[Federal Register Volume 76, Number 122 (Friday, June 24, 2011)]
[Rules and Regulations]
[Pages 37208-37234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-15890]



[[Page 37207]]

Vol. 76

Friday,

No. 122

June 24, 2011

Part III





Department of the Treasury





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Internal Revenue Service





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26 CFR Part 54





Department of Labor





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Employee Benefits Security Administration





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29 CFR Part 2590





 Department of Health and Human Services





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45 CFR Part 147





Group Health Plans and Health Insurance Issuers: Rules Relating to 
Internal Claims and Appeals and External Review Processes; Final Rule

  Federal Register / Vol. 76, No. 122 / Friday, June 24, 2011 / Rules 
and Regulations  

[[Page 37208]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[TD 9532]
RIN 1545-BK30

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB45

DEPARTMENT OF HEALTH AND HUMAN SERVICES

[CMS-9993-IFC2]

45 CFR Part 147

RIN 0938-AQ66


Group Health Plans and Health Insurance Issuers: Rules Relating 
to Internal Claims and Appeals and External Review Processes

AGENCIES: Internal Revenue Service, Department of the Treasury; 
Employee Benefits Security Administration, Department of Labor; Centers 
for Medicare & Medicaid Services, Department of Health and Human 
Services.

ACTION: Amendment to interim final rules with request for comments.

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SUMMARY: This document contains amendments to 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 provisions of the 
Affordable Care Act. These rules are intended to respond to feedback 
from a wide range of stakeholders on the interim final regulations and 
to assist plans and issuers in coming into full compliance with the law 
through an orderly and expeditious implementation process.

DATES: Effective date. This amendment to the interim final regulations 
is effective on July 22, 2011.
    Comment date. Comments are due on or before July 25, 2011.

ADDRESSES: Written comments may be submitted to any of the addresses 
specified below. Any comment that is submitted to any Department will 
be shared with the other Departments. Please do not submit duplicates.
    All comments will be made available to the public. Warning: Do not 
include any personally identifiable information (such as name, address, 
or other contact information) or confidential business information that 
you do not want publicly disclosed. All comments may be posted on the 
Internet and can be retrieved by most Internet search engines. Comments 
may be submitted anonymously.
    Department of Labor. Comments to the Department of Labor, 
identified by RIN 1210-AB45, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected].
     Mail or Hand Delivery: Office of Health Plan Standards and 
Compliance Assistance, Employee Benefits Security Administration, Room 
N-5653, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210, Attention: RIN 1210-AB45.
    Comments received by the Department of Labor will be posted without 
change to http://www.regulations.gov and http://www.dol.gov/ebsa, and 
available for public inspection at the Public Disclosure Room, N-1513, 
Employee Benefits Security Administration, 200 Constitution Avenue, 
NW., Washington, DC 20210.
    Department of Health and Human Services. In commenting, please 
refer to file code CMS-9993-IFC2. Because of staff and resource 
limitations, we cannot accept comments by facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9993-IFC2, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9993-IFC2, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Internal Revenue Service. Comments to the IRS, identified by REG-
125592-10, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: CC:PA:LPD:PR (REG-125592-10), Room 5205, Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044.
     Hand or courier delivery: Monday through Friday between 
the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-125592-10), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC 20224.
    All submissions to the IRS will be open to public inspection and 
copying in Room 1621, 1111 Constitution Avenue, NW., Washington, DC 
from 9 a.m. to 4 p.m.

FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee 
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Karen Levin, Internal Revenue Service, Department of the 
Treasury, at (202) 622-6080; Ellen Kuhn, Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, at (301) 
492-4100.
    Customer Service Information: Individuals interested in obtaining

[[Page 37209]]

information from the Department of Labor concerning employment-based 
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://www.dol.gov/ebsa). In addition, information from HHS on private health 
insurance for consumers can be found on the Centers for Medicare & 
Medicaid Services (CMS) Web site (http://www.cms.hhs.gov/HealthInsReformforConsume/01_Overview.asp). Information on health 
reform can be found at http://www.healthcare.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    The Patient Protection and Affordable Care Act, Public Law 111-148, 
was enacted on March 23, 2010; the Health Care and Education 
Reconciliation Act, Public Law 111-152, was enacted on March 30, 2010 
(collectively known as the ``Affordable Care Act''). The Affordable 
Care Act reorganizes, amends, and adds to the provisions in part A of 
title XXVII of the Public Health Service Act (PHS Act) relating to 
group health plans and health insurance issuers in the group and 
individual markets. The term ``group health plan'' includes both 
insured and self-insured group health plans.\1\ The Affordable Care Act 
adds section 715(a)(1) to the Employee Retirement Income Security Act 
(ERISA) and section 9815(a)(1) to the Internal Revenue Code (the Code) 
to incorporate the provisions of part A of title XXVII of the PHS Act 
into ERISA and the Code, and make them applicable to group health 
plans, and health insurance issuers providing health insurance coverage 
in connection with group health plans. The PHS Act sections 
incorporated by this reference are sections 2701 through 2728. PHS Act 
sections 2701 through 2719A are substantially new, though they 
incorporate some provisions of prior law. PHS Act sections 2722 through 
2728 are sections of prior law renumbered, with some, mostly minor, 
changes.
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    \1\ The term ``group health plan'' is used in title XXVII of the 
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is 
distinct from the term ``health plan'', as used in other provisions 
of title I of the Affordable Care Act. The term ``health plan'', as 
used in those provisions, does not include self-insured group health 
plans.
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    On July 23, 2010, the Departments of Health and Human Services 
(HHS), Labor, and the Treasury (the Departments) issued interim final 
regulations implementing PHS Act section 2719 at 75 FR 43330 (July 2010 
regulations), regarding internal claims and appeals and external review 
processes for group health plans and health insurance issuers offering 
coverage in the group and individual markets. The requirements of PHS 
Act section 2719 and the July 2010 regulations do not apply to 
grandfathered health plans under section 1251 of the Affordable Care 
Act.\2\
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    \2\ The Departments published interim final regulations 
implementing section 1251 of the Affordable Care Act on June 17, 
2010, at 75 FR 34538, as amended on November 17, 2010 at 75 FR 
70114.
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A. Internal Claims and Appeals

    With respect to internal claims and appeals processes for group 
health plans and health insurance issuers offering group health 
insurance coverage, PHS Act section 2719 provides that plans and 
issuers must initially incorporate the internal claims and appeals 
processes set forth in regulations promulgated by the Department of 
Labor (DOL) at 29 CFR 2560.503-1 (the DOL claims procedure regulation) 
and update such processes in accordance with standards established by 
the Secretary of Labor. Similarly, with respect to internal claims and 
appeals processes for individual health insurance coverage, issuers 
must initially incorporate the internal claims and appeals processes 
set forth in applicable State law and update such processes in 
accordance with standards established by the Secretary of HHS.
    The July 2010 regulations provided such updated standards for 
compliance and invited comment on the updated standards. In particular, 
the July 2010 regulations provided the following additional standards 
\3\ for internal claims and appeals processes:
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    \3\ To address certain relevant differences in the group and 
individual markets, the July 2010 regulations provided that health 
insurance issuers offering individual health insurance coverage must 
comply with three additional requirements for internal claims and 
appeals processes. First, the July 2010 regulations include initial 
eligibility determinations in the individual market within the scope 
of claims eligible for internal appeals. Second, health insurance 
issuers offering individual health insurance coverage are permitted 
only one level of internal appeal. Third, health insurance issuers 
offering individual health insurance coverage must maintain all 
records of claims and notices associated with internal claims and 
appeals for six years and must make these records available for 
examination by the claimant, State or Federal oversight agency. 75 
FR 43330, 43334 (July 23, 2010).
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    1. The scope of adverse benefit determinations eligible for 
internal claims and appeals includes a rescission of coverage (whether 
or not the rescission has an adverse effect on any particular benefit 
at the time).\4\
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    \4\ This definition is broader than the definition in the DOL 
claims procedure regulation, which provides that a denial, 
reduction, or termination of, or a failure to provide payment (in 
whole or in part) for a benefit is an adverse benefit determination 
eligible for internal claims and appeals processes.
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    2. Notwithstanding the rule in the DOL claims procedure regulation 
that provides for notification in the case of urgent care claims \5\ 
not later than 72 hours after the receipt of the claim, a plan or 
issuer must notify a claimant of a benefit determination (whether 
adverse or not) with respect to a claim involving urgent care as soon 
as possible, taking into account the medical exigencies, but not later 
than 24 hours after the receipt of the claim by the plan or issuer.\6\
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    \5\ A claim involving urgent care is generally a claim for 
medical care or treatment with respect to which the application of 
the time periods for making non-urgent care determinations could 
seriously jeopardize the life or health of the claimant or the 
ability of the claimant to regain maximum function; or, in the 
opinion of the physician with knowledge of the claimant's medical 
condition, would subject the claimant to severe pain that cannot be 
adequately managed without the care or treatment that is the subject 
of the claim.
    \6\ Under the July 2010 regulations, there is a special 
exception if the claimant fails to provide sufficient information to 
determine whether, or to what extent, benefits are covered or 
payable under the plan.
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    3. Clarifications with respect to full and fair review, such that 
plans and issuers are clearly required to provide the claimant (free of 
charge) with new or additional evidence considered, relied upon, or 
generated by (or at the direction of) the plan or issuer in connection 
with the claim, as well as any new or additional rationale for a denial 
at the internal appeals stage, and a reasonable opportunity for the 
claimant to respond to such new evidence or rationale.
    4. Clarifications regarding conflicts of interest, such that 
decisions regarding hiring, compensation, termination, promotion, or 
other similar matters with respect to an individual, such as a claims 
adjudicator or medical expert, must not be based upon the likelihood 
that the individual will support the denial of benefits.
    5. Notices must be provided in a culturally and linguistically 
appropriate manner, as required by the statute, and as set forth in 
paragraph (e) of the July 2010 regulations.
    6. Notices to claimants must provide additional content. 
Specifically:
    a. Any notice of adverse benefit determination or final internal 
adverse benefit determination must include information sufficient to 
identify the claim involved, including the date of the service, the 
health care provider, the claim amount (if applicable), the diagnosis 
code and its corresponding meaning, and the treatment code and its 
corresponding meaning.

[[Page 37210]]

    b. The plan or issuer must ensure that the reason or reasons for an 
adverse benefit determination or final internal adverse benefit 
determination includes the denial code and its corresponding meaning, 
as well as a description of the plan's or issuer's standard, if any, 
that was used in denying the claim. In the case of a final internal 
adverse benefit determination, this description must also include a 
discussion of the decision.
    c. The plan or issuer must provide a description of available 
internal appeals and external review processes, including information 
regarding how to initiate an appeal.
    d. The plan or issuer must disclose the availability of, and 
contact information for, an applicable office of health insurance 
consumer assistance or ombudsman established under PHS Act section 
2793.
    7. If a plan or issuer fails to strictly adhere to all the 
requirements of the July 2010 regulations, the claimant is deemed to 
have exhausted the plan's or issuer's internal claims and appeals 
process, regardless of whether the plan or issuer asserts that it has 
substantially complied, and the claimant may initiate any available 
external review process or remedies available under ERISA or under 
State law.
    On September 20, 2010, based on a preliminary review of comments 
from stakeholders which indicated that they believed more time was 
needed to come into compliance with PHS Act section 2719 and the 
additional internal claims and appeal standards in the July 2010 
regulations, the Department of Labor issued Technical Release 2010-02 
(T.R. 2010-02), which set forth an enforcement grace period until July 
1, 2011 for compliance with certain new provisions with respect to 
internal claims and appeals.\7\
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    \7\ Technical Release 2010-02 is available at http://www.dol.gov/ebsa/pdf/ACATechnicalRelease2010-02.pdf. HHS published a 
corresponding guidance document, available at: http://cciio.cms.gov/resources/files/interim_procedures_for_internal_claims_and_appeals.pdf.
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    Specifically, T.R. 2010-02 set forth an enforcement grace period 
until July 1, 2011 with respect to standard 2 above (regarding 
the timeframe for making urgent care claims decisions), standard 
5 above (regarding providing notices in a culturally and 
linguistically appropriate manner), standard 6 above 
(requiring broader content and specificity in notices), and standard 
7 above (regarding exhaustion). T.R. 2010-02 also stated that, 
during that period, the Department of Labor and the Internal Revenue 
Service (IRS) would not take any enforcement action against a group 
health plan, and HHS would not take any enforcement action against a 
self-funded nonfederal governmental health plan that is working in good 
faith to implement such additional standards but does not yet have them 
in place.\8\
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    \8\ T.R. 2010-02 also stated that HHS was encouraging States to 
provide similar grace periods with respect to issuers and HHS would 
not cite a State for failing to substantially enforce the provisions 
of part A of title XXVII of the PHS Act in these situations.
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    Based on further review of the comments received on the July 2010 
regulations and T.R. 2010-02, and other feedback from interested 
stakeholders, on March 18, 2011, the Department of Labor issued 
Technical Release 2011-01 \9\ (T.R. 2011-01), which modified and 
extended the enforcement grace period set forth in T.R. 2010-02. 
Specifically, T.R. 2011-01 extended the enforcement grace period until 
plan years beginning on or after January 1, 2012 with respect to 
standard 2 above (regarding the timeframe for making urgent 
care claims decisions), standard 5 above (regarding providing 
notices in a culturally and linguistically appropriate manner), and 
standard 7 above (regarding exhaustion). Moreover, whereas 
T.R. 2010-02 required plans to be working in good faith to implement 
such standards for the enforcement grace period to apply, T.R. 2011-01 
stated that no such requirement would apply for either the extended or 
the original enforcement grace period.
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    \9\ T.R. 2011-01 is available at http://www.dol.gov/ebsa/pdf/tr11-01.pdf.
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    With respect to standard 6 above (requiring broader 
content and specificity in notices), T.R. 2011-01 extended the 
enforcement grace period only in part. Specifically, with respect to 
the requirement to disclose diagnosis codes and treatment codes (and 
their corresponding meanings), T.R. 2011-01 extended the enforcement 
grace period until plan years beginning on or after January 1, 
2012.\10\ With respect to the other disclosure requirements of standard 
6, the enforcement grace period was extended from July 1, 2011 
until the first day of the first plan year beginning on or after July 
1, 2011 (which is January 1, 2012 for calendar year plans), affecting: 
(a) The disclosure of information sufficient to identify a claim (other 
than the diagnosis and treatment information), (b) the reasons for an 
adverse benefit determination, (c) the description of available 
internal appeals and external review processes, and (d) for plans and 
issuers in States in which an office of health consumer assistance 
program or ombudsman is operational, the disclosure of the availability 
of, and contact information for, such program.\11\
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    \10\ Information related to diagnosis and treatment codes (and/
or their meanings) is, however, generally required to be provided to 
claimants upon request under existing DOL claims procedures. See 29 
CFR 2560.503-1(h)(2)(iii), which is also applicable to plans 
(whether or not they are ERISA plans) and issuers that are not 
grandfathered health plans pursuant to paragraph (b)(2)(i) of the 
July 2010 regulations. Nevertheless, a request for such information, 
in itself, should not be considered to be a request for (and 
therefore trigger the start of) an internal appeal or external 
review.
    \11\ Any enforcement grace period with respect to disclosure 
requirements that has been provided under T.R. 2010-02 or T.R. 2011-
01 does not affect disclosure requirements still in effect for ERISA 
plans under the DOL claims procedure regulation and/or Part 1 of 
ERISA.
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    T.R. 2011-01 also stated the Departments' intent to issue an 
amendment to the July 2010 regulations that would take into account 
comments and other feedback received from stakeholders and make 
modifications to certain provisions of the July 2010 regulations. T.R. 
2011-01 went on to state that the relief was intended to act as a 
bridge until an amendment to the July 2010 regulations was issued.
    This amendment to the July 2010 regulations makes changes with 
respect to the provisions subject to the enforcement grace period under 
T.R. 2011-01. At the expiration of the enforcement grace period, the 
Departments will begin enforcing the relevant requirements of the July 
2010 regulations, as amended by this rulemaking.

B. External Review

1. Applicability of Federal and State External Review Processes
    PHS Act section 2719, the July 2010 regulations, and technical 
guidance issued by the Departments \12\ provide a system with respect 
to applicability of either a State external review process or a Federal 
external review process for non-grandfathered plans and issuers. How 
this impacts plans and issuers varies, depending on the type of 
coverage:
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    \12\ See DOL Technical Release 2010-01, available at http://www.dol.gov/ebsa/pdf/ACATechnicalRelease2010-01.pdf; HHS Technical 
Guidance issued August 26, 2010, available at http://cciio.cms.gov/resources/files/interim_appeals_guidance.pdf; and HHS Technical 
Guidance issued September 23, 2010, available at http://cciio.cms.gov/resources/files/technical_guidance_for_self_funded_non_fed_plans.pdf. Additional clarifications were provided 
in the form of frequently-asked questions (FAQs), available at 
http://www.dol.gov/ebsa/faqs/faq-aca.html and http://cciio.cms.gov/resources/factsheets/aca_implementation_faqs.html#claims.
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    a. Self-insured plans subject to ERISA and/or the Code.
    In the case of self-insured plans subject to ERISA and/or the Code, 
a

[[Page 37211]]

Federal external review process supervised by DOL and Treasury applies 
(the ``private accredited IRO process'' \13\). On August 23, 2010, the 
Department of Labor issued Technical Release 2010-01 (T.R. 2010-01), 
which set forth an interim enforcement safe harbor for self-insured 
plans not subject to a State external review process or to the HHS-
supervised process (the ``HHS-administered process'').\14\ This interim 
enforcement safe harbor essentially permits a private contract process 
under which plans contract with accredited independent review 
organizations (IROs) to perform reviews. Separate guidance being issued 
contemporaneous with the publication of this amendment makes 
adjustments to, and provides clarifications regarding, the operation of 
the private accredited IRO process.
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    \13\ For simplicity, the Federal external review process for 
self-insured plans subject to ERISA and/or the Code supervised by 
DOL and Treasury is referred to as the ``private accredited IRO 
process'' throughout this preamble. However, the interim procedures 
for Federal external review issued as DOL Technical Release 2010-01 
also recognizes that States may choose to expand access to their 
State external review process to plans not subject to applicable 
State laws (such as self-insured ERISA plans) and allows those plans 
to meet their responsibilities to provide external review under PHS 
Act section 2719(b) by voluntarily complying with the provisions of 
that State external review process.
    \14\ HHS Technical Guidance issued August 26, 2010 provided 
that, for insured coverage, the Federal external review process 
would be fulfilled through the HHS-administered process.
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    b. Insured coverage.
    In the case of health insurance issuers in the group and individual 
market, the July 2010 regulations set forth 16 minimum consumer 
protections based on the Uniform External Review Model Act promulgated 
by the National Association of Insurance Commissioners (NAIC) that, if 
provided by a State external review process, will result in the State's 
process applying in lieu of a Federal external review process. 
Moreover, for insured group health plans, as provided under paragraph 
(c)(1) of the July 2010 regulations, if a State external review process 
applies to and is binding on the plan's health insurance issuer under 
paragraph (c) of the July 2010 regulations (regarding State standards 
for external review), then the insured group health plan is not 
required to comply with either the State external review process or the 
Federal external review process. The July 2010 regulations provided a 
transition period for plan years (in the individual market, policy 
years) beginning before July 1, 2011, during which any existing State 
external review process will be considered sufficient (and will apply 
to health insurance issuers in that State). During the transition 
period, in States and territories without an existing State external 
review process (Alabama, Mississippi, Nebraska, Guam, American Samoa, 
U.S. Virgin Islands and the Northern Mariana Islands), HHS guidance 
generally provided that health insurance issuers will participate in 
the HHS-administered process. As explained later in this preamble, this 
amendment to the July 2010 regulations modifies the transition period 
originally issued as part of the July 2010 regulations so that the last 
day of the transition period for all health insurance issuers offering 
group and individual health insurance coverage is December 31, 2011.
    In addition, the July 2010 regulations provided that, following the 
conclusion of the transition period, health insurance issuers in a 
State that does not meet the minimum consumer protection standards set 
forth in paragraph (c) of the July 2010 regulations will participate in 
an external review process under Federal standards similar to the 
process under the NAIC Uniform Model Act, such as the HHS-administered 
process. Separate guidance being issued contemporaneous with the 
publication of this amendment announces standards under which, until 
January 1, 2014, a State may also operate such an external review 
process under Federal standards similar to the process under the NAIC 
Uniform Model Act (an ``NAIC-similar process''). Accordingly, if HHS 
determines that a State has neither implemented the minimum consumer 
protections required under paragraph (c) of the July 2010 regulations, 
nor an NAIC-similar process, issuers in the State will have the choice 
of participating in either the HHS-administered process or the private 
accredited IRO process. HHS is adopting this approach to permit States 
to operate their external review processes under standards established 
by the Secretary until January 1, 2014, avoiding unnecessary 
disruption, while States work to adopt an ``NAIC-parallel process,'' 
consistent with the consumer protections set forth in paragraph (c) of 
the July 2010 regulations.
    c. Self-insured, nonfederal governmental plans.
    For self-insured, nonfederal governmental plans (which are subject 
to the PHS Act, but not ERISA or the Code), previous HHS guidance 
generally provided that they follow the private accredited IRO 
process.\15\ (In States and territories that did not have an existing 
external review process (Alabama, Mississippi, Nebraska, Guam, American 
Samoa, U.S. Virgin Islands and the Northern Mariana Islands), previous 
HHS guidance generally provided that such plans may choose to follow 
the HHS-administered process or follow the private accredited IRO 
process.) Separate guidance being issued contemporaneous with the 
publication of this amendment generally treats self-insured nonfederal 
governmental plans the same as health insurance issuers. That is, a 
State may temporarily operate such an external review process 
applicable to a self-insured nonfederal governmental plan under Federal 
standards similar to the process under the NAIC Uniform Model Act. If 
no such State-operated process exists, self-insured nonfederal 
governmental plans have the choice of participating in either the HHS-
administered process or the private accredited IRO process.
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    \15\ See HHS Technical Guidance issued September 23, 2010.
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2. Scope of Claims Eligible for External Review
    While the process varies depending on the type of coverage, so does 
the scope of claims eligible for external review. That is, for 
insurance coverage and self-insured nonfederal governmental plans 
subject to a State external review process (either an NAIC-parallel 
process or an NAIC-similar process), the State determines the scope of 
claims eligible for external review.\16\ For coverage subject to either 
the HHS-administered process or the private accredited IRO process, the 
July 2010 regulations provided that any adverse benefit determination 
(or final internal adverse benefit determination) could be reviewed 
unless it is related to a participant's or beneficiary's failure to 
meet the requirements for eligibility under the terms of a group health 
plan. As explained later in this preamble, this amendment to the July 
2010 regulations modifies the scope of claims eligible for

[[Page 37212]]

external review under the Federal external review process.
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    \16\ Under paragraphs (c)(2)(i) and (c)(2)(xvi) of the July 2010 
regulations, State processes must provide external review for 
adverse benefit determinations (including final internal adverse 
benefit determinations) that are based on issuer's (or plan's) 
requirements for medical necessity, appropriateness, health care 
setting, level of care, or effectiveness of a covered benefit; or 
that involve experimental or investigational treatment. (A State 
external review process may also provide for external review of a 
broader scope of adverse benefit determinations.) At the same time, 
paragraph (c)(3) of the July 2010 regulations provides a transition 
period during which a State external review process will be 
considered binding on an issuer (or a plan), in lieu of the 
requirements of any Federal external review process, even if the 
State process does not meet all the requirements of paragraph (c)(2) 
of the July 2010 regulations. That transition period is being 
modified by this amendment, as described below.
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II. Overview of Amendments to the Interim Final Regulations

A. Internal Claims and Appeals

1. Expedited Notification of Benefit Determinations Involving Urgent 
Care (Paragraph (b)(2)(ii)(B) of the July 2010 Regulations)
    The July 2010 regulations provided that a plan or issuer must 
notify a claimant of a benefit determination (whether adverse or not) 
with respect to a claim involving urgent care (as defined in the DOL 
claims procedure regulation) \17\ as soon as possible, taking into 
account the medical exigencies, but not later than 24 hours after the 
receipt of the claim by the plan or issuer, unless the claimant fails 
to provide sufficient information to determine whether, or to what 
extent, benefits are covered or payable under the plan or health 
insurance coverage. This was a change from the DOL claims procedure 
regulation, which generally requires a determination not later than 72 
hours after receipt of the claim by a group health plan for urgent care 
claims. The preamble to the July 2010 regulations stated that the 
Departments expected electronic communication would enable faster 
decision-making than in the year 2000, when the DOL claims procedure 
regulation was issued.\18\
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    \17\ Under the DOL claims procedure regulation, a ``claim 
involving urgent care'' is a claim for medical care or treatment 
with respect to which the application of the time periods for making 
non-urgent care determinations could seriously jeopardize the life 
or health of the claimant or the ability of the claimant to regain 
maximum function; or, in the opinion of a physician with knowledge 
of the claimant's medical condition, would subject the claimant to 
severe pain that cannot be adequately managed without the care or 
treatment that is the subject of the claim.
    \18\ 75 FR 43330, 43333 (July 23, 2010).
---------------------------------------------------------------------------

    While some commenters supported the 24-hour rule (particularly 
consumer advocates and medical associations, including mental health 
providers who noted the 24-hour standard was especially important for 
people in psychiatric crisis), concerns were raised by many plans and 
issuers regarding the burden of a 24-hour turnaround. Some commenters 
argued that some of the claims constituting ``urgent care'' and thus 
qualifying for the expedited timeframe really do not need to be made 
within 24 hours. Moreover, a number of commenters highlighted that the 
72-hour provision was intended only to serve as a ``backstop''; as the 
general rule under both the July 2010 regulations and the DOL claims 
procedure regulation requires a decision as soon as possible consistent 
with the medical exigencies involved, making the change to a 24-hour 
timeframe unnecessary for the most serious medical cases. Some 
commenters cited the Emergency Medical Treatment and Labor Act 
(EMTALA),\19\ which generally requires hospitals to provide emergency 
care to individuals with or without insurance or preauthorization and, 
therefore, mitigates the need for expedited pre-service emergency 
claims determinations in many situations. Finally, some commenters 
stated that a firm 24-hour turnaround for urgent care claims will 
adversely affect claimants, as plans and issuers will not have 
sufficient time to properly review a claim, adversely affecting the 
quality of the review process in cases where the provider cannot be 
consulted in time, and leading to unnecessary denials of claims.
---------------------------------------------------------------------------

    \19\ 42 U.S.C. 1395dd.
---------------------------------------------------------------------------

    After considering the comments, and the costs and benefits of an 
absolute 24-hour decision-making deadline for pre-service urgent care 
claims, this amendment permits plans and issuers to follow the original 
rule in the DOL claims procedure regulation (requiring decision-making 
in the context of pre-service urgent care claims as soon as possible 
consistent with the medical exigencies involved but in no event later 
than 72 hours), provided that the plan or issuer defers to the 
attending provider with respect to the decision as to whether a claim 
constitutes ``urgent care.'' At the same time, the Departments 
underscore that the 72-hour timeframe remains only an outside limit and 
that, in cases where a decision must be made more quickly based on the 
medical exigencies involved, the requirement remains that the decision 
should be made sooner than 72 hours after receipt of the claim.
2. Additional Notice Requirements for Internal Claims and Appeals 
(Paragraph (b)(2)(ii)(E) of the July 2010 Regulations)
    The July 2010 regulations also provided additional content 
requirements for any notice of adverse benefit determination or final 
internal adverse benefit determination. The July 2010 regulations 
required a plan or issuer to:
    (a) Ensure that any notice of adverse benefit determination or 
final internal adverse benefit determination includes information 
sufficient to identify the claim involved. Under the July 2010 
regulations, this information included the date of service, the health 
care provider, and the claim amount (if applicable),\20\ as well as the 
diagnosis code (such as an ICD-9 code, ICD-10 code, or DSM-IV 
code),\21\ the treatment code (such as a CPT code),\22\ and the 
corresponding meanings of these codes.
---------------------------------------------------------------------------

    \20\ The amount of the claim may not be knowable or available at 
the time, such as in a case of preauthorization, or there may be no 
specific claim, such as in a case of rescission that is not 
connected to a claim.
    \21\ ICD-9 and ICD-10 codes refer to the International 
Classification of Diseases, 9th revision and 10th revision, 
respectively. The DSM-IV codes refer to the Diagnostic and 
Statistical Manual of Mental Disorders, Fourth Edition.
    \22\ CPT refers to Current Procedural Terminology.
---------------------------------------------------------------------------

    (b) Ensure that the description of the reason or reasons for the 
adverse benefit determination or final internal adverse benefit 
determination includes the denial code (such as a CARC and RARC) \23\ 
and its corresponding meaning. It must also include a description of 
the plan's or issuer's standard, if any, that was used in denying the 
claim (for example, if a plan applies a medical necessity standard in 
denying a claim, the notice must include a description of the medical 
necessity standard). In the case of a notice of final internal adverse 
benefit determination, this description must include a discussion of 
the decision.
---------------------------------------------------------------------------

    \23\ CARC refers to Claim Adjustment Reason Code and RARC refers 
to Remittance Advice Remark Code.
---------------------------------------------------------------------------

    (c) Provide a description of available internal appeals and 
external review processes, including information regarding how to 
initiate an appeal.
    (d) Disclose the availability of, and contact information for, any 
applicable office of health insurance consumer assistance or ombudsman 
established under PHS Act section 2793 to assist enrollees with the 
internal claims and appeals and external review processes.\24\
---------------------------------------------------------------------------

    \24\ To assist plans and issuers in making these disclosures, 
the Departments provided a current list of relevant consumer 
assistance programs and ombudsmen in the Appendix to T.R. 2011-01. 
Plans and issuers with July 1 plan years may rely upon the list in 
that Appendix when developing their notices of adverse benefit 
determination and final internal adverse benefit determination for 
plan years beginning on July 1, 2011. The Departments are committed 
to reviewing and updating this list. The first update is being made 
available contemporaneous with publication of this amendment. The 
first update is available (and any future updates will be made 
available) at http://www.dol.gov/ebsa/healthreform and  http://cciio.cms.gov/programs/consumer/capgrants/index.html.
---------------------------------------------------------------------------

    Many comments received on the July 2010 regulations raised concerns 
about the additional content required to be included in the notices. 
Comments by a range of stakeholders, including plans, issuers, and 
consumer advocacy organizations focused heavily on the automatic 
provision of the diagnosis

[[Page 37213]]

and treatment codes (and their meanings). Concerns were raised about 
privacy (because explanations of benefits (EOBs) often are sent to an 
individual who is not the patient, such as an employee who is the 
patient's spouse or parent), interference with the doctor-patient 
relationship,\25\ and high costs.\26\ More specifically, commenters 
highlighted that sensitive issues such as mental health treatments 
would be identified by specific treatment or diagnosis codes and that 
privacy concerns are magnified for adult dependents under age 26 who 
may be covered by their parent's health plan. Others pointed out that 
there are over 20,000 treatment and diagnosis codes in use today, 
presenting a costly administrative and operational challenge for plans 
and issuers. Comments also questioned the efficacy of providing the 
codes, which some argued are often very difficult for the average 
patient to understand.\27\
---------------------------------------------------------------------------

    \25\ Several commenters raised concerns that providers' initial 
or suspected diagnosis may not match the ultimate diagnosis or 
patients' perception of their diagnosis. One commenter gave the 
example of a patient who has a biopsy procedure. In that case, the 
patient would receive an EOB with an initial diagnosis code of 
cancer, however the results of the biopsy may rule out cancer. In 
that situation, the EOB can result in confusion and unnecessary 
mental anguish.
    \26\ In particular, comment letters cited concerns with respect 
to programming aspects of providing diagnosis codes at a time when 
plans and issuers are changing over from ICD-9 diagnosis codes to 
more extensive and technical ICD-10 codes.
    \27\ Several commenters noted that technical ICD-9 and/or ICD-10 
codes can be confusing and/or cause worry. One commenter gave the 
example of a patient presenting with a white coating on his tongue, 
who is told not to worry and to brush the tongue with a toothbrush. 
The diagnosis code is 529.3, hypertrophy of tongue papillae, a term 
not used by the patient's doctor during the office visit and, 
therefore, prone to cause confusion and/or concern.
---------------------------------------------------------------------------

    Other comments were received in support of the coding provisions. 
Consumer advocates commented positively on the requirement that denial 
notices include information for consumers about their right to appeal 
denials and the availability of state consumer assistance programs 
(CAPs) that will help consumers file appeals. There were also positive 
comments on the requirement to provide a rationale for the denial 
(including a description of the plan's or issuer's standard (such as 
``medical necessity''), if any, that was used denying the claim). With 
respect to the provision of coding information, some commented that 
this would be helpful to consumers because coding errors and missing 
coding information often are the basis for denying claims.
    After considering all of the comments, and the costs and benefits 
of the additional disclosure, this amendment eliminates the requirement 
to automatically provide the diagnosis and treatment codes as part of a 
notice of adverse benefit determination (or final internal adverse 
benefit determination) and instead substitutes a requirement that the 
plan or issuer must provide notification of the opportunity to request 
the diagnosis and treatment codes (and their meanings) in all notices 
of adverse benefit determination (and notices of final internal adverse 
benefit determination), and a requirement to provide this information 
upon request.\28\ This amendment also clarifies that, in any case, a 
plan or issuer must not consider a request for such diagnosis and 
treatment information, in itself, to be a request for (and therefore 
trigger the start of) an internal appeal or external review.
---------------------------------------------------------------------------

    \28\ As discussed earlier, in footnote 9, information related to 
diagnosis and treatment codes (and/or their meanings) is, however, 
generally required to be provided to claimants upon request under 
existing DOL claims procedures, which is also incorporated in the 
July 2010 regulations. See 29 CFR 2560.503-1(h)(2)(iii) and 
paragraph (b)(2)(i) of the July 2010 regulations.
---------------------------------------------------------------------------

3. Deemed Exhaustion of Internal Claims and Appeals Processes 
(Paragraph (b)(2)(ii)(F) of the July 2010 Regulations)
    The courts generally require claimants to exhaust administrative 
proceedings before going to court or seeking external review. When 
plans and issuers offer full and fair internal procedures for resolving 
claims, it is reasonable to insist that claimants first turn to those 
procedures before seeking judicial or external review of benefit 
denials. There is less justification, however, for insisting that a 
claimant exhaust administrative procedures that do not comply with the 
law. Accordingly, the July 2010 regulations permitted claimants to 
immediately seek review if a plan or issuer failed to ``strictly 
adhere'' to all of the July 2010 regulations' requirements for internal 
claims and appeals processes, regardless of whether the plan or issuer 
asserted that it ``substantially complied'' with the July 2010 
regulations. The July 2010 regulations also clarified that, in such 
circumstances, the reviewing tribunal should not give special deference 
to the plan's or issuer's decision, but rather should resolve the 
dispute de novo. Consumer groups generally supported this ``strict 
adherence'' approach, but the approach received a number of negative 
comments from some issuers and plan sponsors, who advocate a 
``substantial compliance'' approach.
    The Departments continue to believe that claimants should not have 
to follow an internal claims and appeals procedure that is less than 
full, fair, and timely, as set forth in the July 2010 regulations. In 
response to comments, the Departments are retaining the general 
approach to this requirement, but this amendment also adds a new 
paragraph (b)(2)(ii)(F)(2) to the July 2010 regulations to provide an 
exception to the strict compliance standard for errors that are minor 
and meet certain other specified conditions. The new paragraph will 
also protect claimants whose attempts to pursue other remedies under 
paragraph (b)(2)(ii)(F)(1) of the interim final regulations are 
rejected by a reviewing tribunal. Under the amended approach, any 
violation of the procedural rules of the July 2010 regulations 
pertaining to internal claims and appeals would permit a claimant to 
seek immediate external review or court action, as applicable, unless 
the violation was:
    (1) De minimis;
    (2) Non-prejudicial;
    (3) Attributable to good cause or matters beyond the plan's or 
issuer's control;
    (4) In the context of an ongoing good-faith exchange of 
information; and
    (5) Not reflective of a pattern or practice of non-compliance.
    In addition, the claimant would be entitled, upon written request, 
to an explanation of the plan's or issuer's basis for asserting that it 
meets this standard, so that the claimant could make an informed 
judgment about whether to seek immediate review. Finally, if the 
external reviewer or the court rejects the claimant's request for 
immediate review on the basis that the plan met this standard, this 
amendment would give the claimant the right to resubmit and pursue the 
internal appeal of the claim.
4. Form and Manner of Notice (Paragraph (e) of the July 2010 
Regulations)
    PHS Act section 2719 requires group health plans and health 
insurance issuers to provide relevant notices in a culturally and 
linguistically appropriate manner. The July 2010 regulations set forth 
a requirement to provide notices in a non-English language based on 
separate thresholds of the number of people who are literate in the 
same non-English language. In the group market, the threshold set forth 
in the July 2010 regulations differs depending on the number of 
participants in the plan:
     For a plan that covers fewer than 100 participants at the 
beginning of a plan year, the threshold is 25 percent of

[[Page 37214]]

all plan participants being literate only in the same non-English 
language.
     For a plan that covers 100 or more participants at the 
beginning of a plan year, the threshold is the lesser of 500 
participants, or 10 percent of all plan participants, being literate 
only in the same non-English language.
    These thresholds were adapted from the DOL regulations regarding 
style and format for a summary plan description, at 29 CFR 2520.102-
2(c) for participants who are not literate in English. For the 
individual market, the threshold is 10 percent of the population 
residing in the county being literate only in the same non-English 
language. The individual market threshold was generally adapted from 
the approach used under the Medicare Advantage program, which required 
translation of materials in languages spoken by more than 10 percent of 
the general population in a service area at the time the threshold was 
established.
    Under the July 2010 regulations, if an applicable threshold is met 
with respect to a non-English language, the plan or issuer must provide 
the notice upon request in the non-English language. Additionally, the 
plan or issuer must include a statement in the English versions of all 
notices, prominently displayed in the non-English language, offering 
the provision of such notices in the non-English language. Finally, to 
the extent the plan or issuer maintains a customer assistance process 
(such as a telephone hotline) that answers questions or provides 
assistance with filing claims and appeals, the plan or issuer must 
provide such assistance in the non-English language.
    Comments received in response to the July 2010 regulations raised 
several concerns about this requirement. One group of commenters stated 
that the thresholds for the group market were difficult to comply with, 
especially for small plans (where an individual or a small number of 
individuals could cause a plan to change status with respect to the 
threshold) and insured plans (where the issuer may be in a very 
difficult position to determine the English literacy of an employer's 
workforce). Some commenters stated that the threshold requirements for 
the group and individual markets should be consistent.
    Other commenters were concerned with the high costs of compliance 
with this rule, particularly the ``tagging and tracking requirement'' 
to the extent that individuals who request a document in a non-English 
language would need to be ``tagged'' and ``tracked'' so that any future 
notices would be provided automatically in the non-English language. 
Some of these commenters cited the high costs associated with 
implementing translation requirements pursuant to California State law 
and the low take-up rates of translated materials in California. Some 
commenters also cited the importance of having written translation of 
documents available (at a minimum, upon request), as well as having 
oral language services for customer assistance.
    Following review of the comments submitted on this issue and 
further review and consideration of the provisions of PHS Act section 
2719, the Departments have determined it is appropriate to amend the 
provisions of the July 2010 regulations related to the provision of 
notices in a culturally and linguistically appropriate manner. This 
amendment establishes a single threshold with respect to the percentage 
of people who are literate only in the same non-English language for 
both the group and individual markets. With respect to group health 
plans and health insurance issuers offering group or individual health 
insurance coverage, the threshold percentage of people who are literate 
only in the same non-English language will be set at 10 percent or more 
of the population residing in the claimant's county, as determined 
based on American Community Survey data published by the United States 
Census Bureau.\29\ The Departments will update this guidance annually 
on their Web site if there are changes to the list of the counties 
determined to meet this 10 percent threshold for the county's 
population being literate only in the same non-English language.\30\
---------------------------------------------------------------------------

    \29\ At the time of publication of this amendment, 255 U.S. 
counties (78 of which are in Puerto Rico) meet this threshold. The 
overwhelming majority of these are Spanish; however, Chinese, 
Tagalog, and Navajo are present in a few counties, affecting five 
states (specifically, Alaska, Arizona, California, New Mexico, and 
Utah). A full list of the affected U.S. counties in 2011 is included 
in Table 2 later in this preamble, under the heading, ``IV. Economic 
Impact and Paperwork Burden.''
    \30\ This information will be made available at http://www.dol.gov/ebsa/healthreform and http://cciio.cms.gov/.
---------------------------------------------------------------------------

    This amendment to the July 2010 regulations requires that each 
notice sent by a plan or issuer to an address in a county that meets 
this threshold include a one-sentence statement in the relevant non-
English language about the availability of language services. The 
Departments have provided guidance with sample sentences in the 
relevant languages in separate guidance being issued contemporaneous 
with the publication of this amendment. For ease of administration, 
some plans and issuers may choose to use a one-sentence statement for 
all notices within an entire State (or for a particular service area) 
that reflects the threshold language or languages in any county within 
the State or service area. For example, statewide notices in California 
could include the relevant one-sentence statement in Spanish and 
Chinese because, using the data from Table 2, Spanish meets the 10 
percent threshold in Los Angeles County and 22 other counties and 
Chinese meets the 10 percent threshold in San Francisco County. This 
would be a permissible approach to meeting the rule under this 
amendment.
    In addition to including a statement in all notices in the relevant 
non-English language, this amendment requires a plan or issuer to 
provide a customer assistance process (such as a telephone hotline) 
with oral language services in the non-English language and provide 
written notices in the non-English language upon request. For this 
purpose, plans and issuers are permitted to direct claimants to the 
same customer service telephone number where representatives can first 
attempt to address the consumer's questions with an oral discussion, 
but also provide a written translation upon request in the threshold 
non-English language. Finally, this amendment removes any ``tagging and 
tracking'' requirement that would have otherwise applied under the July 
2010 regulations.
    This amendment to the July 2010 regulations provides standards for 
providing culturally and linguistically appropriate notices that 
balance the objective of protecting consumers by providing 
understandable notices to individuals who speak primary languages other 
than English with the goal of simplifying information collection 
burdens on plans and issuers. (Note, nothing in these regulations 
should be construed as limiting an individual's rights under Federal or 
State civil rights statutes, such as Title VI of the Civil Rights Act 
of 1964 (Title VI) which prohibits recipients of Federal financial 
assistance, including issuers participating in Medicare Advantage, from 
discriminating on the basis of race, color, or national origin. To 
ensure non-discrimination on the basis of national origin, recipients 
are required to take reasonable steps to ensure meaningful access to 
their programs and activities by limited English proficient persons. 
For more information, see, ``Guidance to Federal Financial Assistance 
Recipients Regarding Title VI Prohibition Against National Origin 
Discrimination Affecting Limited English Proficient Persons,'' 
available at http://www.hhs.gov/ocr/civilrights/resources/

[[Page 37215]]

specialtopics/lep/policyguidancedocument.html.)
    The Departments welcome comments on this amendment, including 
whether it would be appropriate to include a provision in the final 
rules requiring health insurance issuers providing group health 
insurance coverage to provide language services in languages that do 
not meet the requisite threshold for an applicable non-English 
language, if requested by the administrator or sponsor of the group 
health plan to which the coverage relates. For example, if Chinese does 
not meet the 10 percent threshold in New York County, but an employer 
with a large Chinese-speaking population asks the health insurance 
issuer providing its group health insurance coverage to provide 
language services in Chinese (as described in the amendment), the 
Departments invite comment on what obligations should be imposed on the 
issuer, if any, to provide language services in Chinese.

B. External Review

1. Duration of Transition Period for State External Review Processes
    In general, if State laws do not meet the minimum consumer 
protections of the NAIC Uniform Model Act,\31\ as set forth in 
paragraph (c)(2) of the July 2010 regulations, insurance coverage (as 
well as self-insured nonfederal governmental plan and church plan 
coverage) is subject to the requirements of an external review process 
under Federal standards similar to the process under the NAIC Uniform 
Model Act, such as the HHS-administered process. Paragraph (c)(3) of 
the July 2010 regulations provided a transition period for plan years 
(in the individual market, policy years) beginning before July 1, 2011 
in order to allow States time to amend their laws to meet or go beyond 
the minimum consumer protections of the NAIC Uniform Model Act set 
forth in paragraph (c)(2) of the July 2010 regulations. HHS has been 
working closely with States regarding enactment of laws to conform to 
paragraph (c)(2) and much progress has been made. However, enacting 
State legislation and regulations can often be a complex and time-
consuming process. Accordingly, the Departments are modifying the 
transition period under paragraph (c)(3) of the July 2010 regulations 
so that the last day of the transition period is December 31, 2011 to 
give States, which are making substantial progress in implementing 
State external review processes that conform to paragraph (c)(2), the 
requisite time to complete that process. Because the July 2010 
regulations would have ended the transition period for plan years (in 
the individual market, policy years) beginning on or after July 1, 
2011, the Departments note that ending the transition period on 
December 31, 2011 will reduce the length of the transition period for 
plans and policies with plan years (in the individual market, policy 
years) beginning after January 1 but before July 1. When the July 2010 
regulations were published, the Departments anticipated that issuers in 
every State that had not enacted laws to conform to paragraph (c)(2) of 
the July 2010 regulations would need to participate in the HHS-
administered process. Now, the Departments have decided that issuers 
may continue to participate in a State external review process under 
Federal standards similar to the process under the NAIC Uniform Model 
Act (an NAIC-similar process), which the Departments anticipate will 
reduce market disruption when the transition period ends. Therefore, 
based on the Departments' concerns for making the consumer protections 
of the Affordable Care Act available without undue delay and for 
ensuring as much uniformity as possible in the availability of those 
protections regardless of the form of a consumer's health coverage, the 
Departments have decided to end the transition period on December 31, 
2011. Therefore, this amendment to the July 2010 regulations provides 
that, before January 1, 2012, an applicable State external process will 
apply in lieu of the requirements of the Federal external review 
process. PHS Act section 2719(c) authorizes the Departments to deem an 
external review process ``in operation as of the date of enactment'' of 
the Affordable Care Act as compliant with the external review 
requirements of PHS Act section 2719(b). Through December 31, 2011, any 
currently effective State external review process satisfies the 
requirements of either PHS Act section 2719(c) or section 2719(b)(2). 
If there is no applicable State external review process, separate 
guidance being issued contemporaneous with the publication of this 
amendment generally provides a choice between the HHS-administered 
process or the private accredited IRO process.
---------------------------------------------------------------------------

    \31\ The NAIC Uniform Model Act in place on July 23, 2010 
provides external review for claims involving medical necessity, 
appropriateness, health care setting, level of care, effectiveness 
(of a covered benefit), whether a treatment is experimental, and 
whether a treatment is investigational.
---------------------------------------------------------------------------

2. Scope of the Federal External Review Process
    Paragraph (d)(1) of the July 2010 regulations sets forth the scope 
of claims eligible for external review under the Federal external 
review process. Specifically, any adverse benefit determination 
(including a final internal adverse benefit determination) could be 
reviewed unless it related to a participant's or beneficiary's failure 
to meet the requirements for eligibility under the terms of a group 
health plan (i.e., worker classification and similar issues were not 
within the scope of the Federal external review process).
    Comments received in response to the July 2010 regulations were 
mixed on the scope of claims eligible for external review. Some 
commenters argued that PHS Act section 2719 requires the Federal 
external review process to be ``similar to'' the NAIC Uniform Model Act 
and that the broader scope of claims eligible for the Federal external 
review process is a major departure from the NAIC Uniform Model Act. In 
addition, some comments from plans and issuers stated that the IROs 
that are used in the private accredited IRO process traditionally have 
expertise in adjudicating medical claims, and questioned IROs' 
experience and expertise with legal and contractual claims. Other 
comments from IROs and the IRO industry stated that these organizations 
do currently conduct reviews that involve both medical judgment issues 
and legal and contractual issues, and that there is sufficient capacity 
for conducting reviews of such disputes.
    Some plan and issuer comments highlighted that, with a limited 
number of accredited IROs and increased demand for their services, the 
cost of external review for self-insured group health plans will likely 
increase. By contrast, an IRO association group commented that member 
organizations are not at capacity with regard to the volume of work 
they can perform, and that they are confident that the number of 
accredited IROs can adequately handle the volume of reviews anticipated 
for the Federal external review process.
    Some plans and issuers stated that handing plan document 
interpretation and legal interpretation issues over to an IRO may raise 
issues of consistency of interpretations within a plan, unwarranted 
consistency across plans that have unique standards, ERISA fiduciary 
responsibility concerns, and possible conflicts. At the same time, 
other comments generally supported the broad scope of claims eligible 
for the

[[Page 37216]]

Federal external review process as set forth in the July 2010 
regulations. These commenters argued very strongly that it is nearly 
impossible to adjudicate contractual claims through traditional ERISA 
enforcement (which generally relies on Federal court adjudication), 
leaving plan participants and beneficiaries with no effective means of 
enforcing their rights to benefits under a plan. Consumer organizations 
further commented that external review finally provides the free, 
independent means of enforcement to level the playing field of claims 
adjudication and, therefore, the scope of claims eligible for the 
Federal external review process should be as broad as possible.
    After considering all the comments, with respect to claims for 
which external review has not been initiated before September 20, 2011, 
the amendment suspends the original rule in the July 2010 regulations 
regarding the scope of claims eligible for external review for plans 
using a Federal external review process (regardless of which type of 
Federal process), temporarily replacing it with a different scope. 
Specifically, this amendment suspends the broad scope of claims 
eligible for the Federal external review process and narrows the scope 
to claims that involve (1) medical judgment (excluding those that 
involve only contractual or legal interpretation without any use of 
medical judgment), as determined by the external reviewer; or (2) a 
rescission of coverage. The more narrow scope under this amendment is 
more similar to the scope of claims eligible for external review under 
the NAIC Uniform Model Act. This amendment provides an example 
describing a plan that generally only provides 30 physical therapy 
visits but will provide more with an approved treatment plan. The 
plan's rejection of a treatment plan submitted by a provider for the 
31st visit based on a failure to meet the plan's standard for medical 
necessity involves medical judgment and, therefore, the claim is 
eligible for external review. Similarly, another example describes a 
plan that generally does not provide coverage for services provided on 
an out-of-network basis, but will provide coverage if the service 
cannot effectively be provided in network. In this example, again, the 
plan's rejection of a claim for out-of-network services involves 
medical judgment. Additional examples of situations in which a claim is 
considered to involve medical judgment include adverse benefit 
determinations based on:
     The appropriate health care setting for providing medical 
care to an individual (such as outpatient versus inpatient care or home 
care versus rehabilitation facility);
     Whether treatment by a specialist is medically necessary 
or appropriate (pursuant to the plan's standard for medical necessity 
or appropriateness);
     Whether treatment involved ``emergency care'' or ``urgent 
care'', affecting coverage or the level of coinsurance;
     A determination that a medical condition is a preexisting 
condition;
     A plan's general exclusion of an item or service (such as 
speech therapy), if the plan covers the item or service in certain 
circumstances based on a medical condition (such as, to aid in the 
restoration of speech loss or impairment of speech resulting from a 
medical condition);
     Whether a participant or beneficiary is entitled to a 
reasonable alternative standard for a reward under the plan's wellness 
program; \32\
---------------------------------------------------------------------------

    \32\ See 26 CFR 54.9802-1(f)(2)(iv)(A), 29 CFR 
2590.702(f)(2)(iv)(A), and 45 CFR 146.121(f)(2)(iv)(A), requiring 
that wellness programs that require individuals to satisfy a 
standard related to a health factor in order to obtain a reward 
allow a reasonable alternative standard (or waiver of the otherwise 
applicable standard) for obtaining the reward for any individual for 
whom, for that period, it is either unreasonably difficult due to a 
medical condition to satisfy the otherwise applicable standard, or 
medically inadvisable to attempt to satisfy the otherwise applicable 
standard.
---------------------------------------------------------------------------

     The frequency, method, treatment, or setting for a 
recommended preventive service, to the extent not specified, in the 
recommendation or guideline of the U.S. Preventive Services Task Force, 
the Advisory Committee on Immunization Practices of the Centers for 
Disease Control and Prevention, or the Health Resources and Services 
Administration (as described in PHS Act section 2713 and its 
implementing regulations); \33\ and
---------------------------------------------------------------------------

    \33\ See 26 CFR 54.9815-2713T, 29 CFR 2590.715-2713, and 45 CFR 
147.130; see also FAQ 8, FAQs About the Affordable Care Act 
Implementation Part II, regarding the scope, setting, or frequency 
of the items or services to be covered under the preventive health 
services recommendations and guidelines (available at http://www.dol.gov/ebsa/faqs/faq-aca2.html and http://cciio.cms.gov/resources/factsheets/aca_implementation_faqs2.html).
---------------------------------------------------------------------------

     Whether a plan is complying with the nonquantitative 
treatment limitation provisions of the Mental Health Parity and 
Addiction Equity Act and its implementing regulations, which generally 
require, among other things, parity in the application of medical 
management techniques.\34\
---------------------------------------------------------------------------

    \34\ See Code section 9812 and 26 CFR 54.9812-1T, ERISA section 
712 and 29 CFR 2590.712, and PHS Act section 2726 and 45 CFR 
146.136.
---------------------------------------------------------------------------

    The suspension is intended to give the marketplace time to adjust 
to providing external review. It will also allow the Departments time 
to evaluate IROs' capacity for handling external reviews; to consider 
whether current accreditation standards are sufficient to ensure that 
IROs are capable of making accurate and consistent decisions (both 
across different plans and across different IROs) regarding legal and 
contractual issues that do not involve medical judgment or rescissions; 
and to assess the mechanics of the Federal external review process (and 
any potential adjustments). The Departments solicit comments on these 
issues, including on whether limiting the scope of claims during the 
suspension period will impose administrative costs in determining 
whether a claim is eligible for external review. The Departments also 
welcome any data on external review claims actually performed to date 
under private contracts pursuant to the private accredited IRO process 
for implementing PHS Act Sec.  2719(b), including number of claims 
reviewed, type of review (such as whether it involved any medical 
judgment or not), and costs associated with the review. The Departments 
expect that the suspension will be lifted by January 1, 2014, when 
other consumer protections under the Affordable Care Act take effect. 
Moreover, if, after taking into account all the relevant information, 
including public comments, the Departments decide to return to the 
original rule providing for a broad scope of claims or permanently 
modify the scope of claims through rulemaking, the Departments will 
give sufficient advance notice to enable plans, their service 
providers, IROs, and other affected parties sufficient time to comply 
with a new rule.
    Separate guidance being issued contemporaneous with the publication 
of this amendment announces standards under which, until January 1, 
2014, a State may operate an external review process under Federal 
standards similar to the process under the NAIC Uniform Model Act (an 
NAIC-similar process). The Departments are adopting this approach to 
permit States to operate their external review processes under 
standards established by the Departments until January 1, 2014, 
avoiding unnecessary disruption, while States work to adopt the 
consumer protections set forth in paragraph (c) of the July 2010 
regulations. Paragraph (d)(1) of the July 2010 regulations, as amended, 
will govern the scope of a State external review process under Federal 
standards similar to the process under the NAIC Uniform Model Act. 
Because the amended paragraph (d)(1)

[[Page 37217]]

creates a broader scope of external review than is required under the 
NAIC Uniform Model Act, and because it would be illogical to require 
States to make changes to their process to encompass the broader scope 
of paragraph (d)(1) in their external review process while they work to 
adopt the consumer protections of the NAIC Uniform Model Act (which has 
a narrower scope), the Departments are also amending paragraph (d)(1) 
to permit the Secretaries to modify the scope of the Federal external 
review process in future guidance to permit State external review 
processes (both NAIC-similar processes and NAIC-parallel processes) to 
the scope that applies under the NAIC Uniform Model Act.
3. Clarification Regarding Requirement That External Review Decision Be 
Binding
    The Departments have received a number of comments on the 
requirement that an IRO decision be binding on parties. Specifically, 
the July 2010 regulations provided that an external review decision by 
an IRO is binding on the plan or issuer, as well as the claimant, 
except to the extent that other remedies are available under State or 
Federal law.\35\ This binding requirement is also one of the minimum 
consumer protections set forth in paragraph (c) of the July 2010 
regulations.\36\
---------------------------------------------------------------------------

    \35\ See 26 CFR 54.9815-2719T(d)(2)(iv), 29 CFR 2590.715-
2719(d)(2)(iv), and 45 CFR 147.136(d)(2)(iv).
    \36\ See 26 CFR 54.9815-2719T(c)(2)(xi), 29 CFR 2590.715-
2719(c)(2)(xi), and 45 CFR 147.136(c)(2)(xi).
---------------------------------------------------------------------------

    Some comments received in response to the July 2010 regulations 
highlighted the importance of this consumer protection and expressed 
approval that this requirement would minimize delays that could further 
hurt claimants, as the plan or issuer must provide coverage or payment 
for the claim immediately upon receipt of a notice of a final external 
review decision. Other commenters questioned whether the requirement 
that external review is binding eliminates the plan's or issuer's 
option to choose to pay a claim at any time during or after the 
external review process.
    Nothing in PHS Act section 2719(b), the July 2010 regulations, or 
related guidance precludes a plan or issuer from choosing to provide 
coverage or payment for a benefit. Instead, the Departments read the 
requirement of the NAIC Uniform Model Act, which is incorporated into 
the July 2010 regulations, to require plans and issuers to provide a 
benefit if that is the decision of the IRO. A plan or issuer may not 
delay payment because the plan disagrees and intends to seek judicial 
review. Instead, while the plan may be entitled to seek judicial 
review, it must act in accordance with the IRO's decision (including by 
making payment on the claim) unless or until there is a judicial 
decision otherwise. However, the requirement that the IRO's decision be 
binding does not preclude the plan or issuer from making payment on the 
claim or otherwise providing benefits at any time, including following 
a final external review decision that denies the claim or otherwise 
fails to require such payment or benefits.
    After considering all the comments on the requirement that an IRO 
decision be binding on the plan and issuer, as well as the claimant, 
this amendment clarifies the language in paragraphs (c)(2)(xi) 
(regarding the minimum standards for State external review processes) 
and (d)(2)(iv) (regarding Federal external review process standards). 
Specifically, these two provisions are amended to add language stating 
that, for purposes of the binding provision, the plan or issuer must 
provide benefits (including by making payment on the claim) pursuant to 
the final external review decision without delay, regardless of whether 
the plan or issuer intends to seek judicial review of the external 
review decision and unless or until there is a judicial decision 
otherwise. The Departments welcome comments as to whether any 
additional clarifications about the binding provision would be helpful.

C. Separate, Contemporaneous Technical Guidance

    Separate technical guidance is being issued by the Departments 
contemporaneous with the publication of this amendment. This technical 
guidance addresses both State- and Federally-administered external 
review processes. An appendix to this technical guidance contains 
revised versions of the three model notices issued by the Departments 
in connection with the July 2010 regulations. The updated versions of 
the model notice of adverse benefit determination, model notice of 
final internal adverse benefit determination, and model notice of final 
external review decision reflect the requirements contained in the 
provisions of this amendment and the guidance. This technical guidance 
will be available at http://www.dol.gov/ebsa/healthreform and http://cciio.cms.gov.
    HHS is issuing also two additional technical guidance documents. 
The first provides instructions for self-insured nonfederal 
governmental plans and health insurance issuers with respect to 
election of a Federal external review process. The second provides, for 
transparency purposes, updated information on how the county-level 
estimates pertaining to the 10 percent threshold were calculated for 
the rules related to culturally and linguistically appropriate notices. 
Both of these documents will be available at http://cciio.cms.gov.

III. Interim Final Rules

    Section 9833 of the Code, section 734 of ERISA, and section 2792 of 
the PHS Act authorize the Secretaries of the Treasury, Labor, and HHS 
(collectively, the Secretaries) to promulgate any interim final rules 
that they determine are appropriate to carry out the provisions of 
chapter 100 of the Code, part 7 of subtitle B of title I of ERISA, and 
part A of title XXVII of the PHS Act, which include PHS Act sections 
2701 through 2728 and the incorporation of those sections into ERISA 
section 715 and Code section 9815. The amendments promulgated in this 
rulemaking carry out the provisions of these statutes. Therefore, the 
foregoing interim final rule authority applies to these amendments.
    Under the Administrative Procedure Act (APA) (5 U.S.C. 551 et 
seq.), while a general notice of proposed rulemaking and an opportunity 
for public comment is generally required before promulgation of 
regulations, this is not required when an agency, for good cause, finds 
that notice and public comment thereon are impracticable, unnecessary, 
or contrary to the public interest. The provisions of the APA that 
ordinarily require a notice of proposed rulemaking do not apply here 
because of the specific authority to issue interim final rules granted 
by section 9833 of the Code, section 734 of ERISA, and section 2792 of 
the PHS Act. Moreover, even if the APA requirements for notice and 
comment were applicable to this regulation, they have been satisfied. 
This is because the matters that are the subject of these amendments 
have already been subjected to public notice and comment, as they were 
addressed in the July 2010 regulations, and are a logical outgrowth of 
that document. The amendments made in this interim final rule are being 
made in response to public comments received on the July 2010 
regulations. While the Departments have determined that, even if the 
APA were applicable, an additional opportunity for public comment is 
unnecessary in the case of these amendments, the Departments are 
issuing these amendments as an interim

[[Page 37218]]

final rule so as to provide the public with an opportunity for public 
comment on these modifications.

IV. Economic Impact and Paperwork Burden

A. Summary and Need for Regulatory Action--Department of Labor and 
Department of Health and Human Services

    As stated earlier in this preamble, the Departments previously 
issued the July 2010 regulations implementing PHS Act section 2719, 
which were published in the Federal Register on July 23, 2010 (75 FR 
43330). The July 2010 regulations set forth rules with respect to 
internal claims and appeals and external appeals processes for group 
health plans and health insurance issuers that are not grandfathered 
health plans.
    As described in detail in Section II of this preamble, after the 
July 2010 regulations were issued, the Departments received public 
comments expressing concerns about the burdens associated with several 
of the regulations' provisions. In response to such comments, the 
Departments are hereby amending the following provisions of the July 
2010 regulations:
     Expedited notification of benefit determinations involving 
urgent care (paragraph (b)(2)((ii)(B) of the July 2010 regulations);
     Additional notice requirements with respect to notice of 
adverse benefit determinations or final internal adverse benefit 
determination (paragraph (b)(2)(ii)(E) of the July 2010 
regulations);\37\
---------------------------------------------------------------------------

    \37\ Under the July 2010 regulations, this included the date of 
service, the health care provider, and the claim amount (if 
applicable), as well as the diagnosis code (such as an ICD-9 code, 
ICD-10 code, or DSM-IV code), the treatment code (such as a CPT 
code), and the corresponding meanings of these codes.
---------------------------------------------------------------------------

     Deemed exhaustion of internal claims and appeals processes 
(paragraph (b)(2)(ii)(F) of the July 2010 regulations);
     Providing notices in a culturally and linguistically 
appropriate manner (paragraph (e) of the July 2010 regulations);
     The duration of the transition period for State external 
review processes (paragraph (c)(3) of the July 2010 regulations); and
     The scope of claims eligible for external review under the 
Federal external appeals process (paragraph (d)(1) of the July 2010 
regulations).
    The Departments crafted these amendments to the July 2010 
regulations to secure the protections intended by Congress. In 
accordance with OMB Circular A-4, the Departments have quantified the 
costs of these amendments where feasible and provided a qualitative 
discussion of some of the benefits and costs that may stem from them.
    The Departments believe that (i) the costs associated with the 
amended rules are less than the costs associated with the July 2010 
regulations, (ii) the amended rules adequately protect the rights of 
participants, beneficiaries, and policyholders, and (iii) the benefits 
of the amended rules justify their costs relative to the pre-Affordable 
Care Act baseline and the July 2010 regulations.

B. Executive Orders 12866 and 13563--Department of Labor and Department 
of Health and Human Services

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget.
    The Departments provide an assessment of the potential costs and 
benefits associated with each amended regulatory provision below, as 
summarized in Table 1.

                        Table 1--Accounting Table
------------------------------------------------------------------------
                                Benefits
-------------------------------------------------------------------------
Qualitative: Amendments to the interim final regulations ensure urgent
 care benefit determinations are made in a timely manner, increase
 patient privacy, ensure non-English speakers understand their rights,
 and provide that claimants will be deemed to have exhausted their
 administrative proceedings and can proceed to court or external review
 if a plan or issuer fails to strictly adhere to the regulatory
 requirements with the exception of the requirements that are described
 in the amendment. These amendments are expected to reduce compliance
 costs while still ensuring patient protections.
------------------------------------------------------------------------


 
                                                                                                      Period
                      Cost                           Estimate       Year dollar   Discount  rate      covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/year)...........             1.7            2011       7 percent       2012-2014
                                                             1.7            2011       3 percent       2012-2014
----------------------------------------------------------------------------------------------------------------
Qualitative: Monetized costs are for providing notices upon request in a culturally and linguistically
 appropriate manner. Non-monetized costs include costs for plans and issuers to respond to requests for
 diagnostic and treatment codes, and costs incurred by claimants to resolve whether a plan or insurer's failure
 to strictly adhere to the regulatory requirements is sufficient for a claimant to proceed directly to an
 external or court review.
----------------------------------------------------------------------------------------------------------------

1. Estimated Number of Affected Entities
    For purposes of estimating the entities affected by these 
amendments to the July 2010 regulations, the Departments have defined a 
large group health plan as an employer plan with 100 or more workers 
and a small group plan as an employer plan with fewer than 100 workers. 
The Departments make the following estimates about plans and issuers 
affected by these amendments: (1) There are approximately 72,000 large 
and 2.8 million small ERISA-covered group health plans with an 
estimated 97.0 million participants in large group plans and 40.9 
million participants in small group plans;\38\ (2) there are

[[Page 37219]]

126,000 governmental plans with 36.1 million participants in large 
plans and 2.3 million participants in small plans;\39\ and (3) there 
are 16.7 million individuals under age 65 covered by individual health 
insurance policies.\40\
---------------------------------------------------------------------------

    \38\ All participant counts and the estimates of individual 
policies are from the U.S. Department of Labor, EBSA calculations 
using the March 2009 Current Population Survey Annual Social and 
Economic Supplement and the 2008 Medical Expenditure Panel Survey.
    \39\ Estimate is from the 2007 Census of Government.
    \40\ US Census Bureau, Current Population Survey, March 2009.
---------------------------------------------------------------------------

    The actual number of affected individuals depends on several 
factors, including whether (i) a health plan retains its grandfather 
status, (ii) the plan is subject to ERISA, (iii) benefits provided 
under the plan are self-funded or financed by the purchase of an 
insurance policy, (iii) the applicable State has enacted an internal 
claims and appeals law, and (iv) the applicable State has enacted an 
external review law, and if so the scope of such law, and (v) the 
number of new plans and enrollees in such plans.
2. Benefits and Costs
    The benefits and costs of the amendments to the July 2010 
regulations are discussed together under this section, because the 
primary effect of the amendments is to reduce the cost of compliance.
    a. Expedited notification of benefit determination involving urgent 
care. As discussed in detail above, the July 2010 regulations generally 
provide that a plan or issuer must notify a claimant of a benefit 
determination with respect to an urgent care claim as soon as possible 
taking into account the medical exigencies, but no later than 24 hours 
after the receipt of the claim by the plan or issuer. This was a change 
from the DOL claims procedure regulation, which requires an urgent care 
determination to be made not later than 72 hours after receipt of the 
claim by a group health plan. The Departments received several comments 
regarding the burdens associated with meeting the 24-hour turnaround. 
Some commenters argued that some of the claims constituting ``urgent 
care'' and thus qualifying for the expedited timeframe really do not 
need to be decided within 24 hours. Moreover, a number of commenters 
highlighted that the 72-hour provision was never anything more than a 
``backstop''; the general rule under both the July 2010 regulations and 
the DOL claims procedure regulation is for a decision as soon as 
possible consistent with the medical exigencies involved, making the 
change to a 24-hour timeframe unnecessary for the most serious medical 
cases. Finally, some commenters cited the Emergency Medical Treatment 
and Labor Act (EMTALA)\41\, which generally requires emergency room 
care to be treated with or without insurance or preauthorization and, 
therefore, mitigates much of the need for expedited pre-service 
emergency claims determinations in many situations.
---------------------------------------------------------------------------

    \41\ 42 U.S.C. 1395dd.
---------------------------------------------------------------------------

    After considering the comments, and the costs and benefits of an 
absolute 24-hour decision-making deadline, the amendment permits plans 
and issuers to follow the original rule in the DOL claims procedure 
regulation (requiring decision-making in the context of pre-service 
urgent care claims as soon as possible consistent with the medical 
exigencies involved but in no event no later than 72 hours), provided 
the plan or issuer defers to the attending provider with respect to the 
decision as to whether a claim constitutes ``urgent care.''
    The Departments expect that this amendment will ensure urgent care 
benefit determinations are made in a timely manner while reducing 
burden on plans and issuers for several reasons. ERISA-covered plans 
were already subject to this requirement; therefore, there is no 
additional burden imposed on such plans from the pre-Affordable Care 
Act baseline. For self-insured nonfederal governmental plans and 
issuers in the individual market, the 72-hour requirement would 
increase burden from a pre-Affordable Care Act baseline to the extent 
that such plans and issuers are not already meeting this standard. The 
Departments do not have sufficient data to estimate the fraction of 
plans and issuers that were not already in compliance with this 
standard. Many claims filed with self-insured nonfederal governmental 
plans and individual market issuers already could have been meeting 
this requirement for urgent care claims, because ERISA claims 
constitute a large portion of health claims, and the Departments 
understand that, in general, issuers and service providers apply the 
same claims and appeals standards to ERISA-covered and non-ERISA-
covered plans.
    Plans and issuers that previously were not subject to the DOL 
claims procedure regulation and that are not already meeting the claims 
and appeals standard under the DOL claims procedure regulation, could 
incur additional costs to become compliant with the 72-hour standard, 
but the Departments expect these costs to be less than those associated 
with a 24-hour standard. Speeding up the notification process for these 
determinations to meet the 72-hour standard could necessitate incurring 
additional cost to add more employees or find other ways to shorten the 
timeframe, but again such costs are expected to be less than the costs 
associated with meeting the 24-hour standard provided in the July 2010 
regulations. Additional costs for claimants may be associated with this 
requirement if meeting the 72-hour timeframe results in more claims 
being denied than would have been denied under a longer notification 
period, but again such costs are expected to be less than the costs 
associated with meeting the 24-hour standard provided in the July 2010 
regulations. The Departments do not have sufficient data to estimate 
such costs.
    b. Additional notice requirements for internal claims and appeals. 
As discussed above, the July 2010 regulations had additional content 
requirements for the required notices. The Departments received 
comments addressing the requirements to include the diagnosis code 
(such as an ICD-9 code, ICD-10 code, or DSM-IV code), the treatment 
code (such as a CPT code), and the corresponding meanings of these 
codes. Concerns were raised about patient privacy, interference with 
the doctor-patient relationship, and high costs. Commenters also 
pointed out that there are currently over 20,000 treatment and 
diagnosis codes in use today, presenting a costly administrative and 
operational challenge for plans and issuers. Comments also questioned 
the efficacy of providing codes which some argued are often very 
difficult for the average patient to understand.
    After considering all the comments, and the costs and benefits of 
the additional disclosure, the amendment to the July 2010 regulations 
eliminates the requirement to automatically provide the diagnosis and 
treatment codes as part of a notice of adverse benefit determination 
(or final internal adverse benefit determination) and instead requires 
plans and issuers to provide notification of the opportunity to request 
the diagnosis and treatment codes (and their meanings) in all notices 
of adverse benefit determination (and notices of final internal adverse 
benefit determination) and to provide this information upon request.
    Making the codes only available upon request protects patients' 
privacy while reducing the burden for plans and issuers to redesign 
notices. However, plans and issuers will still incur costs to establish 
procedures to receive, process, and mail the requests. The Departments 
do not have a basis to estimate the net cost associated with this 
amendment, because they do not have sufficient data available to 
estimate

[[Page 37220]]

the savings that will result from plans and issuers not needing to 
redesign notices or calculate the number of future requests.
    c. Deemed exhaustion of internal claims and appeals process. The 
July 2010 regulations provide that claimants can immediately seek 
judicial or external review if a plan or issuer failed to ``strictly 
adhere'' to all of the July 2010 regulations' requirements for internal 
claims and appeals processes, regardless of whether the plan or issuer 
asserted that it ``substantially complied'' with the July 2010 
regulations. This approach received a number of negative comments from 
some issuers and plan sponsors, who prefer a ``substantial compliance'' 
approach, especially in cases where deviations from the regulatory 
standards were minor.
    In response to these comments, the Departments are retaining the 
approach to this requirement, but this amendment also adds a new 
paragraph (b)(2)(ii)(F)(2) to the July 2010 regulations to provide an 
exception to the strict compliance standard for errors that are minor 
and meet certain other specified conditions. The new paragraph will 
also protect claimants whose attempts to pursue other remedies under 
paragraph (b)(2)(ii)(F)(1) of the interim final regulations are 
rejected by a reviewing tribunal. Under the amended approach, any 
violation of the procedural rules of July 2010 regulations pertaining 
to internal claims and appeals would permit a claimant to seek 
immediate external review or court action, as applicable, unless the 
violation was:
    (1) De minimis;
    (2) Non-prejudicial;
    (3) Attributable to good cause or matters beyond the plan's or 
issuer's control;
    (4) In the context of an ongoing good-faith exchange of 
information; and
    (5) Not reflective of a pattern or practice of non-compliance.\42\
---------------------------------------------------------------------------

    \42\ In addition, the claimant would be entitled, upon written 
request, to an explanation of the plan's or issuer's basis for 
asserting that it meets this standard, so that the claimant could 
make an informed judgment about whether to seek immediate review. 
Finally, if the external reviewer or the court rejects the 
claimant's request for immediate review on the basis that the plan 
met this standard, this amendment would give the claimant the right 
to resubmit and pursue the internal appeal of the claim.
---------------------------------------------------------------------------

    The Departments expect that this amendment will protect patients' 
right to proceed to external review while lowering costs based on the 
assumption that internal appeals are less expensive than external 
reviews or litigation. However, the amendment may add some costs, 
because participants and policyholders now may face uncertainty 
regarding whether a particular violation is minor. Many claimants may 
incur a cost to seek professional advice, because they will not be able 
to make this judgment on their own behalf. Alternatively, some 
claimants might seek immediate external review or judicial review and 
be denied it. The Departments do not have a sufficient basis to 
estimate these costs.
    d. Culturally and Linguistically Appropriate Notices. PHS Act 
section 2719 requires group health plans and health insurance issuers 
to provide relevant notices in a culturally and linguistically 
appropriate manner. The July 2010 regulations set forth a requirement 
to provide notices in a non-English language based on separate 
thresholds of the number of people who are literate in the same non-
English language. In the group market, the threshold set forth in the 
July 2010 regulations differs depending on the number of participants 
in the plan as follows:
     For a plan that covers fewer than 100 participants at the 
beginning of a plan year, the threshold is 25 percent of all plan 
participants being literate only in the same non-English language.
     For a plan that covers 100 or more participants at the 
beginning of a plan year, the threshold is the lesser of 500 
participants, or 10 percent of all plan participants, being literate 
only in the same non-English language.\43\
---------------------------------------------------------------------------

    \43\ These thresholds were adapted from the DOL regulations 
regarding style and format for a summary plan description, at 29 CFR 
2520.102-2(c) for participants who are not literate in English.

For the individual market, the threshold is 10 percent of the 
population residing in the county being literate only in the same non-
English language.\44\
---------------------------------------------------------------------------

    \44\ The individual market threshold was generally adapted from 
the approach used under the Medicare Advantage program, which 
required translation of materials in languages spoken by more than 
10 percent of the general population in a service area at the time 
the threshold was established.
---------------------------------------------------------------------------

    Under the July 2010 regulations, if an applicable threshold is met 
with respect to a non-English language, the plan or issuer must provide 
the notice upon request in the non-English language. Additionally, the 
plan or issuer must include a statement in the English versions of all 
notices, prominently displayed in the non-English language, offering 
the provision of such notices in the non-English language. Finally, to 
the extent the plan or issuer maintains a customer assistance process 
(such as a telephone hotline) that answers questions or provides 
assistance with filing claims and appeals, the plan or issuer must 
provide such assistance in the non-English language.
    As discussed earlier in this preamble, the Departments received 
comments that raised concerns regarding the burdens imposed by this 
provision. In response to these comments, the Departments have decided 
to amend the July 2010 regulations' provisions related to the provision 
of notices in a culturally and linguistically appropriate manner to 
establish a single threshold with respect to the number of people who 
are literate only in the same non-English language for both the group 
and individual markets. Under the amended provision, for group health 
plans and health insurance issuers offering group or individual health 
insurance coverage, the threshold percentage of people who are literate 
only in the same non-English language will be set at 10 percent or more 
of the population residing in the claimant's county, as determined 
based on American Community Survey (ACS) data published by the United 
States Census Bureau. Table 2, below provides a chart listing those 255 
U.S. counties (78/255 are in Puerto Rico) in which at least 10 percent 
of the population speak a particular non-English language and speak 
English less than ``very well.'' These data are applicable for 2011 and 
are calculated using 2005-2009 ACS data. The Departments will update 
this guidance annually on their Web site if there are changes to the 
list of the counties determined to meet this 10 percent threshold for 
the county's population being literate only in the same non-English 
language.

[[Page 37221]]



  Table 2--Percent of the County Population That Speak a Particular Non-English Language and Speak English Less
                                     Than ``Very Well'', by U.S. County \45\
----------------------------------------------------------------------------------------------------------------
                                                                             Non-English language
            State                         County             ---------------------------------------------------
                                                               Spanish  %   Chinese  %   Tagalog  %   Navajo  %
----------------------------------------------------------------------------------------------------------------
AK..........................  Aleutians West Census Area....           13  ...........           16  ...........
AK..........................  Aleutians East Borough........  ...........  ...........           35  ...........
AR..........................  Sevier County.................           17  ...........  ...........  ...........
AZ..........................  Apache County.................  ...........  ...........  ...........           12
AZ..........................  Maricopa County...............           11  ...........  ...........  ...........
AZ..........................  Yuma County...................           22  ...........  ...........  ...........
AZ..........................  Santa Cruz County.............           39  ...........  ...........  ...........
CA..........................  Colusa County.................           27  ...........  ...........  ...........
CA..........................  Fresno County.................           15  ...........  ...........  ...........
CA..........................  Glenn County..................           14  ...........  ...........  ...........
CA..........................  Imperial County...............           32  ...........  ...........  ...........
CA..........................  Kern County...................           16  ...........  ...........  ...........
CA..........................  Kings County..................           18  ...........  ...........  ...........
CA..........................  Los Angeles County............           19  ...........  ...........  ...........
CA..........................  Madera County.................           18  ...........  ...........  ...........
CA..........................  Merced County.................           20  ...........  ...........  ...........
CA..........................  Monterey County...............           25  ...........  ...........  ...........
CA..........................  Napa County...................           14  ...........  ...........  ...........
CA..........................  Orange County.................           14  ...........  ...........  ...........
CA..........................  Riverside County..............           15  ...........  ...........  ...........
CA..........................  San Benito County.............           21  ...........  ...........  ...........
CA..........................  San Bernardino County.........           15  ...........  ...........  ...........
CA..........................  San Diego County..............           11  ...........  ...........  ...........
CA..........................  San Francisco County..........  ...........           12  ...........  ...........
CA..........................  San Joaquin County............           12  ...........  ...........  ...........
CA..........................  Santa Barbara County..........           15  ...........  ...........  ...........
CA..........................  Santa Cruz County.............           12  ...........  ...........  ...........
CA..........................  Stanislaus County.............           13  ...........  ...........  ...........
CA..........................  Sutter County.................           12  ...........  ...........  ...........
CA..........................  Tulare County.................           21  ...........  ...........  ...........
CA..........................  Ventura County................           14  ...........  ...........  ...........
CO..........................  Adams County..................           12  ...........  ...........  ...........
CO..........................  Costilla County...............           11  ...........  ...........  ...........
CO..........................  Denver County.................           12  ...........  ...........  ...........
CO..........................  Eagle County..................           16  ...........  ...........  ...........
CO..........................  Garfield County...............           12  ...........  ...........  ...........
CO..........................  Lake County...................           11  ...........  ...........  ...........
CO..........................  Phillips County...............           12  ...........  ...........  ...........
CO..........................  Prowers County................           12  ...........  ...........  ...........
CO..........................  Saguache County...............           15  ...........  ...........  ...........
CO..........................  Yuma County...................           10  ...........  ...........  ...........
FL..........................  Collier County................           13  ...........  ...........  ...........
FL..........................  DeSoto County.................           21  ...........  ...........  ...........
FL..........................  Glades County.................           10  ...........  ...........  ...........
FL..........................  Hardee County.................           22  ...........  ...........  ...........
FL..........................  Hendry County.................           26  ...........  ...........  ...........
FL..........................  Miami-Dade County.............           31  ...........  ...........  ...........
FL..........................  Okeechobee County.............           12  ...........  ...........  ...........
FL..........................  Osceola County................           16  ...........  ...........  ...........
GA..........................  Atkinson County...............           12  ...........  ...........  ...........
GA..........................  Echols County.................           20  ...........  ...........  ...........
GA..........................  Hall County...................           16  ...........  ...........  ...........
GA..........................  Telfair County................           10  ...........  ...........  ...........
GA..........................  Whitfield County..............           18  ...........  ...........  ...........
IA..........................  Buena Vista County............           12  ...........  ...........  ...........
ID..........................  Clark County..................           22  ...........  ...........  ...........
ID..........................  Minidoka County...............           11  ...........  ...........  ...........
ID..........................  Owyhee County.................           12  ...........  ...........  ...........
ID..........................  Power County..................           13  ...........  ...........  ...........
IL..........................  Kane County...................           15  ...........  ...........  ...........
KS..........................  Finney County.................           16  ...........  ...........  ...........
KS..........................  Ford County...................           23  ...........  ...........  ...........
KS..........................  Grant County..................           16  ...........  ...........  ...........
KS..........................  Hamilton County...............           11  ...........  ...........  ...........
KS..........................  Seward County.................           26  ...........  ...........  ...........
KS..........................  Stanton County................           19  ...........  ...........  ...........
KS..........................  Stevens County................           11  ...........  ...........  ...........
KS..........................  Wichita County................           12  ...........  ...........  ...........

[[Page 37222]]

 
KS..........................  Wyandotte County..............           10  ...........  ...........  ...........
NC..........................  Alleghany County..............           14  ...........  ...........  ...........
NC..........................  Duplin County.................           14  ...........  ...........  ...........
NE..........................  Colfax County.................           23  ...........  ...........  ...........
NE..........................  Dakota County.................           14  ...........  ...........  ...........
NE..........................  Dawson County.................           15  ...........  ...........  ...........
NJ..........................  Hudson County.................           18  ...........  ...........  ...........
NJ..........................  Passaic County................           16  ...........  ...........  ...........
NJ..........................  Union County..................           13  ...........  ...........  ...........
NM..........................  Chaves County.................           11  ...........  ...........  ...........
NM..........................  Dona Ana County...............           18  ...........  ...........  ...........
NM..........................  Hidalgo County................           12  ...........  ...........  ...........
NM..........................  Lea County....................           11  ...........  ...........  ...........
NM..........................  Luna County...................           18  ...........  ...........  ...........
NM..........................  McKinley County...............  ...........  ...........  ...........           15
NM..........................  Mora County...................           11  ...........  ...........  ...........
NM..........................  Santa Fe County...............           12  ...........  ...........  ...........
NM..........................  Chaves County.................           11  ...........  ...........  ...........
NV..........................  Clark County,.................           11  ...........  ...........  ...........
NY..........................  Bronx County..................           20  ...........  ...........  ...........
NY..........................  New York County...............           10  ...........  ...........  ...........
NY..........................  Queens County.................           12  ...........  ...........  ...........
OK..........................  Texas County..................           18  ...........  ...........  ...........
OR..........................  Hood River County.............           15  ...........  ...........  ...........
OR..........................  Marion County.................           11  ...........  ...........  ...........
OR..........................  Morrow County.................           14  ...........  ...........  ...........
TX..........................  Andrews County................           11  ...........  ...........  ...........
TX..........................  Atascosa County...............           11  ...........  ...........  ...........
TX..........................  Bailey County.................           18  ...........  ...........  ...........
TX..........................  Bexar County..................           12  ...........  ...........  ...........
TX..........................  Brooks County.................           18  ...........  ...........  ...........
TX..........................  Calhoun County................           12  ...........  ...........  ...........
TX..........................  Cameron County................           30  ...........  ...........  ...........
TX..........................  Camp County...................           11  ...........  ...........  ...........
TX..........................  Castro County.................           20  ...........  ...........  ...........
TX..........................  Cochran County................           18  ...........  ...........  ...........
TX..........................  Concho County.................           29  ...........  ...........  ...........
TX..........................  Crane County..................           10  ...........  ...........  ...........
TX..........................  Crockett County...............           20  ...........  ...........  ...........
TX..........................  Crosby County.................           11  ...........  ...........  ...........
TX..........................  Culberson County..............           15  ...........  ...........  ...........
TX..........................  Dallam County.................           12  ...........  ...........  ...........
TX..........................  Dallas County.................           18  ...........  ...........  ...........
TX..........................  Dawson County.................           12  ...........  ...........  ...........
TX..........................  Deaf Smith County.............           20  ...........  ...........  ...........
TX..........................  Dimmit County.................           33  ...........  ...........  ...........
TX..........................  Duval County..................           26  ...........  ...........  ...........
TX..........................  Ector County..................           12  ...........  ...........  ...........
TX..........................  Edwards County................           10  ...........  ...........  ...........
TX..........................  El Paso County................           29  ...........  ...........  ...........
TX..........................  Frio County...................           16  ...........  ...........  ...........
TX..........................  Garza County..................           35  ...........  ...........  ...........
TX..........................  Gonzales County...............           14  ...........  ...........  ...........
TX..........................  Hale County...................           12  ...........  ...........  ...........
TX..........................  Hall County...................           14  ...........  ...........  ...........
TX..........................  Hansford County...............           16  ...........  ...........  ...........
TX..........................  Harris County.................           18  ...........  ...........  ...........
TX..........................  Hidalgo County................           35  ...........  ...........  ...........
TX..........................  Howard County.................           16  ...........  ...........  ...........
TX..........................  Hudspeth County...............           31  ...........  ...........  ...........
TX..........................  Jim Hogg County...............           26  ...........  ...........  ...........
TX..........................  Jim Wells County..............           13  ...........  ...........  ...........
TX..........................  Karnes County.................           17  ...........  ...........  ...........
TX..........................  Kenedy County.................           14  ...........  ...........  ...........
TX..........................  Kinney County.................           15  ...........  ...........  ...........
TX..........................  Kleberg County................           11  ...........  ...........  ...........
TX..........................  La Salle County...............           22  ...........  ...........  ...........
TX..........................  Lamb County...................           15  ...........  ...........  ...........

[[Page 37223]]

 
TX..........................  Lipscomb County...............           14  ...........  ...........  ...........
TX..........................  Lynn County...................           12  ...........  ...........  ...........
TX..........................  Maverick County...............           48  ...........  ...........  ...........
TX..........................  Midland County................           11  ...........  ...........  ...........
TX..........................  Moore County..................           19  ...........  ...........  ...........
TX..........................  Nueces County.................           12  ...........  ...........  ...........
TX..........................  Ochiltree County..............           17  ...........  ...........  ...........
TX..........................  Parmer County.................           22  ...........  ...........  ...........
TX..........................  Pecos County..................           18  ...........  ...........  ...........
TX..........................  Presidio County...............           36  ...........  ...........  ...........
TX..........................  Reagan County.................           21  ...........  ...........  ...........
TX..........................  Reeves County.................           27  ...........  ...........  ...........
TX..........................  San Patricio County...........           12  ...........  ...........  ...........
TX..........................  Schleicher County.............           12  ...........  ...........  ...........
TX..........................  Sherman County................           14  ...........  ...........  ...........
TX..........................  Starr County..................           43  ...........  ...........  ...........
TX..........................  Sterling County...............           11  ...........  ...........  ...........
TX..........................  Sutton County.................           18  ...........  ...........  ...........
TX..........................  Tarrant County................           10  ...........  ...........  ...........
TX..........................  Terrell County................           12  ...........  ...........  ...........
TX..........................  Terry County..................           11  ...........  ...........  ...........
TX..........................  Titus County..................           20  ...........  ...........  ...........
TX..........................  Travis County.................           12  ...........  ...........  ...........
TX..........................  Upton County..................           11  ...........  ...........  ...........
TX..........................  Uvalde County.................           15  ...........  ...........  ...........
TX..........................  Val Verde County..............           29  ...........  ...........  ...........
TX..........................  Ward County...................           12  ...........  ...........  ...........
TX..........................  Webb County...................           49  ...........  ...........  ...........
TX..........................  Willacy County................           20  ...........  ...........  ...........
TX..........................  Winkler County................           13  ...........  ...........  ...........
TX..........................  Yoakum County.................           23  ...........  ...........  ...........
TX..........................  Zapata County.................           36  ...........  ...........  ...........
TX..........................  Zavala County.................           33  ...........  ...........  ...........
UT..........................  San Juan County...............  ...........  ...........  ...........           12
VA..........................  Manassas city.................           17  ...........  ...........  ...........
VA..........................  Manassas Park city............           18  ...........  ...........  ...........
WA..........................  Adams County..................           23  ...........  ...........  ...........
WA..........................  Douglas County................           11  ...........  ...........  ...........
WA..........................  Franklin County...............           27  ...........  ...........  ...........
WA..........................  Grant County..................           16  ...........  ...........  ...........
WA..........................  Yakima County.................           17  ...........  ...........  ...........
PR..........................  Anasco Municipio..............           85  ...........  ...........  ...........
PR..........................  Adjuntas Municipio............           86  ...........  ...........  ...........
PR..........................  Aguada Municipio..............           81  ...........  ...........  ...........
PR..........................  Aguadilla Municipio...........           78  ...........  ...........  ...........
PR..........................  Aguas Buenas Municipio........           90  ...........  ...........  ...........
PR..........................  Aibonito Municipio............           82  ...........  ...........  ...........
PR..........................  Arecibo Municipio.............           83  ...........  ...........  ...........
PR..........................  Arroyo Municipio..............           84  ...........  ...........  ...........
PR..........................  Barceloneta Municipio.........           78  ...........  ...........  ...........
PR..........................  Barranquitas Municipio........           87  ...........  ...........  ...........
PR..........................  Bayamon Municipio.............           78  ...........  ...........  ...........
PR..........................  Cabo Rojo Municipio...........           82  ...........  ...........  ...........
PR..........................  Caguas Municipio..............           80  ...........  ...........  ...........
PR..........................  Camuy Municipio...............           88  ...........  ...........  ...........
PR..........................  Canovanas Municipio...........           83  ...........  ...........  ...........
PR..........................  Carolina Municipio............           77  ...........  ...........  ...........
PR..........................  Catano Municipio..............           82  ...........  ...........  ...........
PR..........................  Cayey Municipio...............           86  ...........  ...........  ...........
PR..........................  Ceiba Municipio...............           73  ...........  ...........  ...........
PR..........................  Ciales Municipio..............           88  ...........  ...........  ...........
PR..........................  Cidra Municipio...............           86  ...........  ...........  ...........
PR..........................  Coamo Municipio...............           84  ...........  ...........  ...........
PR..........................  Comero Municipio..............           93  ...........  ...........  ...........
PR..........................  Corozal Municipio.............           88  ...........  ...........  ...........
PR..........................  Culebra Municipio.............           76  ...........  ...........  ...........
PR..........................  Dorado Municipio..............           77  ...........  ...........  ...........
PR..........................  Fajardo Municipio.............           78  ...........  ...........  ...........

[[Page 37224]]

 
PR..........................  Florida Municipio.............           81  ...........  ...........  ...........
PR..........................  Guayama Municipio.............           80  ...........  ...........  ...........
PR..........................  Guayanilla Municipio..........           85  ...........  ...........  ...........
PR..........................  Guaynabo Municipio............           69  ...........  ...........  ...........
PR..........................  Gurabo Municipio..............           81  ...........  ...........  ...........
PR..........................  Gu[szlig]nica Municipio.......           83  ...........  ...........  ...........
PR..........................  Hatillo Municipio.............           86  ...........  ...........  ...........
PR..........................  Hormigueros Municipio.........           74  ...........  ...........  ...........
PR..........................  Humacao Municipio.............           83  ...........  ...........  ...........
PR..........................  Isabela Municipio.............           85  ...........  ...........  ...........
PR..........................  Jayuya Municipio..............           91  ...........  ...........  ...........
PR..........................  Juana Diaz Municipio..........           86  ...........  ...........  ...........
PR..........................  Juncos Municipio..............           85  ...........  ...........  ...........
PR..........................  Lajas Municipio...............           83  ...........  ...........  ...........
PR..........................  Lares Municipio...............           87  ...........  ...........  ...........
PR..........................  Las Marias Municipio..........           91  ...........  ...........  ...........
PR..........................  Las Piedras Municipio.........           85  ...........  ...........  ...........
PR..........................  Loiza Municipio...............           89  ...........  ...........  ...........
PR..........................  Luquillo Municipio............           79  ...........  ...........  ...........
PR..........................  Manati Municipio..............           84  ...........  ...........  ...........
PR..........................  Maricao Municipio.............           95  ...........  ...........  ...........
PR..........................  Maunabo Municipio.............           88  ...........  ...........  ...........
PR..........................  Mayaguez Municipio............           77  ...........  ...........  ...........
PR..........................  Moca Municipio................           86  ...........  ...........  ...........
PR..........................  Morovis Municipio.............           87  ...........  ...........  ...........
PR..........................  Naguabo Municipio.............           83  ...........  ...........  ...........
PR..........................  Naranjito Municipio...........           91  ...........  ...........  ...........
PR..........................  Orocovis Municipio............           91  ...........  ...........  ...........
PR..........................  Patillas Municipio............           84  ...........  ...........  ...........
PR..........................  Penuelas Municipio............           86  ...........  ...........  ...........
PR..........................  Ponce Municipio...............           80  ...........  ...........  ...........
PR..........................  Quebradillas Municipio........           83  ...........  ...........  ...........
PR..........................  Rincon Municipio..............           73  ...........  ...........  ...........
PR..........................  Rio Grande Municipio..........           85  ...........  ...........  ...........
PR..........................  Sabana Grande Municipio.......           83  ...........  ...........  ...........
PR..........................  Salinas Municipio.............           86  ...........  ...........  ...........
PR..........................  San German Municipio..........           85  ...........  ...........  ...........
PR..........................  San Juan Municipio............           73  ...........  ...........  ...........
PR..........................  San Lorenzo Municipio.........           83  ...........  ...........  ...........
PR..........................  San Sebastian Municipio.......           84  ...........  ...........  ...........
PR..........................  Santa Isabel Municipio........           86  ...........  ...........  ...........
PR..........................  Toa Alta Municipio............           80  ...........  ...........  ...........
PR..........................  Toa Baja Municipio............           80  ...........  ...........  ...........
PR..........................  Trujillo Alto Municipio.......           79  ...........  ...........  ...........
PR..........................  Utuado Municipio..............           83  ...........  ...........  ...........
PR..........................  Vega Alta Municipio...........           83  ...........  ...........  ...........
PR..........................  Vega Baja Municipio...........           76  ...........  ...........  ...........
PR..........................  Vieques Municipio.............           83  ...........  ...........  ...........
PR..........................  Villalba Municipio............           88  ...........  ...........  ...........
PR..........................  Yabucoa Municipio.............           86  ...........  ...........  ...........
PR..........................  Yauco Municipio...............           85  ...........  ...........  ...........
----------------------------------------------------------------------------------------------------------------

    These amendments also require each notice sent by a plan or issuer 
to an address in a county that meets this threshold to include a one-
sentence statement in the relevant non-English language about the 
availability of language services to be provided by the Departments. 
The Departments have provided guidance with sample sentences in the 
relevant languages in separate guidance being issued contemporaneous 
with the publication of this amendment.
---------------------------------------------------------------------------

    \45\ Data are from the 2005-2009 ACS available at http://www.census.gov/acs. Only those counties where at least 10% of the 
county speak a particular non-English language and speak English 
less than ``very well'' are listed.
---------------------------------------------------------------------------

    In addition to including a statement in all notices in the relevant 
non-English language, a plan or issuer would be required to provide a 
customer assistance process (such as a telephone hotline) with oral 
language services in the non-English language and provide written 
notices in the non-English language upon request.
    The Departments expect that the largest cost associated with the 
amended rules for culturally and linguistically appropriate notices 
will be for plans and issuers to provide notices in the applicable non-
English language upon request. Based on the ACS data, the Departments 
estimate that there are about 12 million individuals living in

[[Page 37225]]

covered counties that are literate in a non-English Language. The ACS 
did not start collecting insurance coverage information until 2008. 
Therefore, to estimate the percentage of the 12 million affected 
individuals that were insured, the Departments used the percentage of 
the population in the State that reported being insured by private or 
public employer insurance or in the individual market from the 2009 
Current Population Survey (CPS).\46\ This results in an estimate of 
approximately seven million individuals who are eligible to request 
translation services.
---------------------------------------------------------------------------

    \46\ Please note that using state estimates of insurance 
coverage could lead to an over estimate if those reporting in the 
ACS survey that they speak English less than ``very well'' are less 
likely to be insured than the state average.
---------------------------------------------------------------------------

    In discussions with the regulated community, the Departments found 
that experience in California, which has a State law requirement for 
providing translation services, indicates that requests for 
translations of written documents averages 0.098 requests per 1,000 
members. While the California law is not identical to the amendment to 
the July 2010 regulations, and the demographics for California do not 
match other counties, for purposes of this analysis, the Departments 
used this percentage to estimate of the number of translation service 
requests that plan and issuers can expect to receive. Industry experts 
also told the Departments that while the cost of translation services 
varies, $500 per document is a reasonable approximation of translation 
cost.
    Using the ACS and the CPS, the Departments estimate 34 million 
insured lives in the affected counties. Based on the foregoing, the 
Departments estimate that the cost to provide translation services will 
be approximately $1.7 million annually (34,087,000 lives * 0.098/1000 * 
$500).
    e. Duration of the transition period for State external review 
processes. These amendments to the July 2010 regulations modify the 
transition period under paragraph (c)(3) so that the last day of the 
transition period is December 31, 2011. Modifying the transition period 
gives states additional time to implement State external review 
processes that conform to paragraph (c)(2). This modification produces 
benefits and costs to participants and beneficiaries depending upon 
which state they live in and the timing of the beginning of the plan 
year. HHS is working closely with states to help them have external 
review processes that meet the requirements of paragraph (c)(2). The 
July 2010 regulations would have participants living in states with 
laws that do not meet the minimum consumer protections in paragraph 
(c)(2) entering the Federal external review process that would provide 
more consumer protections. However, this requirement to enter the 
Federal external review process would take effect upon the start of a 
new plan year beginning on or after July 1, 2011.
    This modification delays coverage of external review for 
participants whose plan year would have started between July 1, 2011 
and December 31, 2011, but provides coverage sooner for participants in 
plans with plan years beginning after January 1, 2012, and has no 
change for participants in plans with plan years beginning on January 
1, 2012.
    The annual reporting form for certain ERISA covered health plans, 
the Form 5500, has information on health plan year end dates and also 
the number of participants in health plans. While most health plans 
with less than 100 participants are not required to file the Form 5500, 
the Departments are able to observe the plan year end dates and hence 
the plan year start dates for large plans. The Departments looked at 
the dispersion of plan year start dates for plans that filed the Form 
5500 and found that nearly 76 percent of participants are in plans with 
a plan year start date of January 1, 2012 and hence will not be 
effected by the change in the rule; nearly 13 percent of participants 
are in plans that could possibly see a delay in receiving the 
protections of external review, while just over 10 percent of 
participants will be able to access the protections sooner. These 
estimates did not take into account the state in which the plan was 
located. The Departments do not have data on the start date of policies 
in the individual market. While on net about 2.4 percent of 
participants in affected plans could see a delay in receiving the 
protections, these costs are offset by giving states, and issuers 
additional time, and hence lower costs, to prepare for complying with 
the rule.
    f. Scope of Federal External Review. Paragraph (d)(1) of the July 
2010 regulations provides that any adverse benefit determination 
(including a final internal adverse benefit determination) could be 
brought to the Federal external review process unless it related to a 
participant's or beneficiary's failure to meet the requirements for 
eligibility under the terms of a group health plan (i.e., worker 
classification and similar issues were not within the scope of the 
Federal external review process). As discussed earlier in this 
preamble, comments received in response to the July 2010 regulations 
indicate that the scope of external review claims was too broad.
    After considering all the comments, with respect to plans subject 
to the Federal external review process, for claims for which external 
review has not been initiated before September 20, 2011, the amendment 
suspends the original rule in the July 2010 regulations regarding the 
scope of claims eligible for external review for plans using the 
Federal process, temporarily replacing it with a different scope. 
Specifically, this amendment suspends the broad scope of claims 
eligible for external review and narrows the scope to those that 
involve (1) medical judgment (excluding those that involve only 
contractual or legal interpretation without any use of medical 
judgment), as determined by the external reviewer; or (2) a rescission 
of coverage. The suspension is 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 regulations' broader scope would be likely to justify its 
costs.

C. Regulatory Flexibility Act--Department of Labor and Department of 
Health and Human Services

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the APA (5 
U.S.C. 551 et seq.) and that are likely to have a significant economic 
impact on a substantial number of small entities. Under Section 553(b) 
of the APA, a general notice of proposed rulemaking is not required 
when an agency, for good cause, finds that notice and public comment 
thereon are impracticable, unnecessary, or contrary to the public 
interest. The interim final regulations were exempt from the APA, 
because the Departments made a good cause finding that a general notice 
of proposed rulemaking is not necessary earlier in this preamble. 
Therefore, the RFA did not apply and the Departments were not required 
to either certify that the regulations or this amendment would not have 
a significant economic impact on a substantial number of small entities 
or conduct a regulatory flexibility analysis.
    Nevertheless, the Departments carefully considered the likely 
impact of the rule on small entities in connection with their 
assessment under Executive Order 12866. Consistent with the policy of 
the RFA, the Departments encourage the public to submit comments that 
suggest alternative rules that accomplish

[[Page 37226]]

the stated purpose of the Affordable Care Act and minimize the impact 
on small entities.

D. Special Analyses--Department of the Treasury

    Notwithstanding the determinations of the Department of Labor and 
Department of Health and Human Services, for purposes of the Department 
of the Treasury, it has been determined that this Treasury decision is 
not a significant regulatory action for purposes of Executive Order 
12866. Therefore, a regulatory assessment is not required. It has also 
been determined that section 553(b) of the APA (5 U.S.C. chapter 5) 
does not apply to these temporary regulations. For the applicability of 
the RFA, refer to the Special Analyses section in the preamble to the 
cross-referencing notice of proposed rulemaking published elsewhere in 
this issue of the Federal Register. Pursuant to section 7805(f) of the 
Code, these temporary regulations have been submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on their impact on small businesses.

E. Paperwork Reduction Act

1. Department of Labor and Department of the Treasury
    Currently, the Departments are soliciting 60 days of public 
comments concerning these disclosures. The Departments have submitted a 
copy of these interim final regulations to OMB in accordance with 44 
U.S.C. 3507(d) for review of the information collections. The 
Departments and OMB are particularly interested in comments that:
     Evaluate whether the collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, for example, by 
permitting electronic submission of responses.
    Comments should be sent to the Office of Information and Regulatory 
Affairs, Attention: Desk Officer for the Employee Benefits Security 
Administration either by fax to (202) 395-7285 or by e-mail to [email protected]. A copy of the ICR may be obtained by contacting 
the PRA addressee: G. Christopher Cosby, Office of Policy and Research, 
U.S. Department of Labor, Employee Benefits Security Administration, 
200 Constitution Avenue, NW., Room N-5718, Washington, DC 20210. 
Telephone: (202) 693-8410; Fax: (202) 219-4745. These are not toll-free 
numbers. E-mail: [email protected]. ICRs submitted to OMB also are 
available at reginfo.gov (http://www.reginfo.gov/public/do/PRAMain).
a. Department of Labor and Department of the Treasury: Affordable Care 
Act Internal Claims and Appeals and External Review Disclosures for 
Non-Grandfathered Plans
    These amendments make two changes to the interim final regulations 
that affect the paperwork burden. The first is an amendment no longer 
requiring that diagnosis and treatment codes be included on notices of 
adverse benefit determination and final internal adverse benefit 
determination. Instead, they must notify claimants of the opportunity 
to receive the codes on request and plans and issuers must provide the 
codes upon request. The Departments expect that this change will lower 
costs, because plans and issuers no longer will have to provide the 
codes on the notices. Plans and issuers will incur a cost to establish 
procedures for receive, process, and mail the codes upon request; 
however, the Departments are unable to estimate such cost due to a lack 
of a basis for an estimate of the number of requests that will be made 
for the codes.
    The amendments also change the method for determining who is 
eligible to receive a notice in a culturally and linguistically 
appropriate manner, and the information that must be provided to such 
persons. The previous rule was based on the number of employees at a 
firm. The new rule is based on whether a participant or beneficiary 
resides in a county where ten percent or more of the population 
residing in the county is literate only in the same non-English 
language.
    Participants and beneficiaries residing in an affected county and 
speaking an applicable non-English language will now receive a one-
sentence statement in all notices written in the applicable non-English 
language about the availability of language services. In addition to 
including the statement, plan and issuers are required to provide a 
customer assistance process (such as a telephone hotline) with oral 
language services in the non-English language and provide written 
notices in the non-English language upon requests.
    The Departments understand that oral translation services are 
already provided for nearly all covered participants and beneficiaries. 
Therefore, no additional burden is associated with this requirement of 
the amendment. The Departments estimate that plans will incur an annual 
cost burden of $1.2 million to translate written notices into the 
relevant non-English language.\47\
---------------------------------------------------------------------------

    \47\ The Department's methodology for this estimate is explained 
in IV, B, 2, d, above.
---------------------------------------------------------------------------

    Based on the foregoing, the Departments have adjusted the total 
estimated cost burden for this information collection. The cost burden 
is $243,000 in 2011, $1.7 million in 2012, and $1.8 million in 2013.
    Type of Review: Revised collection.
    Agencies: Employee Benefits Security Administration, Department of 
Labor; Internal Revenue Service, U.S. Department of the Treasury,
    Title: Affordable Care Act Internal Claims and Appeals and External 
Review Disclosures for Non-Grandfathered Plans.
    OMB Number: 1210-0144; 1545-2182.
    Affected Public: Business or other for-profit; not-for-profit 
institutions.
    Total Respondents: 1,020,000 (three-year average).
    Total Responses: 111,000(three-year average).
    Frequency of Response: Occasionally.
    Estimated Total Annual Burden Hours: 233 hours (Employee Benefits 
Security Administration); 233 hours (Internal Revenue Service) (three-
year average).
    Estimated Total Annual Burden Cost: $628,900 (Employee Benefits 
Security Administration); $628,900 (Internal Revenue Service) (three-
year average).
2. Department of Health and Human Services
a. ICR Regarding Affordable Care Act Internal Claims and Appeals and 
External Review Disclosures for Non-grandfathered Plans
    As discussed above in the Department of Labor and Department of the 
Treasury PRA section, these amendments make two changes to the interim 
final regulations that affect the paperwork burden. The first is an 
amendment no longer requiring that diagnosis and treatment codes be 
included on notices of adverse benefit determination and final internal 
adverse benefit

[[Page 37227]]

determination. Instead these codes are available upon request. The 
Departments expect that this change will lower costs compared to the 
July 2010 regulations because plans and issuers no longer will have to 
provide the codes on the notices. Plans and issuers will incur a cost 
to establish procedures for receiving, processing, and mailing the 
codes upon request; however, the Departments are unable to estimate 
such cost due to lack of a basis for an estimate of the number of 
requests that will be made for the codes. Second, the amendments also 
changes who is eligible to receive a notice in a culturally or 
linguistically appropriate manner.
    The Departments estimated the new cost burden of providing the 
translation of requested notices into the applicable non-English 
language. The annual cost burden is estimated to be $430,000 annually 
starting in 2012. The derivation of this estimate was discussed above 
in the Economic Impact section.
    Due to the amendments, the Department has adjusted the total 
estimated costs of this information collection. The Department 
estimates that State and local governmental plans and issuers offering 
coverage in the individual market will incur a total hour burden of 
570,804 hours in 2011, 998,807 hours in 2012, and 1.22 million hours in 
2013 to comply with equivalent costs of $28.2 million in 2011, $57.4 
million in 2012, and $70.5 million in 2013. The total cost burden for 
those plans that use service providers, including the cost of mailing 
all responses is estimated to be $20.7 million in 2011, $37.9 million 
in 2012, and $51.7 million in 2013.
    The hour and cost burden is summarized below:
    Type of Review: Revised collection.
    Agency: Department of Health and Human Services.
    Title: Affordable Care Act Internal Claims and Appeals and External 
Review Disclosures
    OMB Number: 0938-1099.
    Affected Public: Business; State, Local, or Tribal Governments.
    Respondents: 46,773 (three-year average).
    Responses: 218,650,000 (three-year average).
    Frequency of Response: Occasionally.
    Estimated Total Annual Burden Hours: 929,870 hours (three-year 
average).
    Estimated Total Annual Burden Cost: $36,600,000 (three-year 
average).
    We have requested emergency OMB review and approval of the 
aforementioned information collection requirements by July 1, 2011. To 
obtain copies of the supporting statement and any related forms for the 
proposed paperwork collections referenced above, access CMS' Web site 
at http://www.cms.gov/PaperworkReductionActof1995/PRAL/list.asp#TopOfPage or e-mail your request, including your address, 
phone number, OMB number, and CMS document identifier, to 
[email protected], or call the Reports Clearance Office at 410-786-
1326.
    If you comment on any of these information collection requirements, 
please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer, CMS-9993-IFC2
    Fax: (202) 395-6974; or
    E-mail: [email protected]

F. Congressional Review Act

    These amendments to the interim final regulations are subject to 
the Congressional Review Act provisions of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and 
have been transmitted to Congress and the Comptroller General for 
review.

G. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires 
agencies to prepare several analytic statements before proposing any 
rules that may result in annual expenditures of $100 million (as 
adjusted for inflation) by State, local and tribal governments or the 
private sector. These amendments to the interim final regulations are 
not subject to the Unfunded Mandates Reform Act because they are being 
issued as interim final regulations. However, consistent with the 
policy embodied in the Unfunded Mandates Reform Act, the regulation has 
been designed to be the least burdensome alternative for State, local 
and tribal governments, and the private sector, while achieving the 
objectives of the Affordable Care Act.

H. Federalism Statement--Department of Labor and Department of Health 
and Human Services

    Executive Order 13132 outlines fundamental principles of 
federalism, and requires the adherence to specific criteria by Federal 
agencies in the process of their formulation and implementation of 
policies that have ``substantial direct effects'' on the States, the 
relationship between the national government and States, or on the 
distribution of power and responsibilities among the various levels of 
government. Federal agencies promulgating regulations that have 
federalism implications must consult with State and local officials, 
and describe the extent of their consultation and the nature of the 
concerns of State and local officials in the preamble to the 
regulation.
    In the Departments' view, these amendments to the interim final 
regulations have federalism implications, because they have direct 
effects on the States, the relationship between the national government 
and States, or on the distribution of power and responsibilities among 
various levels of government. However, in the Departments' view, the 
federalism implications of these interim final regulations are 
substantially mitigated because, with respect to health insurance 
issuers, the Departments expect that the majority of States will enact 
laws or take other appropriate action to implement an internal and 
external appeals process that will meet or exceed federal standards.
    In general, through section 514, ERISA supersedes State laws to the 
extent that they relate to any covered employee benefit plan, and 
preserves State laws that regulate insurance, banking, or securities. 
While ERISA prohibits States from regulating a plan as an insurance or 
investment company or bank, the preemption provisions of section 731 of 
ERISA and section 2724 of the PHS Act (implemented in 29 CFR 
2590.731(a) and 45 CFR 146.143(a)) apply so that the HIPAA requirements 
(including those of the Affordable Care Act) are not to be ``construed 
to supersede any provision of State law which establishes, implements, 
or continues in effect any standard or requirement solely relating to 
health insurance issuers in connection with group health insurance 
coverage except to the extent that such standard or requirement 
prevents the application of a requirement'' of a Federal standard. The 
conference report accompanying HIPAA indicates that this is intended to 
be the ``narrowest'' preemption of State laws. (See House Conf. Rep. 
No. 104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 
2018.) States may continue to apply State law requirements except to 
the extent that such requirements prevent the application of the 
Affordable Care Act

[[Page 37228]]

requirements that are the subject of this rulemaking. State insurance 
laws that are more stringent than the Federal requirements are unlikely 
to ``prevent the application of'' the Affordable Care Act, and be 
preempted. Accordingly, States have significant latitude to impose 
requirements on health insurance issuers that are more restrictive than 
the Federal law. Furthermore, the Departments have opined that, in the 
instance of a group health plan providing coverage through group health 
insurance, the issuer will be required to follow the external review 
procedures established in State law (assuming the State external review 
procedure meets the minimum standards set out in these interim final 
rules).
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have federalism 
implications or limit the policy making discretion of the States, the 
Departments have engaged in efforts to consult with and work 
cooperatively with affected State and local officials, including 
attending conferences of the National Association of Insurance 
Commissioners (NAIC), meeting with NAIC staff counsel on issues arising 
from the interim final regulations and consulting with State insurance 
officials on an individual basis. It is expected that the Departments 
will act in a similar fashion in enforcing the Affordable Care Act 
requirements, including the provisions of section 2719 of the PHS Act. 
Throughout the process of developing these amendments to the interim 
final regulations, to the extent feasible within the specific 
preemption provisions of HIPAA as it applies to the Affordable Care 
Act, the Departments have attempted to balance the States' interests in 
regulating health insurance issuers, and Congress' intent to provide 
uniform minimum protections to consumers in every State. By doing so, 
it is the Departments' view that they have complied with the 
requirements of Executive Order 13132.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to these regulations, the 
Departments certify that the Employee Benefits Security Administration 
and the Centers for Medicare and Medicaid Services have complied with 
the requirements of Executive Order 13132 for the attached amendment to 
the interim final regulations in a meaningful and timely manner.

V. Statutory Authority

    The Department of the Treasury temporary regulations are adopted 
pursuant to the authority contained in sections 7805 and 9833 of the 
Code.
    The Department of Labor interim final regulations are adopted 
pursuant to the authority contained in 29 U.S.C. 1027, 1059, 1135, 
1161-1168, 1169, 1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 
1191b, and 1191c; sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 
401(b), Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 
512(d), Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), 
Pub. L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 
Stat. 1029; Secretary of Labor's Order 6-2009, 74 FR 21524 (May 7, 
2009).
    The Department of Health and Human Services interim final 
regulations are adopted pursuant to the authority contained in sections 
2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg 
through 300gg-63, 300gg-91, and 300gg-92), as amended.

List of Subjects

26 CFR Part 54

    Excise taxes, Health care, Health insurance, Pensions, Reporting 
and recordkeeping requirements.

29 CFR Part 2590

    Continuation coverage, Disclosure, Employee benefit plans, Group 
health plans, Health care, Health insurance, Medical child support, 
Reporting and recordkeeping requirements.

45 CFR Part 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements, and State regulation of health insurance.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement, Internal Revenue 
Service.

    Approved: June 21, 2011.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury (Tax Policy).

    Signed this 20th day of June 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.

CMS-9993-IFC2

    Approved: June 16, 2011.
Donald Berwick,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: June 17, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

Department of the Treasury

Internal Revenue Service

26 CFR Chapter I

    Accordingly, 26 CFR part 54 is amended as follows:

PART 54--PENSION EXCISE TAXES

0
Paragraph 1. The general authority citation for part 54 continues to 
read as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 54.9815-2719T is amended by:
0
1. Revising paragraphs (b)(2)(ii)(B), (b)(2)(ii)(E)(1), (b)(2)(ii)(F), 
(c)(2)(xi), (c)(3), (d)(1), (d)(2)(iv) and (e).
0
2. Redesignating (b)(2)(ii)(E)(2), (b)(2)(ii)(E)(3), and 
(b)(2)(ii)(E)(4) as (b)(2)(ii)(E)(3), (b)(2)(ii)(E)(4), and 
(b)(2)(ii)(E)(5), respectively.
0
3. Adding new paragraph (b)(2)(ii)(E)(2).
    The revisions and addition read as follows:


Sec.  54.9815-2719T  Internal claims and appeals and external review 
processes (temporary).

* * * * *
    (b) * * *
    (2) * * *
    (ii) * * *
    (B) Expedited notification of benefit determinations involving 
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which 
generally provide, among other things, in the case of urgent care 
claims for notification of the plan's benefit determination (whether 
adverse or not) as soon as possible, taking into account the medical 
exigencies, but not later than 72 hours after receipt of the claim) 
continue to apply to the plan and issuer. For purposes of this 
paragraph (b)(2)(ii)(B), a claim involving urgent care has the meaning 
given in 29 CFR 2560.503-1(m)(1), as determined by the attending 
provider, and the plan or issuer shall defer to such determination of 
the attending provider.
* * * * *
    (E) * * *
    (1) The plan and issuer must ensure that any notice of adverse 
benefit determination or final internal adverse benefit determination 
includes information sufficient to identify the

[[Page 37229]]

claim involved (including the date of service, the health care 
provider, the claim amount (if applicable), and a statement describing 
the availability, upon request, of the diagnosis code and its 
corresponding meaning, and the treatment code and its corresponding 
meaning).
    (2) The plan and issuer must provide to participants and 
beneficiaries, as soon as practicable, upon request, the diagnosis code 
and its corresponding meaning, and the treatment code and its 
corresponding meaning, associated with any adverse benefit 
determination or final internal adverse benefit determination. The plan 
or issuer must not consider a request for such diagnosis and treatment 
information, in itself, to be a request for an internal appeal under 
this paragraph (b) or an external review under paragraphs (c) and (d) 
of this section.
* * * * *
    (F) Deemed exhaustion of internal claims and appeals processes--(1) 
In the case of a plan or issuer that fails to adhere to all the 
requirements of this paragraph (b)(2) with respect to a claim, the 
claimant is deemed to have exhausted the internal claims and appeals 
process of this paragraph (b), except as provided in paragraph 
(b)(2)(ii)(F)(2) of this section. Accordingly, the claimant may 
initiate an external review under paragraph (c) or (d) of this section, 
as applicable. The claimant is also entitled to pursue any available 
remedies under section 502(a) of ERISA or under State law, as 
applicable, on the basis that the plan or issuer has failed to provide 
a reasonable internal claims and appeals process that would yield a 
decision on the merits of the claim. If a claimant chooses to pursue 
remedies under section 502(a) of ERISA under such circumstances, the 
claim or appeal is deemed denied on review without the exercise of 
discretion by an appropriate fiduciary.
    (2) Notwithstanding paragraph (b)(2)(ii)(F)(1) of this section, the 
internal claims and appeals process of this paragraph (b) will not be 
deemed exhausted based on de minimis violations that do not cause, and 
are not likely to cause, prejudice or harm to the claimant so long as 
the plan or issuer demonstrates that the violation was for good cause 
or due to matters beyond the control of the plan or issuer and that the 
violation occurred in the context of an ongoing, good faith exchange of 
information between the plan and the claimant. This exception is not 
available if the violation is part of a pattern or practice of 
violations by the plan or issuer. The claimant may request a written 
explanation of the violation from the plan or issuer, and the plan or 
issuer must provide such explanation within 10 days, including a 
specific description of its bases, if any, for asserting that the 
violation should not cause the internal claims and appeals process of 
this paragraph (b) to be deemed exhausted. If an external reviewer or a 
court rejects the claimant's request for immediate review under 
paragraph (b)(2)(ii)(F)(1) of this section on the basis that the plan 
met the standards for the exception under this paragraph 
(b)(2)(ii)(F)(2), the claimant has the right to resubmit and pursue the 
internal appeal of the claim. In such a case, within a reasonable time 
after the external reviewer or court rejects the claim for immediate 
review (not to exceed 10 days), the plan shall provide the claimant 
with notice of the opportunity to resubmit and pursue the internal 
appeal of the claim. Time periods for re-filing the claim shall begin 
to run upon claimant's receipt of such notice.
* * * * *
    (c) * * *
    (2) * * *
    (xi) The State process must provide that the decision is binding on 
the plan or issuer, as well as the claimant, except to the extent other 
remedies are available under State or Federal law, and except that the 
requirement that the decision be binding shall not preclude the plan or 
issuer from making payment on the claim or otherwise providing benefits 
at any time, including after a final external review decision that 
denies the claim or otherwise fails to require such payment or 
benefits. For this purpose, the plan or issuer must provide benefits 
(including by making payment on the claim) pursuant to the final 
external review decision without delay, regardless of whether the plan 
or issuer intends to seek judicial review of the external review 
decision and unless or until there is a judicial decision otherwise.
* * * * *
    (3) Transition period for external review processes. (i) Through 
December 31, 2011, an applicable State external review process 
applicable to a health insurance issuer or group health plan is 
considered to meet the requirements of PHS Act section 2719(b). 
Accordingly, through December 31, 2011, an applicable State external 
review process will be considered binding on the issuer or plan (in 
lieu of the requirements of the Federal external review process). If 
there is no applicable State external review process, the issuer or 
plan is required to comply with the requirements of the Federal 
external review process in paragraph (d) of this section.
    (ii) For final internal adverse benefit determinations (or, in the 
case of simultaneous internal appeal and external review, adverse 
benefit determinations) provided on or after January 1, 2012, the 
Federal external review process will apply unless the Department of 
Health and Human Services determines that a State law meets all the 
minimum standards of paragraph (c)(2) of this section.
    (d) * * *
    (1) Scope--(i) In general. Subject to the suspension provision in 
paragraph (d)(1)(ii) of this section and except to the extent provided 
otherwise by the Secretary in guidance, the Federal external review 
process established pursuant to this paragraph (d) applies to any 
adverse benefit determination or final internal adverse benefit 
determination (as defined in paragraphs (a)(2)(i) and (a)(2)(v) of this 
section), except that a denial, reduction, termination, or a failure to 
provide payment for a benefit based on a determination that a 
participant or beneficiary fails to meet the requirements for 
eligibility under the terms of a group health plan is not eligible for 
the Federal external review process under this paragraph (d).
    (ii) Suspension of general rule. Unless or until this suspension is 
revoked in guidance by the Secretary, with respect to claims for which 
external review has not been initiated before September 20, 2011, the 
Federal external review process established pursuant to this paragraph 
(d) applies only to:
    (A) An adverse benefit determination (including a final internal 
adverse benefit determination) by a plan or issuer that involves 
medical judgment (including, but not limited to, those based on the 
plan's or issuer's requirements for 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), as determined by the external reviewer; and
    (B) A rescission of coverage (whether or not the rescission has any 
effect on any particular benefit at that time).
    (iii) Examples. The rules of paragraph (d)(1)(ii) of this section 
are illustrated by the following examples:

    Example 1. (i) Facts. A group health plan provides coverage for 
30 physical therapy visits generally. After the 30th visit, coverage 
is provided only if the service is preauthorized pursuant to an 
approved treatment plan that takes into account medical necessity 
using the plan's definition

[[Page 37230]]

of the term. Individual A seeks coverage for a 31st physical therapy 
visit. A's health care provider submits a treatment plan for 
approval, but it is not approved by the plan, so coverage for the 
31st visit is not preauthorized. With respect to the 31st visit, A 
receives a notice of final internal adverse benefit determination 
stating that the maximum visit limit is exceeded.
    (ii) Conclusion. In this Example 1, the plan's denial of 
benefits is based on medical necessity and involves medical 
judgment. Accordingly, the claim is eligible for external review 
during the suspension period under paragraph (d)(1)(ii) of this 
section. Moreover, the plan's notification of final internal adverse 
benefit determination is inadequate under paragraphs (b)(2)(i) and 
(b)(2)(ii)(E)(3) of this section because it fails to make clear that 
the plan will pay for more than 30 visits if the service is 
preauthorized pursuant to an approved treatment plan that takes into 
account medical necessity using the plan's definition of the term. 
Accordingly, the notice of final internal adverse benefit 
determination should refer to the plan provision governing the 31st 
visit and should describe the plan's standard for medical necessity, 
as well as how the treatment fails to meet the plan's standard.

    Example 2.  (i) Facts. A group health plan does not provide 
coverage for services provided out of network, unless the service 
cannot effectively be provided in network. Individual B seeks 
coverage for a specialized medical procedure from an out-of-network 
provider because B believes that the procedure cannot be effectively 
provided in network. B receives a notice of final internal adverse 
benefit determination stating that the claim is denied because the 
provider is out-of-network.
    (ii) Conclusion. In this Example 2, the plan's denial of 
benefits is based on whether a service can effectively be provided 
in network and, therefore, involves medical judgment. Accordingly, 
the claim is eligible for external review during the suspension 
period under paragraph (d)(1)(ii) of this section. Moreover, the 
plan's notice of final internal adverse benefit determination is 
inadequate under paragraphs (b)(2)(i) and (b)(2)(ii)(E)(3) of this 
section because the plan does provide benefits for services on an 
out-of-network basis if the services cannot effectively be provided 
in network. Accordingly, the notice of final internal adverse 
benefit determination is required to refer to the exception to the 
out-of-network exclusion and should describe the plan's standards 
for determining effectiveness of services, as well as how services 
available to the claimant within the plan's network meet the plan's 
standard for effectiveness of services.
* * * * *
    (2) * * *
    (iv) These standards will provide that an external review decision 
is binding on the plan or issuer, as well as the claimant, except to 
the extent other remedies are available under State or Federal law, and 
except that the requirement that the decision be binding shall not 
preclude the plan or issuer from making payment on the claim or 
otherwise providing benefits at any time, including after a final 
external review decision that denies the claim or otherwise fails to 
require such payment or benefits. For this purpose, the plan or issuer 
must provide any benefits (including by making payment on the claim) 
pursuant to the final external review decision without delay, 
regardless of whether the plan or issuer intends to seek judicial 
review of the external review decision and unless or until there is a 
judicial decision otherwise.
* * * * *
    (e) Form and manner of notice--(1) In general. For purposes of this 
section, a group health plan and a health insurance issuer offering 
group health insurance coverage are considered to provide relevant 
notices in a culturally and linguistically appropriate manner if the 
plan or issuer meets all the requirements of paragraph (e)(2) of this 
section with respect to the applicable non-English languages described 
in paragraph (e)(3) of this section.
    (2) Requirements--(i) The plan or issuer must provide oral language 
services (such as a telephone customer assistance hotline) that include 
answering questions in any applicable non-English language and 
providing assistance with filing claims and appeals (including external 
review) in any applicable non-English language;
    (ii) The plan or issuer must provide, upon request, a notice in any 
applicable non-English language; and
    (iii) The plan or issuer must include in the English versions of 
all notices, a statement prominently displayed in any applicable non-
English language clearly indicating how to access the language services 
provided by the plan or issuer.
    (3) Applicable non-English language. With respect to an address in 
any United States county to which a notice is sent, a non-English 
language is an applicable non-English language if ten percent or more 
of the population residing in the county is literate only in the same 
non-English language, as determined in guidance published by the 
Secretary.
* * * * *

Department of Labor

Employee Benefits Security Administration

29 CFR Chapter XXV

    29 CFR part 2590 is amended as follows:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
1. The authority citation for part 2590 continues to read as follows:

    Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c; 
sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b), Pub. L. 
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. 
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029; 
Secretary of Labor's Order 6-2009, 74 FR 21524 (May 7, 2009).


0
2. Section 2590.715-2719 is amended by:
0
1. Revising paragraphs (b)(2)(ii)(B), (b)(2)(ii)(E)(1), (b)(2)(ii)(F), 
(c)(2)(xi), (c)(3), (d)(1), (d)(2)(iv), and (e).
0
2. Redesignating (b)(2)(ii)(E)(2), (b)(2)(ii)(E)(3), and 
(b)(2)(ii)(E)(4) as (b)(2)(ii)(E)(3), (b)(2)(ii)(E)(4), and 
(b)(2)(ii)(E)(5), respectively.
0
3. Adding new paragraph (b)(2)(ii)(E)(2).
    The revisions and addition read as follows:


Sec.  2590.715-2719  Internal claims and appeals and external review 
processes.

* * * * *
    (b) * * *
    (2) * * *
    (ii) * * *
    (B) Expedited notification of benefit determinations involving 
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which 
generally provide, among other things, in the case of urgent care 
claims for notification of the plan's benefit determination (whether 
adverse or not) as soon as possible, taking into account the medical 
exigencies, but not later than 72 hours after receipt of the claim) 
continue to apply to the plan and issuer. For purposes of this 
paragraph (b)(2)(ii)(B), a claim involving urgent care has the meaning 
given in 29 CFR 2560.503-1(m)(1), as determined by the attending 
provider, and the plan or issuer shall defer to such determination of 
the attending provider.
* * * * *
    (E) * * *
    (1) The plan and issuer must ensure that any notice of adverse 
benefit determination or final internal adverse benefit determination 
includes information sufficient to identify the claim involved 
(including the date of service, the health care provider, the claim 
amount (if applicable), and a statement describing the availability, 
upon request, of the diagnosis code and its corresponding meaning, and 
the treatment code and its corresponding meaning).

[[Page 37231]]

    (2) The plan and issuer must provide to participants and 
beneficiaries, as soon as practicable, upon request, the diagnosis code 
and its corresponding meaning, and the treatment code and its 
corresponding meaning, associated with any adverse benefit 
determination or final internal adverse benefit determination. The plan 
or issuer must not consider a request for such diagnosis and treatment 
information, in itself, to be a request for an internal appeal under 
this paragraph (b) or an external review under paragraphs (c) and (d) 
of this section.
* * * * *
    (F) Deemed exhaustion of internal claims and appeals processes--(1) 
In the case of a plan or issuer that fails to adhere to all the 
requirements of this paragraph (b)(2) with respect to a claim, the 
claimant is deemed to have exhausted the internal claims and appeals 
process of this paragraph (b), except as provided in paragraph 
(b)(2)(ii)(F)(2) of this section. Accordingly, the claimant may 
initiate an external review under paragraph (c) or (d) of this section, 
as applicable. The claimant is also entitled to pursue any available 
remedies under section 502(a) of ERISA or under State law, as 
applicable, on the basis that the plan or issuer has failed to provide 
a reasonable internal claims and appeals process that would yield a 
decision on the merits of the claim. If a claimant chooses to pursue 
remedies under section 502(a) of ERISA under such circumstances, the 
claim or appeal is deemed denied on review without the exercise of 
discretion by an appropriate fiduciary.
    (2) Notwithstanding paragraph (b)(2)(ii)(F)(1) of this section, the 
internal claims and appeals process of this paragraph (b) will not be 
deemed exhausted based on de minimis violations that do not cause, and 
are not likely to cause, prejudice or harm to the claimant so long as 
the plan or issuer demonstrates that the violation was for good cause 
or due to matters beyond the control of the plan or issuer and that the 
violation occurred in the context of an ongoing, good faith exchange of 
information between the plan and the claimant. This exception is not 
available if the violation is part of a pattern or practice of 
violations by the plan or issuer. The claimant may request a written 
explanation of the violation from the plan or issuer, and the plan or 
issuer must provide such explanation within 10 days, including a 
specific description of its bases, if any, for asserting that the 
violation should not cause the internal claims and appeals process of 
this paragraph (b) to be deemed exhausted. If an external reviewer or a 
court rejects the claimant's request for immediate review under 
paragraph (b)(2)(ii)(F)(1) of this section on the basis that the plan 
met the standards for the exception under this paragraph 
(b)(2)(ii)(F)(2), the claimant has the right to resubmit and pursue the 
internal appeal of the claim. In such a case, within a reasonable time 
after the external reviewer or court rejects the claim for immediate 
review (not to exceed 10 days), the plan shall provide the claimant 
with notice of the opportunity to resubmit and pursue the internal 
appeal of the claim. Time periods for re-filing the claim shall begin 
to run upon claimant's receipt of such notice.
* * * * *
    (c) * * *
    (2) * * *
    (xi) The State process must provide that the decision is binding on 
the plan or issuer, as well as the claimant, except to the extent other 
remedies are available under State or Federal law, and except that the 
requirement that the decision be binding shall not preclude the plan or 
issuer from making payment on the claim or otherwise providing benefits 
at any time, including after a final external review decision that 
denies the claim or otherwise fails to require such payment or 
benefits. For this purpose, the plan or issuer must provide benefits 
(including by making payment on the claim) pursuant to the final 
external review decision without delay, regardless of whether the plan 
or issuer intends to seek judicial review of the external review 
decision and unless or until there is a judicial decision otherwise.
* * * * *
    (3) Transition period for external review processes. (i) Through 
December 31, 2011, an applicable State external review process 
applicable to a health insurance issuer or group health plan is 
considered to meet the requirements of PHS Act section 2719(b). 
Accordingly, through December 31, 2011, an applicable State external 
review process will be considered binding on the issuer or plan (in 
lieu of the requirements of the Federal external review process). If 
there is no applicable State external review process, the issuer or 
plan is required to comply with the requirements of the Federal 
external review process in paragraph (d) of this section.
    (ii) For final internal adverse benefit determinations (or, in the 
case of simultaneous internal appeal and external review, adverse 
benefit determinations) provided on or after January 1, 2012, the 
Federal external review process will apply unless the Department of 
Health and Human Services determines that a State law meets all the 
minimum standards of paragraph (c)(2) of this section.
    (d) * * *
    (1) Scope--(i) In general. Subject to the suspension provision in 
paragraph (d)(1)(ii) of this section and except to the extent provided 
otherwise by the Secretary in guidance, the Federal external review 
process established pursuant to this paragraph (d) applies to any 
adverse benefit determination or final internal adverse benefit 
determination (as defined in paragraphs (a)(2)(i) and (a)(2)(v) of this 
section), except that a denial, reduction, termination, or a failure to 
provide payment for a benefit based on a determination that a 
participant or beneficiary fails to meet the requirements for 
eligibility under the terms of a group health plan is not eligible for 
the Federal external review process under this paragraph (d).
    (ii) Suspension of general rule. Unless or until this suspension is 
revoked in guidance by the Secretary, with respect to claims for which 
external review has not been initiated before the effective date of 
this paragraph (d)(1) (September 20, 2011), the Federal external review 
process established pursuant to this paragraph (d) applies only to:
    (A) An adverse benefit determination (including a final internal 
adverse benefit determination) by a plan or issuer that involves 
medical judgment (including, but not limited to, those based on the 
plan's or issuer's requirements for 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), as determined by the external reviewer; and
    (B) A rescission of coverage (whether or not the rescission has any 
effect on any particular benefit at that time).
    (iii) Examples. This rules of paragraph (d)(1)(ii) of this section 
are illustrated by the following examples:
    Example 1.  (i) Facts. A group health plan provides coverage for 
30 physical therapy visits generally. After the 30th visit, coverage 
is provided only if the service is preauthorized pursuant to an 
approved treatment plan that takes into account medical necessity 
using the plan's definition of the term. Individual A seeks coverage 
for a 31st physical therapy visit. A's health care provider submits 
a treatment plan for approval, but it is not approved by the plan, 
so coverage for the 31st visit is not preauthorized. With respect to 
the 31st visit, A receives a notice of final internal adverse 
benefit determination stating that the maximum visit limit is 
exceeded.

[[Page 37232]]

    (ii) Conclusion. In this Example 1, the plan's denial of 
benefits is based on medical necessity and involves medical 
judgment. Accordingly, the claim is eligible for external review 
during the suspension period under paragraph (d)(1)(ii) of this 
section. Moreover, the plan's notification of final internal adverse 
benefit determination is inadequate under paragraphs (b)(2)(i) and 
(b)(2)(ii)(E)(3) of this section because it fails to make clear that 
the plan will pay for more than 30 visits if the service is 
preauthorized pursuant to an approved treatment plan that takes into 
account medical necessity using the plan's definition of the term. 
Accordingly, the notice of final internal adverse benefit 
determination should refer to the plan provision governing the 31st 
visit and should describe the plan's standard for medical necessity, 
as well as how the treatment fails to meet the plan's standard.

    Example 2.  (i) Facts. A group health plan does not provide 
coverage for services provided out of network, unless the service 
cannot effectively be provided in network. Individual B seeks 
coverage for a specialized medical procedure from an out-of-network 
provider because B believes that the procedure cannot be effectively 
provided in network. B receives a notice of final internal adverse 
benefit determination stating that the claim is denied because the 
provider is out-of-network.
    (ii) Conclusion. In this Example 2, the plan's denial of 
benefits is based on whether a service can effectively be provided 
in network and, therefore, involves medical judgment. Accordingly, 
the claim is eligible for external review during the suspension 
period under paragraph (d)(1)(ii) of this section. Moreover, the 
plan's notice of final internal adverse benefit determination is 
inadequate under paragraphs (b)(2)(i) and (b)(2)(ii)(E)(3) of this 
section because the plan does provide benefits for services on an 
out-of-network basis if the services cannot effectively be provided 
in network. Accordingly, the notice of final internal adverse 
benefit determination is required to refer to the exception to the 
out-of-network exclusion and should describe the plan's standards 
for determining effectiveness of services, as well as how services 
available to the claimant within the plan's network meet the plan's 
standard for effectiveness of services.
* * * * *
    (2) * * *
    (iv) These standards will provide that an external review decision 
is binding on the plan or issuer, as well as the claimant, except to 
the extent other remedies are available under State or Federal law, and 
except that the requirement that the decision be binding shall not 
preclude the plan or issuer from making payment on the claim or 
otherwise providing benefits at any time, including after a final 
external review decision that denies the claim or otherwise fails to 
require such payment or benefits. For this purpose, the plan or issuer 
must provide any benefits (including by making payment on the claim) 
pursuant to the final external review decision without delay, 
regardless of whether the plan or issuer intends to seek judicial 
review of the external review decision and unless or until there is a 
judicial decision otherwise.
* * * * *
    (e) Form and manner of notice--(1) In general. For purposes of this 
section, a group health plan and a health insurance issuer offering 
group health insurance coverage are considered to provide relevant 
notices in a culturally and linguistically appropriate manner if the 
plan or issuer meets all the requirements of paragraph (e)(2) of this 
section with respect to the applicable non-English languages described 
in paragraph (e)(3) of this section.
    (2) Requirements--(i) The plan or issuer must provide oral language 
services (such as a telephone customer assistance hotline) that include 
answering questions in any applicable non-English language and 
providing assistance with filing claims and appeals (including external 
review) in any applicable non-English language;
    (ii) The plan or issuer must provide, upon request, a notice in any 
applicable non-English language; and
    (iii) The plan or issuer must include in the English versions of 
all notices, a statement prominently displayed in any applicable non-
English language clearly indicating how to access the language services 
provided by the plan or issuer.
    (3) Applicable non-English language. With respect to an address in 
any United States county to which a notice is sent, a non-English 
language is an applicable non-English language if ten percent or more 
of the population residing in the county is literate only in the same 
non-English language, as determined in guidance published by the 
Secretary.
* * * * *

Department of Health and Human Services

45 CFR Subtitle A

    For the reasons stated in the preamble, the Department of Health 
and Human Services amends 45 CFR part 147 as follows:

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
1. The authority citation for part 147 continues to read as follows:

    Authority:  Sections 2701 through 2763, 2791, and 2792 of the 
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.


0
2. Section 147.136 is amended by:
0
1. Revising paragraphs (b)(2)(ii)(B), (b)(2)(ii)(E)(1), (b)(2)(ii)(F), 
(c)(2)(xi), (c)(3), (d)(1), (d)(2)(iv), and (e).
0
2. Redesignating (b)(2)(ii)(E)(2), (b)(2)(ii)(E)(3), and 
(b)(2)(ii)(E)(4) as (b)(2)(ii)(E)(3), (b)(2)(ii)(E)(4), and 
(b)(2)(ii)(E)(5), respectively.
0
3. Adding new paragraph (b)(2)(ii)(E)(2).
    The revisions and addition read as follows:


Sec.  147.136  Internal claims and appeals and external review 
processes.

* * * * *
    (b) * * *
    (2) * * *
    (ii) * * *
    (B) Expedited notification of benefit determinations involving 
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which 
generally provide, among other things, in the case of urgent care 
claims for notification of the plan's benefit determination (whether 
adverse or not) as soon as possible, taking into account the medical 
exigencies, but not later than 72 hours after receipt of the claim) 
continue to apply to the plan and issuer. For purposes of this 
paragraph (b)(2)(ii)(B), a claim involving urgent care has the meaning 
given in 29 CFR 2560.503-1(m)(1), as determined by the attending 
provider, and the plan or issuer shall defer to such determination of 
the attending provider.
* * * * *
    (E) * * *
    (1) The plan and issuer must ensure that any notice of adverse 
benefit determination or final internal adverse benefit determination 
includes information sufficient to identify the claim involved 
(including the date of service, the health care provider, the claim 
amount (if applicable), and a statement describing the availability, 
upon request, of the diagnosis code and its corresponding meaning, and 
the treatment code and its corresponding meaning).
    (2) The plan and issuer must provide to participants and 
beneficiaries, as soon as practicable, upon request, the diagnosis code 
and its corresponding meaning, and the treatment code and its 
corresponding meaning, associated with any adverse benefit 
determination or final internal adverse benefit determination. The plan 
or issuer must not consider a request for such diagnosis and treatment 
information, in itself, to be a request for an internal appeal under 
this paragraph (b) or an external review under paragraphs (c) and (d) 
of this section.
* * * * *

[[Page 37233]]

    (F) Deemed exhaustion of internal claims and appeals processes--(1) 
In the case of a plan or issuer that fails to adhere to all the 
requirements of this paragraph (b)(2) with respect to a claim, the 
claimant is deemed to have exhausted the internal claims and appeals 
process of this paragraph (b), except as provided in paragraph 
(b)(2)(ii)(F)(2) of this section. Accordingly, the claimant may 
initiate an external review under paragraph (c) or (d) of this section, 
as applicable. The claimant is also entitled to pursue any available 
remedies under section 502(a) of ERISA or under State law, as 
applicable, on the basis that the plan or issuer has failed to provide 
a reasonable internal claims and appeals process that would yield a 
decision on the merits of the claim. If a claimant chooses to pursue 
remedies under section 502(a) of ERISA under such circumstances, the 
claim or appeal is deemed denied on review without the exercise of 
discretion by an appropriate fiduciary.
    (2) Notwithstanding paragraph (b)(2)(ii)(F)(1) of this section, the 
internal claims and appeals process of this paragraph (b) will not be 
deemed exhausted based on de minimis violations that do not cause, and 
are not likely to cause, prejudice or harm to the claimant so long as 
the plan or issuer demonstrates that the violation was for good cause 
or due to matters beyond the control of the plan or issuer and that the 
violation occurred in the context of an ongoing, good faith exchange of 
information between the plan and the claimant. This exception is not 
available if the violation is part of a pattern or practice of 
violations by the plan or issuer. The claimant may request a written 
explanation of the violation from the plan or issuer, and the plan or 
issuer must provide such explanation within 10 days, including a 
specific description of its bases, if any, for asserting that the 
violation should not cause the internal claims and appeals process of 
this paragraph (b) to be deemed exhausted. If an external reviewer or a 
court rejects the claimant's request for immediate review under 
paragraph (b)(2)(ii)(F)(1) of this section on the basis that the plan 
met the standards for the exception under this paragraph 
(b)(2)(ii)(F)(2), the claimant has the right to resubmit and pursue the 
internal appeal of the claim. In such a case, within a reasonable time 
after the external reviewer or court rejects the claim for immediate 
review (not to exceed 10 days), the plan shall provide the claimant 
with notice of the opportunity to resubmit and pursue the internal 
appeal of the claim. Time periods for re-filing the claim shall begin 
to run upon claimant's receipt of such notice.
* * * * *
    (c) * * *
    (2) * * *
    (xi) The State process must provide that the decision is binding on 
the plan or issuer, as well as the claimant, except to the extent other 
remedies are available under State or Federal law, and except that the 
requirement that the decision be binding shall not preclude the plan or 
issuer from making payment on the claim or otherwise providing benefits 
at any time, including after a final external review decision that 
denies the claim or otherwise fails to require such payment or 
benefits. For this purpose, the plan or issuer must provide benefits 
(including by making payment on the claim) pursuant to the final 
external review decision without delay, regardless of whether the plan 
or issuer intends to seek judicial review of the external review 
decision and unless or until there is a judicial decision otherwise.
* * * * *
    (3) Transition period for external review processes. (i) Through 
December 31, 2011, an applicable State external review process 
applicable to a health insurance issuer or group health plan is 
considered to meet the requirements of PHS Act section 2719(b). 
Accordingly, through December 31, 2011, an applicable State external 
review process will be considered binding on the issuer or plan (in 
lieu of the requirements of the Federal external review process). If 
there is no applicable State external review process, the issuer or 
plan is required to comply with the requirements of the Federal 
external review process in paragraph (d) of this section.
    (ii) For final internal adverse benefit determinations (or, in the 
case of simultaneous internal appeal and external review, adverse 
benefit determinations) provided on or after January 1, 2012, the 
Federal external review process will apply unless the Department of 
Health and Human Services determines that a State law meets all the 
minimum standards of paragraph (c)(2) of this section.
    (d) * * *
    (1) Scope--(i) In general. Subject to the suspension provision in 
paragraph (d)(1)(ii) of this section and except to the extent provided 
otherwise by the Secretary in guidance, the Federal external review 
process established pursuant to this paragraph (d) applies to any 
adverse benefit determination or final internal adverse benefit 
determination (as defined in paragraphs (a)(2)(i) and (a)(2)(v) of this 
section), except that a denial, reduction, termination, or a failure to 
provide payment for a benefit based on a determination that a 
participant or beneficiary fails to meet the requirements for 
eligibility under the terms of a group health plan is not eligible for 
the Federal external review process under this paragraph (d).
    (ii) Suspension of general rule. Unless or until this suspension is 
revoked in guidance by the Secretary, with respect to claims for which 
external review has not been initiated before September 20, 2011, the 
Federal external review process established pursuant to this paragraph 
(d) applies only to:
    (A) An adverse benefit determination (including a final internal 
adverse benefit determination) by a plan or issuer that involves 
medical judgment (including, but not limited to, those based on the 
plan's or issuer's requirements for 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), as determined by the external reviewer; and
    (B) A rescission of coverage (whether or not the rescission has any 
effect on any particular benefit at that time).
    (iii) Examples. This rules of paragraph (d)(1)(ii) of this section 
are illustrated by the following examples:

    Example 1.  (i) Facts. A group health plan provides coverage for 
30 physical therapy visits generally. After the 30th visit, coverage 
is provided only if the service is preauthorized pursuant to an 
approved treatment plan that takes into account medical necessity 
using the plan's definition of the term. Individual A seeks coverage 
for a 31st physical therapy visit. A's health care provider submits 
a treatment plan for approval, but it is not approved by the plan, 
so coverage for the 31st visit is not preauthorized. With respect to 
the 31st visit, A receives a notice of final internal adverse 
benefit determination stating that the maximum visit limit is 
exceeded.
    (ii) Conclusion. In this Example 1, the plan's denial of 
benefits is based on medical necessity and involves medical 
judgment. Accordingly, the claim is eligible for external review 
during the suspension period under paragraph (d)(1)(ii) of this 
section. Moreover, the plan's notification of final internal adverse 
benefit determination is inadequate under paragraphs (b)(2)(i) and 
(b)(2)(ii)(E)(3) of this section because it fails to make clear that 
the plan will pay for more than 30 visits if the service is 
preauthorized pursuant to an approved treatment plan that takes into 
account medical necessity using the plan's definition of the term. 
Accordingly, the notice of final internal adverse benefit 
determination should refer to the plan provision governing the 31st 
visit and should

[[Page 37234]]

describe the plan's standard for medical necessity, as well as how 
the treatment fails to meet the plan's standard.

    Example 2. (i) Facts. A group health plan does not provide 
coverage for services provided out of network, unless the service 
cannot effectively be provided in network. Individual B seeks 
coverage for a specialized medical procedure from an out-of-network 
provider because B believes that the procedure cannot be effectively 
provided in network. B receives a notice of final internal adverse 
benefit determination stating that the claim is denied because the 
provider is out-of-network.
    (ii) Conclusion. In this Example 2, the plan's denial of 
benefits is based on whether a service can effectively be provided 
in network and, therefore, involves medical judgment. Accordingly, 
the claim is eligible for external review during the suspension 
period under paragraph (d)(1)(ii) of this section. Moreover, the 
plan's notice of final internal adverse benefit determination is 
inadequate under paragraphs (b)(2)(i) and (b)(2)(ii)(E)(3) of this 
section because the plan does provide benefits for services on an 
out-of-network basis if the services cannot effectively be provided 
in network. Accordingly, the notice of final internal adverse 
benefit determination is required to refer to the exception to the 
out-of-network exclusion and should describe the plan's standards 
for determining effectiveness of services, as well as how services 
available to the claimant within the plan's network meet the plan's 
standard for effectiveness of services.
* * * * *
    (2) * * *
    (iv) These standards will provide that an external review decision 
is binding on the plan or issuer, as well as the claimant, except to 
the extent other remedies are available under State or Federal law, and 
except that the requirement that the decision be binding shall not 
preclude the plan or issuer from making payment on the claim or 
otherwise providing benefits at any time, including after a final 
external review decision that denies the claim or otherwise fails to 
require such payment or benefits. For this purpose, the plan or issuer 
must provide any benefits (including by making payment on the claim) 
pursuant to the final external review decision without delay, 
regardless of whether the plan or issuer intends to seek judicial 
review of the external review decision and unless or until there is a 
judicial decision otherwise.
* * * * *
    (e) Form and manner of notice--(1) In general. For purposes of this 
section, a group health plan and a health insurance issuer offering 
group or individual health insurance coverage are considered to provide 
relevant notices in a culturally and linguistically appropriate manner 
if the plan or issuer meets all the requirements of paragraph (e)(2) of 
this section with respect to the applicable non-English languages 
described in paragraph (e)(3) of this section.
    (2) Requirements--(i) The plan or issuer must provide oral language 
services (such as a telephone customer assistance hotline) that include 
answering questions in any applicable non-English language and 
providing assistance with filing claims and appeals (including external 
review) in any applicable non-English language;
    (ii) The plan or issuer must provide, upon request, a notice in any 
applicable non-English language; and
    (iii) The plan or issuer must include in the English versions of 
all notices, a statement prominently displayed in any applicable non-
English language clearly indicating how to access the language services 
provided by the plan or issuer.
    (3) Applicable non-English language. With respect to an address in 
any United States county to which a notice is sent, a non-English 
language is an applicable non-English language if ten percent or more 
of the population residing in the county is literate only in the same 
non-English language, as determined in guidance published by the 
Secretary.
* * * * *

[FR Doc. 2011-15890 Filed 6-22-11; 4:15 pm]
BILLING CODE 4830-01-P