New rules make it easier for public to appeal denials of health insurance claims

By Phil Galewitz and Michelle Andrews
Kaiser Health News
Thursday, July 22, 2010; A17

Patients will find it easier to appeal the denials of health insurance claims under rules being issued Thursday by the Obama administration, which is trying to boost political support for the new health-care law by highlighting advantages for consumers.

The regulations guarantee consumers the right to appeal denials -- directly to their insurers and then, if necessary, to external review boards.

The external-review requirement will apply, for the first time, to companies that are self-insured -- ones that pay their employees' claims directly rather than buying insurance to cover their workers.

"This is huge," said Sara Rosenbaum, head of the department of health policy at the George Washington University School of Public Health and Health Services.

Most states already guarantee consumers the right to external appeals, though their rules vary widely. Only Alabama, Mississippi, Nebraska, and North and South Dakota do not have external review laws.

"The rules issued today will end the patchwork of protections that apply to only some plans in some states, and simplify the system for consumers," according to a White House fact sheet.

However, the rules don't apply to "grandfathered" plans -- those that existed on March 23, when the health law was enacted. Plans can lose their "grandfathered" status if they make significant changes to their plans regarding costs or benefits.

Still, by next year, an estimated 31 million people in employer-sponsored plans and 10 million more in individual plans will benefit from the new appeals rights, according to the White House.

Advocates hope the changes will give consumers a fairer shot at fighting back when their claims are denied. Insurers deny claims for many reasons: They may determine that a treatment is not medically necessary, for example, or that it's experimental. Sometimes denials relate to coverage of pre-existing health conditions.

America's Health Insurance Plans, the main health insurance lobby, supports efforts to create uniformity in the appeals process, said spokesman Robert Zirkelbach, who has not yet seen the final rules. "We have encouraged every state to have a third-party review system," he said.

But appealing insurers' denials is easier in some states than others. Many consumers don't know that they can appeal. "Not enough consumers know this is an option that they have," said Angel Robinson, a consumer advocate in the Iowa Insurance Division.

To change that, the administration is providing $30 million in grants to states to strengthen consumer assistance offices.

Administration officials said they hope states that do not have an external review system will set up one using the new rules. If they don't, a federal review system will be set up for them.

Under the regulations, states are "encouraged" to adopt the new standards by July 2011.

The new regulations take effect for plan years starting Sept. 23. But they won't automatically apply to residents in states that have existing external review laws until next July. That's to give states time to adjust to the new standards.

If states fail to change their rules by next July, their residents will then be able to rely on the federal standards. But federal officials are still working out the details of how that would be done.

The system can be hard for patients to navigate.

When Craig Washington suffered a stroke in June 2009, his health plan denied more than $28,000 in claims for the two weeks he was hospitalized in Chicago. The insurer said his stroke was due to a preexisting condition, and because he had been uninsured before starting a job that April as executive director of Roseland Community Hospital Foundation, the plan denied his claims. Washington lost two appeals with his health plan.

Now he's appealing to an independent state review panel. "It's exhausting," he says.

Galewitz and Andrews are reporters for KHN (, an editorially independent news service and a program of the Kaiser Family Foundation, a nonpartisan health-care policy organization that is not affiliated with Kaiser Permanente.

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