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Recent Regulatory Activity on Grievance and Independent Review Requirements

Insurance Regulation Law Alert William J. Toman


Due to some recent regulatory action by the Office of the Commissioner of Insurance ("OCI"), all self-insured nonfederal governmental health plans as well as all health insurance issuers in the group and individual market in Wisconsin must participate in a "federally administered external review process." Plans and issuers should elect one of two possible federally administered external review processes, file the election with the U.S. Department of Health and Human Services ("HHS") and make the necessary changes to their external appeals processes by January 1, 2012.


The Patient Protection and Affordable Care Act, known as the "Affordable Care Act" or, more colloquially, as "health care reform" was enacted in 2009. The Affordable Care Act authorized and directed HHS to regulate the internal appeals and external review processes of insurers offering group or individual health insurance plans. HHS issued regulations in July of 2010, and amended them in June of 2011. The regulations deal with both internal appeals and external review processes. On the topic of external review processes, the HHS regulations acknowledge that many state insurance departments already require some kind of external review. In order to achieve HHS's stated goals of conformity and keeping the regulation at the state level where possible, the HHS regulations provided that if a state's external review process complies with 16 minimum consumer protections (based on the Uniform External Review Model Act promulgated by National Association of Insurance Commissioners), then the state's process applies. If it doesn't, then the HHS regulations create a federal process that applies.[1]

In order to ease the transition and to give states an opportunity to amend their regulations and statutes to come into compliance with the HHS regulations, the regulations created a transition period. During the transition period, if there was any state external review process, then the state's process would be deemed to apply. After the transition period, however, any state process that did not comply would be pre-empted by the federal process created by HHS. The transition period, as extended by the June 2011 amendment to the HHS regulations, ends on December 31, 2011.

HHS delegated its authority to determine whether a state process complies to the Center for Consumer Information and Insurance Oversight ("CCIIO").Wisconsin's process is found in Wisconsin Administrative Code chapter Ins 18, which interprets Sections 632.83 and 632.835 of the Wisconsin Statutes. The Wisconsin process requires an independent review of certain kinds of claims by an Independent Review Organization ("IRO").

On July 29, 2011, the CCIIO notified OCI that Wisconsin's current process does not comply with HHS regulations, and that CCIIO would withdraw its approval of the Wisconsin process after the transition period. On the same day, Wisconsin Representative Peterson introduced AB 210, which would have made certain changes to the Wisconsin process to bring it into compliance. The bill was passed by the Assembly on October 18, 2011, and was messaged immediately to the Senate, where it was referred to the Committee on Insurance and Housing. As of the writing of this alert, AB 210 has not been enacted, and it is not likely to be enacted prior to the end of the transition period on December 31, 2011.

Seeing that no progress had been made in enacting AB 210, OCI promulgated an emergency rule on November 16, 2011, to make certain changes to Ins 18. The regulation was intended as a stop-gap measure until AB 210 could be passed. It amended Wisconsin's grievance and independent review procedures to bring them into compliance with HHS regulations.

On December 1, 2011, however, OCI gave notice that it intended to issue a second emergency rule on Ins 18 that would repeal the prior emergency rule. In the December 1, 2011, notice, OCI acknowledged that Wisconsin's independent review process may be interpreted to conflict with the federal law. However, it went on to state that OCI prefers to maintain its independent review process to the extent it is able under the law. The OCI emergency rule indicated that affected entities would have to comply with both federal and state regulations.

OCI issued a bulletin on December 16, 2011, stating that as a result of the December 1, 2011 notice, OCI anticipates that CCIIO will withdraw its approval of the Wisconsin process. OCI stated that "insurers should make decisions they feel necessary in order to comply with the federal and state standards" and promised to provide further guidance shortly.


Because the November 16, 2011, emergency rule will be repealed, Wisconsin's process will likely not comply with the HHS requirements by the end of the transition period.[2] According to the HHS regulations, any state process that does not comply is pre-empted. Therefore, we believe that as of January 1, 2012, the HHS regulations will pre-empt Wisconsin's process.

According to Technical Release 2011-02 issued jointly by the Departments of Labor, HHS and Treasury (the "Departments"), all self-insured nonfederal governmental health plans as well as health insurance issuers in the group and individual markets in states whose external review processes are found not to meet the HHS requirements must participate in a "federally administered external review process." Such plans and issuers may choose to:

  1. participate in the federal external review process administered by HHS agreement through the Office of Personnel Management (the HHS administered process); or
  2. engage in the private accredited IRO process for plans subject to ERISA and/or the Code.

As most health plans were operating under OCI's regulations previously, this means that most health plans will need to make amendments to their external appeals process and inform HHS which federally administered external review process it intends to comply with.

General instructions for participating in the HHS administered process

Self-insured nonfederal governmental plans and issuers that choose to use the HHS-administered process should follow the instructions provided in "Technical Guidance for Interim Procedures for Federal External Review Relating to Internal Claims and Appeals and External Review for Health Insurance Issuers in the Group and Individual Markets under the Patient Protection and Affordable Care Act," which was originally published on August 26, 2010. Specifically, issuers and plans should follow the information under "Interim Federal External Review Process for Health Insurance Issuers in the Group and Individual Markets" (under Roman Numeral II beginning on page 4) with the following exceptions:

  1. In accordance with the interim final rules implementing section 2719 of the PHS Act on July 23, 2010 (as amended), external review is available for adverse benefit determinations and final internal adverse benefit determinations as defined in 45 CFR §147.136(d)(1)(ii)(A), which include denials by plans and issuers that involve medical judgment (including, but not limited to, those based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit; or its determination that a treatment is experimental or investigational) and a rescission of coverage (whether or not the rescission has any effect on any particular benefit at that time). These definitions of adverse benefit determinations and final internal adverse benefit determinations replace the language in the previous technical guidance.
  2. The information requested to be sent to [email protected] on page 5 of this previous technical guidance should be sent by the earlier of January 1, 2012, or the date by which the plans and issuers are using the HHS-administered process.

General instructions for participating in the private accredited IRO process

Technical Release 2010-01 issued by the Department of Labor on August 23, 2010, and modified by Technical Release 2011-02 describes the private accredited IRO process. Plans and issuers electing the private accredited IRO process should consult these technical releases as well as any amendments that the Department of Labor makes to Technical Release 2010-01 (as modified) in the future for instructions on how to participate in this external review process. As of the date of this client update, there have been no additional amendments to Technical Release 2010-01.

For more information on the federally administered external review processes, please contact William Toman at (608) 283-2434 / [email protected], or your Quarles & Brady Attorney.

UPDATE: OCI issued an updated bulletin on December 27, 2011, in which it attached the CCIIO final determination letter. In the final determination letter, CCIIO indicates that it is giving insurers until March 1, 2012, to come into compliance with the federal external review processes. Insurers should be receiving a letter from CCIOO in the coming months with additional information.

[1] This is distinct from HHS's approach to internal appeals. For internal appeals, like most topics that are regulated by both state and federal government, the stricter rule applies. For rules that are contradictory, the federal rule applies. However, the federal regulations specifically pre-empt all external review laws of a state unless HHS finds that those laws are complaint. Therefore, the issue addressed in this summary with regard to external review does not apply to internal appeals.

[2] CCIIO's website shows that Wisconsin has not implemented the strict nor the similar standards as of 11/22/2010.

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