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Procedural Issues in HR 3962: Rather Disappointing

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In my post of September 27, I observed that the legislation then under consideration in Congress—HR 3200 (the House tri-committee bill), the Senate Health, Education, Labor, and Pensions (HELP) bill, and Baucus chairman’s mark—paid inadequate attention to important procedural issues. In my post of October 27, I noted that the Senate Finance bill had made some progress on at least some of these issues, providing a clearer process for appealing insurance benefit determinations as well as a process for determining subsidy determinations. By contrast, HR 3962, released by House leadership last week, remains disappointing.

I have posted three successive posts at the Health Affairs website describing HR 3962, which contains some strong and helpful provisions. The post that follows examines specifically the procedural protections found in the insurance reform provisions of HR 3962. Another post will analyze how the provisions of HR 3962 would relate to existing federal and state laws governing health care financing.

Like HR 3200, HR 3962 does provide consumers with grievance and appeal procedures to contest the determinations of qualified health benefit plans (QHBPs) (sec. 232). The bill creates a new federal agency, the Health Choices Administration, to implement the health insurance reforms and the exchange. It tasks the Commissioner of this new agency with establishing appeal procedures for determinations made by insurers affecting consumers. QHBPs are supposed to provide an internal claims and appeals process based initially on the ERISA internal appeal process. The Commissioner is also supposed to establish an “impartial, independent, and de novo” external review process, the decisions of which will be binding on the health plans. The bill further requires the Commissioner to establish and implement time limits for review. Finally, the bill preserves judicial review under state law for adverse plan decisions, although this provision is subject to another provision that preserves ERISA preemption. It should be noted that under section 234, these provisions only apply to plans sold outside of the exchange to the extent the specified by the Commissioner. Plans outside the exchange would be group plans, since individuals may only purchase non-grandfathered policies though the exchange.

Section 244 of the bill creates a Health Insurance Ombudsman, which is supposed to receive complaints, grievances, and requests from consumers; “provide assistance” with respect to these; “help individuals determine the relevant information needed to seek an appeal of a decision or determination;” assist individuals with problems arising from disenrollment; and assist individuals in presenting information for establishing eligibility for affordability credits. The ombudsman apparently does not hear appeals itself, but rather assists consumers in pursuing claims and appeals elsewhere.

Beyond this, few other sections of the bill create appeal rights. Section 101 of the bill establishes a transitional national high-risk pool program and requires HHS to provide an appeals process for eligibility and claim denials under the program. Section 103 provides for an independent third party review of insurance company rescissions. Section 111 creates a transitional reinsurance program for employers who provide health benefits to early retirees and requires HHS to establish an appeal process for claims determinations under the program. There are also provisions in the bill for appeals of various determinations and enforcement proceedings involving electronic transactions. The Commissioner is further required to offer QHBPs an opportunity to develop and implement a corrective action plan and then notice and an opportunity for a hearing (as well as an appeal from an initial determination) before terminating a QHBP from the exchange. These provisions can be waived if delay would pose an imminent and serious risk to the health of enrollees. Finally, section 309 preserves the authority of states to address grievances and appeals with respect to plans licensed in other states but selling policies in their state under interstate insurance compacts, and retains the right of consumers to sue out-of-state plans subject to interstate compacts in the consumer’s own state court.

Section 321(g) would give public plan members the same access to the courts afforded Medicare beneficiaries, while section 323(g) would prohibit judicial review of public plan payment methodologies. Nowhere else, in Division A of the bill, however, is judicial review mentioned except with respect to insurer claims determinations, as noted earlier.

Beyond this, the bill is silent. Vital decisions will need to be made regarding eligibility for affordability credits and as to the amount of those credits by the Commissioner, state exchanges, or Medicaid agencies. These will require individual determinations of income eligibility and citizenship status. The bill, however, makes no provision for appeals of these determinations.

The bill also makes no provision for appeals of civil fines or excise taxes assessed against employers that are required to insure their employees but fail to do so. The legislation imposes the employer mandate by amending ERISA and the tax code. Presumably remedies available under those statutes will be available to appeal the amount of the tax, but there is nothing in the bill itself to indicate this. The bill would also authorize HHS to impose civil penalties on employers who fail to “pay or play,” and authorizes HHS to sue in federal court to collect these penalties.

Finally, the bill makes no explicit provision for review of determinations with respect to the tax imposed on persons who fail to comply with the individual mandate. The exaction imposed for failure to comply with the mandate is an income tax. Individuals have to file a return with the IRS documenting their compliance or failure to comply. Presumably the appeal and review procedures available under the tax code are available to review individual mandate compliance determinations, but it continues to seem odd that the question of whether a person belongs to a religious group that objects to health insurance or would suffer too great a hardship in purchasing it should have to argue these issues in a tax appeal. The Senate Finance bill sets up a separate procedure to make these determinations.

Of course, the House has not yet acted on this bill and the Senate has not even released a bill yet, but time is drawing short to make sure we have workable health reform legislation that provides adequate procedures to protect American consumers and businesses. We also need a bill that will not be stopped in its tracks by constitutional due process challenges as soon as it is implemented.

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The views reflected in this expert column are those of the individual authors and do not necessarily represent those of the O’Neill Institute for National and Global Health Law or Georgetown University. This blog is solely informational in nature, and not intended as a substitute for competent legal advice from a licensed and retained attorney in your state or country.

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