WASHINGTON—Interim final rules about the appeals and external claims review processes that nongrandfathered self-insured group health plans must follow under new federal law could prove a challenge for many large, multistate employers, some benefit consultants say.

The challenge is that less than a dozen independent review organizations are qualified to provide those services, the consultants say.

However, the trade group representing the review organizations as well as URAC, its accrediting body, say external reviews are so infrequent that employers should have no trouble lining up the three independent review organizations required under the interim final rules that the Department of Labor, the Department of Health and Human Services and the Internal Revenue Service issued last week (see story, page 19).

Still, employers are concerned about the administrative burden that the regulations implementing the Patient Protection and Affordable Care Act set up, especially because they were issued as many employers are about to start open enrollment for the 2011 plan year.

The law mandates that employees in nongrandfathered self-funded health care plans be able to request a “federal external review” if a claim or benefit is denied during internal reviews by employers and plan administrators.

Under the interim final rules, which apply to plan years beginning on or after Sept. 23, a group health plan must give claimants up to four months to request an external review after an adverse claim or benefit decision. A preliminary review of that request must be conducted within five business days of its receipt, and the plan must issue a written notification of its decision to the claimant within one business day of completing the preliminary review.

If the preliminary review finds an external review is needed, the request must be referred to an independent review organization accredited by URAC or similar nationally recognized accrediting organization, which has 45 days to render a final coverage decision.

To ensure there is no bias in the external review process, benefit plans are required to contract with at least three independent review organizations and rotate claims assignments among them. In addition, the review organizations cannot be paid any financial incentives based on the likelihood that they would support a denial of benefits.

An expedited external review is prescribed for situations requiring immediate medical care, including urgent care and those in which denial of payment for treatment would jeopardize the claimant's ability to regain maximum function.

The interim final rules also outline specific requirements that group benefit plans must include in their contracts with independent review organizations, as well as the type of information and documents that the review organizations must consider in making decisions.

Mike Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York, said the rules are “pretty prescriptive and set pretty high standards for the appeals process.”

A requirement he said he had not anticipated is that employers with self-funded health plans must contract with at least three IROs and rotate claims among them.

“That would be unprecedented, and it will require a great deal of coordination,” Mr. Thompson said.

Steven Wojcik, vp of public policy at the National Business Group on Health in Washington, said most self-funded employers already have external review processes, but they usually contract with only one IRO.

In addition, the required turnaround time may not coincide with employer practices, he said. “Under the new rules, plan members will have four months to file a claim. Some employers may only have given them three months,” Mr. Wojcik said.

Employers that already have an expedited review process may have applied it only to situations where withholding coverage could jeopardize the life and health of a claimant, but not necessarily for jeopardizing a claimant's ability to regain maximum function, Mr. Wojcik added.

Although many large, self-funded employers may have had external review procedures in place prior to the new law, this will be the first time federal law will require them to do so, said Kimberly Boggs, senior employee benefits adviser at Morgan, Lewis & Bockius L.L.P. in Chicago.

Although the regulations permit employers to voluntarily comply with the provisions of their state's external review process as an alternative to complying with the federal regulations, IROs, which are vetted by the states and used by insurers in connection with their insured claims, generally operate in just one or two states and may not be able to provide such services everywhere a multistate employer operates, Mr. Wojcik said.

“If an employer is operating in more than one state, it will try to have a uniform process for external review to make sure there's not a different process for people who live in Wisconsin vs. Illinois,” he said.

Of the 43 IROs that URAC has accredited, only 10 operate on a multistate basis, said Christine Leyden, senior vp and general manager of client services and chief accreditation officer at Washington-based URAC.

Seana Ferris, president of the National Assn. of Independent Review Organizations, said all 19 NAIRO members operate in more than one state, but none operates nationally and NAIRO's members cover only 15 states.

The cost should not be particularly onerous for self-funded employers, said Ms. Ferris, who said the average external review tab is only about $600.

Even if the cost is nominal, the external review requirement establishes another task for employers, which already are overburdened by PPACA's myriad other requirements, Ms. Boggs said.

“Time is money. Adding these additional steps is additional work, and the fact that things need to be turned around so quickly could require additional resources,” she said.

Shawn Nowicki, director of health policy at the New York Business Group on Health, agreed.

“The time and the effort to comply with the new administrative tasks (prescribed by PPACA) eclipse the actual costs,” he said.

He also said issuing the regulations so late in August has many employers scrambling to comply.

“The open enrollment planning process is coming to a close. A lot of their proposed plans are almost set. These regulations are coming late in the process,” Mr. Nowicki said.