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HHS Finalizes Appeal Process for Health Insurance Denials

July 1, 2011

The Department of Health and Human Services (HHS), along with the Department of Labor and the U.S. Treasury, released its final rule regarding appeals of health insurance claims denials.  This interim final rule, released June 22, includes some small but significant changes from the proposed rule issued in July 2010.  The most notable change concerns the right to an external appeal of a denied claim. 

The Affordable Care Act gives members in group and individual health plans the right to appeal the denial of a claim to an independent review panel if they disagree with the company's internal appeal review. This option has not been available before for many plans, including those held by the more than 44 million Americans who are covered by self-insured plans that lost their “grandfathered” or exempt status in 2011.

Consumer advocates are concerned with two of the changes. First, the period for beneficiaries to file an external appeal was reduced from120 days to 60 days.  Further, the new rule limits external appeals to decisions based on "medical judgment."  That restriction would exclude denied claims based on such factors as coding errors and failure to receive pre-authorization. 

However, many other consumer protections 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. Moreover, some of the limitations in external appeals may be removed in 2014 when other consumer protection provisions of the health law take effect.  

The new rule goes into effect on July 22, but HHS will be accepting comments until July 25. Further, it may choose to modify the rule in the future.