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Prompt Pay Crisis & ERISA Solutions

ERISA Provides Preemptive and "Pre-Prompt Pay" Protections,
 Better Than State Law and Most Powerful Timely Payment Protections

ERISA “Prompt Pay” Time Limits

 © 2003 - 2004  Jin Zhou, ERISAclaim.com

Prompt Pay Crisis in U.S. Healthcare Delivery System Demands ERISA Practical Solutions

ERISA Provides Preemptive and "Pre-Prompt Pay" Protections,
 Better Than State Law and Most Powerful Timely Payment Protections

 © 2003 Jin Zhou, ERISAclaim.com

       Prompt payment crisis in health-care reimbursement has been identified as and remained to be the No. 2 problem by AMA through nationwide medical Association surveys even after 47 states having enacted "Prompt Pay" laws and regulations, some very aggressive state enforcements with multimillion dollar penalties against late pay insurers and managed-care organizations, 950,000 physicians nationwide class-action lawsuits in federal courts, abortion of unprecedented seven-year Patient's Bill Of Rights legislation campaign in Congress, and managed-care contracting reengineering between health-care providers and managed-care organization (MCO) as well as class-action settlement with Aetna and CIGNA in federal court.

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Managed-Care Prompt Pay Crisis? What Does an Unanimous US Supreme Court Say?

On June 21, 2004, an unanimous US Supreme Court ruled that claim processing (Prompt Pay, timely benefits determination)  and denials of benefits under the employer-sponsored health plans, ERISA-regulated benefit plans, for both self-insured and fully-insured (through purchase of insurance) health plans, are completely governed by federal law ERISA, that supersedes and invalidates state laws.

ERISAclaim.com: "employer-sponsored group health plans" = "ERISA-regulated benefit plans", both self-insured and fully-insured (through purchase of insurance) health plans, (ERISA - Title 29, Chapter 18.  Sec. 1002.)

New York State, Insurance Department ISSUED 4/13/2004 FOR IMMEDIATE RELEASE Health Net To Refund $4.99 Million To Policyholders And Re-Evaluate Some Healthcare Claims  (The full report, pdf) Also Paid $500,000 Fine And Instituted Remedial Actions Under Separate Department Action

If NASA Columbia tragedy can find some solutions for preventions and resolutions, why can't health-care crisis with potential of paralyzing nation's economy and security deserve and demand some results oriented and compliant but practical solution?

      The Columbia Accident Report and conclusions identifies the foam debris as the likely cause and concludes NASA management culture is the biggest safety risk, this author, Jin Zhou, identified the ignorance, noncompliance and nonenforcement of ERISA claim regulation is the main cause and American business leaders hands-free leadership on employee benefits management as well as health-care industry and managed-care culture are the biggest health-care crisis, because ERISA governs and regulates up to 80% of health-care claims or 60% of health expenditures in the U. S.. ERISA  preempts state laws and managed-care contract enforcement on employee benefits claim delays and denials.

Contrary to the popular understanding and healthcare expert's assertion that ERISA doesn't provide for prompt pay protections as state law does, (AMA REPORT OF THE BOARD OF TRUSTEES:  ERISA Preemption and State Prompt Pay Laws)  (DOC), ERISA  statutorily prescribes the regulatory appeal process for "prompt pay" violations.

United States Supreme Court unanimously ordered on May 27, 2003 in BLACK & DECKER DISABILITY PLAN v. NORD that DOL FAQ (Benefit Claims Procedure Regulation), available on DOL web site, is the view of the Supreme Court and must be followed:

"It is the Secretary of Labor’s view that ERISA is best served by “preserv[ing] the greatest flexibility possible for . . . operating claims processing systems consistent with the prudent administration of a plan.” Department of Labor, Employee Benefits Security Administration, http://www.dol.gov/ebsa/faqs/faq_claims_proc_reg.html, Question B–4 (as visited May 6, 2003) (available in Clerk of Court’s case file). Deference is due that view." (Bold and underline added) Black & Decker Disability Plan v. Nord , U.S. Supreme Court, Decided 05/27/2003

      ERISA claim regulation compliance and enforcement will largely fix "Prompt Pay" violations and crisis in U.S. healthcare delivery system.

Prompt Pay,  Says Who? 
ERISA Preemption of State Laws for 80% of Health-care Claims 

1. ERISA preemption of state laws for both self-insured and fully insured ERISA claims, § 2560.503-1(k)   

1.  It is well known and understood that State Prompt Pay and clean claim rules do not apply to governmental plans, military plans, Medicare/Medicaid, worker's compensation, and liability/personal injury claims as well as self-funded plans.
2. It is also well settled and understood that State prompt pay and clean claim rules do not apply to self-funded ERISA plans, however it is not well understood whether State prompt pay laws and clean claim rules would apply to fully-insured health plan through purchase of commercial insurance, §2560.503-1(a) and whether an employer-sponsored employee health-care benefits plan through purchase of insurance in private-sector falls under ERISA definition.
3.  It is important, for health-care providers and state insurance regulators as well as ERISA plans, especially fully-insured, and managed-care organizations, to understand that ERISA definition and jurisdiction as well as ERISA "prompt pay" time limit provided through § 2560.503-1, cover not only self-insured plan but also fully-insured (fully-funded) employee health-care plans. 
4. §2560.503-1(a) "(a) Scope and purpose. In accordance with the authority of sections 503 and 505 of the Employee Retirement Income Security Act of 1974 (ERISA or the Act), 29 U.S.C. 1133, 1135, this section sets forth minimum requirements for employee benefit plan procedures pertaining to claims for benefits by participants and beneficiaries (hereinafter referred to as claimants). Except as otherwise specifically provided in
   this section, these requirements apply to every employee benefit plan described in section 4(a) and not exempted under section 4(b) of the Act."
5. ERISA Sec. 1002. (1) definition:

“The terms ''employee welfare benefit plan'' and ''welfare plan'' mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise” (underline added)

6. It is also important and necessary to understand that timely payment of the ERISA claim, by self-insured and fully-insured ERISA plans, are clearly "related to" ERISA benefits, and ERISA preemption will make state law prompt pay and clean claim rules unenforceable, not only against self-insured ERISA plans, but also against fully-insured ERISA plans, which together makes state law Pay act useless for up to 80% of health-care claims and more than 50% of health expenditure in the United States.
7. § 2560.503-1(k)  "Preemption of State law. (1) Nothing in this section shall be construed to supersede any provision of State law that regulates insurance, except to the extent that such law prevents the application of a requirement of this section."
8. Clearly and undoubtedly, if a state law prompt pay provision is consistent with ERISA claim regulation with respect to time frame summarized in the table above and below, then it is not preempted, if inconsistent with ERISA claim regulation time frame (some states require less than 30 days for post-service claim initial determination and payment), such state law prompt pay provision will be preempted. Practically speaking, if ERISA, the federal law, provides primary jurisdiction and time frame within which an initial determination has to be made for both self-insured and fully-insured employee health care benefits plan that is better than most state laws, why don't health care providers do something about the compliance of this new federal claim regulation?
    

   State of Connecticut v. Health Net, Inc., 11th Cir. 09/10/2004 State Can NOT Enforce ERISA, Publicly or Privately (ERISAclaim.com - Managed Care Court Watch)   Hawaiian Court Reverses Lower Court Ruling on ERISA Preemption of State Law on External Review (The Supreme Court of the State of Hawaii) Excerpt: "The Hawaiian Supreme Court ruled November 18, 2004, that a state law that gives Hawaii's insurance commissioner authority to conduct external reviews of health insurance plan decisions is 'impliedly' preempted by the Employee Retirement Income Security Act (ERISA)."

    

2. Misconception and Mystery Of ERISA Preemption and Savings Clause For State Insurance Laws  

1. "ERISA’s pre-emption section, 29 U.S.C. § 1144(a), states that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA." Egelhoff v. Egelhoff

2. ERISA preemption before and after U.S. Supreme Court ruling in Rush Prudential Hmo, Inc. V. Moran And Kentucky Assn. Of Health Plans, Inc. V. Miller

1)     It was very confused and frustrated among state regulators and both sides of advocates of state law protections as to whether ERISA preemption will supersede and invalidate anything and everything in State laws in regulating health insurance.

2)     US Supreme Court ruled that ERISA does not preempt Illinois External Medical Review and Kentucky Any Willing Provider (AWP) provisions because these are the state laws regulating insurance industry as a whole and affect insurance risk pool, and they do not provide for any direct remedy from state law to interfere with ERISA benefits civil enforcement, no impermissible connections.

3)     After these Supreme Court rulings, the issue is not settled as to whether State prompt pay act and rules are preempted by ERISA for fully-insured health plans with purchase of health insurance through commercially licensed insurers under state laws.

C.     It is often debated among both sides of prompt pay initiatives as to whether State law prompt pay statutes and regulations fall under ERISA savings clause to survive ERISA preemption for fully-insured ERISA plans. 

D.     After US Supreme Court ruling in Rush Prudential Hmo, Inc. v. Moran and Kentucky Assn. Of Health Plans, Inc. v. Miller, many state regulators and health-care providers declared that their state law prompt pay provisions are saved from ERISA preemptions, while there has been no single case law to show that can be remotely substantiated to its current understanding of the ERISA preemption. 

E.      "But this case addresses a state regulatory scheme that provides no new cause of action under state law and authorizes no new form of ultimate relief. While independent review under §4-10 may well settle the fate of a benefit claim under a particular contract, the state statute does not enlarge the claim beyond the benefits available in any action brought under §1132(a). And although the reviewer's determination would presumably replace that of the HMO as to what is "medically necessary" under this contract,⁹ the relief ultimately available would still be what ERISA authorizes in a suit for benefits under §1132(a).¹⁰ This case therefore does not involve the sort of additional claim or remedy exemplified in Pilot Life, Russell, and Ingersoll-Rand, but instead bears a resemblance to the claims-procedure rule that we sustained in UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358 (1999), holding that a state law barring enforcement of a policy's time limitation on submitting claims did not conflict with §1132(a), even though the state "rule of decision," id., at 377, could mean the difference between success and failure for a beneficiary. The procedure provided by §4-10 does not fall within Pilot Life's categorical preemption."  Rush Prudential Hmo, Inc. V. Moran

F.      "And the results are clear. Today, 47 states have laws and/or regulations requiring the timely payment of health insurance claims. The AMA has worked with 30 states to pass laws specifically based on AMA model legislation. The AMA model legislation requires MCOs and other payors to pay claims within 14 days of submission when filed electronically and within 30 days if submitted on paper. Such entities are required to pay interest on claims that are not paid within specified timeframes. The AMA model legislation also provides physicians a private right of action that allows them to sue the MCO for noncompliance." AMA Late Payment of Claims (pdf), American Medical Association Model Managed Care Contract: Supplement 8. [Page 2] 

3.      Distinction between state law prompt pay act with late pay penalties and independent/external medical review statutes and regulations 

A.     Both Illinois and Texas statutory and regulatory provisions requiring external medical necessity review to settle medical necessity dispute do not offer any direct and specific monetary penalties for any violations of these state statutes and regulations by an fully-insured ERISA plan, while prompt pay state law provisions in 47 states provide private right of action (right to sue by private citizen) and specific late pay interest penalties in addition to benefits reimbursement. 

B.     Prompt Pay Regulations for timely initial benefits determination are "pure eligibility decisions" as fiduciary decisions under ERISA  while "independent medical reviews" as "mixed treatment and eligibility decisions" are not  fiduciary decisions under ERISA as United States Supreme Court unanimously ruled in PEGRAM et al. v. HERDRICH. Any Willing Provider Regulations do not interfere with "pure eligibility decisions" by a fiduciary under ERISA.

"Held: Because mixed treatment and eligibility decisions by HMO physicians are not fiduciary decisions under ERISA" PEGRAM et al. v. HERDRICH.
 

C.   U.S. Supreme Court ruling in Egelhoff v. Egelhoff  with impermissible connections doctrine. 

“A state law relates to an ERISA plan “if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97. To determine whether there is a forbidden connection, the Court looks both to ERISA’s objectives as a guide to the scope of the state law that Congress understood would survive, as well as to the nature of the state law’s effect on ERISA plans. California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc., 519 U.S. 316, 325. Applying this framework, the state statute has an impermissible connection with ERISA plans, as it binds plan administrators to a particular choice of rules for determining beneficiary status.” Egelhoff v. Egelhoff   

4.     ERISA preempts state law prompt pay statutes and regulations for both self-insured and fully-insured ERISA plans because such state law requires prompt pay and imposes non-ERISA statutory and regulatory late pay interest penalties under state law, impermissible connections with ERISA.

5. ERISA Preemption Of Managed-Care Contract (MCO) Contract Governed Under State Laws.

1. Attempts by AMA and state medical associations as well as industry consultants to reengineer provider contract with managed-care organizations (MCO) in order to prevent and cure persistent payment delays have largely ineffective, as late payment violations remain to be the No.2 problem across the country.
2. Provider's litigations against MCO on the claims of breach of MCO contract with providers have failed to make any difference for ERISA plan chronic and persistent delay of reimbursement with deep managed-care discount compromise.
3. AETNA SETTLEMENT AGREEMENT (pdf, 97 pages), dated as of May 21, 2003 by and among AETNA INC., THE REPRESENTATIVE PLAINTIFFS, THE SIGNATORY MEDICAL SOCIETIES AND CLASS COUNSEL

7.10. New Dispute Resolution Process for Physician Billing Disputes.

a."......Nothing contained in this § 7.10 is intended, or shall be construed, to supercede, alter or limit the rights or remedies otherwise available to any Person under § 502(a) of ERISA or to supercede in any respect the claims procedures of § 503 of ERISA." [page 25]

7.11. Medical Necessity External Review Process.

"e. Company shall maintain an internal appeals process for medical necessity denials and shall disclose such process on the Public Website. Company shall adjudicate all such appeals of medical necessity denials on the timeframes that are applicable to Plans subject to ERISA, regardless of whether such Plans are actually subject to ERISA......." [page 30]

D.     CIGNA SETTLEMENT (pdf, 150 pages ) (doc)

 "(3)       Time Limits for Completing Internal Appeals.

All internal appeals shall be completed within the time limits required by regulations  issued by the Department of Labor, even those internal appeals for which ERISA is not applicable. [page 50]

"(4)       Nothing contained in this Section 7.11 is intended, or shall be construed, to supersede, alter or limit the rights or remedies otherwise available to any Person under § 502(a) of ERISA or to supersede in any respect the claims procedures under § 503 of ERISA." [page 53] 

E.      Both Aetna and CIGNA have agreed to settle the class-action lawsuits by 950,000 physicians and agreed to process appeals in accordance with ERISA claim regulations for both ERISA claims and non-ERISA claims, and to establish external review boards for Billing and Coding Disputes, Medical Necessity Disputes and Policy Coverage Disputes, in compliance with state external review laws, however external reviews will not be available until internal appeals/ERISA appeals are completely exhausted. 

F.      All other 8 major insurance companies named in class-action lawsuit have refused to settle, even if federal court would rule for physicians, the Aetna and CIGNA settlements will be as good as it could get from the rest of insurers and MCO's as evidenced in Aetna and CIGNA settlements with physicians. 

G.     Unless physicians understand and complete ERISA internal appeals, all of those "a love fest" and "victories" from class-action settlements would mean a fantasy of "a love fest"  to any physicians. 

H.    "Forty states required individuals to first exhaust their health policy’s internal appeals and grievance process before seeking external review." (GAO, September 2003, Page 46)  The health policy’s internal appeals and grievance process = ERISA appeals 80% of the time.

I.     State regulators aggressive enforcement and imposing multimillion dollar penalties against health insurers and MCO's have provided limited relief of late payment problems for non-ERISA plans and backslash of litigations by health insurers against state insurance regulators on jurisdictional challenges for ERISA claim dispute and delays.

6. ERISA governs and regulates up to 80% of health-care claims

1. ERISA Regulates and Governs ERISA Claim Denials and Disputes

2. Up to 80% of health-care claims or 60% of health expenditures in the U. S. Are ERISA Claims

3. ERISA Governs Approximately 6 Million Private Health And Welfare Plans. These Plans Cover Approximately 150 Million Workers And Their Dependents And Hold Assets Of More Than $4.6 Trillion.

4. ERISA statutes and regulations are equally enforceable for both fully-insured and self-insured ERISA plans and preempt any state prompt pay regulations if late payment interest penalty and private right of action by providers are available.

ERISA Failure Syndrome U.S. Healthcare Crisis Trilogy (Copyright © 2004 by Jin Zhou,  ERISAclaim.com)
ERISA Medical Killing		ERISA Medical Inflation		ERISA Insurance Robbery
	?   ?		?   ?		GAO-04-312 ?   ?
American Job ExportING!		Mass layoffs up in January 2004		Weirton Steel cancels 10,000 GM: $67.5 billion in 2003
The Looming National Benefit Crisis (USATODAY.com) One Nation under Debt: U..S. economy threatened by aging of America NATIONAL DEBT COLLISION COURSE MEDICARE CALCULATOR METHODOLOGY ►HIDDEN COSTS ►DEMOGRAPHICS ►RISING COSTS ►YOUR SHARE ►EXPLAINOR   Healthcare Disaster at Fault Verdict Index: U.S. Government 30% U.S. Employers & Insurers 30% Healthcare Providers 30% Consumers 10% (ERISA Failure + Managed-Care) Destroyed US Healthcare (ERISA Failure + Managed-Care + HSA) Invite US Federal Budget Deficit & Social Security Disasters = 100X 9/11 Attacks GAO: Current and Emerging Fiscal and Retirement Security Challenges, American Benefits Council/MetLife Conference, Washington, DC, on January 14, 2005 Rising Health care Costs Have Many Implications (Direct) Rising Healthcare Costs Have Many Implications (Indirect)   Rx-1  $$$$$$$$$ERISA$$$$$$$$$$  Rx-2

ERISA Provides Not Only "Prompt Pay" But Also "Preemptive"  Protections,
 Better Than State Law and Most Powerful Timely Payment Protections 

1.      Prompt Pay under ERISA (timely initial benefits determination and "provide or make payment")  2560.503-1 (f) (4) & (m) (4)  

A.     ERISA “prompt pay” is provided through ERISA claim regulation, especially through newly effective ERISA claim regulation in response to Patient's Bill Of Rights campaign, which unfortunately died in Congress after seven years of unprecedented legislation and litigation across the country.

B.     ERISA claim regulation with regard to prompt pay or timely benefits determination are provided through § 2560.503-1.

C.     ERISA prompt pay is provided through two consecutive processes, timely initial benefits determination and reasonable benefits reimbursement.

D.     Initial benefits determination with approval of benefits establishes legal ownership for the exact amount of money reimbursable by the plan,

E.      Benefits reimbursement carries out transferring of physical possession of the legally determined amount of money from the plan to the claimant or his/her beneficiary.

F.      Initial benefits determination with disapproval or reduction of the benefits claim triggers ERISA appeal right and plan fiduciary's obligations to disclose and plan's full and fair review process.

G.     Once legal ownership for the exact and correct amount of money is established with benefits approval from initial benefits determination, the claimant is in the best legal position for physical possession in transferring of that money from the plan, voluntarily or involuntarily with minimum legal difficulties through correct procedures provided under ERISA civil enforcement and criminal enforcement

H.     The most payment delay (prompt pay violation) is due to the delay of initial decisionmaking in processing and approval the benefits instead of lack of fund by the plan to pay the claimant and providers.

I.       It is completely misunderstood by health-care providers that ERISA regulatory requirements of timely initial benefits determination does not help anything with actual payment of medical claims.

J    If initial benefits determination was made in a timely fashion as outlined in the regulation but no payment was made due to no funds from the plan to pay, DOL will sue the plan sponsor to enforce compliance:

Labor Department Sues Corporation For Violating Federal Employee Benefit Law (Release Date: 02/02/2004)

"Columbus, Ohio - The U.S. Department of Labor has sued defunct General Clay Products Corporation, of Columbus, Ohio, for abandoning the company’s retirement plan, and also filed suit against its president for failing to forward employee contributions to the health plan. The alleged violations resulted in the loss of health insurance coverage for company workers."

2.      ERISA Timely Benefits Determination Means Initial Benefits Determination, Benefits Decisions, and Actions to "Provide or Make Payments" -Decisions to Pay and Actions to Pay, § 2560.503-1(m)(4).

A.     § 2560.503-1 (m) (4) defines the term of "adverse benefits determination" by including approval for benefits and entitlement decisions AND actions to "provide or make payments" based on initial benefits determination, instead of determination only without "provide or make payment"

§ 2560.503-1 (m) (4) The term ``adverse benefit determination'' means any of the following: a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of a participant's or beneficiary's eligibility to participate in a plan, and including, with respect to group health plans, a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit resulting from the application of any utilization review, as well as a failure to cover an item or service for which benefits are otherwise provided because it is determined to be experimental or investigational or not medically necessary or appropriate.

B.     § 2560.503-1 (f) (4) provides the timing of notification of "the plan's adverse benefits determination" (decisions to pay and actions to pay) instead of initial determination only without actions to pay "based on a determination" (decisions to pay only)

§ 2560.503-1 (f) (4) "Timing of notification of benefit determination. (1) In general. Except as provided in paragraphs (f)(2) and (f)(3) of this section, if a claim is wholly or partially denied, the plan administrator shall notify the claimant, in accordance with paragraph (g) of this section, of the plan's adverse benefit determination within a reasonable period of time, but not later than 90 days after receipt of the claim by the plan, unless the plan administrator determines that special circumstances require an extension of time for processing the claim. If the plan administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90- day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the plan expects to render the benefit determination."

C.     "Failure to provide or make payment" that is "based on a determination" under ERISA § 2560.503-1 (f) (4) constitutes "adverse benefits determination" under ERISA § 2560.503-1 (m) (4), required timing of notification of initial benefits determination with decisions to pay and actions to pay

D.     Although DOL explains, in its FAQ A-10, that the time frames in these rules does not govern the time within which claims must be paid, it also states "failure to provide services or benefit payments within reasonable periods of time following plan approval, however, may present fiduciary responsibility issues under Part 4 off Title I of ERISA",  DOL advances this position in DOL FAQ C-12, that if any payment is less than 100% of the medical bills, the plan must treat its decision as an adverse benefit determination, even for denied claims determined within time frames required under ERISA § 2560.503-1 (f) (4).

DOL FAQ A-10: Do the time frames in these rules govern the time within which claims must be paid?
 

No. While the regulation establishes time frames within which claims must be decided, the regulation does not address the periods within which payments that have been granted must be actually paid or services that have been approved must be actually rendered. Failure to provide services or benefit payments within reasonable periods of time following plan approval, however, may present fiduciary responsibility issues under Part 4 of title I of ERISA.

DOL FAQ C-12: If a claimant submits medical bills to a plan for reimbursement or payment, and the plan, applying the plan’s limits on co-payment, deductibles, etc., pays less than 100% of the medical bills, must the plan treat its decision as an adverse benefit determination?

Under the regulation, an adverse benefit determination generally includes any denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit. In any instance where the plan pays less than the total amount of expenses submitted with regard to a claim, while the plan is paying out the benefits to which the claimant is entitled under its terms, the claimant is nonetheless receiving less than full reimbursement of the submitted expenses. Therefore, in order to permit the claimant to challenge the plan’s calculation of how much it is required to pay, the decision is treated as an adverse benefit determination under the regulation. Providing the claimant with the required notification of adverse benefit determination will give the claimant the information necessary to understand why the plan has not paid the unpaid portion of the expenses and to decide whether to challenge the denial, e.g., the failure to pay in full. This approach permits claimants to  challenge whether, for example, the plan applied the wrong co-payment requirement or deductible amount. The fact that the plan believes that a claimant’s appeal will prove to be without merit does not mean that the claimant is not entitled to the procedural protections of the rule. This approach to informing claimants of their benefit entitlements with respect to specific claims, further, is consistent with current practice, in which Explanation of Benefits forms routinely describe both payable and non-payable portions of claim-related expenses. See § 2560.503-1(m)(4).

E.     Approval for benefits, "Positive Benefits Determination," on initial determination and its notification without actual payment within time frames in accordance with § 2560.503-1(f)(4) automatically constitutes "Adverse Benefits Determination" defined under § 2560.503-1 (m) (4) and explained under DOL FAQ C-12. 

F.     Adverse benefits determination with positive approval of benefits and without actual payment triggers ERISA appeal process under § 2560.503-1 (h) (2) and § 2560.503-1 (l) as well as possible Fiduciary Breach  Actions and Remedies under Part 4 of title I of ERISA

3.      Faster Than State Law Prompt Decision Making for Different Claims, urgent care, preservice claim and post-service claim.

4.     Initial Benefits Determination in ERISA Carries More Protections Than Late Penalties in State Laws In Optimal and Prompt Benefits Reimbursement

A.      Initial determination triggers legal ownership of the fund/money,

B.      Initial determination Triggers appeal process for faster resolution of benefits determination,

C.      Initial determination Triggers provider contract with MCO, more importantly strip ERISA shield by mooting ERISA jurisdiction.

5.      ERISA "Statute Limitation" For "Clean Claim" Protections 

1. ERISA mandate notification of clean claim rejection, improper claim filing, in 24 hours for urgent care claims, 5 days for preservice claims, failure to notify claimant on claims not clean will foreclose future excuses of cleanness of claim, which state law usually provides no parallel protections.
2. ERISA mandate 30 days limits for  initial benefits determination regardless of claims clean or not for post-service claim.
3. ERISA has clear definition of time frame of the beginning of claim, starting at a time a claim is filed in accordance with the reasonable procedure of a plan for regardless of the claim "clean or not", § 2560.503-1(f)(4). 

6.     ERISA timely initial determination failure triggers ERISA appeal process, which provide for faster and earlier as well as complete access to claim administrative files, complete disclosure for better legal leverage to ensure better reimbursement for denials on the ground of policy exclusion, bundling and down coding, medical necessity, UCR (usual, customary and reasonable), out of network provider exclusion, and identities of legal entities responsible for claim decisionmaking.

7. Failure to Make Timely Initial Determination and failure to timely respond to reviews/appeals under ERISA = failure to establish and maintain claims procedure (new ERISA protection, § 2560.503-1(l) = exhaustion of remedy under ERISA and loss of deferential review standards ("deemed denied" reviews) in federal court = loss of ERISA shield = more benefits payment and attorney fees, better than state law late penalties, it is like “winning” the battle of prompt pay for ERISA plans but losing the war of ERISA shield in coverage and reimbursement.

8.      Prompt Pay in State Laws Is Based on a weak and ambiguous definition of "clean claim", which provides insurers and MCO an open-door escape from "late pay statutory penalty because no payment will be due at all on the ground of no coverage and the medical necessity denials or by unreasonably requesting for additional information, once out of prompt pay provision jurisdiction and falling under State Law Improper Claim Practice Act, most states do not provide private right of action (right to sue a private citizen) and state law penalties; while ERISA provides for a closed-door requirements of either notifying the claimant of insufficient and "not clean claim" in 1 to 5 days or timely benefits determination for "not clean claim".  To make it simple, under state law, if an insurance company and MCO can challenge and escape "clean claim" requirements by doing anything, such as requesting for additional information, then there is no requirements from state law for an insurance company and MCO to make timely initial and final decisions for those "not clean claims", while ERISA claim regulation mandates notification of  “clean or dirty claim” in a timely fashion and provides for very limited extension by pending additional information, and mandatory initial benefits determination in a much faster timeframe than State laws, 72 hours for urgent care, 15 days for preservice claim and 30 days for postservice claim, more importantly ERISA also provides for timely response to appeals/reviews, failure to respond to appeals/reviews will provide the claimant with exhaustion of administrative remedy and deferential judicial review standards in federal court.

9.      ERISA Provides Preemptive Protections and Clean Claim Rejection Protections before the State Laws Can Be Seen on the "Radar Screens" of State Law Jurisdictions for Prompt Pay and Clean Claim Through Urgent Care and Pre-service Claim Provisions:

A.     New ERISA Claim Regulation provides more protections for not only prompt pay protection but also preemptive claim protections before State Law Prompt Pay Recognized Claims Can Be Made;

B.     ERISA Defines a Claim Preemptively While State Law Prompt Pay Defines a Claim in a post-service fashion;

C.     ERISA § 2560.503-1(e) defines "claim for benefits" as a claim filed or request for a plan benefit, including any pre-service Claims and any post-service Claim;

D.     ERISA § 2560.503-1(m)(2) defines "pre-service Claim" as "(2) The term ``pre-service claim'' means any claim for a benefit under a group health plan with respect to which the terms of the plan condition receipt of the benefit, in whole or in part, on approval of the benefit in advance of obtaining medical care."

E.      DOL explains and clarifies a Pre-service Claim in DOL FAQ:

"A-3: Does the regulation apply to a request for a determination whether an individual is eligible for coverage under a plan?

 
The regulation applies to coverage determinations only if they are part of a claim for benefits. The regulation, at § 2560.503-1(e), defines a claim for benefits, in part, as a request for a plan benefit or benefits made by a claimant in accordance with a plan’s reasonable procedure for filing benefit claims. A claim for group health benefits includes pre-service claims (§ 2560.503-1(m)(2)) and post-service claims (§ 2560.503-1(m)(3)). If an individual asks a question concerning eligibility for coverage under a plan without making a claim for benefits, the eligibility determination is not governed by the claims procedure rules. If, on the other hand, the individual files a claim for benefits in accordance with the plan’s reasonable procedures, and that claim is denied because the individual is not eligible for coverage under the plan, the coverage determination is part of a claim and must be handled in accordance with the claims procedures of the plan and the requirements of the regulation. See 65 FR at 70255."

F.      A plain English explanation of pre-service claim is that if any ERISA plan requires pre-certification or prior authorization or anything completed by the claimant or providers as a precondition or perquisites before service is provided and coverage is considered, it is a pre-service claim under ERISA, even without performing a proposed health care service,  complete and submit a claim form to the plan, that is required under the state law to trigger prompt pay laws,

G.     Entire managed-care concept is established on pre-certification, prior authorization and utilization review as well as provroposed health care service,  complete and submit a claim form to the plan, that is required under the state law to trigger prompt pay laws,

G.     Entire managed-care concept is established on pre-certification, prior authorization and utilization review as well as provider participation and network access limitation. Absolute majority of managed-care plans require pre-authorization and pre-certification for significant and expensive medical procedures,

H.     According to the latest researchers report in the January issue of the Annals of Emergency Medicine, Ann Emerg Med 2002;39:24-30, out of  980 emergency department visits involving 951 patients, all of which covered under managed-care insurance, 89% of visits require prior-approval or pre-certification.

I.       Under state law, a pre-service claim denial from prior authorization or pre-certification process will most likely prevent from or discourage the patients and the providers to initiate medical services or filing claims at all because of no coverage,

J.       ERISA § 2560.503-1(c)(ii) qualifies a preservice claim under ERISA:

"(A) Is a communication by a claimant or an authorized representative of a claimant that is received by a person or organizational unit customarily responsible for handling benefit matters; and (B) Is a communication that names a specific claimant; a specific medical condition or symptom; and a specific treatment, service, or product for which approval is requested."

K.     ERISA § 2560.503-1(c)(i) provides "clean claim" rejection protections, 24 hours and 5 days "statue limitation":

"(1)(i) The claims procedures provide that, in the case of a failure by a claimant or an authorized representative of a claimant to follow the plan's procedures for filing a pre-service claim, within the meaning of paragraph (m)(2) of this section, the claimant or representative shall be notified of the failure and the proper procedures to be followed in filing a claim for benefits. This notification shall be provided to the claimant or authorized representative, as appropriate, as soon as possible, but not later than 5 days (24 hours in the case of a failure to file a claim involving urgent care) following the failure. Notification may be oral, unless written notification is requested by the claimant or authorized representative."

L.      ERISA § 2560.503-1(f)(2) provides initial benefits determination in 72 hours for urgent care claims and 15 days for pre-service claims.

M.    ERISA § 2560.503-1(i)(2)(i) provides appeal/review Time limitation with 72 hours for urgent care claims and § 2560.503-1(i)(2)(ii) with 15 days for pre-service claims.

N.     Most of state law prompt pay provisions do not provide any protections unless a traditional claim form is completed and submitted. If state law provides any protections for emergency care, it is only for the the coverage of emergency treatment instead of clear timeline of benefit determination, and the usually this type of coverage verification is provided with a legal disclaimer for coverage and pre-approval disqualification.

O.     Traditionally under managed-care environment, the plan will require prior authorization, pre-certification, prior approval people services is provided through the plan provisions and provider contract agreement, after denial and disapproval of admission or treatment requests, most health-care providers will not provide services with patient concerns of impossibility of payment or even complete and submit insurance forms for reimbursement. This will be legally categorized as policy exclusion denials. According to The updated Harvard & RAND study, funded by the U.S. Department of Labor (DOL), published on June 18, 2003 through Health Affairs, pre-service claim denial is at 42% high while providers do not even consider this type of denials as managed-care denials. Without a claim, the managed-care health plans will reject any appeals because there was no claims or denials to appeal. With or without appeals, this will clearly escape from any state law prompt pay jurisdictions.

P.      Even if a state law provides any protections in this regard for any claims under ERISA plans, and if such s state law is inconsistent with ERISA claim regulation, it will be definitely preempted and unenforceable for 80% of health care claims and 60% of health expenditures in the United States.

Q.     ERISA provides preemptive protections and clean claim rejection protections before the state laws can be seen on the "radar screens" of state law jurisdictions for  prompt pay and clean claim .

10.   Failure to Timely Make Benefit Determination and Review Decisions By the Plan Administrator Will Lose ERISA Shield Protections for the Plan:

A.    Failure to timely make benefit determination and review decisions by the plan administrator will constitute “deemed denied” review/appeal and “deemed exhaustion of administrative remedy” under § 2560.503-1(l), (“a decision on the merits of the claim” = de novo judicial review, instead of deferential judicial review) that will forfeit or preclude the plan from “deferential review standard” on judicial review in federal court, the most important part of “ERISA Shield” on ERISA land.  Gilbertson v Allied Signal Inc

B.     DOL interprets § 2560.503-1(l) through CFR accompanying supplementary information on page 70255: “The Department’s intentions in including this provision in the proposal were to clarify that the procedural minimums of the regulation are essential to procedural fairness and that a decision made in the absence of the mandated procedural protections should not be entitled to any judicial deference.”

C.     JEBIAN v. HEWLETT-PACKARD [9^th Cir., 11/25/03]

Excerpt:  “[3] The primary question before us, of first impression in this circuit, is whether a plan administrator’s decision, other-wise within the administrator’s discretion, can be accorded judicial deference when the purported final, discretionary decision is not made until after the claim is, according to both the terms of the plan and Department of Labor (DOL) regulations, already automatically deemed denied on review. We conclude that where, according to plan and regulatory language, a claim is “deemed . . . denied” on review after the expiration of a given time period, there is no opportunity for the exercise of  discretion and the denial is usually to be reviewed de novo. While deference may be due to a plan administrator that is engaged in a good faith attempt to comply with its deadlines when they lapse, this is not such a case.”

D.  In the following latest 2004 case ruled under new ERISA claim regulation, a failure to render a timely decision by the plan administrator resulted in "deemed denial", "deemed exhaustion of remedy" and "loss of deferential review standard", the worst for the plan in ERISA litigation. (Please note this is a pension claim)

      Linder v. BYK-Chemie USA Inc., 2004 U.S. Dist. LEXIS 6228 (D. Conn.2004)]

Excerpt:  “......Linder argues, however, that under the Department of Labor regulations in effect since January 1, 2002, administrative remedies are deemed to be exhausted if the Plan Administrator fails to respond to a claim for benefits within 90 days. He argues that the Plan's claims procedures, which provide that a claimant may administratively appeal if the Plan Administrator fails to respond within 90 days, are invalid, as they fail to comply with ERISA's procedural requirements. The Court agrees.

Under the express terms of the regulations, Linder's claim is deemed exhausted, and he is entitled to bring suit in federal court. See 29 C.F.R. § 2560.503-1(l).

......The ERISA regulations are clear that claimants are "deemed to have exhausted administrative remedies" in such circumstances. As 28 C.F.R. § 2560.503-1(l) provides:

In the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.......

IV. Conclusion
For the foregoing reasons, defendant's motion for summary judgment is DENIED."
 

Prompt Pay Solutions under ERISA
How to Request and Appeal for
Prompt and Maximal Reimbursement 

1.      Sufficient Understanding of ERISA Claim Regulation and Claims Procedures, Compliance = Productions

2.      Early Identification of ERISA Patients and ERISA Plans, 80% of Health-care Claims under ERISA

3.      Obtain ERISA Rights to Become "an Authorized Representative" (DOL FAQ B2, B3)

4.      Obtain a Copy of Specific Plan Document, Summary Plan Description (SPD), ERISA Version of Insurance Policy

5.      Understanding Different Types of Health-care Claims under ERISA, Urgent Care, Pre-service Claim and Post-service Claim

6.      Request for Prompt Payment under ERISA, and File "Prompt Appeals" in Accordance with ERISA Claim Regulation Instead of State Prompt Pay Laws

7.      Appeal Only To "Named Fiduciary" Identified by SPD (Summer Plan Description, ERISA Version of Insurance Policy) to Timely and Promptly Trigger the Appeal Process, after Untimely and Failure in Timely Initial Claim Determination

8.      Prompt and Timely Finishing At Least Two Level Appeals To Exhaust Internal/Administrative Remedies, to Foreclose Any Future Excuses in Claim Delays in Federal Court

9.      Make a Final Demand for Payment As Volunteer Appeal under ERISA and Notification of Lawsuit in Federal Court As Provided by ERISA

10.   Prompt and Maximal Reimbursement from ERISA Plans Will Be More Secured When ERISA Shield Is Destroyed and No Winning Chance to Defend a Delay in Federal Court.

ERISA “Prompt Pay” Time Limits

 © 2003 Jin Zhou, ERISAclaim.com

For more specific information, please contact us or check out our appeal systems and seminars.

© 2003  Jin Zhou,  ERISAclaim.com

Dr. Jin Zhou is available for special presentations and consulting to any interesting parties on the subject of Prompt Pay Crisis & ERISA Solutions and U.S. health-care crisis turnaround.

He can be reached at (630)-736-2974 by phone or by email at  ERISAclaim@aol.com

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