Overview of ERISA Claims Procedure Regulations

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On July 1, 2002, the U.S. Department of Labor, under authority granted by the Employee Retirement Income Security Act of 1974 (ERISA), put into effect new regulations covering claims procedures for employer-based health plans.  The focus of this Overview and the accompanying documents―a summary of the main provisions of the claims procedures, a glossary, and three charts outlining timelines for claims―is the regulations' impact on employer-based group health plans.   

These regulations are the first update of claims procedures regulations since 1977 and have been under development since 1998.  The regulations were originally published in the Federal Register in November 2000 and were to become effective on January 1, 2001.  When the Bush Administration took office, applicability date of these regulations was delayed until July 1, 2002. 

When these regulations are fully effective on January 1, 2003, they will cover 130 million Americans enrolled in employer-sponsored health plans covered under ERISA.[1]    These regulations create standards for claims procedures, require greater disclosure of information by insurers, outline requirements for insurers' appeals processes, and establish timelines for insurers in their response to claims and appeals.  Already very adept at using legal requirements to assist consumers, consumer health assistance programs can use these regulations to improve their ability to secure consumers' access to health care. 

This Overview highlights the issues raised by the regulations and discusses how consumer health assistance programs may use the regulations to promote improved state protections for consumers.  We have also prepared a summary of the regulations, a charts outlining timelines for urgent claims, pre-service claims, and post-service claims, and a glossary of terms.

Where to Find the Regulation and Related Documents

The regulation itself and other important documents can be found on-line.  The Federal Register citation for this regulation is Federal Register, Tuesday, November 21, 2000, Vol. 65, No. 225, pages 70246-70271.  The citation for the effective date of the regulation is Federal Register, Monday, July 9, 2001, Vol. 66, No. 131, pages 35886-35888.  DOL has issued advisory guidance in the form of Frequently Asked Questions.

Scope of the Regulations and the Focus of this Presentation

The plans covered by these regulations are employer-sponsored health plans that are neither federal or state plans nor publicly funded plans.  Individually purchased health benefit plans are also not subject to these regulations. The two kinds of plans subject to the regulation are "self-funded" (sometimes called "self-insured" plans), where the employer bears the risk for employee insurance claims, and "fully insured" plans, where the health plan benefits administrator bears the risk for employee insurance claims.     While the regulations address both group health plans and disability plans, our presentation focuses only on group health plans.

Applicability of Regulations and Interaction with State Laws

Self-funded plans are exempt from state laws under ERISA, so these regulations, along with related federal laws and regulations, offer members of those plans the only explicit rights they have when making claims for benefits and appealing claim denials.  Fully insured plans are subject to both state and federal laws, so for them, the regulations establish a floor for regulation.

The regulations provide a floor for consumer protections for fully insured plans, since states may promulgate more stringent requirements for these plans.  States are free to impose their own claims and appeals standards on these plans.  The federal regulation does, however, prohibit states from requiring consumers who have exhausted a plan's internal review process to exhaust state processes before pursuing a case in federal court.  

In states where protections are weaker than these federal regulations, consumer health assistance programs may want to encourage their legislators to bring state regulations up to the federal standards.  Without equivalent state protections, even consumers in fully insured plans would only have recourse to federal court.  With equivalent or stricter regulations, health assistance programs could direct consumers to seek remedies from the state insurance commissions and from state courts.

Processes and Timelines 

The deadlines imposed by the regulations vary, depending on the relationship of the provision of treatment to the claim or appeal.  (For charts of these timelines, click here.)  In other words, claims and appeals for pending care are treated more expeditiously than claims and appeals related to claims for care that has already been rendered.  Even stricter deadlines are imposed when the patient's need for the pending care is urgent.

Denial of a Claim for Benefit

A health plan's decision to deny a claim for benefits or reduce a claim for benefits is termed an "adverse benefit determination" by these regulations.  Under the regulations, these denials must be in writing.  Plans must provide an explanation for the denial, and in cases of medical necessity or experimental treatment denials, consumers may request copies of documentation the plan examined in making its determination.  All information must be made available at no charge to the consumer.  Being able to examine this documentation helps the consumer and the health assistance program in preparing an appeal.  Click here for a summary that describes in more details what the denial must include.

Appeals Process

The regulations lay out standards for the process for appealing adverse benefit determinations.  These standards involve the timeliness of the appeal process, the steps that can be included in the process, disclosure requirements, and the fairness of the process.  The timeliness of the process is outlined in the attached charts and, as in the claims process, there are varying deadlines based upon the type of care that is in dispute. 

Decisions on Appeal

The requirements that health plans must follow in issuing appeal decisions are very similar to those for the original adverse benefit determination.  Click here for a summary that describes these provisions in detail.  As with the original denial, the plan must provide the consumer with all documentation examined in the process of making the determination.

Using the Regulations

The regulations contain a number of provisions that consumer health assistance programs should be able to use to advance their clients' cases.  Some provisions, such as the definition of "day" as a calendar day, not a business day, are straightforward.  For other provisions, state laws may determine the extent to which consumer health programs can "push the envelope."  Nevertheless, the issuing of these new regulations 25 years after the original regulations were put into effect provides programs will valuable tools that can and should be tested immediately,

These regulations create many opportunities for consumer health assistance programs.  A few examples illustrate the opportunities.

1. The information disclosure requirements on the adverse benefit determinations can be invaluable.  Some states currently have such disclosure requirements in place, and consumer health assistance programs in those states have used information from denials (such as utilization review criteria) to prepare successful appeals.  Armed with information from the plans about how claims decisions are made, consumer health assistance programs can look for patterns of claim denials and gather other data  that can strengthen their arguments in favor of consumers.  
   
   
2. Advocates in states with less rigorous disclosure and deadline requirements may push for state legislators to enhance state requirements to meet the federal standards.  Since most health plans are required to follow these standards, matching state regulation would not create additional requirements but would provide state remedies for fully insured plans.  
   
   
3. One possible helpful aspect of the regulations is the designation of an authorized representative.  Consumers may name a representative, although plans are allowed to have some procedure in place to assure that the consumer's choice is clear.  Depending upon state laws on privacy and liability and on the scope of individual health assistance programs, it may be feasible for programs to take on a more active role in helping consumers secure their benefits.

Remedies

Remedies for violations, unfortunately, are limited under ERISA.  To obtain specific relief, a consumer must file a federal lawsuit.  Consumers and their advocates can also file complaints with the U. S. Department of Labor, and we encourage them to do so, although remedies for individual consumers are limited through the Department of Labor complaint process.

Conclusion  

These regulations provide significantly improved protections for consumers who have health coverage through ERISA programs.  However, the extent of the protection is still seriously limited.  These regulations do not address state external appeal rights, mandated benefits, or state court remedies, among other issues.  Only a strong federal Patients' Bill of Rights can provide comprehensive consumer protections.