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HHS Scales Back Rules On Health Insurance Appeals

The Obama administration announced Wednesday that it is scaling back some of its earlier rules under the 2010 health law that governed consumers’ right to appeal denials by health plans, disappointing patient advocates and earning praise from industry groups.

The health overhaul gives members in group and individual health plans the right – many for the first time — to appeal the denial of coverage to an independent review panel. But the administration’s new rules provide beneficiaries less time to prepare their appeal, less information about why their claim was denied and limit what type of denials can be challenged.

However, some important consumer protections that advocates were concerned about remain intact. Decisions by external review panels are binding and patients can still appeal if their insurers cancel their coverage. Employer-sponsored plans that are self-insured will have to use at least two independent review organizations to help assure impartial decisions.

Since states do not regulate self-insured health plans, there has been no requirement allowing those beneficiaries to appeal denials to an independent review panel. The health law extends that right to more than 44 million Americans covered by self-insured plans that have lost their “grandfathered” or exempt status this year.

“The right to an external appeal is considered one of the most important consumer protections that you can have,” said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight at the Department of Health and Human Services. “Consumers do not want insurance companies making medical decisions for them or for their families.”

Yet Larsen said states would have more time to revise the patchwork of local external appeals rules so that they can conform to the federal standards. Insurers won’t have to comply with new state rules incorporating federal requirements until Jan. 1, instead of next month as originally proposed.

Larsen also said that beneficiaries would have 60 instead of 120 days to file an external appeal. Consumer advocates worry that won’t leave enough time to obtain medical records, get letters from doctors and prepare the appeal.

A spokesman for America’s Health Insurance Plans, which had pressed the administration for changes, said the trade group was still reviewing the 95-page document, but the group’s overall impression was positive.

“The new regulations take important steps to simplify and streamline the appeals process so that patients can receive the most accurate and timely decision about their medical claims,” said the spokesman, Robert Zirkelbach.

Stephen Finan, senior policy director at the American Cancer Society Cancer Action Network, said Wednesday’s announcement would have the opposite effect. “Transparency and independence are critical to ensure that a fair and objective appeal is conducted,” he said. “Unfortunately, there are numerous barriers and burdens placed on the consumer that could prevent a timely and objective resolution to a denial.”

“My greatest disappointment is the narrowing the scope of external review,” said Jennifer Jaff, executive director of Advocacy for Patients With Chronic Illness, a nonprofit group in Farmington, Conn., that handles about 750 health insurance appeals a year. “The regulation imposes a new fuzzy standard.”

This standard limits external appeals, said Finan, to decisions based on “medical judgment.” That restriction “would fail to address a significant proportion of denied claims based on other factors such as coding errors and failure to receive pre-authorization,” he said.

In addition, consumer groups are concerned that limiting information insurers have to provide about why a claim was denied will require beneficiaries to seek additional explanation if they want to appeal.

Some of the limitations in external appeals may be removed in 2014 when other consumer protection provisions of the health law take effect and the marketplace has had “time to adjust to providing external review,” the regulation says.

Contact Susan Jaffe at

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Cost and Quality Insurance The Health Law