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The federal government established the Employee Retirement Income Security Act (ERISA) in an effort to protect citizens’ interest in their pension plans. The law was enacted in 1974 and has been expanded and updated three times, when health insurance and disability protection rights were added or extended.

The Consolidated Omnibus Budget Reconciliation Act of 1985 and the Health Insurance Portability and Accountability Act of 1996 were added to the regula­tion to provide further protections. The passage of the Patient Protection and Affordable Care Act (PPACA) added further protections in the forms of layers of appeals as well as certain protections against employers interfering with employees’ rights to present and obtain future benefits (aka health insurance).

Within the regu­lations is language that states that any insurance plan that is purchased through an employer gains protections of the act. The importance of this regula­tion falls within the ability of a healthcare facility to obtain information from the insurance company and the employer free of charge, under penalty of law, as well as to use timelines to their advantage and ask for reviews by a third party.

The employer and review agent must provide the information, which must include how the decision to deny coverage is made, a copy of the patient’s benefit plan (summary plan description), the information that was used to make the decision (including any internal policies), the name and specialty of the physician making the decision, and a full explanation of the denial, including the appeal process. This author has seen insurance companies provide an explanation of benefits (EOB) as the only communication of the denial in a line-item format, with a code stating that the denial was based on a lack of medical necessity – and this is a violation of the ERISA statutes that pre­empt any state law in the interpretation of the plan.

ERISA has many components, including those intended:

  • To ensure that beneficiaries receive adequate information about their plan benefits;
  • To protect their benefits by creating statutory rights, enforcing benefit obligations, and providing adequate remedies;
  • To set standards of conduct for parties establishing and maintaining employee benefit plans;
  • To establish a network of governmental agencies to enforce the rights and standards established under ERISA; and
  • To safeguard benefits promised under terminated plans.

Generally, ERISA applies to all private employer plans. A number of plans, however, are specifically exempt: federal, state, and local government plans (including plans established under the Railroad Retirement Act), as well as church plans and others that are not commonly seen in the hospital setting. 

Provisions in the ERISA law require that a plan administrator supply a summary plan description (SPD), better known as the benefit plan manual, among other documents to a beneficiary or other party that has been assigned the right to collect on behalf of the beneficiary. 

The SPD is probably the most important disclosure document that a plan provides its participants and beneficiaries. Basically, an SPD provides general information about the plan’s benefits. The SPD should be written in simple terms so that the average participant can understand it.

Another important ERISA notice requirement relates to denials of benefit claims. Each ERISA plan must provide a written notice of a benefit denial. The notice must set forth the specific reasons for the denial and must be written in a manner that the participant can understand. The plan also must inform the individual of his or her right to a full and fair review of the decision to deny the claim. These procedures also should be described in the plan’s SPD.

Any person who willfully violates ERISA’s reporting and disclosure requirements may be fined up to $5,000 and/or imprisoned for no more than one year. Any company that willfully violates these requirements may be fined up to $100,000.

For case managers that deal with denials, the ability to overturn them requires many tools, from the ability to understand the clinical picture and the interventions done, to using the utilization review process to know what should or should not have been admitted, to great letter-writing and research to use guidelines and evidenced-based medicine as a means to sway the payer to their side. The appeal writer should know and take advantage of the law. Using ERISA to obtain the benefit plan and information about who made the decision on the denial is crucial to understanding how the payor came to its decision. Writing an appeal based on a few sentences in a denial letter will sometimes lead to missing a greater opportunity. Without knowing the resources that your opponent used, how do you then perfect the appeal? Also, what should be included in your plea for them to overturn their decision? When I first started writing appeals, I was unaware that I could look into the payer’s “mind” by using the law to force them to turn over the very guidelines and documents used to deny a claim. Think about this aspect as a “discovery” phase, similar to how it is done in a criminal investigation, in which the defendant can request the prosecutor to disclose any relevant information that will be used against them. 

Often, case managers/appeal specialists do not appreciate that their entire case depends upon evidence they submit to the claims administrator supporting coverage. This is all done in an internal appeal conducted by the insurance company or a third-party appeals administrator. As a result, hospitals often do not fully develop the administrative record, which includes the clinical information from the medical record, the information specific to the benefit that is being denied by the plan that is contained in the SPD, and a rebuttal to the decision, as well as information showing that at the time, the medical director for the payor was not qualified to render a decision due to a lack of specialization. This leaves the high likelihood that the administrative record is developed primarily by the insurance claims administrator with evidence supporting denial of the claim and no rebuttal evidence. The administrative record frequently has little or no substantive or compelling evidence favoring coverage for that reason.

Another aspect of ERISA is the timelines to which the payers must adhere. If they do not and do not request extensions due to a lack of having the complete record, they in essence have lost and are required to pay. They must indicate in every step of the denial process the timelines to appeal and the deadlines for their response. It is imperative to use a system that alerts you if they have exceeded the turnaround time allotted so you can demand payment. ERISA plans provide 180 days to appeal a denial. Once all of the information necessary to perfect an appeal is gathered, including a copy of the SPD, the guidelines used, and who made the decision, take time to write out an appeal, have it reviewed by a physician (preferably a physician advisor who understands the utilization review process), and scrutinize admission criteria and regulations. Having completed the letter and the review by the physician, ensure that all the information needed for an appeal is included in material that is sent to the payer, since that will be the record that will be used in any external appeal that is allowed, per the ERISA laws.

Any time there is a final determination, you have a choice to continue the internal appeal process or partake of an external review by a state or federal agency. Having a third party review the claim can be beneficial, especially if you deal with a plan that is known for issuing denials that are not appropriate. It will be what is called a de novo, or “new review,” but the material you sent to the payor is what they will use. No new information may be submitted unless there is a compelling reason, and that is why there must be great emphasis placed on the package sent to a carrier for an appeal in the first place. A letter and the medical record is not enough; do the leg work to get the other information. Of course, balancing the cost of the denial to the amount of effort to collect is necessary as well. Put in internal guidelines comparing the projected cost of appeal to dollars denied, because sometimes,, even if you win, you lost, because your return on investment is insufficient to cover the cost of overturning the denial.

ERISA should be a standard tool that all case management departments should have at their disposal, and understanding the rules will allow you to be better prepared to take on the insurance carriers and get your hospital paid for services rendered. 

About the Author 

Paul Arias is currently the corporate director of care management for Lifebridge Health in the Greater Baltimore area. Paul received an ASN from Miami Dade Community College in 1994 and began his nursing career as a nurse in a cardiac ICU at the Miami VA. Paul obtained his BSN at the University of Miami and graduated in 1996. He obtained a Masters in Information Systems in 2007 from the University of Phoenix. Paul recently graduated with a law degree from Concord Law School. Paul has also authored a book entitled “Prevent Denials and Win Appeals: The Hospital Case Manager’s Guide to Revenue Integrity.”

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