said, these interim final 

regulations do not set a specific 

standard for availability of the State 

external review process that is 

considered to meet the minimum 

consumer protections of the NAIC 

Uniform Model Act. If it is determined 

that market-wide application of the 

State external review process is 

required, plans and issuers would be 

subject to the Federal external review 

process in States that do not apply the 

State external review process to all 

issuers in the State. Alternatively, if it 

is determined that universal availability 

is not required, those plans and issuers 

that are not subject to the State external 

review process would be, as are selfinsured plans, subject to the Federal 

external review process. The 

Departments seek comments whether 

the Federal external review process 

should apply to all plans and issuers in 

a State if the State external review 

process does not apply to all issuers in 

the State. After reviewing the 

comments, the Departments expect to 

issue future guidance addressing the 

issue. 

d. Federal External Review Process 

PHS Act section 2719(b)(2) requires 

the Departments to establish standards, 

‘‘through guidance,’’ governing an 

external review process that is similar to 

the State external appeals process that 

meets the standards in these regulations. 

These interim final regulations set forth 

the scope of claims eligible for review 

under the Federal external review 

process. Specifically, under the Federal 

external review process, the terms 

‘‘adverse benefit determination’’ and 

‘‘final internal adverse benefit 

determination’’ are defined the same as 

they are for purposes of internal claims 

and appeals (and, thus, include 

rescissions of coverage). However, an 

adverse benefit determination or final 

internal adverse benefit determination 

that relates to a participant’s or 

beneficiary’s failure to meet the 

requirements for eligibility under the 

terms of a group health plan (i.e., 

worker classification and similar issues) 

is not within the scope of the Federal 

external review process. 

These interim final regulations set 

forth the standards that would apply to 

claimants, plans, and issuers under this 

Federal external review process, and the 

substantive standards that would be 

applied under this process. They also 

reflect the statutory requirement that the 

process established through guidance 

from the Departments be similar to a 

State external review process that 

complies with the standards in these 

regulations. They also provide that the 

Federal external review process, like the 

State external review process, will 

provide for expedited external review 

and additional consumer protections 

with respect to external review for 

claims involving experimental or 

investigational treatment. The 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43337 

16For internal claims involving urgent care (for 

which the claim is generally made by a health care 

provider), where paragraph (g) of the DOL claims 

procedure regulation permits an initial oral notice 

of determination must be made within 24 hours and 

follow-up in written or electronic notification 

within 3 days of the oral notification, it may not be 

reasonable, practicable, or appropriate to provide 

notice in a non-English language within 24 hours. 

In such situations, the requirement to provide 

notice in a culturally and linguistically appropriate 

manner is satisfied if the initial notice is provided 

in English and the follow-up notice is provided in 

the appropriate non-English language. 

17The county-by-county approach is generally 

adapted from the approach used under the 

Medicare Advantage program. 

Departments will address in subregulatory guidance how nongrandfathered self-insured group health 

plans that currently maintain an 

internal appeals process that otherwise 

meets the Federal external review 

standards may comply or be brought 

into compliance with the requirements 

of the new Federal external review 

process. 

e. Culturally and Linguistically 

Appropriate 

The statute and these interim final 

regulations require that notices of 

available internal claims and appeals 

and external review processes be 

provided in a culturally and 

linguistically appropriate manner. Plans 

and issuers are considered to provide 

relevant notices in a culturally and 

linguistically appropriate manner if 

notices are provided in a non-English 

language as described these interim 

final regulations.16 Under these interim 

final regulations, the requirement to 

provide notices in a non-English 

language is based on thresholds of the 

number of people who are literate in the 

same non-English language. In the group 

market, the threshold differs depending 

on the number of participants in the 

plan. For a plan that covers fewer than 

100 participants at the beginning of a 

plan year, the threshold is 25 percent of 

all plan participants being literate only 

in the same non-English language. For a 

plan that covers 100 or more 

participants at the beginning of a plan 

year, the threshold is the lesser of 500 

participants, or 10 percent of all plan 

participants, being literate only in the 

same non-English language. The 

thresholds are adapted from the 

Department of Labor’s regulations 

regarding style and format for a 

summary plan description, at 29 CFR 

2520.102–2(c). In the individual market, 

the threshold is 10 percent of the 

population residing in the county being 

literate only in the same non-English 

language.17 The Department of Health 

and Human Services will publish 

guidance that issuers may consult to 

establish these county level estimates on 

its Web site at http://www.hhs.gov/ 

ociio/ by September 23, 2010. The 

Department of Health and Human 

Services welcomes comments on 

whether the threshold should remain 10 

percent and whether it should continue 

to be applied on a county-by-county 

basis. 

If an applicable threshold is met, 

notice must be provided upon request in 

the non-English language with respect 

to which the threshold is met. In 

addition, the plan or issuer must also 

include a statement in the English 

versions of all notices, prominently 

displayed in the non-English language, 

offering the provision of such notices in 

the non-English language. Once a 

request has been made by a claimant, 

the plan or issuer must provide all 

subsequent notices to a claimant in the 

non-English language. In addition, to 

the extent the plan or issuer maintains 

a customer assistance process (such as 

a telephone hotline) that answers 

questions or provides assistance with 

filing claims and appeals, the plan or 

issuer must provide such assistance in 

the non-English language. 

f. Secretarial Authority 

The statute provides the Departments 

with the authority to deem an external 

review process of a group health plan or 

health insurance issuer, in operation as 

of March 23, 2010, to be in compliance 

with PHS Act section 2719. These 

interim final regulations provide the 

Departments may determine that the 

external review process of a plan or 

issuer, in operation as of March 23, 

2010, is considered in compliance with 

a State external review process or the 

Federal external review process, as 

applicable. 

g. Applicability Date 

The requirements to implement 

effective internal and external claims 

and appeals processes apply for plan 

years (in the individual market, policy 

years) beginning on or after September 

23, 2010. The statute and these interim 

final regulations do not apply to 

grandfathered health plans. See 26 CFR 

54.9815–1251T, 29 CFR 2590.715–1251, 

and 45 CFR 147.140 (75 FR 34538, June 

17, 2010). 

III. Interim Final Regulations and 

Request for Comments 

Section 9833 of the Code, section 734 

of ERISA, and section 2792 of the PHS 

Act authorize the Secretaries of the 

Treasury, Labor, and HHS (collectively, 

the Secretaries) to promulgate any 

interim final rules that they determine 

are appropriate to carry out the 

provisions of chapter 100 of the Code, 

part 7 of subtitle B of title I of ERISA, 

and part A of title XXVII of the PHS Act, 

which include PHS Act sections 2701 

through 2728 and the incorporation of 

those sections into ERISA section 715 

and Code section 9815. 

In addition, under Section 553(b) of 

the Administrative Procedure Act (APA) 

(5 U.S.C. 551 et seq.) a general notice of 

proposed rulemaking is not required 

when an agency, for good cause, finds 

that notice and public comment thereon 

are impracticable, unnecessary, or 

contrary to the public interest. The 

provisions of the APA that ordinarily 

require a notice of proposed rulemaking 

do not apply here because of the 

specific authority granted by section 

9833 of the Code, section 734 of ERISA, 

and section 2792 of the PHS Act. 

However, even if the APA were 

applicable, the Secretaries have 

determined that it would be 

impracticable and contrary to the public 

interest to delay putting the provisions 

in these interim final regulations in 

place until a full public notice and 

comment process was completed. As 

noted above, the internal claims and 

appeals and external review provisions 

of the Affordable Care Act are 

applicable for plan years (in the 

individual market, policy years) 

beginning on or after September 23, 

2010, six months after date of 

enactment. Had the Departments 

published a notice of proposed 

rulemaking, provided for a 60-day 

comment period, and only then 

prepared final regulations, which would 

be subject to a 60-day delay in effective 

date, it is unlikely that it would have 

been possible to have final regulations 

in effect before late September, when 

these requirements could be in effect for 

some plans or policies. Moreover, the 

requirements in these interim final 

regulations require significant lead time 

in order to implement. These interim 

final regulations require plans and 

issuers to provide internal claims and 

appeals and external review processes 

and to notify participants, beneficiaries, 

and enrollees of their rights to such 

processes. Plans and issuers will 

presumably need to amend current 

internal claims and appeals procedures, 

adopt new external review processes, 

and notify participants, beneficiaries, 

and enrollees of these changes before 

they go into effect. Moreover, group 

health plans and health insurance 

issuers subject to these provisions will 

have to take these changes into account 

in establishing their premiums, and in 

making other changes to the designs of 

plan or policy benefits. In some cases, 

mstockstill on DSKH9S0YB1PROD with RULES2

43338 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

18The Affordable Care Act adds Section 715 to 

the Employee Retirement Income Security Act 

(ERISA) and section 9815 to the Internal Revenue 

Code (the Code) to make the provisions of part A 

of title XXVII of the PHS Act applicable to group 

health plans, and health insurance issuers 

providing health insurance coverage in connection 

with group health plans, under ERISA and the Code 

as if those provisions of the PHS Act were included 

in ERISA and the Code. 

issuers will need time to secure 

approval for these changes in advance of 

the plan or policy year in question. 

Accordingly, in order to allow plans 

and health insurance coverage to be 

designed and implemented on a timely 

basis, regulations must be published 

and available to the public well in 

advance of the effective date of the 

requirements of the Affordable Care Act. 

It is not possible to have a full notice 

and comment process and to publish 

final regulations in the brief time 

between enactment of the Affordable 

Care Act and the date regulations are 

needed. 

The Secretaries further find that 

issuance of proposed regulations would 

not be sufficient because the provisions 

of the Affordable Care Act protect 

significant rights of plan participants 

and beneficiaries and individuals 

covered by individual health insurance 

policies and it is essential that 

participants, beneficiaries, insureds, 

plan sponsors, and issuers have 

certainty about their rights and 

responsibilities. Proposed regulations 

are not binding and cannot provide the 

necessary certainty. By contrast, the 

interim final regulations provide the 

public with an opportunity for 

comment, but without delaying the 

effective date of the regulations. 

For the foregoing reasons, the 

Departments have determined that it is 

impracticable and contrary to the public 

interest to engage in full notice and 

comment rulemaking before putting 

these interim final regulations into 

effect, and that it is in the public interest 

to promulgate interim final regulations. 

IV. Economic Impact and Paperwork 

Burden 

A. Summary—Department of Labor and 

Department of Health and Human 

Services 

As stated earlier in this preamble, 

these interim final regulations 

implement PHS Act section 2719, which 

sets forth rules with respect to internal 

claims and appeals and external appeals 

processes for group health plans and 

health insurance issuers that are not 

grandfathered health plans.18 This 

provision generally is effective for plan 

years (in the individual market, policy 

years) beginning on or after September 

23, 2010, which is six months after the 

March 23, 2010 date of enactment of the 

Affordable Care Act. 

The Departments have crafted these 

interim final regulations to secure the 

protections intended by Congress in the 

most economically efficient manner 

possible. In accordance with OMB 

Circular A–4, the Departments have 

quantified the benefits and costs where 

possible and provided a qualitative 

discussion of some of the benefits and 

costs that may stem from these interim 

final regulations. 

B. Executive Order 12866—Department 

of Labor and Department of Health and 

Human Services 

Under Executive Order 12866 (58 FR 

51735), ‘‘significant’’ regulatory actions 

are subject to review by the Office of 

Management and Budget (OMB). 

Section 3(f) of the Executive Order 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule (1) Having an annual effect on the 

economy of $100 million or more in any 

one year, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

a serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. OMB 

has determined that this rule is 

significant within the meaning of 

section 3(f)(1) of the Executive Order, 

because it is likely to have an effect on 

the economy of $100 million in any one 

year. Accordingly, OMB has reviewed 

these rules pursuant to the Executive 

Order. The Departments provide an 

assessment of the potential costs and 

benefits of each regulatory provision 

below, summarized in table 1. 

TABLE 1—ACCOUNTING TABLE

Benefits: 

Qualitative: A more uniform, rigorous, and consumer friendly system of claims and appeals processing will provide a broad range of direct and 

indirect benefits that will accrue to varying degrees to all of the affected parties. These interim final regulations could improve the extent to 

which employee benefit plans provide benefits consistent with the established terms of individual plans. While payment of these benefits will 

largely constitute transfers, the transfers will be welfare improving, because incorrectly denied benefits will be paid. Greater certainty and consistency in the handling of benefit claims and appeals and improved access to information about the manner in which claims and appeals are 

adjudicated should lead to efficiency gains in the system, both in terms of the allocation of spending across plans and enrollees as well as 

operational efficiencies among individual plans. This certainty and consistency can also be expected to benefit, to varying degrees, all parties 

within the system, particularly consumers, and to lead to broader social welfare gains. 

Estimate Year dollar Discount rate Period 

covered 

Costs: 

Annualized Monetized ($millions/year) ............................................................ 51.2 2010 7% 2011–2013 

51.6 2010 3% 2011–2013 

Qualitative: The Departments have quantified the primary source of costs associated with these interim final regulations that will be incurred to 

(i) administer and conduct the internal and external review process, (ii) prepare and distribute required disclosures and notices, and (iii) bring 

plan and issuers’ internal and external claims and appeals procedures into compliance with the new requirements. The Departments also 

have quantified the start-up costs for issuers in the individual market to bring themselves into compliance. 

Reversals: 

Annualized Monetized ($millions/year) ............................................................ 24.4 2010 7% 2011–2013 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43339 

19 29 CFR 2560.503–1. 

20To the extent that the ERISA preemption 

provisions do not prevent a State external review 

process from applying to a self-insured plan (for 

example, for self-insured nonfederal governmental 

plans, self-insured church plans, and self-insured 

multiple employer welfare arrangements) the State 

could make its external review process applicable 

to them. The Departments are unaware of the 

number of these plans that are subject to State 

external review laws. 

21Please note that under these interim final 

regulations, the individual health insurance market 

is not required to comply with the requirements of 

the Department of Labor’s claims and appeals 

procedure regulation that apply to multiemployer 

plans. 

Estimate Year dollar Discount rate Period 

covered 

24.7 2010 3% 2011–2013 

Qualitative: The Departments estimated the dollar amount of claim denials reversed in the external review process. While this amount is a cost 

to plans, it represents a payment of benefits that should have previously been paid to participants, but was denied. Part of this amount is a 

transfer from plans and issuers to those now receiving payment for denied benefits. These transfers will improve equity, because incorrectly 

denied benefits will be paid. Part of the amount could also be a cost if the reversal leads to services and hence resources being utilized now 

that had been denied previously. The Departments are not able to distinguish between the two types, but believe that most reversals are associated with a transfer. 

1. Need for Regulatory Action 

Before the enactment of the 

Affordable Care Act, health plan 

sponsors and issuers were not uniformly 

required to implement claims and 

appeals processes. For example, ERISAcovered group health plan sponsors 

were required to implement internal 

claims and appeal processes that 

complied with the DOL claims 

procedure regulation,19 while group 

health plans that were not covered by 

ERISA, such as plans sponsored by State 

and local governments were not. Health 

insurance issuers offering coverage in 

the individual insurance market were 

required to comply with various 

applicable State internal appeals laws 

but were not required to comply with 

the DOL claims procedure regulation. 

With respect to external appeal 

processes, before the enactment of the 

Affordable Care Act, sponsors of fullyinsured ERISA-covered group health 

plans, fully-insured State and local 

governmental plans, and fully-insured 

church plans were required to comply 

with State external review laws, while 

self-insured ERISA-covered group 

health plans were not subject to such 

laws due to ERISA preemption.20 In the 

individual health insurance market, 

issuers in States with external review 

laws were required to comply with such 

laws. However, uniform external review 

standards did not apply, because State 

external review laws vary from State-toState. Moreover, at least six States did 

not have external review laws when the 

Affordable Care Act was enacted; 

therefore, issuers in those States were 

not required to implement an external 

review process. 

Under this regulatory system, 

inconsistent claims and appeals 

processes applied to plan sponsors and 

issuers and a patchwork of consumer 

protections were provided to 

participants, beneficiaries, and 

enrollees. The applicable processes and 

protections depended on several factors 

including whether (i) Plans were subject 

to ERISA, (ii) benefits were self-funded 

or financed by the purchase of an 

insurance policy, (iii) issuers were 

subject to State internal claims and 

appeals laws, and (iv) issuers were 

subject to State external review laws, 

and if so, the scope of such laws (such 

as, whether the laws only apply to one 

segment of the health insurance market, 

e.g., managed care or HMO coverage). 

These uneven protections created an 

appearance of unfairness, increased cost 

for issuers and plans operating in 

multiple States, and may have led to 

confusion among consumers about their 

rights. 

Congress enacted new PHS Act 

section 2719 to ensure that plans and 

issuers implemented more uniform 

internal and external claims and appeals 

processes and to set a minimum 

standard of consumer protections that 

are available to participants, 

beneficiaries, and enrollees. These 

interim final regulations are necessary 

to provide rules that plan sponsors and 

issuers can use to implement effective 

internal and external claims and appeals 

processes that meet the requirements of 

new PHS Act section 2719. 

2. PHS Act Section 2719—Claims and 

Appeals Process (26 CFR 54.9815– 

2719T, 29 CFR 2590.715–2719, 45 CFR 

147.136) 

a. Summary 

As discussed earlier in this preamble, 

section 1001 of the Affordable Care Act 

adds new PHS Act section 2719, which 

requires all non-grandfathered group 

health plans and health insurance 

issuers offering group or individual 

health coverage to implement uniform 

internal claims and appeals and external 

appeals processes. Under PHS Act 

section 2719 and these interim final 

regulations, all sponsors of nongrandfathered group health plans and 

health insurance issuers offering group 

or individual health insurance coverage 

must comply with all requirements of 

the DOL claims procedures regulation 21

as well as the new standards that are 

established by the Secretary of Labor 

and the Secretary of Health and Human 

Services in paragraphs (b)(2) and (b)(3) 

of these interim final regulations. 

On the external appeals side, all 

group health plans or health insurance 

issuers offering group or individual 

health insurance coverage that are not 

grandfathered must comply with an 

applicable State external review process 

that, at a minimum, includes the 

consumer protections set forth in the 

Uniform Heath Carrier External Review 

Model Act promulgated by the National 

Association of Insurance Commissioners 

(the ‘‘NAIC Uniform Model Act’’) and is 

binding on the plan or issuer. If the 

State has not established an external 

review process that meets the 

requirements of the NAIC Uniform 

Model Act or a plan is not subject to 

State insurance regulation, (including a 

State law that establishes an external 

review process) because it is a selfinsured plan, the plan or issuer must 

comply with the requirements of a 

Federal external review process set forth 

in paragraph (d) of these interim final 

regulations. 

b. Estimated Number of Affected 

Entities 

For purposes of the new requirements 

in the Affordable Care Act that apply to 

group health plans and health insurance 

issuers in the group and individual 

markets, the Departments have defined 

a large group health plan as an employer 

plan with 100 or more workers and a 

small group plan as an employer plan 

with fewer than 100 workers. The 

Departments make the following 

estimates about plans and issuers 

affected by these interim final 

regulations: (1) There are approximately 

72,000 large and 2.8 million small 

ERISA-covered group health plans with 

mstockstill on DSKH9S0YB1PROD with RULES2

43340 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

22All participant counts and the estimates of 

individual policies are from the U.S. Department of 

Labor, EBSA calculations using the March 2009 

Current Population Survey Annual Social and 

Economic Supplement and the 2008 Medical 

Expenditure Panel Survey. 

23Estimate is from the 2007 Census of 

Government. 24U.S. Census Bureau, Current Population 

Survey, March 2009. 25 75 FR 34538 (June 17, 2010). 26See 75 FR 34538 (June 17, 2010). 

27See 75 FR 34538 (June 17, 2010) for a detailed 

description of the derivation of the estimates for the 

percentages of grandfathered health plans. In brief, 

the Departments used data from the 2008 and 2009 

Kaiser Family Foundations/Health Research and 

Educational Trust survey of employers to estimate 

the proportion of plans that made changes in costsharing requirements that would have caused them 

to relinquish grandfather status if those same 

changes were made in 2011, and then applied a set 

of assumptions about how employer behavior might 

change in response to the incentives created by the 

grandfather regulations to estimate the proportion 

of plans likely to relinquish grandfather status. The 

estimates of changes in 2012 and 2013 were 

calculated by using the 2011 calculations and 

assuming that an identical percentage of plan 

sponsors will relinquish grandfather status in each 

year. 

28To estimate the number of individuals covered 

in grandfathered health plans, the Departments 

extended the analysis described in 75 FR 34538, 

and estimated a weighted average of the number of 

employees in grandfathered health plans in the 

large employer and small employer markets 

separately, weighting by the number of employees 

in each employer’s plan. Estimates for the large 

employer and small employer markets were then 

combined, using the estimates supplied above that 

there are 133.1 million covered lives in the large 

group market, and 43.2 million in the small group 

market. 

29Adele M. Kirk. The Individual Insurance 

Market: A Building Block for Health Care Reform? 

Health Care Financing Organization Research 

Synthesis. May 2008. 

30This understanding is based on the 

Departments’ conversations with industry experts. 

In addition, the Departments understand that 

ERISA-covered plans, State and local government 

plans, and non-ERISA covered church plans 

generally use the same insurance issuers and 

service providers who apply the ERISA claims and 

appeals requirements to all types of plans. 

31To address certain relevant differences in the 

group and individual markets, health insurance 

issuers offering individual health insurance 

coverage must comply with the following three 

additional requirements: (1) Expand the scope of 

the claims and appeals process to cover initial 

eligibility determinations; (2) provide only one 

level of internal appeal (although the DOL claims 

procedure regulation permits group health plans to 

have a second level of internal appeals), which 

allows claimants to seek either an external appeal 

or judicial review immediately after an adverse 

determination is upheld in the first level of internal 

appeal; and (3) maintain records of all claims and 

notices associated with their internal claims and 

appeals processes and make such records available 

for examination upon request by claimants and 

Federal or State regulatory officials. 

32To the extent that the ERISA preemption 

provisions do not prevent a State external review 

process from applying to a self-insured plan (for 

example, for self-insured nonfederal governmental 

plans, self-insured church plans, and self-insured 

an estimated 97.0 million participants 

in large group plans and 40.9 million 

participants in small group plans; 22 (2) 

there are 126,000 governmental plans 

with 36.1 million participants in large 

plans and 2.3 million participants in 

small plans; 23 and (3) there are 16.7 

million individuals under age 65 

covered by individual health insurance 

policies.24

As described in the Departments’ 

interim final regulations relating to 

status as a grandfathered health plan,25

the Affordable Care Act preserves the 

ability of individuals to retain coverage 

under a group health plan or health 

insurance coverage in which the 

individual was enrolled on March 23, 

2010 (a grandfathered health plan). 

Group health plans and individual 

health insurance coverage that are 

grandfathered health plans do not have 

to meet the requirements of these 

interim final regulations. Therefore, 

only plans and issuers offering group 

and individual health insurance 

coverage that are not grandfathered 

health plans will be affected by these 

interim final regulations. 

Plans can choose to make certain 

disqualifying changes and relinquish 

their grandfather status.26 The 

Affordable Care Act provides plans with 

the ability to maintain grandfathered 

status in order to promote stability for 

consumers while allowing plans and 

sponsors to make reasonable 

adjustments to lower costs and 

encourage the efficient use of services. 

Based on an analysis of the changes 

plans have made over the past few 

years, the Departments expect that more 

plans will choose to make these changes 

over time and therefore the number of 

grandfathered health plans is expected 

to decrease. Correspondingly, the 

number of plans and policies affected by 

these interim final regulations is likely 

to increase over time. In addition, the 

number of individuals receiving the full 

benefits of the Affordable Care Act is 

likely to increase over time. The 

Departments estimate that 18 percent of 

large employer plans and 30 percent of 

small employer plans would relinquish 

grandfather status in 2011, increasing 

over time to 45 percent and 66 percent 

respectively by 2013, although there is 

substantial uncertainty surrounding 

these estimates.27 The Departments also 

estimate that in 2011, roughly 31 

million people will be enrolled in group 

health plans subject to PHS Act section 

2719 and these interim final regulations, 

growing to approximately 78 million in 

2013.28

In the individual market, one study 

estimated that 40 percent to 67 percent 

of individual policies terminate each 

year.29 Because newly purchased 

individual policies are not 

grandfathered, the Departments expect 

that a large proportion of individual 

policies will not be grandfathered, 

covering up to and perhaps exceeding 

10 million individuals. 

Not all potentially affected 

individuals will be affected equally by 

these interim final regulations. As stated 

in the Need for Regulatory Action 

section above, sponsors of ERISAcovered group health plans were 

required to implement an internal 

appeals process that complied with the 

DOL claims procedure regulation before 

the Affordable Care Act’s enactment, 

and the Departments also understand 

that many non-Federal governmental 

plans and church plans that are not 

subject to ERISA nonetheless implement 

internal claims and appeals processes 

that comply with the DOL claims 

procedure regulation.30 Therefore, 

participants and beneficiaries covered 

by such plans only will be affected by 

the new internal claims and appeals 

standards that are provided by the 

Secretary of Labor in paragraph (b)(2)(ii) 

of these interim final regulations. 

These interim final regulations will 

have the largest impact on individuals 

covered in the individual health 

insurance market, because as discussed 

earlier in this preamble, for the first 

time, these issuers will be required to 

comply with the DOL claims procedure 

regulation for internal claims and 

appeals as well as the additional 

standards added by the Secretary of the 

Department of Health and Human 

Services in paragraph (b)(3) of these 

interim final regulations that are in 

some cases more protective than the 

ERISA standard.31

On the external appeals side, before 

the enactment of the Affordable Care 

Act, issuers offering coverage in the 

group and individual health insurance 

market already were required to comply 

with State external review laws. At that 

time, all States except Alabama, 

Mississippi, Nebraska, North Dakota, 

South Dakota, and Wyoming had 

external review laws, and thirteen States 

had external review laws that apply 

only to certain market segments (for 

example, managed care or HMOs). 

Therefore, the extent to which enrollees 

covered by policies issued by these 

issuers will be affected by these interim 

final regulations depends on whether 

the applicable State external review law 

complies with the minimum consumer 

protections set forth in the NAIC 

Uniform Model Act, because if it does 

not, the policies will become subject to 

the Federal external review process that 

applies to self-insured plans that are not 

subject to State regulation 32 and plans 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43341 

multiple employer welfare arrangements) the State 

could make its external review process applicable 

to such plans if it includes, at a minimum, the 

consumer protections in the NAIC Uniform Model 

Act. 

33While it is possible that some ERISA-covered 

self-insured plans may have adopted external 

review procedures as a matter of good business 

practice, the Departments are uncertain regarding 

the level to which this has occurred. 

and policies in States that do not have 

external review laws that meet the 

minimum consumer protections set 

forth in the NAIC Uniform Model Act. 

Individuals participating in ERISAcovered self-insured group health plans 

will be among those most affected by 

the external review requirements 

contained in these interim final 

regulations, because the preemption 

provisions of ERISA prevent a State’s 

external review process from applying 

directly to an ERISA-covered selfinsured plan.33 These plans now will be 

required to comply with the Federal 

external review process set forth under 

paragraph (d) of these interim final 

regulations. 

In summary, the number of affected 

individuals depends on several factors, 

including whether (i) a health plan 

retains its grandfather status, (ii) the 

plan is subject to ERISA, (iii) benefits 

provided under the plan are self-funded 

or financed by the purchase of an 

insurance policy, (iii) the applicable 

State has enacted an internal claims and 

appeals law, and (iv) the applicable 

State has enacted an external review 

law, and if so the scope of such law, and 

(v) the number of new plans and 

enrollees in such plans. 

c. Benefits 

In developing these interim final 

regulations, the Departments closely 

considered their potential economic 

effects, including both costs and 

benefits. Because of data limitations and 

a lack of effective measures, the 

Departments did not attempt to quantify 

expected benefits. Nonetheless, the 

Departments were able to identify with 

confidence several of the interim final 

regulation’s major economic benefits. 

These interim final regulations will 

help transform the current, highly 

variable health claims and appeals 

process into a more uniform and 

structured process. As stated in the 

Need for Regulatory Action above, 

before the enactment of the Affordable 

Care Act, inconsistent internal and 

external claims and appeals standards 

applied to plan sponsors and issuers, 

and a patchwork of consumer 

protections were provided to 

participants, beneficiaries, and enrollees 

that depended on several factors 

including whether (i) Plans were subject 

to ERISA, (ii) benefits were self-funded 

or financed by the purchase of an 

insurance policy, (iii) issuers were 

subject to State internal claims and 

appeals laws, and (iv) issuers were 

subject to State external review laws, 

and if so, the scope of such laws (such 

as, whether the laws only apply to one 

segment of the health insurance market, 

e.g., managed care or HMO coverage). 

A more uniform, rigorous, and 

consumer friendly system of claims and 

appeals processing will provide a broad 

range of direct and indirect benefits that 

will accrue to varying degrees to all of 

the affected parties. In general, the 

Departments expect that these interim 

final regulations will improve the extent 

to which employee benefit plans 

provide benefits consistent with the 

established terms of individual plans. 

This will cause some participants to 

receive benefits that, absent the fuller 

protections of the regulation, they might 

otherwise have been incorrectly denied. 

In other circumstances, expenditures by 

plans may be reduced as a fuller and 

fairer system of claims and appeals 

processing helps facilitate enrollee 

acceptance of cost management efforts. 

Greater certainty and consistency in the 

handling of benefit claims and appeals 

and improved access to information 

about the manner in which claims and 

appeals are adjudicated may lead to 

efficiency gains in the system, both in 

terms of the allocation of spending at a 

macro-economic level as well as 

operational efficiencies among 

individual plans. This certainty and 

consistency can also be expected to 

benefit, to varying degrees, all parties 

within the system and to lead to broader 

social welfare gains, particularly for 

consumers. 

By making claims and appeals 

processes more uniform, these interim 

final regulations will increase efficiency 

in the operation of employee benefit 

plans and health care delivery as well 

as health insurance and labor markets. 

These interim final regulations are 

expected to increase efficiency by 

reducing complexity that arises when 

different market segments are subject to 

varying claims and appeals standards. 

Idiosyncratic requirements, time-frames, 

and procedures for claims processing 

impose substantial burdens on 

participants, their representatives, and 

service providers. By establishing a 

more uniform and complete set of 

minimum requirements and consumer 

protections, these interim final 

regulations will reduce the complexity 

of claims and appeals processing 

requirements, thereby increasing 

efficiency. 

The Departments expect that these 

interim final regulations also will 

improve the efficiency of health plans 

by enhancing their transparency and 

fostering participants’ confidence in 

their fairness. When information about 

the terms and conditions under which 

benefits will be provided is unavailable 

to enrollees, they could discount the 

value of benefits to compensate for the 

perceived risk. The enhanced disclosure 

and notice requirements of these interim 

final regulations will help participants, 

beneficiaries, and enrollees better 

understand the reasons underlying 

adverse benefit determinations and their 

appeal rights. 

The Departments believe that 

excessive delays and inappropriate 

denials of health benefits are relatively 

rare. Most claims are approved in a 

timely fashion. Many claim denials and 

delays are appropriate given the plan’s 

terms and the circumstances at hand. 

Nonetheless, to the extent that delays 

and inappropriate denials occur, 

substantial harm can be suffered by 

participants, beneficiaries, and 

enrollees, which can also lead to an 

associated loss of confidence in the 

fairness and benefits of the system. A 

more timely and complete review 

process required under these interim 

final rules regulations should reduce the 

levels of delay and error in the system 

and improve health outcomes. 

The voluntary nature of the 

employment-based health benefit 

system in conjunction with the open 

and dynamic character of labor markets 

make explicit as well as implicit 

negotiations on compensation a key 

determinant of the prevalence of 

employee benefits coverage. The 

prevalence of benefits is therefore 

largely dependent on the efficacy of this 

exchange. If workers perceive that there 

is the potential for inappropriate denial 

of benefits or handling of appeals, they 

will discount the value of such benefits 

to adjust for this risk. This discount 

drives a wedge in compensation 

negotiation, limiting its efficiency. With 

workers unwilling to bear the full cost 

of the benefit, fewer benefits will be 

provided. To the extent that workers 

perceive that these interim final 

regulations, supported by enforcement 

authority, reduces the risk of 

inappropriate denials of benefits, the 

differential between the employers’ 

costs and workers’ willingness to accept 

wage offsets is minimized. 

Effective claims procedures also can 

improve health care, health plan 

quality, and insurance market efficiency 

by serving as a communication channel, 

providing feedback from participants, 

beneficiaries, and providers to plans 

mstockstill on DSKH9S0YB1PROD with RULES2

43342 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

34The Departments are uncertain regarding the 90 

percent compliance rate for State and local 

government plans. Therefore, to establish a range, 

the Departments estimated the cost assuming 75 

percent State and local governmental plan 

compliance. Assuming 75 percent compliance, the 

cost of State and local plan internal review 

compliance would increase from $2 million to $5 

million in 2011, $3.6 million to $9.1 million in 

2012, and $5 million to $12.4 million in 2012. 

35Source: Estimates are from NAIC 2007 financial 

statements data and the California Department of 

Managed Healthcare (2009) (http:// 

wpso.dmhc.ca.gov/hpsearch/viewall.aspx). 

36 Discussions with the National Association of 

Insurance Commissioners suggest that three States 

require issuers in the individual market to follow 

the NAIC internal grievance appeals model. Eleven 

States have no set procedures in place, while the 

rest have varying requirements. Some issuers 

voluntarily follow the ERISA claims and appeals 

procedures. 

37The OMB Control Number for the DOL 

procedure regulation is 1210–0053. OMB approved 

the three-year renewal of the Control Number 

through May 31, 2013, on May 21, 2010. 38Research at the time of the Claims Regulation 

as well as responses to the Claims RFI reported a 

wide range of claims per participant—between 5 

and 18. The Department eventually settled on 10.2. 39AHIP, ‘‘Update: A Survey of Health Care Claims 

Receipt and Processing Times, 2009,’’ January 2010. 40Health Insurance Association of America 

(HIAA, which later merged with AHIP) reported a 

denial rate of 14 percent in ‘‘Results from an HIAA 

Survey on Claims Payment Process,’’ March 2003. 

These included duplicate claims as well as denied 

claims that were appeals. RAND reported an 

increased trend in claim denials in, ‘‘Inside the 

Black Box of Managed Care Decisions,’’ Research 

Brief, 2004 from 3 percent to between 8 and 10 

percent. 

41The assumption that 3 percent of claims are 

pre-service is based on comments the Department 

received in response to the proposed DOL claims 

procedure regulation in 2000. 

about quality issues. Aggrieved 

claimants are especially likely to 

disenroll if they do not understand their 

appeal rights, or if they believe that 

their plans’ claims and appeals 

procedures will not effectively resolve 

their difficulties. Unlike appeals, 

however, disenrollments fail to alert 

plans to the difficulties that prompted 

them. More uniform and effective 

appeals procedures can give 

participants and beneficiaries an 

alternative way to respond to difficulties 

with their plans. Plans in turn can use 

the information gleaned from the 

appeals process to improve services. 

The Departments also expect that 

these interim final regulations’ higher 

standard for more uniform internal and 

external claims appeals adjudication 

will enhance some insurers’ and group 

health plans’ abilities to effectively 

control costs by limiting access to 

inappropriate care. Providing a more 

formally sanctioned framework for 

internal and external review and 

consultation on difficult claims 

facilitates the adoption of cost 

containment programs by employers 

who, in the absence of a regulation 

providing some guidance, may have 

opted to pay questionable claims rather 

than risk alienating participants or being 

deemed to have breached a fiduciary 

duty. 

In summary, the interim final 

regulations’ more uniform standards for 

handling health benefit claims and 

appeals will reduce the incidence of 

excessive delays and inappropriate 

denials, averting serious, avoidable 

lapses in health care quality and 

resultant injuries and losses to 

participant, beneficiaries and enrollees. 

They also will enhance enrollees’ level 

of confidence in and satisfaction with 

their health care benefits and improve 

plans’ awareness of participant, 

beneficiary, and provider concerns, 

prompting plan responses that improve 

health care quality. Finally, by helping 

to ensure prompt and precise adherence 

to contract terms and by improving the 

flow of information between plans and 

enrollees, the interim final regulations 

will bolster the efficiency of labor, 

health care, and insurance markets. The 

Departments therefore conclude that the 

economic benefits of these interim final 

regulations will justify their costs. 

d. Costs and Transfers 

The Departments have quantified the 

primary source of costs associated with 

these interim final regulations that will 

be incurred to (i) Administer and 

conduct the internal and external 

review process, (ii) prepare and 

distribute required disclosures and 

notices, and (iii) bring plan and issuers’ 

internal and external claims and appeals 

procedures into compliance with the 

new requirements. The Departments 

also have quantified the start-up costs 

for issuers in the individual market to 

bring themselves into compliance and 

the costs and the transfers associated 

with the reversal of denied claims 

during the external review process. 

These costs and the methodology used 

to estimate them are discussed below. 

i. Internal Claims and Appeals. As 

discussed above, these interim final 

regulations require all group health 

plans and issuers offering coverage in 

the group and individual health 

insurance market to comply with the 

DOL claims procedure regulation. The 

ERISA-covered market, with an 

estimated 2.8 million plans and 138 

million covered participants, already is 

required to comply with the DOL claims 

procedure regulation and is far larger 

than either the non-Federal 

governmental plan market, with an 

estimated 126,000 governmental plans 

and 30 million participants, or the 

individual market, with 16.7 million 

participants. As stated in the Estimated 

Number of Affected Entities section, the 

Departments understand that many nonFederal governmental plans comply 

with the DOL claims procedure 

regulation, because they use the same 

issuers and service providers as ERISAcovered plans, and these issuers and 

service providers implement the 

internal claims and appeals process for 

plans in both markets. Therefore, for 

purposes of this regulatory impact 

analysis, the Departments assume that 

90 percent of the claims volume in the 

non-Federal governmental group health 

plan market already complies with the 

DOL claims procedure regulation.34

The Departments estimate that 170 

issuers offer policies only in the 

individual market.35 While the 

Departments believe that some issuers 

are subject to applicable state laws 

governing internal appeals processes, 

and have evidence that some issuers 

already comply with the DOL claims 

procedure regulation, some issuers will 

have to change their internal claims and 

appeals processes to comply with these 

interim final regulations.36 The 

Departments estimate that issuers would 

incur a start-up cost of $3.5 million in 

the first year to comply with these 

interim final regulations by revising 

processes, creating or revising forms, 

modifying systems, and training 

personnel. These costs are mitigated by 

the model notice of initial benefit 

determination the Departments will be 

issuing in subregulatory guidance. This 

notice will not require any data to be 

provided that cannot be automatically 

populated by plans and issuers. 

ii. Cost Required to Implement DOL 

Claims Procedure Regulation 

Requirements. The Departments’ 

estimates of the annual costs for plans 

and issuers to comply with the DOL 

claims procedure regulation are based 

on the methodology used for the 

Paperwork Reduction Act (PRA) hour 

and cost burden analysis of DOL claims 

procedure regulation.37 The Department 

first estimated the number of 

individuals covered by nongrandfathered plans using the March 

2009 Current Population Survey Annual 

Social and Economic Supplement and 

the 2008 Medical Expenditure Panel 

Survey. Each covered individual was 

estimated to generate 10.2 claims on 

average per year,38 82 percent of which 

were filed electronically.39 The 

Departments then assumed that 15 

percent of these claims were denied.40

The Departments assume that three 

percent of these claims were pre-service 

with the remaining being post-service 

claims.41 The number of post-service 

claims extended was based on the share 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43343 

42AHIP, ‘‘Update: A Survey of Health Care Claims 

Receipt and Processing Times, 2009,’’ January 2010. 43 ‘‘Inside the Black Box of Managed Care 

Decisions,’’ Research Brief, 2004. 44The Department based this assumption on the 

number of appealed Medicare pre-authorization 

denials. They received comments for the proposed 

regulation arguing this estimate was either too high 

or too low and so the Department chose to retain 

the assumption. 

45The Department in its initial claims regulation 

assumed that an expert consultation would cost 

$500 which translated into roughly 5 hours of a 

physician’s time. EBSA has revised this slightly 

downward based on the costs reported by IROs to 

review medical claims. 

46The Departments’ estimates of labor rates 

include wages, other benefits, and overhead based 

on the National Occupational Employment Survey 

(May 2008, Bureau of Labor Statistics) and the 

Employment Cost Index June 2009, Bureau of Labor 

Statistics). 

of ‘‘clean’’ claims that took more than 30 

days to complete processing.42 The 

share of denials expected to be 

appealed, 0.2 percent, was based on a 

RAND study.43 The Departments expect 

half of these appeals to be reversed,44

and those not reversed were divided 

between ‘‘medical claims’’ (28.9 percent) 

and ‘‘administrative claims’’ (71.1 

percent). 

The Departments attributed costs to 

notifying individuals of denied claims 

and processing appeals. Initial denials 

were assumed to only take a few 

minutes for a clerical worker to draft 

and send an adverse benefit 

determination notice based on the 

model notice that will be issued by the 

Departments that does not require any 

information to be included that cannot 

be auto-populated. Appealed denials 

deemed ‘‘medical’’ are assumed to 

require a physician, with an estimated 

labor rate of $154.07 to review and was 

expected to take 4 1⁄2 hours to decide 

and draft a response, regardless of 

outcome.45 Appealed denials deemed 

‘‘administrative’’ require a legal 

professional with an estimated labor 

rate of $119.03, and a decision and 

response was expected to take two 

minutes for a reversal and two hours for 

a denial.46 Mailing costs for the notice 

of adverse determination and notice of 

decision of internal appeal is estimated 

at 54 cents a notice for material, 

printing, and postage costs. 

Because ERISA-covered plans already 

are required to comply with the DOL 

claims procedure regulation, the 

Departments did not attribute any cost 

to these plans to comply with the rule. 

As stated above, the Departments 

understand from consulting with 

industry experts that a substantial 

majority of State and local government 

plans also currently comply with the 

existing DOL claims procedure 

regulation; therefore, the Departments 

assumed that only ten percent of the 

estimated claims of individuals covered 

by these plans would constitute a new 

expense. All claims in nongrandfathered plans in the individual 

market were assumed to bear the full 

cost of compliance, because these 

policies are being required to comply 

with the DOL claims procedure 

regulation for the first time. Table 2 

shows the estimated number of claims. 

TABLE 2—ESTIMATED CLAIMS AND APPEALS IN NON-GRANDFATHERED COVERAGE

2011 2012 2013 

Private 

sector 

ESI 

Government sector ESI 

Individual 

market 

Private 

sector 

ESI 

Government sector ESI 

Individual 

market 

Private 

sector 

ESI 

Government sector ESI 

Individual 

market 

Total Enrollees (millions) ............................................... 138.0 39.0 15.1 138.0 39.0 15.1 138.0 39.0 15.1 

Non-Grandfathered Enrollees ....................................... 24.4 6.9 6.0 44.5 12.6 9.7 61.0 17.2 11.8 

Total Claims (millions) ................................................... 248.9 70.4 61.5 453.8 128.3 98.5 622.4 175.9 120.6 

Pre-Service: 

Claim Approved ..................................................... 6.3 1.8 1.6 11.6 3.3 2.5 15.9 4.5 3.1 

Claim Denied ......................................................... 1.1 0.3 0.3 2.0 0.6 0.4 2.8 0.8 0.5 

Post-Service: 

Claims Approved .................................................... 196.2 55.5 45.2 357.8 101.1 72.3 490.7 138.7 88.6 

Claim Denied ......................................................... 36.2 10.2 9.0 66.0 18.7 14.3 90.6 25.6 17.6 

Claim Extended ...................................................... 9.0 2.5 5.6 16.4 4.6 8.9 22.5 6.3 10.9 

Total Internal Appeals (thousands) ............................... 85.4 24.1 52.8 155.7 44.0 84.5 213.6 60.4 103.5 

Appeals Upheld ...................................................... 34.2 9.7 21.1 62.3 17.6 33.8 85.4 24.1 41.4 

Appeals Denied ...................................................... 51.2 14.5 31.7 93.4 26.4 50.7 128.1 36.2 62.1 

Medical subtotal .............................................. 24.7 7.0 15.3 45.0 12.7 24.4 61.7 17.4 29.9 

Appeals Upheld ....................................... 9.9 2.8 6.1 18.0 5.1 9.8 24.7 7.0 12.0 

Appeals Denied ....................................... 14.8 4.2 9.2 27.0 7.6 14.6 37.0 10.5 17.9 

Administrative subtotal .................................... 60.7 17.2 37.5 110.7 31.3 60.1 151.8 42.9 73.6 

Appeals Upheld ....................................... 24.3 6.9 15.0 44.3 12.5 24.0 60.7 17.2 29.4 

Appeals Denied ....................................... 36.4 10.3 22.5 66.4 18.8 36.0 91.1 25.8 44.1 

Total New External Appeals (thousands) ..................... 2.0 0.6 0.2 3.7 1.1 0.3 5.0 1.5 0.4 

As shown in Table 3 below, the 

Departments estimate that the cost of 

the internal process, including the costs 

of internal appeals and notice 

distribution, is $1.5 million in 2011 and 

rises to $3.8 million in 2013 as the 

number of non-grandfathered plans 

increases. The Departments estimate 

that the cost for the internal review 

process for the individual market is 

$28.8 million in 2011 and rises to $56.4 

million in 2013. 

iii. Additional Requirements for 

Group Health Plans. As discussed 

earlier in this preamble, paragraph 

(b)(2)(i) of these interim final 

regulations imposes additional 

requirements to the DOL claims 

procedure regulation that must be 

satisfied by group health plans and 

issuers offering group and individual 

coverage in the individual and group 

health insurance markets. The 

Departments believe that the additional 

requirements have modest costs 

associated with them, because they 

merely clarify provisions of the DOL 

claims procedure regulation. These 

requirements and their associated costs 

are discussed below. 

Definition of adverse determination. 

These interim final regulations expand 

the definition of adverse benefit 

determination to include rescissions of 

coverage. While new, the methodology 

used to estimate the burden for the 

internal appeals process already 

captures this burden as most rescissions 

are associated with a claim and 

therefore would already be accounted 

for. The requirement allows for appeal 

of rescinded coverage that does not have 

mstockstill on DSKH9S0YB1PROD with RULES2

43344 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

47EBSA estimates of labor rates include wages, 

other benefits, and overhead based on the National 

Occupational Employment Survey (May 2008, 

Bureau of Labor Statistics) and the Employment 

Cost Index June 2009, Bureau of Labor Statistics). 

48This estimate is based on the methodology used 

to analyze the cost burden for the DOL claims 

procedure regulation (OMB Control Number 1210– 

0053). 

an associated claim. While the 

Departments lack data to estimate the 

number of rescissions that occur 

without an associated claim for benefits, 

the Departments believe this number is 

small. 

Expedited notification of benefit 

determination involving urgent care. 

The current DOL claims procedure 

regulation requires that a plan or issuer 

provide notification in the case of an 

urgent care claim as soon as possible 

taking into account the medical 

exigencies, but no later than 72 hours 

after receipt of the claim by the plan. 

These interim final regulations reduce 

the time limit to no later than 24 hours 

after the receipt of the claim by the plan 

or issuer. The Departments are not able 

to quantify the costs of this requirement. 

However, two factors could suggest this 

requirement does not impose substantial 

cost. First, the DOL claims procedure 

regulation requires urgent care 

notification to be made as soon as 

possible; therefore, it is likely that some 

claims currently are handled in less 

than the 24 hours. In addition, the 

technological developments that have 

occurred since the 72 hour standard was 

issued in the 2000 DOL claims 

procedure regulation should facilitate 

faster notification at reduced costs. 

However, plans and issuers would incur 

additional cost for urgent care notices 

that take longer than the required 24 

hours to produce. Speeding up the 

notification process for these 

determinations might necessitate 

incurring additional cost to add more 

employees or find other ways to shorten 

the timeframe. Additional costs may be 

associated with this requirement if a 

shorter timeframe results in claims 

being denied that would not have been 

under a 72 hour standard or claims 

being approved that would have been 

denied under a longer notification 

period. 

Full and fair review. These interim 

final regulations require the plan or 

issuer to provide the claimant, free of 

charge, with any new or additional 

evidence relied upon or generated by 

the plan or issuer and the rationale used 

for a determination during the appeals 

process sufficiently in advance of the 

due date of the response to an adverse 

benefit determination. This requirement 

increases the administrative burden on 

plans and issuers to prepare and deliver 

the new and additional information to 

the claimant. The Departments are not 

aware of data suggesting how often 

plans rely on new or additional 

evidence during the appeals process or 

the volume of materials that are 

received. 

For purposes of this regulatory impact 

analysis, the Departments assume, as an 

upper bound, that all appealed claims 

will involve a reliance on additional 

evidence. The Departments assume that 

this requirement will impose a cost of 

just under $1 million in 2013, the year 

with the highest cost. The Departments 

estimated this cost by assuming that it 

will require medical office staff with a 

labor rate of $26.85 five minutes 47 to 

collect and distribute the additional 

evidence considered, relied on, or 

generated during the appeals process. 

The Departments estimate that on 

average, material, printing and postage 

costs will be $2.24 per mailing. The 

Departments further assume that 38 

percent of all mailings will be 

distributed electronically with no 

associated material, printing or postage 

costs.48

Eliminating conflicts of interest. As 

discussed earlier in this preamble, these 

interim final regulations require plans 

and issuers to ensure that all claims and 

appeals are adjudicated in a manner 

designed to ensure the independence 

and impartiality of the persons involved 

in making the decision. Accordingly, 

decisions regarding hiring, 

compensation, termination, promotion, 

or other similar matters with respect to 

any individual (such as a claims 

adjudicator or medical expert) must not 

be made based upon the likelihood or 

perceived likelihood that the individual 

will support or tend to support the 

denial of benefits. 

This requirement could require plans 

or issuers to change policies that 

currently create a conflict of interest and 

to discontinue practices that create such 

conflicts. The Departments believe that 

many plans and issuers already have 

such requirements in place as a matter 

of good business practice, but do not 

have sufficient data to provide an 

estimate. However, the Departments 

believe that the cost associated with this 

requirement will be minimal. 

Enhanced notice. These interim final 

regulations provide new standards 

regarding notice to enrollees. 

Specifically, the statute and these 

interim final regulations require a plan 

or issuer to provide notice to enrollees, 

in a culturally and linguistically 

appropriate manner (standards for 

which are described later in this 

preamble). Plans and issuers must 

comply with the requirements of 

paragraphs (g) and (j) of the DOL claims 

procedure regulation, which detail 

requirements regarding the issuance of a 

notice of adverse benefit determination. 

Moreover, for purposes of these interim 

final regulations, additional content 

requirements apply for these notices. A 

plan or issuer must ensure that any 

notice of adverse benefit determination 

or final adverse benefit determination 

includes information sufficient to 

identify the claim involved. This 

includes the date of service, the health 

care provider, and the claim amount (if 

applicable), as well as the diagnosis 

code (such as an ICD–9 code, ICD–10 

code, or DSM–IV code), the treatment 

code (such as a CPT code), and the 

corresponding meanings of these codes. 

A plan or issuer must also ensure that 

description of the reason or reasons for 

the denial includes a description of the 

standard that was used in denying the 

claim. In the case of a notice of final 

adverse benefit determination, this 

description must include a discussion of 

the decision. Additionally, the plan or 

issuer must provide a description of 

available internal appeals and external 

review processes, including information 

regarding how to initiate an appeal. 

Finally, the plan or issuer must disclose 

the availability of, and contact 

information for, any applicable office of 

health insurance consumer assistance or 

ombudsman established under PHS Act 

section 2793 to assist such enrollees 

with the internal claims and appeals 

and external review process. The 

Departments intend to issue model 

notices that could be used to satisfy all 

the notice requirements under these 

interim final regulations in the very near 

future that will mitigate the cost 

associated with providing them. These 

notices will be made available at 

http://www.dol.gov/ebsa and http:// 

www.hhs.gov/ociio/. The cost of sending 

the notices is included in the costs of 

the internal and external review 

process. The Departments were unable 

to estimate the cost of providing the 

model notices in a linguistically and 

culturally appropriate manner. However 

the Departments believe the overall 

costs to be small as only a small number 

of plans are believed to be affected. The 

Departments request comments that 

could help in estimating these costs, 

particularly with respect to the 

individual insurance market. 

Deemed exhaustion of internal 

process. These interim final regulations 

provide that, in the case of a plan or 

issuer that fails to strictly adhere to all 

the requirements of the internal claims 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43345 

49The Departments do not have a basis to 

estimate this, because the Departments do not know 

how often this denial takes place or how often they 

are appealed. The costs should be minimal, because 

the decisions will be made quickly, and the period 

of coverage will be brief. The Departments expect 

the cost to be small relative to the cost of reversals, 

which the Departments have estimated. 

50However, the Departments believe this number 

to be small. Approximately 10 to 15 percent of 

applicants are declined coverage in the individual 

market, while the Departments do not know how 

many of those denied coverage will appeal, using 

appeal rates for internal and external appeals would 

result in only a few thousand appeals. See 

‘‘Fundamentals of Underwriting in the nongroup 

Health Insurance Market,’’ pages 10–12, April 13, 

2005. 

51AHIP Center for Policy and Research, ‘‘An 

Update on State External Review Programs, 2006,’’ 

July 2008. 

52North Carolina Department of Insurance 

‘‘Healthcare Review Program: Annual Report,’’ 2008. 

53Pollitz, Karen, Jeff Crowley, Kevin Lucia, and 

Eliza Bangit ‘‘Assessing State External Review 

Programs and the Effects of Pending Federal 

Patient’s Rights Legislation.’’ Kaiser Family 

Foundation (2002) page 27. 

54AHIP Center for Policy and Research, ‘‘An 

Update on State External Review Programs, 2006,’’ 

July 2008. 

and appeals process with respect to a 

claim, the claimant is deemed to have 

exhausted the internal claims and 

appeals process, regardless of whether 

the plan or issuer asserts that it 

substantially complied with these 

requirements or that the error was de 

minimis. Accordingly, under such 

deemed exhaustion, the claimant may 

initiate an external review and pursue 

any available remedies under applicable 

law, such as judicial review. The 

Departments are unable to quantify the 

costs that are associated with this 

requirement. While this provision 

possibly could result in an increased 

number of external appeals it could 

reduce overall costs if costly litigation is 

avoided. 

Continued coverage. Finally, the 

statute and these interim final 

regulations require a plan and issuer to 

provide continued coverage pending the 

outcome of an internal appeal. For this 

purpose, the plan or issuer must comply 

with the requirements of paragraph 

(f)(2)(ii) of the DOL claims procedure 

regulation, which generally provide that 

a plan or issuer cannot reduce or 

terminate an ongoing course of 

treatment without providing advance 

notice and an opportunity for advance 

review. Moreover, as described more 

fully earlier in this preamble, the plan 

or issuer must also provide 

simultaneous external review in 

advance of a reduction or termination of 

an ongoing course of treatment. 

This provision would not impose any 

additional cost on plans and issuers that 

comply with the DOL claims procedure 

regulation; however, costs would be 

incurred by issuers in the individual 

market. The Departments are unable to 

quantify the cost associated with this 

requirement, because they lack 

sufficient data on the number of 

simultaneous reviews that are 

conducted.49

iv. Additional Requirements for 

Issuers in the Individual Insurance 

Market. To address certain relevant 

differences in the group and individual 

markets, health insurance issuers 

offering individual health insurance 

coverage must comply with three 

additional requirements. First, these 

interim final regulations expand the 

scope of the group health coverage 

internal claims and appeals process to 

cover initial eligibility determinations. 

This protection is important since 

eligibility determinations in the 

individual market are frequently based 

on the health status of the applicant, 

including preexisting conditions. The 

Departments do not have sufficient data 

to quantify the costs associated with this 

requirement.50

Second, although the DOL claims 

procedure regulation permits group 

health plans to have a second level of 

internal appeals, these interim final 

regulations require health insurance 

issuers offering individual health 

insurance coverage to have only one 

level of internal appeals. This allows the 

claimant to seek either external review 

or judicial review immediately after an 

adverse determination is upheld in the 

first level of internal appeals. The 

Departments have factored this cost into 

their estimate of the cost for issuers 

offering coverage in the individual 

market to comply with requirement. 

Finally, these interim final regulations 

require health insurance issuers offering 

individual health insurance coverage to 

maintain records of all claims and 

notices associated with their internal 

claims and appeals processes. An issuer 

must make such records available for 

examination upon request. Accordingly, 

a claimant or State or Federal agency 

official generally would be able to 

request and receive such documents free 

of charge. The Departments believe that 

minimal costs are associated with this 

requirement, because most issuers retain 

the required information in the normal 

course of their business operations. 

v. External Appeals. The analysis of 

the cost associated with implementing 

an external review process under these 

interim final regulations focuses on the 

cost incurred by the following three 

groups that were not required to 

implement an external review process 

before the enactment of the Affordable 

Care Act: plans and participants in 

ERISA-covered self-insured plans; plans 

and participants in States with no 

external review laws, and plans and 

participants in States that have State 

laws only covering specific market 

segment (usually HMOs or managed 

care coverage). 

The Departments estimate that there 

are about 76.9 million participants in 

self-insured ERISA-covered plans and 

approximately 13.8 million participants 

in self-insured State and local 

governmental plans. In the States which 

currently have no external review laws 

there are an estimated 4.2 million 

participants (2.5 million participants in 

ERISA-covered plans, 1.2 million 

participants in governmental plans and 

0.6 million in individual with policies 

in the individual market). In the States 

that currently have limited external 

review laws, there are 15.6 million 

participants (8.4 million participants in 

ERISA-covered plans, 4.2 million 

participants in governmental plans and 

3.0 million individuals with individual 

health insurance in the individual 

market). These estimates lead to a total 

of 110.5 million participants, however, 

only the 44.2 million participants in 

non-grandfathered plans will be newly 

covered by the external review 

requirement in 2011. As plans 

relinquish their grandfather status in 

subsequent years, more individuals will 

be covered. 

The Departments assume that there 

are an estimated 1.3 external appeals for 

every 10,000 participants,51 and that 

there will be approximately 2,600 

external appeals in 2011. As required by 

these interim final regulations or 

applicable State law, plans or issuers are 

required to pay for most of the cost of 

the external review while claimants may 

be charged a modest filing fee. A recent 

report finds that the average cost of a 

review was approximately $605.52

While the actual cost per review will 

vary by state and also type of review 

(standard or expedited), an older study 

covering many States suggests this is a 

reasonable estimate.53 These estimates 

lead to an estimated cost of the external 

review of $1.6 million (2,600 reviews * 

$605) in 2011. Using a similar method 

and adjusting for the number of nongrandfathered plans in subsequent 

years, the Departments estimate that the 

total cost for external review is $2.9 

million in 2012 and $3.9 million in 

2013. 

On average, about 40 percent of 

denials are reversed on external 

appeal.54 An estimate of the dollar 

mstockstill on DSKH9S0YB1PROD with RULES2

43346 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

55North Carolina Department of Insurance 

‘‘Healthcare Review Program: Annual Report,’’ 2008. 

amount per claim reversed in $12,400.55

This leads to $13.4 million in additional 

claims being reversed by the external 

review process in 2011, which increases 

to $33.1 million in 2013. While this 

amount is a cost to plans, it represents 

a payment of benefits that should have 

previously been paid to participants, but 

was denied. Part of this amount is a 

transfer from plans and issuers to those 

now receiving payment for denied 

benefits. Part of the amount could also 

be a cost if the reversal leads to services 

and hence resources being utilized now 

that had been denied previously. The 

Departments are not able to distinguish 

between the two types but believe that 

most reversals are associated with a 

transfer. 

These interim final regulations also 

require claimants to receive a notice 

informing them of the outcome of the 

appeal. The independent review 

organization that conducts the external 

review is required to prepare the notice; 

therefore, the cost of preparing and 

delivering this notice is included in the 

fee paid them by the insurer to conduct 

the review. 

3. Summary 

These interim final rules extend the 

protections of the DOL claims procedure 

regulation to non-Federal governmental 

plans, and the market for individual 

coverage. Additional protections are 

added that cover these two markets and 

also the market for ERISA covered 

plans. These interim final regulations 

also extend the requirement to provide 

an independent external review. The 

Departments estimate that the total costs 

for these interim final regulations is 

$50.4 million in 2011, $78.8 million in 

2012, and $101.1 million in 2013. The 

estimates are summarized in table 3, 

below. 

TABLE 3—MONETIZED IMPACTS OF INTERIM FINAL REGULATIONS

[In millions] 

2011 2012 2013 

ERISA Market .............................................................................................................................. $1.4 $2.5 $3.5 

External Review .................................................................................................................... 1.2 2.2 3.1 

Internal Review * ................................................................................................................... 0.0 0.0 0.0 

Fair and Full Review ............................................................................................................ 0.2 0.3 0.4 

State & Local Government Market .............................................................................................. 2.4 4.3 6.0 

External Review .................................................................................................................... 0.4 0.6 0.9 

Internal Review ** ................................................................................................................. 2.0 3.6 5.0 

Fair and Full Review ............................................................................................................ 0.05 0.1 0.1 

Individual Market .......................................................................................................................... 32.5 46.4 56.8 

External Review .................................................................................................................... 0.1 0.2 0.2 

Internal Review ..................................................................................................................... 28.8 46.0 56.4 

Fair and Full Review ............................................................................................................ 0.1 0.2 0.2 

Recordkeeping ...................................................................................................................... 0.1 0.1 0.1 

Start-up Costs ....................................................................................................................... 3.5 0.0 0.0 

Total Costs .................................................................................................................... 36.2 53.2 66.2 

Amount of Reversals *** .............................................................................................................. 14.2 25.6 34.9 

ERISA Plans ......................................................................................................................... 10.3 18.7 25.7 

State & Local Government Plans ......................................................................................... 3.0 5.4 7.4 

Individual Market .................................................................................................................. 0.9 1.5 1.9 

* Assumes that ERISA plans already comply with ERISA claims and appeals regulations. 

** Assumes that 90 percent of State and Local Government plans already comply with the ERISA claims and appeals regulation. 

*** This amount includes both transfers and costs with identical offsetting benefits. 

C. Regulatory Flexibility Act— 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the APA (5 U.S.C. 551 

et seq.) and that are likely to have a 

significant economic impact on a 

substantial number of small entities. 

Section 9833 of the Code, section 734 of 

ERISA, and section 2792 of the PHS Act 

authorize the Secretaries to promulgate 

any interim final rules that they 

determine are appropriate to carry out 

the provisions of chapter 100 of the 

Code, part 7 of subtitle B or title I of 

ERISA, and part A of title XXVII of the 

PHS Act, which include PHS Act 

sections 2701 through 2728 and the 

incorporation of those sections into 

ERISA section 715 and Code section 

9815. 

Moreover, under Section 553(b) of the 

APA, a general notice of proposed 

rulemaking is not required when an 

agency, for good cause, finds that notice 

and public comment thereon are 

impracticable, unnecessary, or contrary 

to the public interest. These interim 

final regulations are exempt from APA, 

because the Departments made a good 

cause finding that a general notice of 

proposed rulemaking is not necessary 

earlier in this preamble. Therefore, the 

RFA does not apply and the 

Departments are not required to either 

certify that the rule would not have a 

significant economic impact on a 

substantial number of small entities or 

conduct a regulatory flexibility analysis. 

Nevertheless, the Departments 

carefully considered the likely impact of 

the rule on small entities in connection 

with their assessment under Executive 

Order 12866. Consistent with the policy 

of the RFA, the Departments encourage 

the public to submit comments that 

suggest alternative rules that accomplish 

the stated purpose of the Affordable 

Care Act and minimize the impact on 

small entities. 

D. Special Analyses—Department of the 

Treasury 

Notwithstanding the determinations 

of the Department of Labor and 

Department of Health and Human 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43347 

56Such evidence must be provided as soon as 

possible and sufficiently in advance of the date on 

which the notice of adverse benefit determination 

on review is required to be provided to give the 

claimant a reasonable opportunity to respond prior 

to that date. Additionally, before the plan or issuer 

can issue an adverse benefit determination on 

review based on a new or additional rationale, the 

claimant must be provided, free of charge, with the 

rationale. The rationale must be provided as soon 

as possible and sufficiently in advance of the date 

on which the notice of adverse benefit 

determination on review is required to be provided 

to give the claimant a reasonable opportunity to 

respond prior to that date. 

Services, for purposes of the Department 

of the Treasury, it has been determined 

that this Treasury decision is not a 

significant regulatory action for 

purposes of Executive Order 12866. 

Therefore, a regulatory assessment is not 

required. It has also been determined 

that section 553(b) of the APA (5 U.S.C. 

chapter 5) does not apply to these 

interim final regulations. For the 

applicability of the RFA, refer to the 

Special Analyses section in the 

preamble to the cross-referencing notice 

of proposed rulemaking published 

elsewhere in this issue of the Federal 

Register. Pursuant to section 7805(f) of 

the Code, these temporary regulations 

have been submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small businesses. 

E. Paperwork Reduction Act 

1. Department of Labor and Department 

of the Treasury 

As discussed above in the Department 

of Labor and Department of the Treasury 

PRA section, these interim final 

regulations require group health plans 

and health insurance issuers offering 

group or individual health insurance 

coverage to comply with the DOL claims 

procedure regulation with updated 

standards. They also require such plans 

and issuers to implement an external 

review process. 

Currently, the Departments are 

soliciting 60 days of public comments 

concerning these disclosures. The 

Departments have submitted a copy of 

these interim final regulations to OMB 

in accordance with 44 U.S.C. 3507(d) for 

review of the information collections. 

The Departments and OMB are 

particularly interested in comments 

that: 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

for example, by permitting electronic 

submission of responses. 

Comments should be sent to the 

Office of Information and Regulatory 

Affairs, Attention: Desk Officer for the 

Employee Benefits Security 

Administration either by fax to (202) 

395–7285 or by e-mail to 

oira_submission@omb.eop.gov. A copy 

of the ICR may be obtained by 

contacting the PRA addressee: G. 

Christopher Cosby, Office of Policy and 

Research, U.S. Department of Labor, 

Employee Benefits Security 

Administration, 200 Constitution 

Avenue, NW., Room N–5718, 

Washington, DC 20210. Telephone: 

(202) 693–8410; Fax: (202) 219–4745. 

These are not toll-free numbers. E-mail: 

ebsa.opr@dol.gov. ICRs submitted to 

OMB also are available at reginfo.gov 

(http://www.reginfo.gov/public/do/ 

PRAMain). 

a. Department of Labor and Department 

of the Treasury: Affordable Care Act 

Internal Claims and Appeals and 

External Review Disclosures for NonGrandfathered Plans 

As discussed earlier in this preamble, 

under PHS Act section 2719 and these 

interim final regulations, all sponsors of 

non-grandfathered group health plans 

and health insurance issuers offering 

group health insurance coverage must 

comply with all requirements of the 

DOL claims procedure regulation (29 

CFR 2560.503–1) as well as the new 

standards in paragraph (b)(2)(ii) of these 

interim final regulations. 

Before the enactment of the 

Affordable Care Act, ERISA-covered 

group health plans already were 

required to comply with the 

requirements of the DOL claims 

procedure regulation. The DOL claims 

procedure regulation requires, among 

other things, plans to provide a claimant 

who is denied a claim with a written or 

electronic notice that contains the 

specific reasons for denial, a reference 

to the relevant plan provisions on which 

the denial is based, a description of any 

additional information necessary to 

perfect the claim, and a description of 

steps to be taken if the participant or 

beneficiary wishes to appeal the denial. 

The regulation also requires that any 

adverse decision upon review be in 

writing (including electronic means) 

and include specific reasons for the 

decision, as well as references to 

relevant plan provisions. The 

Departments are not soliciting 

comments concerning an information 

collection request (ICR) pertaining to the 

requirement for ERISA-covered group 

health plans to meet the disclosure 

requirements of DOL’s claims procedure 

regulation, because the costs and 

burdens associated with complying with 

these previsions already are accounted 

for under the Department of Labor’s 

Employee Benefit Plan Claims 

Procedure Under ERISA regulation 

(OMB Control Number 1210–0053). 

Additional hour and cost burden is 

associated with paragraph (b)(2)(ii)(C) of 

these interim final regulations, which 

requires non-grandfathered ERISAcovered group health plans to provide 

the claimant, free of charge, with any 

new or additional evidence considered 

relied upon, or generated by the plan or 

issuer in connection with the claim.56

This requirement increases the 

administrative burden on plans and 

issuers to prepare and deliver the 

additional information to the claimant. 

Additional hour and cost burden also 

is associated with the requirement in 

paragraphs (c) and (d) of the regulations 

which set forth the external review 

requirements. The requirement for 

group health plans to implement an 

external review process will impose an 

hour and cost burden on plans that were 

not required to implement such a 

process before the enactment of the 

Affordable Care Act, such as selfinsured plans, plans in states with no 

external review laws, and plans in states 

with limited scope external review laws 

(such as laws that only impact specific 

market segments like HMOs). 

The Departments estimate that 

approximately 93 percent of large 

benefit and all small benefit plans 

administer claims using a third-party 

provider, or roughly 5 percent of 

covered individuals. In-house 

administration burdens are accounted 

for as hours, while purchased services 

are accounted for as dollar costs. Based 

on the foregoing, total burden hours are 

estimated at 300 hours in 2011, 500 

hours in 2012, and 700 hours in 2013. 

Equivalent costs are $11,000, $19,000, 

and $26,000 respectively. 

As stated in the preceding paragraph, 

the bulk of claims will be processed by 

third-party service providers. Total cost 

is estimated by multiplying the number 

of responses by the amount of time 

required to prepare the documents and 

then multiplying this by the appropriate 

hourly cost of either clerical workers 

mstockstill on DSKH9S0YB1PROD with RULES2

43348 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

57EBSA estimates of labor rates include wages, 

other benefits, and overhead based on the National 

Occupational Employment Survey (May 2008, 

Bureau of Labor Statistics) and the Employment 

Cost Index June 2009, Bureau of Labor Statistics). 

58The special rules in the DOL claims procedure 

regulation applicable only to multiemployer plans, 

as described earlier in this preamble, do not apply 

to health insurance issuers in the individual 

market. 

($26.14) or doctors ($154.07),57 and then 

adding the cost of copying and mailing 

responses ($0.54 each for those not sent 

electronically). Based on the foregoing, 

the Departments estimate that the total 

estimated cost burden for those plans 

that use service providers, including the 

cost of mailing all responses (including 

mailing costs for those prepared inhouse listed in Table 2), is $243,000 in 

2011, $443,000 in 2012, and $607,000 in 

2013. 

Type of Review: New collection. 

Agencies: Employee Benefits Security 

Administration, Department of Labor; 

Internal Revenue Service, U.S. 

Department of the Treasury. 

Title: Affordable Care Act Internal 

Claims and Appeals and External 

Review Disclosures for NonGrandfathered Plans. 

OMB Number: 1210–0144; 1545– 

2182. 

Affected Public: Business or other forprofit; not-for-profit institutions. 

Total Respondents: 607,000. 

Total Responses: 62,000. 

Frequency of Response: Occasionally. 

Estimated Total Annual Burden 

Hours: 150 hours (Employee Benefits 

Security Administration); 150 hours 

(Internal Revenue Service). 

Estimated Total Annual Burden Cost: 

$121,500 (Employee Benefits Security 

Administration); $121,500 (Internal 

Revenue Service). 

2. Department of Health and Human 

Services 

As discussed above in the Department 

of Labor and Department of the Treasury 

PRA section, these interim final 

regulations require group health plans 

and health insurance issuers offering 

group or individual health insurance 

coverage to comply with the DOL claims 

procedure regulation with updated 

standards. They also require such plans 

and issuers to implement an external 

review process. 

a. ICR Regarding Affordable Care Act 

Internal Claims and Appeals and 

External Review Disclosures for NonGrandfathered Plans 

As discussed earlier in the preamble, 

paragraph (b)(2) and (b)(3) of these 

interim final regulations require all 

group health plan sponsors and health 

insurance issuers offering coverage in 

the group and individual health 

insurance markets to comply with the 

requirements of DOL’s claims procedure 

regulation for their internal claims and 

appeals processes. Plan sponsors and 

issuers offering coverage in the group 

market also are required to satisfy the 

additional standards that are imposed 

on group health plans and issuers in 

paragraph (b)(2)(ii) of these interim final 

regulations, while issuers offering 

coverage in the individual health 

insurance market are required to satisfy 

the additional standards set forth in 

paragraph (b)(3)(ii) of these interim final 

regulations. 

On the external review side, for 

purposes of this PRA analysis, the 

Department estimates the hour and cost 

burden for plans that were not 

previously subject to any external 

review requirements (self-insured plans, 

plans in states with no external review 

programs, and non-managed care plans 

in states that require external review 

only for managed care plans) to 

implement an external review process. 

Based on the foregoing, the 

Department estimates that state and 

local governmental plans and issuers 

offering coverage in the individual 

market will incur a total hour burden 

hours of 566,000 hours in 2011, 989,000 

hours in 2012, and 1.2 million hours in 

2013 to comply with equivalent costs of 

$28.1 million in 2011, $57.1 million in 

2012, and $70.1 million in 2013. The 

total estimated cost burden for those 

plans that use service providers, 

including the cost of mailing all 

responses is estimated to be $20.7 

million in 2011, $37.4 million in 2012, 

and $51.1 million in 2013 

The hour and cost burden is 

summarized below: 

Type of Review: New collection. 

Agency: Department of Health and 

Human Services. 

Title: Affordable Care Act Internal 

Claims and Appeals and External 

Review Disclosures. 

OMB Number: 0938–1098. 

Affected Public: Business; State, 

Local, or Tribal Governments. 

Respondents: 27,829. 

Responses: 132,035,000. 

Frequency of Response: Occasionally. 

Estimated Total Annual Burden 

Hours: 566,000 hours. 

Estimated Total Annual Burden Cost: 

$20,700,000. 

b. ICR Regarding Affordable Care Act 

Recordkeeping Requirement for NonGrandfathered Plans 

As discussed earlier in this preamble, 

a health insurance issuer offering 

individual health insurance coverage 

must generally comply with all the 

requirements for the internal claims and 

appeals process that apply to group 

health coverage.58 In addition to these 

standards, paragraph (b)(3)(ii)(H) of 45 

CFR 147.136 requires health insurance 

issuers offering individual health 

insurance coverage to maintain records 

of all claims and notices associated with 

their internal claims and appeals 

processes. The records must be 

maintained for at least six years, which 

is the same requirement for group health 

plans under the ERISA recordkeeping 

requirements. An issuer must make 

such records available for examination 

upon request. Accordingly, a claimant 

or State or Federal agency official 

generally would be able to request and 

receive such documents free of charge. 

The Department assumes that most of 

these records will be kept in the 

ordinary course of the issuers’ business. 

Therefore, the Department estimates 

that the recordkeeping burden imposed 

by this ICR will require five minutes of 

a legal professional’s time (with a rate 

of $119.03/hour) to determine the 

relevant documents that must be 

retained and ten minutes of clerical staff 

time (with a labor rate of $26.14/hour) 

to organize and file the required 

documents to ensure that they are 

accessible to claimants and Federal and 

State governmental agency officials. As 

shown in Table 4, below, overall, the 

Department estimates that there to be a 

total annual hour burden of 1,800 hours 

with an equivalent cost of $105,000. 

TABLE 4—TOTAL HOUR BURDEN AND EQUIVALENT COST

Number Hours Hourly labor 

cost Hour burden Equivalent cost 

(A) (B) (C) A*B A*B*C 

Record Keeping (attorney): Individual ................................. 7,350 0.08 $119 613 $72,906 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43349 

TABLE 4—TOTAL HOUR BURDEN AND EQUIVALENT COST—Continued 

Number Hours Hourly labor 

cost Hour burden Equivalent cost 

(A) (B) (C) A*B A*B*C 

Record Keeping (clerical): Individual ................................... 7,350 0.17 26 1,225 32,022 

Total .............................................................................. ........................ ........................ ........................ 1,838 104,927 

Because this burden is borne solely by 

the insurers offering coverage in the 

individual health insurance market, and 

these issuers are assumed to process all 

claims in-house, there is no annual cost 

burden associated with this collection of 

information. 

These paperwork burden estimates 

are summarized as follows: 

Type of Review: New collection. 

Agency: Department of Health and 

Human Services. 

Title: Affordable Care Act 

Recordkeeping Requirements. 

OMB Number: 0938–1098. 

Affected Public: For Profit Business. 

Respondents: 490. 

Responses: 7,350. 

Frequency of Response: Occasionally. 

Estimated Total Annual Burden 

Hours: 1,800 hours. 

Estimated Total Annual Burden Cost: 

$0. 

If you comment on any of these 

information collection requirements, 

please do either of the following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget: 

Attention: CMS Desk Officer, OCIIO– 

9994–IFC. 

Fax: (202) 395 6974; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

F. Congressional Review Act 

These interim final regulations are 

subject to the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and have 

been transmitted to Congress and the 

Comptroller General for review. 

G. Unfunded Mandates Reform Act 

The Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4) requires 

agencies to prepare several analytic 

statements before proposing any rules 

that may result in annual expenditures 

of $100 million (as adjusted for 

inflation) by State, local and tribal 

governments or the private sector. These 

interim final regulations are not subject 

to the Unfunded Mandates Reform Act 

because they are being issued as interim 

final regulations. However, consistent 

with the policy embodied in the 

Unfunded Mandates Reform Act, the 

regulation has been designed to be the 

least burdensome alternative for State, 

local and tribal governments, and the 

private sector, while achieving the 

objectives of the Affordable Care Act. 

H. Federalism Statement—Department 

of Labor and Department of Health and 

Human Services 

Executive Order 13132 outlines 

fundamental principles of federalism, 

and requires the adherence to specific 

criteria by Federal agencies in the 

process of their formulation and 

implementation of policies that have 

‘‘substantial direct effects’’ on the States, 

the relationship between the national 

government and States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

federalism implications must consult 

with State and local officials, and 

describe the extent of their consultation 

and the nature of the concerns of State 

and local officials in the preamble to the 

regulation. 

In the Departments’ view, these 

interim final regulations have 

federalism implications, because they 

have direct effects on the States, the 

relationship between the national 

government and States, or on the 

distribution of power and 

responsibilities among various levels of 

government. However, in the 

Departments’ view, the federalism 

implications of these interim final 

regulations are substantially mitigated 

because, with respect to health 

insurance issuers, the Departments 

expect that the majority of States will 

enact laws or take other appropriate 

action to implement an internal and 

external appeals process that will meet 

or exceed Federal standards. 

In general, through section 514, 

ERISA supersedes State laws to the 

extent that they relate to any covered 

employee benefit plan, and preserves 

State laws that regulate insurance, 

banking, or securities. While ERISA 

prohibits States from regulating a plan 

as an insurance or investment company 

or bank, the preemption provisions of 

section 731 of ERISA and section 2724 

of the PHS Act (implemented in 29 CFR 

2590.731(a) and 45 CFR 146.143(a)) 

apply so that the HIPAA requirements 

(including those of the Affordable Care 

Act) are not to be ‘‘construed to 

supersede any provision of State law 

which establishes, implements, or 

continues in effect any standard or 

requirement solely relating to health 

insurance issuers in connection with 

group health insurance coverage except 

to the extent that such standard or 

requirement prevents the application of 

a requirement’’ of a Federal standard. 

The conference report accompanying 

HIPAA indicates that this is intended to 

be the ‘‘narrowest’’ preemption of State 

laws. (See House Conf. Rep. No. 104– 

736, at 205, reprinted in 1996 U.S. Code 

Cong. & Admin. News 2018.) States may 

continue to apply State law 

requirements except to the extent that 

such requirements prevent the 

application of the Affordable Care Act 

requirements that are the subject of this 

rulemaking. State insurance laws that 

are more stringent than the Federal 

requirements are unlikely to ‘‘prevent 

the application of ’’ the Affordable Care 

Act, and be preempted. Accordingly, 

States have significant latitude to 

impose requirements on health 

insurance issuers that are more 

restrictive than the Federal law. 

Furthermore, the Departments have 

opined that, in the instance of a group 

health plan providing coverage through 

group health insurance, the issuer will 

be required to follow the external 

review procedures established in State 

law (assuming the State external review 

procedure meets the minimum 

standards set out in these interim final 

rules). 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

States, the Departments have engaged in 

mstockstill on DSKH9S0YB1PROD with RULES2

43350 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

efforts to consult with and work 

cooperatively with affected State and 

local officials, including attending 

conferences of the National Association 

of Insurance Commissioners, meeting 

with NAIC staff counsel on issues 

arising from these interim final 

regulations and consulting with State 

insurance officials on an individual 

basis. It is expected that the 

Departments will act in a similar 

fashion in enforcing the Affordable Care 

Act requirements, including the 

provisions of section 2719 of the PHS 

Act. Throughout the process of 

developing these interim final 

regulations, to the extent feasible within 

the specific preemption provisions of 

HIPAA as it applies to the Affordable 

Care Act, the Departments have 

attempted to balance the States’ 

interests in regulating health insurance 

issuers, and Congress’ intent to provide 

uniform minimum protections to 

consumers in every State. By doing so, 

it is the Departments’ view that they 

have complied with the requirements of 

Executive Order 13132. 

V. Statutory Authority 

The Department of the Treasury 

temporary regulations are adopted 

pursuant to the authority contained in 

sections 7805 and 9833 of the Code. 

The Department of Labor interim final 

regulations are adopted pursuant to the 

authority contained in 29 U.S.C. 1027, 

1059, 1135, 1161–1168, 1169, 1181– 

1183, 1181 note, 1185, 1185a, 1185b, 

1191, 1191a, 1191b, and 1191c; sec. 

101(g), Public Law 104–191, 110 Stat. 

1936; sec. 401(b), Public Law 105–200, 

112 Stat. 645 (42 U.S.C. 651 note); sec. 

512(d), Public Law 110–343, 122 Stat. 

3881; sec. 1001, 1201, and 1562(e), 

Public Law 111–148, 124 Stat. 119, as 

amended by Public Law 111–152, 124 

Stat. 1029; Secretary of Labor’s Order 6– 

2009, 74 FR 21524 (May 7, 2009). 

The Department of Health and Human 

Services interim final regulations are 

adopted pursuant to the authority 

contained in sections 2701 through 

2763, 2791, and 2792 of the PHS Act (42 

U.S.C. 300gg through 300gg–63, 300gg– 

91, and 300gg–92), as amended. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Part 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Approved: July 19, 2010. 

Michael F. Mundaca, 

Assistant Secretary of the Treasury (Tax 

Policy). 

Signed this 16th day of July 2010. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: July 19, 2010. 

Jay Angoff, 

Director, Office of Consumer Information and 

Insurance Oversight. 

Dated: July 19, 2010. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Chapter 1 

■ Accordingly, 26 CFR parts 54 and 602 

are amended as follows: 

PART 54—PENSION EXCISE TAXES 

■ Paragraph 1. The authority citation 

for part 54 is amended by adding an 

entry for § 54.9815–2719T in numerical 

order to read in part as follows: 

Authority: 26 U.S.C. 7805 * * * 

Section 54.9815–2719T also issued under 

26 U.S.C. 9833. 

■ Par. 2. Section 54.9815–2719T is 

added to read as follows: 

§ 54.9815–2719T Internal claims and 

appeals and external review processes 

(temporary). 

(a) Scope and definitions—(1) Scope. 

This section sets forth requirements 

with respect to internal claims and 

appeals and external review processes 

for group health plans and health 

insurance issuers that are not 

grandfathered health plans under 

§ 54.9815–1251T. Paragraph (b) of this 

section provides requirements for 

internal claims and appeals processes. 

Paragraph (c) of this section sets forth 

rules governing the applicability of State 

external review processes. Paragraph (d) 

of this section sets forth a Federal 

external review process for plans and 

issuers not subject to an applicable State 

external review process. Paragraph (e) of 

this section prescribes requirements for 

ensuring that notices required to be 

provided under this section are 

provided in a culturally and 

linguistically appropriate manner. 

Paragraph (f) of this section describes 

the authority of the Secretary to deem 

certain external review processes in 

existence on March 23, 2010 as in 

compliance with paragraph (c) or (d) of 

this section. Paragraph (g) of this section 

sets forth the applicability date for this 

section. 

(2) Definitions. For purposes of this 

section, the following definitions 

apply— 

(i) Adverse benefit determination. An 

adverse benefit determination means an 

adverse benefit determination as 

defined in 29 CFR 2560.503–1, as well 

as any rescission of coverage, as 

described in § 54.9815–2712T(a)(2) 

(whether or not, in connection with the 

rescission, there is an adverse effect on 

any particular benefit at that time). 

(ii) Appeal (or internal appeal). An 

appeal or internal appeal means review 

by a plan or issuer of an adverse benefit 

determination, as required in paragraph 

(b) of this section. 

(iii) Claimant. Claimant means an 

individual who makes a claim under 

this section. For purposes of this 

section, references to claimant include a 

claimant’s authorized representative. 

(iv) External review. External review 

means a review of an adverse benefit 

determination (including a final internal 

adverse benefit determination) 

conducted pursuant to an applicable 

State external review process described 

in paragraph (c) of this section or the 

Federal external review process of 

paragraph (d) of this section. 

(v) Final internal adverse benefit 

determination. A final internal adverse 

benefit determination means an adverse 

benefit determination that has been 

upheld by a plan or issuer at the 

completion of the internal appeals 

process applicable under paragraph (b) 

of this section (or an adverse benefit 

determination with respect to which the 

internal appeals process has been 

exhausted under the deemed exhaustion 

rules of paragraph (b)(2)(ii)(F) of this 

section). 

(vi) Final external review decision. A 

final external review decision, as used 

in paragraph (d) of this section, means 

a determination by an independent 

review organization at the conclusion of 

an external review. 

(vii) Independent review organization 

(or IRO). An independent review 

organization (or IRO) means an entity 

that conducts independent external 

reviews of adverse benefit 

determinations and final internal 

adverse benefit determinations pursuant 

to paragraph (c) or (d) of this section. 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43351 

(viii) NAIC Uniform Model Act. The 

NAIC Uniform Model Act means the 

Uniform Health Carrier External Review 

Model Act promulgated by the National 

Association of Insurance Commissioners 

in place on July 23, 2010. 

(b) Internal claims and appeals 

process—(1) In general. A group health 

plan and a health insurance issuer 

offering group health insurance 

coverage must implement an effective 

internal claims and appeals process, as 

described in this paragraph (b). 

(2) Requirements for group health 

plans and group health insurance 

issuers. A group health plan and a 

health insurance issuer offering group 

health insurance coverage must comply 

with all the requirements of this 

paragraph (b)(2). In the case of health 

insurance coverage offered in 

connection with a group health plan, if 

either the plan or the issuer complies 

with the internal claims and appeals 

process of this paragraph (b)(2), then the 

obligation to comply with this 

paragraph (b)(2) is satisfied for both the 

plan and the issuer with respect to the 

health insurance coverage. 

(i) Minimum internal claims and 

appeals standards. A group health plan 

and a health insurance issuer offering 

group health insurance coverage must 

comply with all the requirements 

applicable to group health plans under 

29 CFR 2560.503–1, except to the extent 

those requirements are modified by 

paragraph (b)(2)(ii) of this section. 

Accordingly, under this paragraph (b), 

with respect to health insurance 

coverage offered in connection with a 

group health plan, the group health 

insurance issuer is subject to the 

requirements in 29 CFR 2560.503–1 to 

the same extent as the group health 

plan. 

(ii) Additional standards. In addition 

to the requirements in paragraph 

(b)(2)(i) of this section, the internal 

claims and appeals processes of a group 

health plan and a health insurance 

issuer offering group health insurance 

coverage must meet the requirements of 

this paragraph (b)(2)(ii). 

(A) Clarification of meaning of 

adverse benefit determination. For 

purposes of this paragraph (b)(2), an 

‘‘adverse benefit determination’’ 

includes an adverse benefit 

determination as defined in paragraph 

(a)(2)(i) of this section. Accordingly, in 

complying with 29 CFR 2560.503–1, as 

well as the other provisions of this 

paragraph (b)(2), a plan or issuer must 

treat a rescission of coverage (whether 

or not the rescission has an adverse 

effect on any particular benefit at that 

time) as an adverse benefit 

determination. (Rescissions of coverage 

are subject to the requirements of 

§ 54.9815–2712T.) 

(B) Expedited notification of benefit 

determinations involving urgent care. 

Notwithstanding the rule of 29 CFR 

2560.503–1(f)(2)(i) that provides for 

notification in the case of urgent care 

claims not later than 72 hours after the 

receipt of the claim, for purposes of this 

paragraph (b)(2), a plan and issuer must 

notify a claimant of a benefit 

determination (whether adverse or not) 

with respect to a claim involving urgent 

care as soon as possible, taking into 

account the medical exigencies, but not 

later than 24 hours after the receipt of 

the claim by the plan or issuer, unless 

the claimant fails to provide sufficient 

information to determine whether, or to 

what extent, benefits are covered or 

payable under the plan or health 

insurance coverage. The requirements of 

29 CFR 2560.503–1(f)(2)(i) other than 

the rule for notification within 72 hours 

continue to apply to the plan and issuer. 

For purposes of this paragraph 

(b)(2)(ii)(B), a claim involving urgent 

care has the meaning given in 29 CFR 

2560.503–1(m)(1). 

(C) Full and fair review. A plan and 

issuer must allow a claimant to review 

the claim file and to present evidence 

and testimony as part of the internal 

claims and appeals process. 

Specifically, in addition to complying 

with the requirements of 29 CFR 

2560.503–1(h)(2)— 

(1) The plan or issuer must provide 

the claimant, free of charge, with any 

new or additional evidence considered, 

relied upon, or generated by the plan or 

issuer (or at the direction of the plan or 

issuer) in connection with the claim; 

such evidence must be provided as soon 

as possible and sufficiently in advance 

of the date on which the notice of final 

internal adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date; and 

(2) Before the plan or issuer can issue 

a final internal adverse benefit 

determination based on a new or 

additional rationale, the claimant must 

be provided, free of charge, with the 

rationale; the rationale must be 

provided as soon as possible and 

sufficiently in advance of the date on 

which the notice of final internal 

adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date. 

(D) Avoiding conflicts of interest. In 

addition to the requirements of 29 CFR 

2560.503–1(b) and (h) regarding full and 

fair review, the plan and issuer must 

ensure that all claims and appeals are 

adjudicated in a manner designed to 

ensure the independence and 

impartiality of the persons involved in 

making the decision. Accordingly, 

decisions regarding hiring, 

compensation, termination, promotion, 

or other similar matters with respect to 

any individual (such as a claims 

adjudicator or medical expert) must not 

be made based upon the likelihood that 

the individual will support the denial of 

benefits. 

(E) Notice. A plan and issuer must 

provide notice to individuals, in a 

culturally and linguistically appropriate 

manner (as described in paragraph (e) of 

this section) that complies with the 

requirements of 29 CFR 2560.503–1(g) 

and (j). The plan and issuer must also 

comply with the additional 

requirements of this paragraph 

(b)(2)(ii)(E). 

(1) The plan and issuer must ensure 

that any notice of adverse benefit 

determination or final internal adverse 

benefit determination includes 

information sufficient to identify the 

claim involved (including the date of 

service, the health care provider, the 

claim amount (if applicable), the 

diagnosis code and its corresponding 

meaning, and the treatment code and its 

corresponding meaning). 

(2) The plan and issuer must ensure 

that the reason or reasons for the 

adverse benefit determination or final 

internal adverse benefit determination 

includes the denial code and its 

corresponding meaning, as well as a 

description of the plan’s or issuer’s 

standard, if any, that was used in 

denying the claim. In the case of a 

notice of final internal adverse benefit 

determination, this description must 

include a discussion of the decision. 

(3) The plan and issuer must provide 

a description of available internal 

appeals and external review processes, 

including information regarding how to 

initiate an appeal. 

(4) The plan and issuer must disclose 

the availability of, and contact 

information for, any applicable office of 

health insurance consumer assistance or 

ombudsman established under PHS Act 

section 2793 to assist individuals with 

the internal claims and appeals and 

external review processes. 

(F) Deemed exhaustion of internal 

claims and appeals processes. In the 

case of a plan or issuer that fails to 

strictly adhere to all the requirements of 

this paragraph (b)(2) with respect to a 

claim, the claimant is deemed to have 

exhausted the internal claims and 

appeals process of this paragraph (b), 

regardless of whether the plan or issuer 

asserts that it substantially complied 

mstockstill on DSKH9S0YB1PROD with RULES2

43352 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

with the requirements of this paragraph 

(b)(2) or that any error it committed was 

de minimis. Accordingly the claimant 

may initiate an external review under 

paragraph (c) or (d) of this section, as 

applicable. The claimant is also entitled 

to pursue any available remedies under 

section 502(a) of ERISA or under State 

law, as applicable, on the basis that the 

plan or issuer has failed to provide a 

reasonable internal claims and appeals 

process that would yield a decision on 

the merits of the claim. If a claimant 

chooses to pursue remedies under 

section 502(a) of ERISA under such 

circumstances, the claim or appeal is 

deemed denied on review without the 

exercise of discretion by an appropriate 

fiduciary. 

(iii) Requirement to provide continued 

coverage pending the outcome of an 

appeal. A plan and issuer subject to the 

requirements of this paragraph (b)(2) are 

required to provide continued coverage 

pending the outcome of an appeal. For 

this purpose, the plan and issuer must 

comply with the requirements of 29 CFR 

2560.503–1(f)(2)(ii), which generally 

provides that benefits for an ongoing 

course of treatment cannot be reduced 

or terminated without providing 

advance notice and an opportunity for 

advance review. 

(c) State standards for external 

review—(1) In general. (i) If a State 

external review process that applies to 

and is binding on a health insurance 

issuer offering group health insurance 

coverage includes at a minimum the 

consumer protections in the NAIC 

Uniform Model Act, then the issuer 

must comply with the applicable State 

external review process and is not 

required to comply with the Federal 

external review process of paragraph (d) 

of this section. In such a case, to the 

extent that benefits under a group health 

plan are provided through health 

insurance coverage, the group health 

plan is not required to comply with 

either this paragraph (c) or the Federal 

external review process of paragraph (d) 

of this section. 

(ii) To the extent that a group health 

plan provides benefits other than 

through health insurance coverage (that 

is, the plan is self-insured) and is 

subject to a State external review 

process that applies to and is binding on 

the plan (for example, is not preempted 

by ERISA) and the State external review 

process includes at a minimum the 

consumer protections in the NAIC 

Uniform Model Act, then the plan must 

comply with the applicable State 

external review process and is not 

required to comply with the Federal 

external review process of paragraph (d) 

of this section. 

(iii) If a plan or issuer is not required 

under paragraph (c)(1)(i) or (c)(1)(ii) of 

this section to comply with the 

requirements of this paragraph (c), then 

the plan or issuer must comply with the 

Federal external review process of 

paragraph (d) of this section, except to 

the extent, in the case of a plan, the plan 

is not required under paragraph (c)(1)(i) 

of this section to comply with paragraph 

(d) of this section. 

(2) Minimum standards for State 

external review processes. An applicable 

State external review process must meet 

all the minimum consumer protections 

in this paragraph (c)(2). The Department 

of Health and Human Services will 

determine whether State external review 

processes meet these requirements. 

(i) The State process must provide for 

the external review of adverse benefit 

determinations (including final internal 

adverse benefit determinations) by 

issuers (or, if applicable, plans) that are 

based on the issuer’s (or plan’s) 

requirements for medical necessity, 

appropriateness, health care setting, 

level of care, or effectiveness of a 

covered benefit. 

(ii) The State process must require 

issuers (or, if applicable, plans) to 

provide effective written notice to 

claimants of their rights in connection 

with an external review for an adverse 

benefit determination. 

(iii) To the extent the State process 

requires exhaustion of an internal 

claims and appeals process, exhaustion 

must be unnecessary where the issuer 

(or, if applicable, the plan) has waived 

the requirement, the issuer (or the plan) 

is considered to have exhausted the 

internal claims and appeals process 

under applicable law (including by 

failing to comply with any of the 

requirements for the internal appeal 

process, as outlined in paragraph (b)(2) 

of this section), or the claimant has 

applied for expedited external review at 

the same time as applying for an 

expedited internal appeal. 

(iv) The State process provides that 

the issuer (or, if applicable, the plan) 

against which a request for external 

review is filed must pay the cost of the 

IRO for conducting the external review. 

Notwithstanding this requirement, the 

State external review process may 

require a nominal filing fee from the 

claimant requesting an external review. 

For this purpose, to be considered 

nominal, a filing fee must not exceed 

$25, it must be refunded to the claimant 

if the adverse benefit determination (or 

final internal adverse benefit 

determination) is reversed through 

external review, it must be waived if 

payment of the fee would impose an 

undue financial hardship, and the 

annual limit on filing fees for any 

claimant within a single plan year must 

not exceed $75. 

(v) The State process may not impose 

a restriction on the minimum dollar 

amount of a claim for it to be eligible for 

external review. Thus, the process may 

not impose, for example, a $500 

minimum claims threshold. 

(vi) The State process must allow at 

least four months after the receipt of a 

notice of an adverse benefit 

determination or final internal adverse 

benefit determination for a request for 

an external review to be filed. 

(vii) The State process must provide 

that IROs will be assigned on a random 

basis or another method of assignment 

that assures the independence and 

impartiality of the assignment process 

(such as rotational assignment) by a 

State or independent entity, and in no 

event selected by the issuer, plan, or the 

individual. 

(viii) The State process must provide 

for maintenance of a list of approved 

IROs qualified to conduct the external 

review based on the nature of the health 

care service that is the subject of the 

review. The State process must provide 

for approval only of IROs that are 

accredited by a nationally recognized 

private accrediting organization. 

(ix) The State process must provide 

that any approved IRO has no conflicts 

of interest that will influence its 

independence. Thus, the IRO may not 

own or control, or be owned or 

controlled by a health insurance issuer, 

a group health plan, the sponsor of a 

group health plan, a trade association of 

plans or issuers, or a trade association 

of health care providers. The State 

process must further provide that the 

IRO and the clinical reviewer assigned 

to conduct an external review may not 

have a material professional, familial, or 

financial conflict of interest with the 

issuer or plan that is the subject of the 

external review; the claimant (and any 

related parties to the claimant) whose 

treatment is the subject of the external 

review; any officer, director, or 

management employee of the issuer; the 

plan administrator, plan fiduciaries, or 

plan employees; the health care 

provider, the health care provider’s 

group, or practice association 

recommending the treatment that is 

subject to the external review; the 

facility at which the recommended 

treatment would be provided; or the 

developer or manufacturer of the 

principal drug, device, procedure, or 

other therapy being recommended. 

(x) The State process allows the 

claimant at least five business days to 

submit to the IRO in writing additional 

information that the IRO must consider 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43353 

when conducting the external review 

and it requires that the claimant is 

notified of the right to do so. The 

process must also require that any 

additional information submitted by the 

claimant to the IRO must be forwarded 

to the issuer (or, if applicable, the plan) 

within one business day of receipt by 

the IRO. 

(xi) The State process must provide 

that the decision is binding on the 

issuer (or, if applicable, the plan), as 

well as the claimant except to the extent 

that other remedies are available under 

State or Federal law. 

(xii) The State process must require, 

for standard external review, that the 

IRO provide written notice to the 

claimant and the issuer (or, if 

applicable, the plan) of its decision to 

uphold or reverse the adverse benefit 

determination (or final internal adverse 

benefit determination) within no more 

than 45 days after the receipt of the 

request for external review by the IRO. 

(xiii) The State process must provide 

for an expedited external review if the 

adverse benefit determination (or final 

internal adverse benefit determination) 

concerns an admission, availability of 

care, continued stay, or health care 

service for which the claimant received 

emergency services, but has not been 

discharged from a facility; or involves a 

medical condition for which the 

standard external review time frame 

would seriously jeopardize the life or 

health of the claimant or jeopardize the 

claimant’s ability to regain maximum 

function. As expeditiously as possible 

but within no more than 72 hours after 

the receipt of the request for expedited 

external review by the IRO, the IRO 

must make its decision to uphold or 

reverse the adverse benefit 

determination (or final internal adverse 

benefit determination) and notify the 

claimant and the issuer (or, if 

applicable, the plan) of the 

determination. If the notice is not in 

writing, the IRO must provide written 

confirmation of the decision within 48 

hours after the date of the notice of the 

decision. 

(xiv) The State process must require 

that issuers (or, if applicable, plans) 

include a description of the external 

review process in or attached to the 

summary plan description, policy, 

certificate, membership booklet, outline 

of coverage, or other evidence of 

coverage it provides to participants, 

beneficiaries, or enrollees, substantially 

similar to what is set forth in section 17 

of the NAIC Uniform Model Act. 

(xv) The State process must require 

that IROs maintain written records and 

make them available upon request to the 

State, substantially similar to what is set 

forth in section 15 of the NAIC Uniform 

Model Act. 

(xvi) The State process follows 

procedures for external review of 

adverse benefit determinations (or final 

internal adverse benefit determinations) 

involving experimental or 

investigational treatment, substantially 

similar to what is set forth in section 10 

of the NAIC Uniform Model Act. 

(3) Transition period for existing 

external review processes—(i) For plan 

years beginning before July 1, 2011, an 

applicable State external review process 

applicable to a health insurance issuer 

or group health plan is considered to 

meet the requirements of this paragraph 

(c). Accordingly, for plan years 

beginning before July 1, 2011, an 

applicable State external review process 

will be considered binding on the issuer 

or plan (in lieu of the requirements of 

the Federal external review process). If 

there is no applicable State external 

review process, the issuer or plan is 

required to comply with the 

requirements of the Federal external 

review process in paragraph (d) of this 

section. 

(ii) For final internal adverse benefit 

determinations (or, in the case of 

simultaneous internal appeal and 

external review, adverse benefit 

determinations) provided after the first 

day of the first plan year beginning on 

or after July 1, 2011, the Federal 

external review process will apply 

unless the Department of Health and 

Human Services determines that a State 

law meets all the minimum standards of 

paragraph (c)(2) of this section as of the 

first day of the plan year. 

(d) Federal external review process. A 

plan or issuer not subject to an 

applicable State external review process 

under paragraph (c) of this section must 

provide an effective Federal external 

review process in accordance with this 

paragraph (d) (except to the extent, in 

the case of a plan, the plan is described 

in paragraph (c)(1)(i) of this section as 

not having to comply with this 

paragraph (d)). In the case of health 

insurance coverage offered in 

connection with a group health plan, if 

either the plan or the issuer complies 

with the Federal external review process 

of this paragraph (d), then the obligation 

to comply with this paragraph (d) is 

satisfied for both the plan and the issuer 

with respect to the health insurance 

coverage. 

(1) Scope. The Federal external 

review process established pursuant to 

this paragraph (d) applies to any adverse 

benefit determination or final internal 

adverse benefit determination as 

defined in paragraphs (a)(2)(i) and 

(a)(2)(v) of this section, except that a 

denial, reduction, termination, or a 

failure to provide payment for a benefit 

based on a determination that a 

participant or beneficiary fails to meet 

the requirements for eligibility under 

the terms of a group health plan is not 

eligible for the external review process 

under this paragraph (d). 

(2) External review process standards. 

The Federal external review process 

established pursuant to this paragraph 

(d) will be similar to the process set 

forth in the NAIC Uniform Model Act 

and will meet standards issued by the 

Secretary. These standards will comply 

with all of the requirements described 

in this paragraph (d)(2). 

(i) These standards will describe how 

a claimant initiates an external review, 

procedures for preliminary reviews to 

determine whether a claim is eligible for 

external review, minimum 

qualifications for IROs, a process for 

approving IROs eligible to be assigned 

to conduct external reviews, a process 

for random assignment of external 

reviews to approved IROs, standards for 

IRO decision-making, and rules for 

providing notice of a final external 

review decision. 

(ii) These standards will provide an 

expedited external review process for— 

(A) An adverse benefit determination, 

if the adverse benefit determination 

involves a medical condition of the 

claimant for which the timeframe for 

completion of an expedited internal 

appeal under paragraph (b) of this 

section would seriously jeopardize the 

life or health of the claimant, or would 

jeopardize the claimant’s ability to 

regain maximum function and the 

claimant has filed a request for an 

expedited internal appeal under 

paragraph (b) of this section; or 

(B) A final internal adverse benefit 

determination, if the claimant has a 

medical condition where the timeframe 

for completion of a standard external 

review pursuant to paragraph (d)(3) of 

this section would seriously jeopardize 

the life or health of the claimant or 

would jeopardize the claimant’s ability 

to regain maximum function, or if the 

final internal adverse benefit 

determination concerns an admission, 

availability of care, continued stay, or 

health care service for which the 

claimant received emergency services, 

but has not been discharged from a 

facility. 

(iii) With respect to claims involving 

experimental or investigational 

treatments, these standards will also 

provide additional consumer 

protections to ensure that adequate 

clinical and scientific experience and 

protocols are taken into account as part 

of the external review process. 

mstockstill on DSKH9S0YB1PROD with RULES2

43354 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

(iv) These standards will provide that 

an external review decision is binding 

on the plan or issuer, as well as the 

claimant, except to the extent other 

remedies are available under State or 

Federal law. 

(v) These standards may establish 

external review reporting requirements 

for IROs. 

(vi) These standards will establish 

additional notice requirements for plans 

and issuers regarding disclosures to 

participants and beneficiaries describing 

the Federal external review procedures 

(including the right to file a request for 

an external review of an adverse benefit 

determination or a final internal adverse 

benefit determination in the summary 

plan description, policy, certificate, 

membership booklet, outline of 

coverage, or other evidence of coverage 

it provides to participants or 

beneficiaries). 

(vii) These standards will require 

plans and issuers to provide information 

relevant to the processing of the external 

review, including, but not limited to, 

the information considered and relied 

on in making the adverse benefit 

determination or final internal adverse 

benefit determination. 

(e) Form and manner of notice. (1) For 

purposes of this section, a group health 

plan and health insurance issuer 

offering group health insurance 

coverage are considered to provide 

relevant notices in a culturally and 

linguistically appropriate manner— 

(i) For a plan that covers fewer than 

100 participants at the beginning of a 

plan year, if the plan and issuer provide 

notices upon request in a non-English 

language in which 25 percent or more 

of all plan participants are literate only 

in the same non-English language; or 

(ii) For a plan that covers 100 or more 

participants at the beginning of a plan 

year, if the plan and issuer provide 

notices upon request in a non-English 

language in which the lesser of 500 or 

more participants, or 10 percent or more 

of all plan participants, are literate only 

in the same non-English language. 

(2) If an applicable threshold 

described in paragraph (e)(1) of this 

section is met, the plan and issuer must 

also— 

(i) Include a statement in the English 

versions of all notices, prominently 

displayed in the non-English language, 

offering the provision of such notices in 

the non-English language; 

(ii) Once a request has been made by 

a claimant, provide all subsequent 

notices to the claimant in the nonEnglish language; and 

(iii) To the extent the plan or issuer 

maintains a customer assistance process 

(such as a telephone hotline) that 

answers questions or provides 

assistance with filing claims and 

appeals, the plan or issuer must provide 

such assistance in the non-English 

language. 

(f) Secretarial authority. The Secretary 

may determine that the external review 

process of a group health plan or health 

insurance issuer, in operation as of 

March 23, 2010, is considered in 

compliance with the applicable process 

established under paragraph (c) or (d) of 

this section if it substantially meets the 

requirements of paragraph (c) or (d) of 

this section, as applicable. 

(g) Applicability/effective date. The 

provisions of this section apply for plan 

years beginning on or after September 

23, 2010. See § 54.9815–1251T for 

determining the application of this 

section to grandfathered health plans 

(providing that these rules regarding 

internal claims and appeals and external 

review processes do not apply to 

grandfathered health plans). 

(h) Expiration date. The applicability 

of this section expires on July 22, 2013 

or on such earlier date as may be 

provided in final regulations or other 

action published in the Federal 

Register. 

PART 602—OMB CONTROL NUMBERS 

UNDER THE PAPERWORK 

REDUCTION ACT 

■ Par. 3. The authority citation for part 

602 continues to read in part as follows: 

Authority: 26 U.S.C. 7805. 

■ Par. 4. Section 602.101(b) is amended 

by adding the following entry in 

numerical order to the table to read as 

follows: 

§ 602.101 OMB Control numbers. 

* * * * * 

(b) * * * 

CFR part or section where 

identified and described 

Current 

OMB control 

No. 

* * * * * 

54.9815–2719T ......................... 1545–2182 

* * * * * 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

■ 29 CFR part 2590 is amended as 

follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 1. The authority citation for part 2590 

continues to read as follows: 

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1191, 1191a, 1191b, and 

1191c; sec. 101(g), Pub. L. 104–191, 110 Stat. 

1936; sec. 401(b), Pub. L. 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. 

110–343, 122 Stat. 3881; sec. 1001, 1201, and 

1562(e), Pub. L. 111–148, 124 Stat. 119, as 

amended by Pub. L. 111–152, 124 Stat. 1029; 

Secretary of Labor’s Order 6–2009, 74 FR 

21524 (May 7, 2009). 

Subpart C—Other Requirements 

■ 2. Section 2590.715–2719 is added to 

subpart C to read as follows: 

§ 2590.715–2719 Internal claims and 

appeals and external review processes. 

(a) Scope and definitions—(1) Scope. 

This section sets forth requirements 

with respect to internal claims and 

appeals and external review processes 

for group health plans and health 

insurance issuers that are not 

grandfathered health plans under 

§ 2590.715–1251 of this part. Paragraph 

(b) of this section provides requirements 

for internal claims and appeals 

processes. Paragraph (c) of this section 

sets forth rules governing the 

applicability of State external review 

processes. Paragraph (d) of this section 

sets forth a Federal external review 

process for plans and issuers not subject 

to an applicable State external review 

process. Paragraph (e) of this section 

prescribes requirements for ensuring 

that notices required to be provided 

under this section are provided in a 

culturally and linguistically appropriate 

manner. Paragraph (f) of this section 

describes the authority of the Secretary 

to deem certain external review 

processes in existence on March 23, 

2010 as in compliance with paragraph 

(c) or (d) of this section. Paragraph (g) 

of this section sets forth the 

applicability date for this section. 

(2) Definitions. For purposes of this 

section, the following definitions 

apply— 

(i) Adverse benefit determination. An 

adverse benefit determination means an 

adverse benefit determination as 

defined in 29 CFR 2560.503–1, as well 

as any rescission of coverage, as 

described in § 2590.715–2712(a)(2) of 

this part (whether or not, in connection 

with the rescission, there is an adverse 

effect on any particular benefit at that 

time). 

(ii) Appeal (or internal appeal). An 

appeal or internal appeal means review 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43355 

by a plan or issuer of an adverse benefit 

determination, as required in paragraph 

(b) of this section. 

(iii) Claimant. Claimant means an 

individual who makes a claim under 

this section. For purposes of this 

section, references to claimant include a 

claimant’s authorized representative. 

(iv) External review. External review 

means a review of an adverse benefit 

determination (including a final internal 

adverse benefit determination) 

conducted pursuant to an applicable 

State external review process described 

in paragraph (c) of this section or the 

Federal external review process of 

paragraph (d) of this section. 

(v) Final internal adverse benefit 

determination. A final internal adverse 

benefit determination means an adverse 

benefit determination that has been 

upheld by a plan or issuer at the 

completion of the internal appeals 

process applicable under paragraph (b) 

of this section (or an adverse benefit 

determination with respect to which the 

internal appeals process has been 

exhausted under the deemed exhaustion 

rules of paragraph (b)(2)(ii)(F) of this 

section). 

(vi) Final external review decision. A 

final external review decision, as used 

in paragraph (d) of this section, means 

a determination by an independent 

review organization at the conclusion of 

an external review. 

(vii) Independent review organization 

(or IRO). An independent review 

organization (or IRO) means an entity 

that conducts independent external 

reviews of adverse benefit 

determinations and final internal 

adverse benefit determinations pursuant 

to paragraph (c) or (d) of this section. 

(viii) NAIC Uniform Model Act. The 

NAIC Uniform Model Act means the 

Uniform Health Carrier External Review 

Model Act promulgated by the National 

Association of Insurance Commissioners 

in place on July 23, 2010. 

(b) Internal claims and appeals 

process—(1) In general. A group health 

plan and a health insurance issuer 

offering group health insurance 

coverage must implement an effective 

internal claims and appeals process, as 

described in this paragraph (b). 

(2) Requirements for group health 

plans and group health insurance 

issuers. A group health plan and a 

health insurance issuer offering group 

health insurance coverage must comply 

with all the requirements of this 

paragraph (b)(2). In the case of health 

insurance coverage offered in 

connection with a group health plan, if 

either the plan or the issuer complies 

with the internal claims and appeals 

process of this paragraph (b)(2), then the 

obligation to comply with this 

paragraph (b)(2) is satisfied for both the 

plan and the issuer with respect to the 

health insurance coverage. 

(i) Minimum internal claims and 

appeals standards. A group health plan 

and a health insurance issuer offering 

group health insurance coverage must 

comply with all the requirements 

applicable to group health plans under 

29 CFR 2560.503–1, except to the extent 

those requirements are modified by 

paragraph (b)(2)(ii) of this section. 

Accordingly, under this paragraph (b), 

with respect to health insurance 

coverage offered in connection with a 

group health plan, the group health 

insurance issuer is subject to the 

requirements in 29 CFR 2560.503–1 to 

the same extent as the group health 

plan. 

(ii) Additional standards. In addition 

to the requirements in paragraph 

(b)(2)(i) of this section, the internal 

claims and appeals processes of a group 

health plan and a health insurance 

issuer offering group health insurance 

coverage must meet the requirements of 

this paragraph (b)(2)(ii). 

(A) Clarification of meaning of 

adverse benefit determination. For 

purposes of this paragraph (b)(2), an 

‘‘adverse benefit determination’’ 

includes an adverse benefit 

determination as defined in paragraph 

(a)(2)(i) of this section. Accordingly, in 

complying with 29 CFR 2560.503–1, as 

well as the other provisions of this 

paragraph (b)(2), a plan or issuer must 

treat a rescission of coverage (whether 

or not the rescission has an adverse 

effect on any particular benefit at that 

time) as an adverse benefit 

determination. (Rescissions of coverage 

are subject to the requirements of 

§ 2590.715–2712 of this part.) 

(B) Expedited notification of benefit 

determinations involving urgent care. 

Notwithstanding the rule of 29 CFR 

2560.503–1(f)(2)(i) that provides for 

notification in the case of urgent care 

claims not later than 72 hours after the 

receipt of the claim, for purposes of this 

paragraph (b)(2), a plan and issuer must 

notify a claimant of a benefit 

determination (whether adverse or not) 

with respect to a claim involving urgent 

care as soon as possible, taking into 

account the medical exigencies, but not 

later than 24 hours after the receipt of 

the claim by the plan or issuer, unless 

the claimant fails to provide sufficient 

information to determine whether, or to 

what extent, benefits are covered or 

payable under the plan or health 

insurance coverage. The requirements of 

29 CFR 2560.503–1(f)(2)(i) other than 

the rule for notification within 72 hours 

continue to apply to the plan and issuer. 

For purposes of this paragraph 

(b)(2)(ii)(B), a claim involving urgent 

care has the meaning given in 29 CFR 

2560.503–1(m)(1). 

(C) Full and fair review. A plan and 

issuer must allow a claimant to review 

the claim file and to present evidence 

and testimony as part of the internal 

claims and appeals process. 

Specifically, in addition to complying 

with the requirements of 29 CFR 

2560.503–1(h)(2)— 

(1) The plan or issuer must provide 

the claimant, free of charge, with any 

new or additional evidence considered, 

relied upon, or generated by the plan or 

issuer (or at the direction of the plan or 

issuer) in connection with the claim; 

such evidence must be provided as soon 

as possible and sufficiently in advance 

of the date on which the notice of final 

internal adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date; and 

(2) Before the plan or issuer can issue 

a final internal adverse benefit 

determination based on a new or 

additional rationale, the claimant must 

be provided, free of charge, with the 

rationale; the rationale must be 

provided as soon as possible and 

sufficiently in advance of the date on 

which the notice of final internal 

adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date. 

(D) Avoiding conflicts of interest. In 

addition to the requirements of 29 CFR 

2560.503–1(b) and (h) regarding full and 

fair review, the plan and issuer must 

ensure that all claims and appeals are 

adjudicated in a manner designed to 

ensure the independence and 

impartiality of the persons involved in 

making the decision. Accordingly, 

decisions regarding hiring, 

compensation, termination, promotion, 

or other similar matters with respect to 

any individual (such as a claims 

adjudicator or medical expert) must not 

be made based upon the likelihood that 

the individual will support the denial of 

benefits. 

(E) Notice. A plan and issuer must 

provide notice to individuals, in a 

culturally and linguistically appropriate 

manner (as described in paragraph (e) of 

this section) that complies with the 

requirements of 29 CFR 2560.503–1(g) 

and (j). The plan and issuer must also 

comply with the additional 

requirements of this paragraph 

(b)(2)(ii)(E). 

(1) The plan and issuer must ensure 

that any notice of adverse benefit 

mstockstill on DSKH9S0YB1PROD with RULES2

43356 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

determination or final internal adverse 

benefit determination includes 

information sufficient to identify the 

claim involved (including the date of 

service, the health care provider, the 

claim amount (if applicable), the 

diagnosis code and its corresponding 

meaning, and the treatment code and its 

corresponding meaning). 

(2) The plan and issuer must ensure 

that the reason or reasons for the 

adverse benefit determination or final 

internal adverse benefit determination 

includes the denial code and its 

corresponding meaning, as well as a 

description of the plan’s or issuer’s 

standard, if any, that was used in 

denying the claim. In the case of a 

notice of final internal adverse benefit 

determination, this description must 

include a discussion of the decision. 

(3) The plan and issuer must provide 

a description of available internal 

appeals and external review processes, 

including information regarding how to 

initiate an appeal. 

(4) The plan and issuer must disclose 

the availability of, and contact 

information for, any applicable office of 

health insurance consumer assistance or 

ombudsman established under PHS Act 

section 2793 to assist individuals with 

the internal claims and appeals and 

external review processes. 

(F) Deemed exhaustion of internal 

claims and appeals processes. In the 

case of a plan or issuer that fails to 

strictly adhere to all the requirements of 

this paragraph (b)(2) with respect to a 

claim, the claimant is deemed to have 

exhausted the internal claims and 

appeals process of this paragraph (b), 

regardless of whether the plan or issuer 

asserts that it substantially complied 

with the requirements of this paragraph 

(b)(2) or that any error it committed was 

de minimis. Accordingly the claimant 

may initiate an external review under 

paragraph (c) or (d) of this section, as 

applicable. The claimant is also entitled 

to pursue any available remedies under 

section 502(a) of ERISA or under State 

law, as applicable, on the basis that the 

plan or issuer has failed to provide a 

reasonable internal claims and appeals 

process that would yield a decision on 

the merits of the claim. If a claimant 

chooses to pursue remedies under 

section 502(a) of ERISA under such 

circumstances, the claim or appeal is 

deemed denied on review without the 

exercise of discretion by an appropriate 

fiduciary. 

(iii) Requirement to provide continued 

coverage pending the outcome of an 

appeal. A plan and issuer subject to the 

requirements of this paragraph (b)(2) are 

required to provide continued coverage 

pending the outcome of an appeal. For 

this purpose, the plan and issuer must 

comply with the requirements of 29 CFR 

2560.503–1(f)(2)(ii), which generally 

provides that benefits for an ongoing 

course of treatment cannot be reduced 

or terminated without providing 

advance notice and an opportunity for 

advance review. 

(c) State standards for external 

review—(1) In general. (i) If a State 

external review process that applies to 

and is binding on a health insurance 

issuer offering group health insurance 

coverage includes at a minimum the 

consumer protections in the NAIC 

Uniform Model Act, then the issuer 

must comply with the applicable State 

external review process and is not 

required to comply with the Federal 

external review process of paragraph (d) 

of this section. In such a case, to the 

extent that benefits under a group health 

plan are provided through health 

insurance coverage, the group health 

plan is not required to comply with 

either this paragraph (c) or the Federal 

external review process of paragraph (d) 

of this section. 

(ii) To the extent that a group health 

plan provides benefits other than 

through health insurance coverage (that 

is, the plan is self-insured) and is 

subject to a State external review 

process that applies to and is binding on 

the plan (for example, is not preempted 

by ERISA) and the State external review 

process includes at a minimum the 

consumer protections in the NAIC 

Uniform Model Act, then the plan must 

comply with the applicable State 

external review process and is not 

required to comply with the Federal 

external review process of paragraph (d) 

of this section. 

(iii) If a plan or issuer is not required 

under paragraph (c)(1)(i) or (c)(1)(ii) of 

this section to comply with the 

requirements of this paragraph (c), then 

the plan or issuer must comply with the 

Federal external review process of 

paragraph (d) of this section, except to 

the extent, in the case of a plan, the plan 

is not required under paragraph (c)(1)(i) 

of this section to comply with paragraph 

(d) of this section. 

(2) Minimum standards for State 

external review processes. An applicable 

State external review process must meet 

all the minimum consumer protections 

in this paragraph (c)(2). The Department 

of Health and Human Services will 

determine whether State external review 

processes meet these requirements. 

(i) The State process must provide for 

the external review of adverse benefit 

determinations (including final internal 

adverse benefit determinations) by 

issuers (or, if applicable, plans) that are 

based on the issuer’s (or plan’s) 

requirements for medical necessity, 

appropriateness, health care setting, 

level of care, or effectiveness of a 

covered benefit. 

(ii) The State process must require 

issuers (or, if applicable, plans) to 

provide effective written notice to 

claimants of their rights in connection 

with an external review for an adverse 

benefit determination. 

(iii) To the extent the State process 

requires exhaustion of an internal 

claims and appeals process, exhaustion 

must be unnecessary where the issuer 

(or, if applicable, the plan) has waived 

the requirement, the issuer (or the plan) 

is considered to have exhausted the 

internal claims and appeals process 

under applicable law (including by 

failing to comply with any of the 

requirements for the internal appeal 

process, as outlined in paragraph (b)(2) 

of this section), or the claimant has 

applied for expedited external review at 

the same time as applying for an 

expedited internal appeal. 

(iv) The State process provides that 

the issuer (or, if applicable, the plan) 

against which a request for external 

review is filed must pay the cost of the 

IRO for conducting the external review. 

Notwithstanding this requirement, the 

State external review process may 

require a nominal filing fee from the 

claimant requesting an external review. 

For this purpose, to be considered 

nominal, a filing fee must not exceed 

$25, it must be refunded to the claimant 

if the adverse benefit determination (or 

final internal adverse benefit 

determination) is reversed through 

external review, it must be waived if 

payment of the fee would impose an 

undue financial hardship, and the 

annual limit on filing fees for any 

claimant within a single plan year must 

not exceed $75. 

(v) The State process may not impose 

a restriction on the minimum dollar 

amount of a claim for it to be eligible for 

external review. Thus, the process may 

not impose, for example, a $500 

minimum claims threshold. 

(vi) The State process must allow at 

least four months after the receipt of a 

notice of an adverse benefit 

determination or final internal adverse 

benefit determination for a request for 

an external review to be filed. 

(vii) The State process must provide 

that IROs will be assigned on a random 

basis or another method of assignment 

that assures the independence and 

impartiality of the assignment process 

(such as rotational assignment) by a 

State or independent entity, and in no 

event selected by the issuer, plan, or the 

individual. 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43357 

(viii) The State process must provide 

for maintenance of a list of approved 

IRO qualified to conduct the external 

review based on the nature of the health 

care service that is the subject of the 

review. The State process must provide 

for approval only of IROs that are 

accredited by a nationally recognized 

private accrediting organization. 

(ix) The State process must provide 

that any approved IRO has no conflicts 

of interest that will influence its 

independence. Thus, the IRO may not 

own or control, or be owned or 

controlled by a health insurance issuer, 

a group health plan, the sponsor of a 

group health plan, a trade association of 

plans or issuers, or a trade association 

of health care providers. The State 

process must further provide that the 

IRO and the clinical reviewer assigned 

to conduct an external review may not 

have a material professional, familial, or 

financial conflict of interest with the 

issuer or plan that is the subject of the 

external review; the claimant (and any 

related parties to the claimant) whose 

treatment is the subject of the external 

review; any officer, director, or 

management employee of the issuer; the 

plan administrator, plan fiduciaries, or 

plan employees; the health care 

provider, the health care provider’s 

group, or practice association 

recommending the treatment that is 

subject to the external review; the 

facility at which the recommended 

treatment would be provided; or the 

developer or manufacturer of the 

principal drug, device, procedure, or 

other therapy being recommended. 

(x) The State process allows the 

claimant at least five business days to 

submit to the IRO in writing additional 

information that the IRO must consider 

when conducting the external review 

and it requires that the claimant is 

notified of the right to do so. The 

process must also require that any 

additional information submitted by the 

claimant to the IRO must be forwarded 

to the issuer (or, if applicable, the plan) 

within one business day of receipt by 

the IRO. 

(xi) The State process must provide 

that the decision is binding on the 

issuer (or, if applicable, the plan), as 

well as the claimant except to the extent 

the other remedies are available under 

State or Federal law. 

(xii) The State process must require, 

for standard external review, that the 

IRO provide written notice to the issuer 

(or, if applicable, the plan) and the 

claimant of its decision to uphold or 

reverse the adverse benefit 

determination (or final internal adverse 

benefit determination) within no more 

than 45 days after the receipt of the 

request for external review by the IRO. 

(xiii) The State process must provide 

for an expedited external review if the 

adverse benefit determination (or final 

internal adverse benefit determination) 

concerns an admission, availability of 

care, continued stay, or health care 

service for which the claimant received 

emergency services, but has not been 

discharged from a facility; or involves a 

medical condition for which the 

standard external review timeframe 

would seriously jeopardize the life or 

health of the claimant or jeopardize the 

claimant’s ability to regain maximum 

function. As expeditiously as possible 

but within no more than 72 hours after 

the receipt of the request for expedited 

external review by the IRO, the IRO 

must make its decision to uphold or 

reverse the adverse benefit 

determination (or final internal adverse 

benefit determination) and notify the 

claimant and the issuer (or, if 

applicable, the plan) of the 

determination. If the notice is not in 

writing, the IRO must provide written 

confirmation of the decision within 48 

hours after the date of the notice of the 

decision. 

(xiv) The State process must require 

that issuers (or, if applicable, plans) 

include a description of the external 

review process in or attached to the 

summary plan description, policy, 

certificate, membership booklet, outline 

of coverage, or other evidence of 

coverage it provides to participants, 

beneficiaries, or enrollees, substantially 

similar to what is set forth in section 17 

of the NAIC Uniform Model Act. 

(xv) The State process must require 

that IROs maintain written records and 

make them available upon request to the 

State, substantially similar to what is set 

forth in section 15 of the NAIC Uniform 

Model Act. 

(xvi) The State process follows 

procedures for external review of 

adverse benefit determinations (or final 

internal adverse benefit determinations) 

involving experimental or 

investigational treatment, substantially 

similar to what is set forth in section 10 

of the NAIC Uniform Model Act. 

(3) Transition period for existing 

external review processes—(i) For plan 

years beginning before July 1, 2011, an 

applicable State external review process 

applicable to a health insurance issuer 

or group health plan is considered to 

meet the requirements of this paragraph 

(c). Accordingly, for plan years 

beginning before July 1, 2011, an 

applicable State external review process 

will be considered binding on the issuer 

or plan (in lieu of the requirements of 

the Federal external review process). If 

there is no applicable State external 

review process, the issuer or plan is 

required to comply with the 

requirements of the Federal external 

review process in paragraph (d) of this 

section. 

(ii) For final internal adverse benefit 

determinations (or, in the case of 

simultaneous internal appeal and 

external review, adverse benefit 

determinations) provided after the first 

day of the first plan year beginning on 

or after July 1, 2011, the Federal 

external review process will apply 

unless the Department of Health and 

Human Services determines that a State 

law meets all the minimum standards of 

paragraph (c)(2) of this section as of the 

first day of the plan year. 

(d) Federal external review process. A 

plan or issuer not subject to an 

applicable State external review process 

under paragraph (c) of this section must 

provide an effective Federal external 

review process in accordance with this 

paragraph (d) (except to the extent, in 

the case of a plan, the plan is described 

in paragraph (c)(1)(i) of this section as 

not having to comply with this 

paragraph (d)). In the case of health 

insurance coverage offered in 

connection with a group health plan, if 

either the plan or the issuer complies 

with the Federal external review process 

of this paragraph (d), then the obligation 

to comply with this paragraph (d) is 

satisfied for both the plan and the issuer 

with respect to the health insurance 

coverage. 

(1) Scope. The Federal external 

review process established pursuant to 

this paragraph (d) applies to any adverse 

benefit determination or final internal 

adverse benefit determination as 

defined in paragraphs (a)(2)(i) and 

(a)(2)(v) of this section, except that a 

denial, reduction, termination, or a 

failure to provide payment for a benefit 

based on a determination that a 

participant or beneficiary fails to meet 

the requirements for eligibility under 

the terms of a group health plan is not 

eligible for the external review process 

under this paragraph (d). 

(2) External review process standards. 

The Federal external review process 

established pursuant to this paragraph 

(d) will be similar to the process set 

forth in the NAIC Uniform Model Act 

and will meet standards issued by the 

Secretary. These standards will comply 

with all of the requirements described 

in this paragraph (d)(2). 

(i) These standards will describe how 

a claimant initiates an external review, 

procedures for preliminary reviews to 

determine whether a claim is eligible for 

external review, minimum 

qualifications for IROs, a process for 

mstockstill on DSKH9S0YB1PROD with RULES2

43358 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

approving IROs eligible to be assigned 

to conduct external reviews, a process 

for random assignment of external 

reviews to approved IROs, standards for 

IRO decisionmaking, and rules for 

providing notice of a final external 

review decision. 

(ii) These standards will provide an 

expedited external review process for— 

(A) An adverse benefit determination, 

if the adverse benefit determination 

involves a medical condition of the 

claimant for which the timeframe for 

completion of an expedited internal 

appeal under paragraph (b) of this 

section would seriously jeopardize the 

life or health of the claimant, or would 

jeopardize the claimant’s ability to 

regain maximum function and the 

claimant has filed a request for an 

expedited internal appeal under 

paragraph (b) of this section; or 

(B) A final internal adverse benefit 

determination, if the claimant has a 

medical condition where the timeframe 

for completion of a standard external 

review pursuant to paragraph (d)(3) of 

this section would seriously jeopardize 

the life or health of the claimant or 

would jeopardize the claimant’s ability 

to regain maximum function, or if the 

final internal adverse benefit 

determination concerns an admission, 

availability of care, continued stay or 

health care service for which the 

claimant received emergency services, 

but has not been discharged from a 

facility. 

(iii) With respect to claims involving 

experimental or investigational 

treatments, these standards will also 

provide additional consumer 

protections to ensure that adequate 

clinical and scientific experience and 

protocols are taken into account as part 

of the external review process. 

(iv) These standards will provide that 

an external review decision is binding 

on the plan or issuer, as well as the 

claimant, except to the extent other 

remedies are available under State or 

Federal law. 

(v) These standards may establish 

external review reporting requirements 

for IROs. 

(vi) These standards will establish 

additional notice requirements for plans 

and issuers regarding disclosures to 

participants and beneficiaries describing 

the Federal external review procedures 

(including the right to file a request for 

an external review of an adverse benefit 

determination or a final internal adverse 

benefit determination in the summary 

plan description, policy, certificate, 

membership booklet, outline of 

coverage, or other evidence of coverage 

it provides to participants or 

beneficiaries. 

(vii) These standards will require 

plans and issuers to provide information 

relevant to the processing of the external 

review, including, but not limited to, 

the information considered and relied 

on in making the adverse benefit 

determination or final internal adverse 

benefit determination. 

(e) Form and manner of notice. (1) For 

purposes of this section, a group health 

plan and health insurance issuer 

offering group health insurance 

coverage are considered to provide 

relevant notices in a culturally and 

linguistically appropriate manner— 

(i) For a plan that covers fewer than 

100 participants at the beginning of a 

plan year, if the plan and issuer provide 

notices upon request in a non-English 

language in which 25 percent or more 

of all plan participants are literate only 

in the same non-English language; or 

(ii) For a plan that covers 100 or more 

participants at the beginning of a plan 

year, if the plan and issuer provide 

notices upon request in a non-English 

language in which the lesser of 500 or 

more participants, or 10 percent or more 

of all plan participants, are literate only 

in the same non-English language. 

(2) If an applicable threshold 

described in paragraph (e)(1) of this 

section is met, the plan and issuer must 

also— 

(i) Include a statement in the English 

versions of all notices, prominently 

displayed in the non-English language, 

offering the provision of such notices in 

the non-English language; 

(ii) Once a request has been made by 

a claimant, provide all subsequent 

notices to the claimant in the nonEnglish language; and 

(iii) To the extent the plan or issuer 

maintains a customer assistance process 

(such as a telephone hotline) that 

answers questions or provides 

assistance with filing claims and 

appeals, the plan or issuer must provide 

such assistance in the non-English 

language. 

(f) Secretarial authority. The Secretary 

may determine that the external review 

process of a group health plan or health 

insurance issuer, in operation as of 

March 23, 2010, is considered in 

compliance with the applicable process 

established under paragraph (c) or (d) of 

this section if it substantially meets the 

requirements of paragraph (c) or (d) of 

this section, as applicable. 

(g) Applicability date. The provisions 

of this section apply for plan years 

beginning on or after September 23, 

2010. See § 2590.715–1251 of this part 

for determining the application of this 

section to grandfathered health plans 

(providing that these rules regarding 

internal claims and appeals and external 

review processes do not apply to 

grandfathered health plans). 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Subtitle A 

■ For the reasons stated in the preamble, 

the Department of Health and Human 

Services amends 45 CFR part 147 as 

follows: 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 1. The authority citation for part 147 

continues to read as follows: 

Authority: Sections 2701 through 2763, 

2791, and 2792 of the Public Health Service 

Act (42 U.S.C. 300gg through 300gg–63, 

300gg–91, and 300gg–92), as amended. 

■ 2. Add § 147.136 to read as follows: 

§ 147.136 Internal claims and appeals and 

external review processes. 

(a) Scope and definitions—(1) Scope. 

This section sets forth requirements 

with respect to internal claims and 

appeals and external review processes 

for group health plans and health 

insurance issuers that are not 

grandfathered health plans under 

§ 147.140 of this part. Paragraph (b) of 

this section provides requirements for 

internal claims and appeals processes. 

Paragraph (c) of this section sets forth 

rules governing the applicability of State 

external review processes. Paragraph (d) 

of this section sets forth a Federal 

external review process for plans and 

issuers not subject to an applicable State 

external review process. Paragraph (e) of 

this section prescribes requirements for 

ensuring that notices required to be 

provided under this section are 

provided in a culturally and 

linguistically appropriate manner. 

Paragraph (f) of this section describes 

the authority of the Secretary to deem 

certain external review processes in 

existence on March 23, 2010 as in 

compliance with paragraph (c) or (d) of 

this section. Paragraph (g) of this section 

sets forth the applicability date for this 

section. 

(2) Definitions. For purposes of this 

section, the following definitions 

apply— 

(i) Adverse benefit determination. An 

adverse benefit determination means an 

adverse benefit determination as 

defined in 29 CFR 2560.503–1, as well 

as any rescission of coverage, as 

described in § 147.128 (whether or not, 

in connection with the rescission, there 

is an adverse effect on any particular 

benefit at that time). 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43359 

(ii) Appeal (or internal appeal). An 

appeal or internal appeal means review 

by a plan or issuer of an adverse benefit 

determination, as required in paragraph 

(b) of this section. 

(iii) Claimant. Claimant means an 

individual who makes a claim under 

this section. For purposes of this 

section, references to claimant include a 

claimant’s authorized representative. 

(iv) External review. External review 

means a review of an adverse benefit 

determination (including a final internal 

adverse benefit determination) 

conducted pursuant to an applicable 

State external review process described 

in paragraph (c) of this section or the 

Federal external review process of 

paragraph (d) of this section. 

(v) Final internal adverse benefit 

determination. A final internal adverse 

benefit determination means an adverse 

benefit determination that has been 

upheld by a plan or issuer at the 

completion of the internal appeals 

process applicable under paragraph (b) 

of this section (or an adverse benefit 

determination with respect to which the 

internal appeals process has been 

exhausted under the deemed exhaustion 

rules of paragraph (b)(2)(ii)(F) or 

(b)(3)(ii)(F) of this section). 

(vi) Final external review decision. A 

final external review decision, as used 

in paragraph (d) of this section, means 

a determination by an independent 

review organization at the conclusion of 

an external review. 

(vii) Independent review organization 

(or IRO). An independent review 

organization (or IRO) means an entity 

that conducts independent external 

reviews of adverse benefit 

determinations and final internal 

adverse benefit determinations pursuant 

to paragraph (c) or (d) of this section. 

(viii) NAIC Uniform Model Act. The 

NAIC Uniform Model Act means the 

Uniform Health Carrier External Review 

Model Act promulgated by the National 

Association of Insurance Commissioners 

in place on July 23, 2010. 

(b) Internal claims and appeals 

process—(1) In general. A group health 

plan and a health insurance issuer 

offering group or individual health 

insurance coverage must implement an 

effective internal claims and appeals 

process, as described in this paragraph 

(b). 

(2) Requirements for group health 

plans and group health insurance 

issuers. A group health plan and a 

health insurance issuer offering group 

health insurance coverage must comply 

with all the requirements of this 

paragraph (b)(2). In the case of health 

insurance coverage offered in 

connection with a group health plan, if 

either the plan or the issuer complies 

with the internal claims and appeals 

process of this paragraph (b)(2), then the 

obligation to comply with this 

paragraph (b)(2) is satisfied for both the 

plan and the issuer with respect to the 

health insurance coverage. 

(i) Minimum internal claims and 

appeals standards. A group health plan 

and a health insurance issuer offering 

group health insurance coverage must 

comply with all the requirements 

applicable to group health plans under 

29 CFR 2560.503–1, except to the extent 

those requirements are modified by 

paragraph (b)(2)(ii) of this section. 

Accordingly, under this paragraph (b), 

with respect to health insurance 

coverage offered in connection with a 

group health plan, the group health 

insurance issuer is subject to the 

requirements in 29 CFR 2560.503–1 to 

the same extent as the group health 

plan. 

(ii) Additional standards. In addition 

to the requirements in paragraph 

(b)(2)(i) of this section, the internal 

claims and appeals processes of a group 

health plan and a health insurance 

issuer offering group health insurance 

coverage must meet the requirements of 

this paragraph (b)(2)(ii). 

(A) Clarification of meaning of 

adverse benefit determination. For 

purposes of this paragraph (b)(2), an 

‘‘adverse benefit determination’’ 

includes an adverse benefit 

determination as defined in paragraph 

(a)(2)(i) of this section. Accordingly, in 

complying with 29 CFR 2560.503–1, as 

well as the other provisions of this 

paragraph (b)(2), a plan or issuer must 

treat a rescission of coverage (whether 

or not the rescission has an adverse 

effect on any particular benefit at that 

time) as an adverse benefit 

determination. (Rescissions of coverage 

are subject to the requirements of 

§ 147.128 of this part.) 

(B) Expedited notification of benefit 

determinations involving urgent care. 

Notwithstanding the rule of 29 CFR 

2560.503–1(f)(2)(i) that provides for 

notification in the case of urgent care 

claims not later than 72 hours after the 

receipt of the claim, for purposes of this 

paragraph (b)(2), a plan and issuer must 

notify a claimant of a benefit 

determination (whether adverse or not) 

with respect to a claim involving urgent 

care as soon as possible, taking into 

account the medical exigencies, but not 

later than 24 hours after the receipt of 

the claim by the plan or issuer, unless 

the claimant fails to provide sufficient 

information to determine whether, or to 

what extent, benefits are covered or 

payable under the plan or health 

insurance coverage. The requirements of 

29 CFR 2560.503–1(f)(2)(i) other than 

the rule for notification within 72 hours 

continue to apply to the plan and issuer. 

For purposes of this paragraph 

(b)(2)(ii)(B), a claim involving urgent 

care has the meaning given in 29 CFR 

2560.503–1(m)(1). 

(C) Full and fair review. A plan and 

issuer must allow a claimant to review 

the claim file and to present evidence 

and testimony as part of the internal 

claims and appeals process. 

Specifically, in addition to complying 

with the requirements of 29 CFR 

2560.503–1(h)(2)— 

(1) The plan or issuer must provide 

the claimant, free of charge, with any 

new or additional evidence considered, 

relied upon, or generated by the plan or 

issuer (or at the direction of the plan or 

issuer) in connection with the claim; 

such evidence must be provided as soon 

as possible and sufficiently in advance 

of the date on which the notice of final 

internal adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date; and 

(2) Before the plan or issuer can issue 

a final internal adverse benefit 

determination based on a new or 

additional rationale, the claimant must 

be provided, free of charge, with the 

rationale; the rationale must be 

provided as soon as possible and 

sufficiently in advance of the date on 

which the notice of final internal 

adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date. 

(D) Avoiding conflicts of interest. In 

addition to the requirements of 29 CFR 

2560.503–1(b) and (h) regarding full and 

fair review, the plan and issuer must 

ensure that all claims and appeals are 

adjudicated in a manner designed to 

ensure the independence and 

impartiality of the persons involved in 

making the decision. Accordingly, 

decisions regarding hiring, 

compensation, termination, promotion, 

or other similar matters with respect to 

any individual (such as a claims 

adjudicator or medical expert) must not 

be made based upon the likelihood that 

the individual will support the denial of 

benefits. 

(E) Notice. A plan and issuer must 

provide notice to individuals, in a 

culturally and linguistically appropriate 

manner (as described in paragraph (e) of 

this section) that complies with the 

requirements of 29 CFR 2560.503–1(g) 

and (j). The plan and issuer must also 

comply with the additional 

mstockstill on DSKH9S0YB1PROD with RULES2

43360 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

requirements of this paragraph 

(b)(2)(ii)(E). 

(1) The plan and issuer must ensure 

that any notice of adverse benefit 

determination or final internal adverse 

benefit determination includes 

information sufficient to identify the 

claim involved (including the date of 

service, the health care provider, the 

claim amount (if applicable), the 

diagnosis code and its corresponding 

meaning, and the treatment code and its 

corresponding meaning). 

(2) The plan and issuer must ensure 

that the reason or reasons for the 

adverse benefit determination or final 

internal adverse benefit determination 

includes the denial code and its 

corresponding meaning, as well as a 

description of the plan’s or issuer’s 

standard, if any, that was used in 

denying the claim. In the case of a 

notice of final internal adverse benefit 

determination, this description must 

include a discussion of the decision. 

(3) The plan and issuer must provide 

a description of available internal 

appeals and external review processes, 

including information regarding how to 

initiate an appeal. 

(4) The plan and issuer must disclose 

the availability of, and contact 

information for, any applicable office of 

health insurance consumer assistance or 

ombudsman established under PHS Act 

section 2793 to assist individuals with 

the internal claims and appeals and 

external review processes. 

(F) Deemed exhaustion of internal 

claims and appeals processes. In the 

case of a plan or issuer that fails to 

strictly adhere to all the requirements of 

this paragraph (b)(2) with respect to a 

claim, the claimant is deemed to have 

exhausted the internal claims and 

appeals process of this paragraph (b), 

regardless of whether the plan or issuer 

asserts that it substantially complied 

with the requirements of this paragraph 

(b)(2) or that any error it committed was 

de minimis. Accordingly the claimant 

may initiate an external review under 

paragraph (c) or (d) of this section, as 

applicable. The claimant is also entitled 

to pursue any available remedies under 

section 502(a) of ERISA or under State 

law, as applicable, on the basis that the 

plan or issuer has failed to provide a 

reasonable internal claims and appeals 

process that would yield a decision on 

the merits of the claim. If a claimant 

chooses to pursue remedies under 

section 502(a) of ERISA under such 

circumstances, the claim or appeal is 

deemed denied on review without the 

exercise of discretion by an appropriate 

fiduciary. 

(iii) Requirement to provide continued 

coverage pending the outcome of an 

appeal. A plan and issuer subject to the 

requirements of this paragraph (b)(2) are 

required to provide continued coverage 

pending the outcome of an appeal. For 

this purpose, the plan and issuer must 

comply with the requirements of 29 CFR 

2560.503–1(f)(2)(ii), which generally 

provides that benefits for an ongoing 

course of treatment cannot be reduced 

or terminated without providing 

advance notice and an opportunity for 

advance review. 

(3) Requirements for individual health 

insurance issuers. A health insurance 

issuer offering individual health 

insurance coverage must comply with 

all the requirements of this paragraph 

(b)(3). 

(i) Minimum internal claims and 

appeals standards. A health insurance 

issuer offering individual health 

insurance coverage must comply with 

all the requirements of the ERISA 

internal claims and appeals procedures 

applicable to group health plans under 

29 CFR 2560.503–1 except for the 

requirements with respect to 

multiemployer plans, and except to the 

extent those requirements are modified 

by paragraph (b)(3)(ii) of this section. 

Accordingly, under this paragraph (b), 

with respect to individual health 

insurance coverage, the issuer is subject 

to the requirements in 29 CFR 

2560.503–1 as if the issuer were a group 

health plan. 

(ii) Additional standards. In addition 

to the requirements in paragraph 

(b)(3)(i) of this section, the internal 

claims and appeals processes of a health 

insurance issuer offering individual 

health insurance coverage must meet 

the requirements of this paragraph 

(b)(3)(ii). 

(A) Clarification of meaning of 

adverse benefit determination. For 

purposes of this paragraph (b)(3), an 

adverse benefit determination includes 

an adverse benefit determination as 

defined in paragraph (a)(2)(i) of this 

section. Accordingly, in complying with 

29 CFR 2560.503–1, as well as other 

provisions of this paragraph (b)(3), an 

issuer must treat a rescission of coverage 

(whether or not the rescission has an 

adverse effect on any particular benefit 

at that time) and any decision to deny 

coverage in an initial eligibility 

determination as an adverse benefit 

determination. (Rescissions of coverage 

are subject to the requirements of 45 

CFR 147.128.) 

(B) Expedited notification of benefit 

determinations involving urgent care. 

Notwithstanding the rule of 29 CFR 

2560.503–1(f)(2)(i) that provides for 

notification in the case of urgent care 

claims not later than 72 hours after the 

receipt of the claim, for purposes of this 

paragraph (b)(3), an issuer must notify a 

claimant of a benefit determination 

(whether adverse or not) with respect to 

a claim involving urgent care as soon as 

possible, taking into account the 

medical exigencies, but not later than 24 

hours after the receipt of the claim by 

the issuer, unless the claimant fails to 

provide sufficient information to 

determine whether, or to what extent, 

benefits are covered or payable under 

the health insurance coverage. The 

requirements of 29 CFR 2560.503– 

1(f)(2)(i) other than the rule for 

notification within 72 hours continue to 

apply to the issuer. For purposes of this 

paragraph (b)(3)(ii)(B), a claim involving 

urgent care has the meaning given in 29 

CFR 2560.503–1(m)(1). 

(C) Full and fair review. An issuer 

must allow a claimant to review the 

claim file and to present evidence and 

testimony as part of the internal claims 

and appeals process. Specifically, in 

addition to complying with the 

requirements of 29 CFR 2560.503– 

1(h)(2)— 

(1) The issuer must provide the 

claimant, free of charge, with any new 

or additional evidence considered, 

relied upon, or generated by the issuer 

(or at the direction of the issuer) in 

connection with the claim; such 

evidence must be provided as soon as 

possible and sufficiently in advance of 

the date on which the notice of final 

internal adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date; and 

(2) Before the issuer can issue a final 

internal adverse benefit determination 

based on a new or additional rationale, 

the claimant must be provided, free of 

charge, with the rationale; the rationale 

must be provided as soon as possible 

and sufficiently in advance of the date 

on which the notice of final internal 

adverse benefit determination is 

required to be provided under 29 CFR 

2560.503–1(i) to give the claimant a 

reasonable opportunity to respond prior 

to that date. 

(D) Avoiding conflicts of interest. In 

addition to the requirements of 29 CFR 

2560.503–1(b) and (h) regarding full and 

fair review, the issuer must ensure that 

all claims and appeals are adjudicated 

in a manner designed to ensure the 

independence and impartiality of the 

persons involved in making the 

decision. Accordingly, decisions 

regarding hiring, compensation, 

termination, promotion, or other similar 

matters with respect to any individual 

(such as a claims adjudicator or medical 

expert) must not be made based upon 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43361 

the likelihood that the individual will 

support the denial of benefits. 

(E) Notice. An issuer must provide 

notice to individuals, in a culturally and 

linguistically appropriate manner (as 

described in paragraph (e) of this 

section) that complies with the 

requirements of 29 CFR 2560.503–1(g) 

and (j). The issuer must also comply 

with the additional requirements of this 

paragraph (b)(2)(ii)(E). 

(1) The issuer must ensure that any 

notice of adverse benefit determination 

or final internal adverse benefit 

determination includes information 

sufficient to identify the claim involved 

(including the date of service, the health 

care provider, the claim amount (if 

applicable), the diagnosis code and its 

corresponding meaning, and the 

treatment code and its corresponding 

meaning). 

(2) The issuer must ensure that the 

reason or reasons for the adverse benefit 

determination or final internal adverse 

benefit determination includes the 

denial code and its corresponding 

meaning, as well as a description of the 

issuer’s standard, if any, that was used 

in denying the claim. In the case of a 

notice of final internal adverse benefit 

determination, this description must 

include a discussion of the decision. 

(3) The issuer must provide a 

description of available internal appeals 

and external review processes, 

including information regarding how to 

initiate an appeal. 

(4) The issuer must disclose the 

availability of, and contact information 

for, any applicable office of health 

insurance consumer assistance or 

ombudsman established under PHS Act 

section 2793 to assist individuals with 

the internal claims and appeals and 

external review processes. 

(F) Deemed exhaustion of internal 

claims and appeals processes. In the 

case of an issuer that fails to strictly 

adhere to all the requirements of this 

paragraph (b)(3) with respect to a claim, 

the claimant is deemed to have 

exhausted the internal claims and 

appeals process of this paragraph (b), 

regardless of whether the issuer asserts 

that it substantially complied with the 

requirements of this paragraph (b)(3) or 

that any error it committed was de 

minimis. Accordingly the claimant may 

initiate an external review under 

paragraph (c) or (d) of this section, as 

applicable. The claimant is also entitled 

to pursue any available remedies under 

applicable State law on the basis that 

the issuer has failed to provide a 

reasonable internal claims and appeals 

process that would yield a decision on 

the merits of the claim. 

(G) One level of internal appeal. 

Notwithstanding the requirements in 29 

CFR § 2560.503–1(c)(3), a health 

insurance issuer offering individual 

health insurance coverage must provide 

for only one level of internal appeal 

before issuing a final determination. 

(H) Recordkeeping requirements. A 

health insurance issuer offering 

individual health insurance coverage 

must maintain for six years records of 

all claims and notices associated with 

the internal claims and appeals process, 

including the information detailed in 

paragraph (b)(3)(ii)(E) of this section and 

any other information specified by the 

Secretary. An issuer must make such 

records available for examination by the 

claimant or State or Federal oversight 

agency upon request. 

(iii) Requirement to provide continued 

coverage pending the outcome of an 

appeal. An issuer subject to the 

requirements of this paragraph (b)(3) is 

required to provide continued coverage 

pending the outcome of an appeal. For 

this purpose, the issuer must comply 

with the requirements of 29 CFR 

2560.503–1(f)(2)(ii) as if the issuer were 

a group health plan, so that the issuer 

cannot reduce or terminate an ongoing 

course of treatment without providing 

advance notice and an opportunity for 

advance review. 

(c) State standards for external 

review—(1) In general. (i) If a State 

external review process that applies to 

and is binding on a health insurance 

issuer offering group or individual 

health insurance coverage includes at a 

minimum the consumer protections in 

the NAIC Uniform Model Act, then the 

issuer must comply with the applicable 

State external review process and is not 

required to comply with the Federal 

external review process of paragraph (d) 

of this section. In such a case, to the 

extent that benefits under a group health 

plan are provided through health 

insurance coverage, the group health 

plan is not required to comply with 

either this paragraph (c) or the Federal 

external review process of paragraph (d) 

of this section. 

(ii) To the extent that a group health 

plan provides benefits other than 

through health insurance coverage (that 

is, the plan is self-insured) and is 

subject to a State external review 

process that applies to and is binding on 

the plan (for example, is not preempted 

by ERISA) and the State external review 

process includes at a minimum the 

consumer protections in the NAIC 

Uniform Model Act, then the plan must 

comply with the applicable State 

external review process and is not 

required to comply with the Federal 

external review process of paragraph (d) 

of this section. 

(iii) If a plan or issuer is not required 

under paragraph (c)(1)(i) or (c)(1)(ii) of 

this section to comply with the 

requirements of this paragraph (c), then 

the plan or issuer must comply with the 

Federal external review process of 

paragraph (d) of this section, except to 

the extent, in the case of a plan, the plan 

is not required under paragraph (c)(1)(i) 

of this section to comply with paragraph 

(d) of this section. 

(2) Minimum standards for State 

external review processes. An applicable 

State external review process must meet 

all the minimum consumer protections 

in this paragraph (c)(2). The Department 

of Health and Human Services will 

determine whether State external review 

processes meet these requirements. 

(i) The State process must provide for 

the external review of adverse benefit 

determinations (including final internal 

adverse benefit determinations) by 

issuers (or, if applicable, plans) that are 

based on the issuer’s (or plan’s) 

requirements for medical necessity, 

appropriateness, health care setting, 

level of care, or effectiveness of a 

covered benefit. 

(ii) The State process must require 

issuers (or, if applicable, plans) to 

provide effective written notice to 

claimants of their rights in connection 

with an external review for an adverse 

benefit determination. 

(iii) To the extent the State process 

requires exhaustion of an internal 

claims and appeals process, exhaustion 

must be unnecessary where the issuer 

(or, if applicable, the plan) has waived 

the requirement, the issuer (or the plan) 

is considered to have exhausted the 

internal claims and appeals process 

under applicable law (including by 

failing to comply with any of the 

requirements for the internal appeal 

process, as outlined in paragraph (b)(2) 

or (b)(3) of this section), or the claimant 

has applied for expedited external 

review at the same time as applying for 

an expedited internal appeal. 

(iv) The State process provides that 

the issuer (or, if applicable, the plan) 

against which a request for external 

review is filed must pay the cost of the 

IRO for conducting the external review. 

Notwithstanding this requirement, the 

State external review process may 

require a nominal filing fee from the 

claimant requesting an external review. 

For this purpose, to be considered 

nominal, a filing fee must not exceed 

$25, it must be refunded to the claimant 

if the adverse benefit determination (or 

final internal adverse benefit 

determination) is reversed through 

external review, it must be waived if 

mstockstill on DSKH9S0YB1PROD with RULES2

43362 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

payment of the fee would impose an 

undue financial hardship, and the 

annual limit on filing fees for any 

claimant within a single plan year (in 

the individual market, policy year) must 

not exceed $75. 

(v) The State process may not impose 

a restriction on the minimum dollar 

amount of a claim for it to be eligible for 

external review. Thus, the process may 

not impose, for example, a $500 

minimum claims threshold. 

(vi) The State process must allow at 

least four months after the receipt of a 

notice of an adverse benefit 

determination or final internal adverse 

benefit determination for a request for 

an external review to be filed. 

(vii) The State process must provide 

that IROs will be assigned on a random 

basis or another method of assignment 

that assures the independence and 

impartiality of the assignment process 

(such as rotational assignment) by a 

State or independent entity, and in no 

event selected by the issuer, plan, or the 

individual. 

(viii) The State process must provide 

for maintenance of a list of approved 

IRO qualified to conduct the external 

review based on the nature of the health 

care service that is the subject of the 

review. The State process must provide 

for approval only of IROs that are 

accredited by a nationally recognized 

private accrediting organization. 

(ix) The State process must provide 

that any approved IRO has no conflicts 

of interest that will influence its 

independence. Thus, the IRO may not 

own or control, or be owned or 

controlled by a health insurance issuer, 

a group health plan, the sponsor of a 

group health plan, a trade association of 

plans or issuers, or a trade association 

of health care providers. The State 

process must further provide that the 

IRO and the clinical reviewer assigned 

to conduct an external review may not 

have a material professional, familial, or 

financial conflict of interest with the 

issuer or plan that is the subject of the 

external review; the claimant (and any 

related parties to the claimant) whose 

treatment is the subject of the external 

review; any officer, director, or 

management employee of the issuer; the 

plan administrator, plan fiduciaries, or 

plan employees; the health care 

provider, the health care provider’s 

group, or practice association 

recommending the treatment that is 

subject to the external review; the 

facility at which the recommended 

treatment would be provided; or the 

developer or manufacturer of the 

principal drug, device, procedure, or 

other therapy being recommended. 

(x) The State process allows the 

claimant at least five business days to 

submit to the IRO in writing additional 

information that the IRO must consider 

when conducting the external review 

and it requires that the claimant is 

notified of the right to do so. The 

process must also require that any 

additional information submitted by the 

claimant to the IRO must be forwarded 

to the issuer (or, if applicable, the plan) 

within one business day of receipt by 

the IRO. 

(xi) The State process must provide 

that the decision is binding on the 

issuer (or, if applicable, the plan), as 

well as the claimant except to the extent 

the other remedies are available under 

State or Federal law. 

(xii) The State process must require, 

for standard external review, that the 

IRO provide written notice to the 

claimant and the issuer (or, if 

applicable, the plan) of its decision to 

uphold or reverse the adverse benefit 

determination (or final internal adverse 

benefit determination) within no more 

than 45 days after the receipt of the 

request for external review by the IRO. 

(xiii) The State process must provide 

for an expedited external review if the 

adverse benefit determination (or final 

internal adverse benefit determination) 

concerns an admission, availability of 

care, continued stay, or health care 

service for which the claimant received 

emergency services, but has not been 

discharged from a facility; or involves a 

medical condition for which the 

standard external review time frame 

would seriously jeopardize the life or 

health of the claimant or jeopardize the 

claimant’s ability to regain maximum 

function. As expeditiously as possible 

but within no more than 72 hours after 

the receipt of the request for expedited 

external review by the IRO, the IRO 

must make its decision to uphold or 

reverse the adverse benefit 

determination (or final internal adverse 

benefit determination) and notify the 

claimant and the issuer (or, if 

applicable, the plan) of the 

determination. If the notice is not in 

writing, the IRO must provide written 

confirmation of the decision within 48 

hours after the date of the notice of the 

decision. 

(xiv) The State process must require 

that issuers (or, if applicable, plans) 

include a description of the external 

review process in or attached to the 

summary plan description, policy, 

certificate, membership booklet, outline 

of coverage, or other evidence of 

coverage it provides to participants, 

beneficiaries, or enrollees, substantially 

similar to what is set forth in section 17 

of the NAIC Uniform Model Act. 

(xv) The State process must require 

that IROs maintain written records and 

make them available upon request to the 

State, substantially similar to what is set 

forth in section 15 of the NAIC Uniform 

Model Act. 

(xvi) The State process follows 

procedures for external review of 

adverse benefit determinations (or final 

internal adverse benefit determinations) 

involving experimental or 

investigational treatment, substantially 

similar to what is set forth in section 10 

of the NAIC Uniform Model Act. 

(3) Transition period for existing 

external review processes—(i) For plan 

years (in the individual market, policy 

years) beginning before July 1, 2011, an 

applicable State external review process 

applicable to a health insurance issuer 

or group health plan is considered to 

meet the requirements of this paragraph 

(c). Accordingly, for plan years (in the 

individual market, policy years) 

beginning before July 1, 2011, an 

applicable State external review process 

will be considered binding on the issuer 

or plan (in lieu of the requirements of 

the Federal external review process). If 

there is no applicable State external 

review process, the issuer or plan is 

required to comply with the 

requirements of the Federal external 

review process in paragraph (d) of this 

section. 

(ii) For final internal adverse benefit 

determinations (or, in the case of 

simultaneous internal appeal and 

external review, adverse benefit 

determinations) provided after the first 

day of the first plan year (in the 

individual market, policy year) 

beginning on or after July 1, 2011, the 

Federal external review process will 

apply unless the Department of Health 

and Human Services determines that a 

State law meets all the minimum 

standards of paragraph (c)(2) of this 

section as of the first day of the plan 

year (in the individual market, policy 

year). 

(d) Federal external review process— 

A plan or issuer not subject to an 

applicable State external review process 

under paragraph (c) of this section must 

provide an effective Federal external 

review process in accordance with this 

paragraph (d) (except to the extent, in 

the case of a plan, the plan is described 

in paragraph (c)(1)(i) of this section as 

not having to comply with this 

paragraph (d)). In the case of health 

insurance coverage offered in 

connection with a group health plan, if 

either the plan or the issuer complies 

with the Federal external review process 

of this paragraph (d), then the obligation 

to comply with this paragraph (d) is 

satisfied for both the plan and the issuer 

mstockstill on DSKH9S0YB1PROD with RULES2

Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 43363 

with respect to the health insurance 

coverage. 

(1) Scope. The Federal external 

review process established pursuant to 

this paragraph (d) applies to any adverse 

benefit determination or final internal 

adverse benefit determination as 

defined in paragraphs (a)(2)(i) and 

(a)(2)(v) of this section, except that a 

denial, reduction, termination or, or a 

failure to provide payment for a benefit 

based on a determination that a 

participant or beneficiary fails to meet 

the requirements for eligibility under 

the terms of a group health plan is not 

eligible for the external review process 

under this paragraph (d). 

(2) External review process standards. 

The Federal external review process 

established pursuant to this paragraph 

(d) will be similar to the process set 

forth in the NAIC Uniform Model Act 

and will meet standards issued by the 

Secretary. These standards will comply 

with all of the requirements described 

in this paragraph (d)(2). 

(i) These standards will describe how 

a claimant initiates an external review, 

procedures for preliminary reviews to 

determine whether a claim is eligible for 

external review, minimum 

qualifications for IROs, a process for 

approving IROs eligible to be assigned 

to conduct external reviews, a process 

for random assignment of external 

reviews to approved IROs, standards for 

IRO decision-making, and rules for 

providing notice of a final external 

review decision. 

(ii) These standards will provide an 

expedited external review process for— 

(A) An adverse benefit determination, 

if the adverse benefit determination 

involves a medical condition of the 

claimant for which the timeframe for 

completion of an expedited internal 

appeal under paragraph (b) of this 

section would seriously jeopardize the 

life or health of the claimant, or would 

jeopardize the claimant’s ability to 

regain maximum function and the 

claimant has filed a request for an 

expedited internal appeal under 

paragraph (b) of this section; or 

(B) A final internal adverse benefit 

determination, if the claimant has a 

medical condition where the timeframe 

for completion of a standard external 

review pursuant to paragraph (d)(3) of 

this section would seriously jeopardize 

the life or health of the claimant or 

would jeopardize the claimant’s ability 

to regain maximum function, or if the 

final internal adverse benefit 

determination concerns an admission, 

availability of care, continued stay or 

health care service for which the 

claimant received emergency services, 

but has not been discharged from a 

facility. 

(iii) With respect to claims involving 

experimental or investigational 

treatments, these standards will also 

provide additional consumer 

protections to ensure that adequate 

clinical and scientific experience and 

protocols are taken into account as part 

of the external review process. 

(iv) These standards will provide that 

an external review decision is binding 

on the plan or issuer, as well as the 

claimant, except to the extent other 

remedies are available under State or 

Federal law. 

(v) These standards may establish 

external review reporting requirements 

for IROs. 

(vi) These standards will establish 

additional notice requirements for plans 

and issuers regarding disclosures to 

participants, beneficiaries, and enrollees 

describing the Federal external review 

procedures (including the right to file a 

request for an external review of an 

adverse benefit determination or a final 

internal adverse benefit determination 

in the summary plan description, 

policy, certificate, membership booklet, 

outline of coverage, or other evidence of 

coverage it provides to participants, 

beneficiaries, or enrollees. 

(vii) These standards will require 

plans and issuers to provide information 

relevant to the processing of the external 

review, including, but not limited to, 

the information considered and relied 

on in making the adverse benefit 

determination or final internal adverse 

benefit determination. 

(e) Form and manner of notice—(1) 

Group health coverage—(i) For purposes 

of this section, a group health plan and 

health insurance issuer offering group 

health insurance coverage are 

considered to provide relevant notices 

in a culturally and linguistically 

appropriate manner— 

(A) For a plan that covers fewer than 

100 participants at the beginning of a 

plan year, if the plan and issuer provide 

notices upon request in a non-English 

language in which 25 percent or more 

of all plan participants are literate only 

in the same non-English language; or 

(B) For a plan that covers 100 or more 

participants at the beginning of a plan 

year, if the plan and issuer provides 

notices upon request in a non-English 

language in which the lesser of 500 or 

more participants, or 10 percent or more 

of all plan participants, are literate only 

in the same non-English language. 

(ii) If an applicable threshold 

described in paragraph (e)(1)(i) of this 

section is met, the plan and issuer must 

also— 

(A) Include a statement in the English 

versions of all notices, prominently 

displayed in the non-English language, 

offering the provision of such notices in 

the non-English language; 

(B) Once a request has been made by 

a claimant, provide all subsequent 

notices to the claimant in the nonEnglish language; and 

(C) To the extent the plan or issuer 

maintains a customer assistance process 

(such as a telephone hotline) that 

answers questions or provides 

assistance with filing claims and 

appeals, the plan or issuer must provide 

such assistance in the non-English 

language. 

(2) Individual health insurance 

coverage—(i) For purposes of this 

section, a health insurance issuer 

offering individual health insurance 

coverage is considered to provide 

relevant notices in a culturally and 

linguistically appropriate manner if the 

issuer provides notices upon request in 

a non-English language in which 10 

percent or more of the population 

residing in the claimant’s county are 

literate only in the same non-English 

language, determined in guidance 

published by the Secretary of Health 

and Human Services. 

(ii) If the threshold described in 

paragraph (e)(2)(i) of this section is met, 

the issuer must also— 

(A) Include a statement in the English 

versions of all notices, prominently 

displayed in the non-English language, 

offering the provision of such notices in 

the non-English language; 

(B) Once a request has been made by 

a claimant, provide all subsequent 

notices to the claimant in the nonEnglish language; and 

(C) To the extent the issuer maintains 

a customer assistance process (such as 

a telephone hotline) that answers 

questions or provides assistance with 

filing claims and appeals, the issuer 

must provide such assistance in the 

non-English language. 

(f) Secretarial authority. The Secretary 

may determine that the external review 

process of a group health plan or health 

insurance issuer, in operation as of 

March 23, 2010, is considered in 

compliance with the applicable process 

established under paragraph (c) or (d) of 

this section if it substantially meets the 

requirements of paragraph (c) or (d) of 

this section, as applicable. 

mstockstill on DSKH9S0YB1PROD with RULES2

43364 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Rules and Regulations 

(g) Applicability date. The provisions 

of this section apply for plan years (in 

the individual market, policy years) 

beginning on or after September 23, 

2010. See § 147.140 of this part for 

determining the application of this 

section to grandfathered health plans 

(providing that these rules regarding 

internal claims and appeals and external 

review processes do not apply to 

grandfathered health plans). 

[FR Doc. 2010–18043 Filed 7–22–10; 8:45 am] 

BILLING CODE 4830–01–P, 4510–29–P, 4120–01–P 

mstockstill on DSKH9S0YB1PROD with RULES2