Obama Administration Gives In to Industry on Health Reform Rule; Weakens Consumers' Ability to Challenge Unfair Denials of Health Care

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Jun 23, 2011, 11:48 ET

WASHINGTON, June 23, 2011 /PRNewswire-USNewswire/ -- A health reform regulation issued by the Obama administration late Wednesday bends toward industry demands and undermines rights granted to patients under federal health reform allowing them to appeal wrongful denials of care by health plans. Consumer Watchdog called on the administration to reverse changes in the rule and protect consumers' ability to challenge unjust denials of care.

The federal regulation issued yesterday is meant to standardize internal appeals and external reviews of denials of care. Its most significant impact is on patients who do not already have the right to seek review of denials of care under state laws. Most states give patients the right to request an independent external review of insurance benefit denials, however health plans funded by employers, so-called "self-insured" plans covering tens of millions of Americans, do not have to comply with these laws. Patients in these self-insured health plans, and consumers in the few states without external review laws, have little means to challenge a wrongful denial of care, even if that denial causes severe harm or death. The health reform law gave all patients a right to challenge unjust denials, but this regulation could prevent many consumers from obtaining timely, independent external review, Consumer Watchdog said.

Insurance companies often administer these self-funded plans on behalf of large employers, even though they have no accountability for the denials of care.

"The Obama administration gave in to the insurance industry and large employer lobby on rules that would, for the first time, give rights to patients with certain employer-paid health plans to challenge a health care denial. These consumers need the protection of independent reviews the most because they usually have no legal remedy for a wrongful decision to deny care under an errant 1987 Supreme Court ruling. Health reform was intended to strengthen the public's ability to make insurers provide the coverage patients are promised. The administration should reverse the changes in this regulation that undermine that promise," said Carmen Balber, Washington director for Consumer Watchdog.

The interim regulation issued last year by the Department of Health and Human Services was significantly stronger than the amendments announced yesterday. The changes curtail the ability of consumers to obtain independent and timely reviews of unfair coverage denials.

Amendments to Health Reform External Review and Internal Appeals Regulation

Federal External Review	July 2010	June 2011
Scope of decisions subject to external review	Denial, reduction, or failure to make payment based on: whether benefit is covered; pre-existing condition, network exclusions or other limits on otherwise covered benefits; determination of medical necessity or that benefit is experimental; rescission of coverage.	Denial, reduction, or failure to make payment based on: medical judgment (excluding claims involving legal or contractual issues); rescission of coverage.
Time to request review	120 days	60 days
Trigger allowing consumers to seek external review	Plan not in strict compliance with internal appeals process	Plan not in strict compliance with internal appeals process, with exceptions for violations that are: de minimus, attributable to "good cause," not reflecting a pattern, part of a "good faith" information exchange, non-prejudicial
Independence of external reviewer	Insurer/employer chooses reviewers; must choose three and rotate assignment	Insurer/employer chooses reviewers; must choose three by July 2012; HHS discretion to allow exceptions
When group plans must use non-English languages in denial notices	500 or 10% of plan participants are literate in the same non-English language	When 10% of county in which plan participant resides are literate in the same non-English language

Internal Appeals	July 2010	June 2011
Timeline for review of urgent cases	24 hours	72 hours

Read the chart of amendments online: http://www.consumerwatchdog.org/archive/obama-administration-weakens-health-reform-external-review-and-internal-appeals-regulation.

Changes to the external review regulation include: limiting the type of claims denials patients can take to an external reviewer; shortening the time a patient has to seek a review; making it harder for patients to trigger the right to an external review; and lowering standards for communicating in the appropriate language for non-English speakers. The regulation also compromises the independence of reviewers by allowing employers to choose their own reviewers.

Changes to the minimum standards for internal appeals extend from 24 to 72 hours the amount of time a plan has to decide an internal appeal in urgent cases.

The U.S. Supreme Court ruled in 1987 (Pilot Life v. Dedeaux) that the Employee Retirement Income Security Act (ERISA) prevents consumers with employer-paid insurance from holding employers or insurance companies legally accountable for damages for improper processing of insurance claims. The health reform law failed to close this loophole, so the new external review process is the only way for consumers with self-insured plans to obtain an outside ruling on unjust benefit denials. The regulation released Wednesday by HHS undermines even that small protection, said Consumer Watchdog.

Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org.

SOURCE Consumer Watchdog