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Claims Appeals and External Review Processes

Interim Final Rule

Score: 13 / 60

RULE SUMMARY

This document contains interim final regulations implementing the requirements regarding internal claims and appeals and external review processes for group health plans and health insurance coverage in the group and individual markets under the Patient Protection and Affordable Care Act. The regulations will generally affect health insurance issuers; group health plans; and participants, beneficiaries, and enrollees in health insurance coverage and in-group health plans. The regulations provide plans and issuers with guidance necessary to comply with the law.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

CriterionScore

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
A keyword and RIN search turn up the Federal Register notice in regulations.gov. The short RIA is contained in the notice. The HHS web site does not provide an intuitive set of links to the regulation, and it does not turn up using the search function on the HHS web page. The regulation is findable on the HHS web page, but one must know to go to the page of the Center for Consumer Information and Insurance Oversight.
4/5
2. How verifiable are the data used in the analysis?
Government data sources are cited but not linked. Numerical inputs are usually sourced to government or think tank studies.
2/5
3. How verifiable are the models and assumptions used in the analysis?
Models and assumptions are very unclear. Some figures on the number of plans and people affected are based on the RIA for another regulation; calculation method is explained briefly in footnotes. Some assumptions (e.g., % of ERISA plans already in compliance) seem pulled from thin air. Dollar value of claim denials reversed as a result of the regulation is reported, but it is not clear how the figure was calculated.
1/5
4. Was the analysis comprehensible to an informed layperson?
The short RIA is reasonably readable, but the analysis is still difficult to understand. Since the departments did not always "show their work," it was not always clear how they got from their starting point to conclusions. We reread parts of this several times; some parts were comprehensible while others remain entirely unclear.
2/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
1/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
Benefits that should not have been denied will now be paid. Better outcomes promised but very vaguely defined: "Greater certainty and consistency in the handling of benefit claims and appeals and improved access to information about the manner in which claims and appeals are adjudicated should lead to efficiency gains in the system, both in terms of the allocation of spending across plans and enrollees as well as operational efficiencies among individual plans. This certainty and consistency can also be expected to benefit, to varying degrees, all parties within the system, particularly consumers, and to lead to broader social welfare gains." The departments also claim to reduce the risk premium associated with health insurance purchases.
2/5
Does the analysis identify how these outcomes are to be measured?
Benefits are not measured. Change in claims awarded is estimated.
1/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The section of the RIA on "benefits" consists solely of assertions of the departments' "beliefs" that more uniform appeals and claims processes will produce an array of efficiency benefits and improve fairness. Indeed, it is entirely unclear why the rule would generate any of the benefits claimed.
1/5
Does the analysis present credible empirical support for the theory?
The "benefits" section cites absolutely no supporting evidence.
0/5
Does the analysis adequately assess uncertainty about the outcomes?
Some outcomes are presented as possibilities rather than certainties, but overall, the existence of positive outcomes is assumed to be certain.
0/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
1/5
Does the analysis identify a market failure or other systemic problem?
Analysis asserts that plans were previously subject to a "patchwork" of different rules regarding appeals and external review of claims depending on how they were funded: whether they were state or federally regulated, whether they were subject to ERISA, etc. These differences created an "appearance of unfairness," raised costs for issuers, and may have confused consumers. No explanation of why insurers have not adopted more uniform or efficient procedures on their own, or why diversity is an inherent problem. Perhaps the array of different legal requirements is a systemic problem, but this is not really explained.
2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
Differences in appeals and claims processes resulted from different legal/regulatory requirements. No discussion of whether there are rational reasons for these differences. No discussion of why currently denied claims are wrongfully denied.
1/5
Does the analysis present credible empirical support for the theory?
No. In fact, some examples suggest some health care plans adopt appeals and external review policies that are more rigorous than those required by prior regulation. No evidence presented showing that currently denied claims are wrongfully denied, even though the increase in claims paid out is a major transfer created by the regulation.
0/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
No discussion of whether the asserted problems are uncertain. A systemic problem is assumed to be certain even though no explicit evidence of a systemic problem was presented.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
0/5
Does the analysis enumerate other alternatives to address the problem?
No alternatives discussed.
0/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
No alternatives discussed.
0/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
No alternatives evaluated.
0/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
Baseline is not explicitly discussed or justified, but appears to be whatever occurred in the most recent year for which data were available. Since outcomes/benefits are not actually measured, baseline outcomes are not measured either.
0/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
For the proposed regulation, the analysis estimates administration, disclosure, and compliance costs, along with transfers associated with reversal of denied claims. No analysis of costs of alternatives because no alternatives were considered.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
Analysis admits that some costs or transfers are not calculated. Compliance costs seem pretty thorough, but behavioral changes could lead to other expenditures that are not accounted for. For example, the analysis does not consider whether the regulation will result in increased unnecessary medical treatment and higher premiums. The change in ruling that allows for external/judicial review if the insurers makes even de minimis mistakes may be especially costly.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
No relevant discussion.
0/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
No relevant discussion.
0/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Some acknowledgement of the difficulty of estimating due to uncertainty, but no uncertainty analysis performed.
1/5
Does the analysis identify the alternative that maximizes net benefits?
Since benefits were not measured, net benefits could not be calculated.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
Since benefits were not measured, cost effectiveness could not be calculated.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Companies are assumed to bear the administration, information, and compliance costs. Costs are calculated separately for ERISA plans, state/local government plans, and individual plans. No discussion of how these costs might be passed on to consumers.
2/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
Analysis vaguely asserts benefits for the insured and the plans. Since these benefits were not calculated, they were not broken down by beneficiary. Analysis notes that claims reversed on appeal often represent transfers from insurers to insured.
1/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
Major decisions all appear to have been made in the legislation. The RIA exists, but it seems impossible the departments could have used it because there was no calculation of benefits and no alternatives were considered. Notice states that these are interim final regulations because there was insufficient time to finish a proposed rule by the September 23, 2010 legislative deadline.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Benefits and net benefits were not calculated, so the agency made its decisions in the dark about net benefits.
0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
No goals/measures established. It is not even clear how one would use the short RIA to develop goals and measures.
0/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
Data on claim appeal reversals apparently exist. Although the RIA calculates these, it does not provide sufficient explanation of why an increase or decrease in this figure represents a favorable or unfavorable outcome.
0/5
 
Total13 / 60