One of the many jobs in administering a health plan is determining whether a claim should be paid. This requires looking at the plan and determining whether the claim meets the criterium established under the plan. As one would imagine, this may lead to claims being denied. Section 503 of the Employee Retirement Income Security Act of 1974 (“ERISA”) requires the plan to provide any participant or beneficiary whose claim for benefits was denied under the plan adequate written notice of the denial.
What is Adequate Notice?
Under ERISA’s regulations, “adequate notice” a written description of the specific reasons for the denial and reference to the plan provision on which the determination was based. Additionally, if the claim was denied due to missing information and/or materials, the notice must also provide a description of the information and materials needed to perfect the claim and must also explain why the information or materials are necessary. In other words, the notice must give the participant/beneficiary a clear understanding of the plan’s position on the claim.
Finally, the notice must describe any appeal rights (including any time restraints) and address the claimant’s right to bring a civil action under ERISA §502(a). While it is not required by statutes or regulations, some courts have held that claimants have not properly received notice of an internal time limitation unless the notice includes an exact deadline to bring legal action.
What If the Plan is a Group Health Plan?
A group health plan, such as a multiemployer health plan, has additional requirements for what it must include in a denial letter. If the plan denies a claim involving urgent care, the denial letter must include an explanation of the expedited review process for such claims. In addition, if the plan relied on an internal rule, guideline, protocol, or other similar criterion in making it decision to deny the claim, the plan must provide either (a) a copy of the specific internal rule, guideline, protocol, or other similar criterion; or (b) a statement that a copy such internal rule, guideline, protocol, or other similar criterion will be provided free of charge to the claimant upon request.
Similarly, if the plan makes its decision to deny the claim based on a medical necessity or experimental treatment or similar exclusion or limit, the plan must provide either (a) “an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances;” or (b) “a statement that such explanation will be provided free of charge upon request.”
Key Takeaways
The main purpose of a denial letter is twofold: (1) to provide notice of the claim’s status and (2) to put the claimant on notice of his/her rights going forward. Recently, courts have pushed back on plans that issue inadequate notices and have required them to provide the coverage or benefits originally sought. Thus, it’s extremely important that plans review denial letters before they are sent out to plan participants and beneficiaries.