Require an independent external review process

The external review process is key to ensuring that individuals denied coverage can have an external reviewer (i.e., not someone employed or contracted by the health plan) evaluate if denied services were medically necessary. In individual and group health plans, the Affordable Care Act guarantees the right to external reviews of denials (otherwise known as “adverse benefit determinations”). Unfortunately, in practice, this right to external review is often undermined. There are three categories of external review systems for individual and group health plans. First, there is a state-administered system that is created by state law and where states must contract with so-called Independent Review Organizations (IROs). Second, there is a federal external review process, in which federal law sets requirements under which plans must operate, but plans administer the process by contracting with IROs of their choice. Third, there is a federally-administered external review process, which the federal government administers.[1] For fully-insured individual and group plans that are subject to state law, states can administer their own external review system and, if they do not, can use either the federal external review process or the federally-administered external review process. Self-funded group plans (which are not subject to state law) are subject to the federal external review process.

Unfortunately, insurers and claims administrators often also have contracts with the same IROs that conduct external reviews to conduct internal reviews. IROs often view insurers and administrators as their clients, and IROs have said that “client preference” is a leading determinant of the basis for review. Under the federal external review process, claims administrators assign external reviews to IROs and frequently instruct them to limit the scope of reviews, despite regulations requiring IROs to evaluate non-quantitative treatment limitations (i.e., medical management techniques). Additionally, many states and the federal external review process (though not the federally-administered external review process) effectively are subject to no oversight, with no transparency as to whether external review timeframes and notice requirements are complied with. This is critical, because under the federal external review process, IROs are permitted to terminate external reviews and automatically reverse adverse benefit determinations when insurers/administrators fail to provide timely and complete information. Finally, the identity of external reviewers is concealed from consumers, making it impossible to validate their training and experience, credentials or conflicts.

To ensure proper external reviews, Congress should, for self-funded group plans, require use of the federally-administered external review process, which is more transparent and lacks such conflicts. For state-regulated fully-insured individual and group health plans, Congress should require that states only contract with IROs that do not accept direct business from health insurers or administrators in any market segment and require external reviewers’ identities to be made available to consumers. (California utilizes an external review vendor that does not accept private contracts from insurers/claims administrators.)[2] If a state does not administer its own system, Congress should require the state to use the federally-administered external review process.