Consumer Appeal Rights in Private Health Coverage

The Affordable Care Act (ACA) requires that all consumers in non-grandfathered health plans have the right to appeal denied claims, first internally to the plan, and then, if the plan upholds its denial, to an independent external reviewer, sometimes called an IRO. Most states had enacted external appeal laws prior to the ACA, but these did not apply to self-insured group health plans which cover most privately insured Americans and which states cannot regulate.

Regulations to implement ACA appeal protections were first published in 2010 requiring that all adverse benefit determinations (such as claims denials or incorrect application of cost-sharing) must be eligible for both internal appeal and external review. The regulation also set content and language access standards for denial notices. However, in response to public comment about possible increased volume and cost of appeals resulting from the ACA, federal appeals standards were substantially modified in 2011, and these changes were made permanent in 2015. As a result, under current federal standards:

• Only a small percentage of adverse benefit determinations – those decided on the basis of medical necessity or similar clinical judgment – are eligible for external review. Other adverse determinations, including denial of coverage or application of higher cost sharing because a service was provided out of network, are generally not eligible
• The health plan reviews requests for external review to determine if are eligible
• The group health plan contracts with and pays the external review entity (as can health insurance companies in states that have not enacted external appeal laws), and
• Language access standards limit the number of people who must be provided written denial notices in another language if they have limited English proficiency (LEP).

The No Surprises Act (NSA), makes disputes over coverage of surprise medical bills eligible for external review starting in 2022. In addition, pending federal legislation would appropriate new funding for state Consumer Assistance Programs (CAPs), which were established under the ACA to help consumers resolve disputes and file appeals with private health plans. This brief reviews federal appeals standards for private health plans and consumer access to the appeals process.

Most denials are ineligible for external appeal and health plans decide which claims are eligible

The 2010 federal appeals regulation established broad appeal rights for consumers in case of any dispute over how a claim was covered. The regulation stated that all adverse benefit determinations – whether denial or partial payment of a claim or application of in-network vs. out-of-network cost sharing – must be eligible for internal appeal, meaning the consumer has a right to ask the health plan to reconsider any such determination. The 2010 regulation also required that all adverse benefit determinations upheld by the plan would be eligible for independent external review. Transparency data reported by the federal government and states indicate that the health plans tend to uphold most adverse benefit determinations that are internally appealed. By contrast, denials that are externally appealed tend to be overturned. For example, a 2020 report on claims denials and appeals in Maryland shows a 64% reversal rate of denials that were externally appealed.

The scope of claims eligible for external appeal was amended in 2011, limited to only to those denials based on medical necessity or other determination involving clinical judgment. Since then, transparency data reported by the federal government indicate that fewer than 1% of claims denials are on the basis of medical necessity; claims are almost always denied for some other reason, including for example, because the service was provided out of network and so not covered. The 2011 limitation was described as a temporary suspension “intended to give the marketplace time to adjust to providing external review. The Departments believe that, once the market has so adjusted, it will become clear that the benefits of the July 2010 regulation’s broader scope would be likely to justify its costs.” Yet, rules were amended again in 2015 to make permanent this narrowed scope of eligibility for external appeal.

The 2015 amendments also required that upon receiving a request for external appeal, a group health plan must complete a preliminary review to determine whether the claim is eligible. If the plan determines the claim is ineligible, it must notify the consumer why and provide the toll-free number at the U.S. Department of Labor. The regulation does not describe any further recourse for consumers who disagree with the health plan’s determination.

Recent regulations to implement the No Surprises Act added surprise medical bills to the scope of claims eligible for external review, but made no other changes, including to the process under which plans determine eligibility for external review.

Health plans hire the external review entities

External appeals are generally conducted by independent review organizations (IROs). These third-party entities provide objective review of claims disputes, relying on expert medical peer reviewers for medical necessity disputes and on insurance law experts for other contractual coverage disputes. Under state external review laws, a state agency (usually the Insurance Department) contracts with one or more IROs to conduct external appeals. Neither plans nor consumers can select the IRO, and before it is assigned a case, the IRO must certify that it has no material conflicts of interest related to the health plan, patient, or provider. In 2010, the US Department of Health and Human Services (HHS) established a federal external appeals process for insured plans in states that had not adopted ACA appeals standards (currently these include Alabama, Florida, Georgia, Pennsylvania, Texas and Wisconsin). Under the HHS process, the federal government contracts with and pays an IRO to conduct external appeals.

The 2011 regulations, however, codified guidance issued earlier by the US DOL that established a new, so-called “private accredited IRO process” for self-insured group health plans. Under this process, the group health plan contracts with the IRO. To mitigate against bias, plans must contract with at least three accredited IROs and rotate or randomly assign external reviews among them. The 2011 amendments also required that, in states that have not adopted ACA appeals standards, insurers can choose on a case-by-case basis whether to use the HHS external appeals process or the private accredited IRO process. This flexibility also extends to self-insured nonfederal governmental plans, which cover more than 19 million public employees and dependents and which are otherwise regulated by HHS. The federal government does not report data on who uses the HHS external appeals process or how often.

The federal government also does not require group health plans to report information relating to the IROs with which they privately contract, the number of external appeals requested or granted, or the outcomes of appeals. As noted above, HealthCare.gov insurers are required to report summary data on the number of denied claims and appeals under qualified health plans, but do not report information on who conducts external appeals.

Standards for denial notices limit language access and other detail

To be able to appeal a denial or partial denial of a claims, including for example, a surprise medical bill, consumers must first be notified of the adverse benefit determination. Federal regulations set minimum standards for when health plan denial notices (also called explanation-of-benefit notices, or EOBs) must be provided in non-English languages for individuals with limited English proficiency (LEP). Federal rules also set standards for the content of denial notices; both of these standards have changed significantly.

Language access

The ACA requires health plans to provide denial notices in a “culturally and linguistically appropriate manner” explaining the plan action and describing consumers’ appeal rights. The 2010 appeals regulation required that denial notices and notice of appeal rights must be provided in writing in a non-English language to consumers upon request when certain thresholds are met. For large group health plans that cover 100 or more people, the threshold was the lesser of 500 participants or 10% of all plan participants being literate only in the same non-English language. For small group health plans, the threshold was 25% of all plan participants. In the individual market, the threshold was 10% of the population residing in the county being literate only in the same non-English language. In addition, once a consumer did request a written translated notice, plans were required to provide all subsequent notices to that consumer in that language.

The 2011 amendments reduced the threshold percentages for all group or individual health plan to 10% or more of the population residing in the individual’s county being fluent only that that consumer’s non-English language. According to the most recent data released by CMS, this threshold applies in just 266 counties (188 counties across 24 states, plus 78 counties in Puerto Rico), primarily to people literate only in Spanish.  Plans are also required to include “taglines” on the EOB in affected counties – one sentence notices indicating that oral translation services are available from a call center. As a result, for example, if a meat processing plant in South Dakota with 600 employees offers health benefits to its workers, which include 60 employees who speak only Spanish, under the 2010 appeals regulation, that firm would have been required to provide EOBs in Spanish to its LEP workers if they would so request. However, under the 2011 regulations, this standard does not apply because in no South Dakota counties are at least 10% of county residents fluent only in Spanish.

The 2011 regulation also eliminated the requirement for plans to automatically provide translations of subsequent notices; instead, consumers must separately request a translation for each EOB. The reason for these changes cited concerns for cost burdens imposed by the 2010 standards.

Content of denial notices

The 2010 appeals regulation also required that EOBs must include information necessary to identify each claim, including a description of the service, date of service, treating provider, and the specific diagnosis codes (such as ICD-10) and billing codes (such as CPT) associated with each service along with an explanation of the meaning of these codes.

However, citing various concerns related to privacy, interference with the doctor patient relationship, and the cost to health plans and issuers, the 2011 regulations removed the requirement to include billing and diagnosis codes and their meaning on the EOB, though codes must be made available to consumers on request. Coding information can be key to understanding an adverse benefit determination and can sometimes trigger the denial. One study estimates that coding errors may account for 14% of all claims denials by private health plans. In addition, for seriously ill patients whose EOB may contain numerous lines of claims that may be only briefly identified – for example, as “lab test” or “radiology service” – coding detail can make it easier to discern which services were denied or paid incorrectly.

By contrast, regulations implementing the No Surprises Act do require that other types of consumer notices – including consent notices and good faith estimates of charges by out-of-network providers – must contain billing and diagnosis codes for relevant services.

Many consumers need help navigating appeals

In general consumers exercise appeal rights only infrequently. The ACA requires all non-grandfathered health plans to report transparency data on claims denials and appeals. Although this requirement has not been implemented for employer-sponsored plans, marketplace plans report that consumers appeal fewer than two-tenths of one percent of denied claims internally to their health plan. Issuers uphold denials in most internal appeals (about 60%); and less than 3% of denials that are internally appealed make it to external review.

This result is not so surprising considering low rates of health insurance literacy among American consumers, and considering that people who make claims are likely to be sick and so possibly less able to contest insurance problems. Studies also find many consumers don’t understand appeals processes and often don’t know where to turn for help.

Expert help can make a difference. The Affordable Care Act authorized the establishment of state health insurance ombudsman programs, also called Consumer Assistance Programs, or CAPs, to educate the public about their rights and protections under private health plans and to help consumers resolve disputes with their health plans, including filing appeals. The ACA provided initial funding of $30 million for CAPs, and 40 states were awarded CAP grants in 2010. In light of limited funding, most programs were housed in state agencies already engaged in consumer services – departments of insurance, attorney general offices, and state independent health insurance ombudsman agencies. Most CAPs remain in operation, though no further CAP funding has been appropriated since 2010, and several programs have since closed. This year, pending federal legislation would appropriate new funding for CAPs: the Build Back Better Act would appropriate $100 million for CAPs over four years, and the FY 2022 Labor-HHS Appropriations Act would provide $50 million for CAPs in 2022.

The ACA requires all non-grandfathered private health plans to include on the EOB contact information for state CAPs and notice that these agencies can help people file appeals. CAPs help individuals with a range of problems related to denied claims, surprise medical bills, mental health parity concerns, and other areas, often resolving problems and getting denials overturned. Even so, CAPs also acknowledge federal limits to appeal rights and have formally commented that eligibility for external review and other standards promoting access to appeals should be expanded.

Discussion

In addition to expanding eligibility for coverage, the ACA expanded appeal rights to help consumers gain access to covered benefits. Patients-bill-of-rights laws enacted years earlier by many states guaranteed appeal rights – including access to independent external review of disputes over health plan denials – but state laws could not reach most privately insured Americans in group health plans where state regulation is preempted. As a result, federally guaranteed appeal rights are what apply to most privately insured Americans, and these rights are subject to strict limits.

Under current federal rules, only denials on grounds of medical necessity (fewer than 1% of all denials) can be appealed to an independent external reviewer. Starting in 2022 disputes related to surprise medical bills and mental health parity must also be eligible for external review. Federal rules also let group health plans determine whether a denial is eligible for external review. When external appeal is granted, for most privately insured consumers, the claim will be reviewed by entities contracted to the health plan. And consumers with limited English proficiency are only guaranteed the right to receive denial notices in another language if they live in a limited number of US counties and then, only if the translation they seek is in Spanish.

By contrast, the first federal regulation to implement ACA appeals provisions, issued in 2010, provided for more comprehensive protections, but standards were rolled back the following year to give group health plans time to adjust to an anticipated higher volume of appeals that might otherwise be unmanageable and drive up the cost of coverage. Since then, however, transparency data reported by marketplace plans indicate that consumers rarely appeal denied claims internally to their health plan, let alone to external appeal. Broadening eligibility for and simplifying the appeals process could reduce barriers for consumers without necessarily prompting uncontrolled growth in the number of appeals.