By: Ron Peck, Esq.
Lately, I’ve caught myself talking (often) about fiduciary duty, appeals, and how they relate to each other. In response to my commentary; that everyone needs to decide who is going to handle appeals and/or function as a fiduciary in that regard… some industry experts have asked how severe is the threat? How likely is it that they will face a final appeal – make a bad decision – see that decision appear before a court – and be held liable for breaching their duty? Indeed, in years past, second (final) appeals and external appeals were rare. To this, I remind folks that as of March 23, 2010, Federal Law entitles all plan members to appeal health benefit plan decisions through an “internal appeal” process. If a benefit plan still denies payment or coverage, the law permits the member to have an independent third party decide to uphold or overturn the plan’s decision. This final process is often referred to as an “external review;” https://www.hhs.gov/healthcare/about-the-law/cancellations-and-appeals/appealing-health-plan-decisions/index.html.
Most benefit plans offer two appeals “internally,” before an “external” appeal can be filed. The first internal appeal involves the plan administrator or its representative reviewing its initial claim denial. The second internal appeal – often called the “final” internal appeal (since it is the last “bite at the apple” before a denial is submitted to an external reviewer for an external appeal), usually involves the plan administrator or its representative reviewing their response to the first internal appeal. The repetitiveness and fact that the same entity is reviewing its own work over and over led lawmakers to include in the Affordable Care Act (“ACA”) provisions enabling participants to demand an external appeal. Today, any denial that involves medical judgment where the patient or their provider disagree with the health insurance plan’s decision may be externally appealed, as well as any denial that involves a determination that a treatment is experimental or investigational, or cancellation of coverage based on an insurer’s claim that the insured gave false or incomplete information when they applied for coverage. In 2016, the DOL released a denied claims report (https://www.oig.dol.gov/public/reports/oa/2017/05-17-001-12-121.pdf) indicating that more than 2 million denied claims will be appealed in the next year. Of that, more than half of those denials are overturned.
Insurance companies in all states must participate in an external review process that meets the consumer protection standards of the health care law, and the cost to the participant (requesting the appeal) can’t be more than $25 per external review; https://www.healthcare.gov/appeal-insurance-company-decision/external-review/.
Prior to these ACA reforms, success rates for appeals have been documented at more than 50% and these reforms provide an even greater likelihood of success when appealing denials; Government Accountability Office (US) Washington: GAO; 2011. Mar, [cited 2012 Mar 10]. Report to the Secretary of Health and Human Services and the Secretary of Labor: private health insurance: data on application and coverage denials. Also available from: URL: http://www.gao.gov/new.items/d11268.pdf.
In light of the low cost to the participant, likelihood of achieving payment (overturn of a denial), and absolute legal right to demand one, the rate of final level internal appeals and external appeals is skyrocketing. Indeed, many providers of medical services are coaching their patients regarding how to file appeals, and supporting them through the process, as they are incentivized to see denials appealed as well. As mentioned, the maximum cost to the participant is $25. Most Independent Review Organizations charge a lot more than that per appeal, with some complex appeals costing thousands of dollars to review. As a result, benefit plans will be the ones paying the lion’s share of the cost of external appeals; a cost they will incur regardless of whether the denial is upheld or overturned. Take note: this cost (to utilize an IRO) is not paid once, but twice, by most plans. Indeed, benefit plans will ordinarily hire an IRO to assist with the final, internal appeal – and if the claim remains denied – hire another IRO for the external appeal.
Finally, if a claim is denied by the plan – both when first received, again upon first appeal, and again upon final appeal – and the matter is externally appealed… if the external reviewer determines that the claim is not only payable, but that the decision to deny was arbitrary – that plan may be penalized up to treble damages for fiduciary breach. In other words, if the unpaid (but eventually payable) claims were $100,000.00, the plan may be forced to pay up to another $300,000.00 to the aggrieved parties – for a total payment of $400,000.00.
So… In response to those who say that, in the past, final appeals, external appeals, and fiduciary liability were never major issues… they may be in for a rude awakening, as providers and patients continue to awaken themselves to the opportunities available to them, to fight denials – at no cost or risk to them.
Contact The Phia Group today about an affordable care act external review!