By Hunter Raines, Albany Government Law Review
New York’s external appeal legislation, giving patients and health care providers a right to an external appeal of health plan adverse coverage determinations, has been invaluable in improving the patient’s access to care while protecting the provider’s right to adequate reimbursement for health care services. However, changes enacted in July 2011 measurably impact the operation of this statutory creature, which merits examination and review of the process as it currently stands.
In the early 1990s, the rising costs of health care inspired a new insurance model closely tied to the concept of strict care management. By strictly managing consumer options, health care costs were constrained. However, this model encumbered access to needed health care for many. New York’s Managed Care Reform Act, signed by Governor Pataki in 1996, provided new protection for New York consumers in the health insurance market. Since the passage of the act, consumers now have the right to obtain a description of services and procedures covered by their health plan, the right to an explanation of the patient’s financial responsibility for such procedures and services and the right to appeal adverse coverage determinations. These legislative protections are far reaching, applying to most health plans excluding those which are self-funded or otherwise subject to ERISA, which is beyond the scope of this article.
This article will provide a brief background and scope of the New York legislation, discuss recent changes to the legislation and the impact of these changes on New York consumers in addition to highlighting an opportunity to improve the legislation through the furtherance of recent revisions.
What is this Right to Externally Appeal?
New York’s legislation has little impact on adverse determinations precipitated by the non-payment of insurance premiums, an expired policy or other consumer-driven defects. The legislation reaches health plans which look beyond whether their customer has paid them for coverage. Namely, if a health care plan engages in coverage determinations based on medical necessity or the experimental, investigatory or clinical trial nature of the treatment, the state may be able to review the insurance company’s coverage determination based on those factors. External appeal is available to these denials made concurrently, prospectively or, in some cases, retroactively. The primary peculiarity of each of these distinctions is in who may appeal the decision and when, which will be discussed more below.
Oversight responsibility for externally appealing adverse health care determinations statutorily falls to the New York State Insurance Department. The Department reviews activities of health plans and external appeal agents, consumer complaints and compliance with external appeals statutory requirements and report to the legislature on the implications on the program.
The law mandates that plans covered by the legislation must maintain a level of internal appeal process. Generally, no matter how many levels of internal appeal a particular health plan may have, an external appeal may be requested at the “final adverse determination,” which is generally deemed to occur following an internal appeal to the health plan upholding the adverse coverage determination. The appeal may permissibly be filed by one of several parties. The patient, the patient’s healthcare provider or the patient’s designee may submit an external appeal request to the New York State Insurance Department within the articulated time frame of a “final adverse determination” from an internal appeal within the health plan, or if the internal appeal process has been effectively waived by the health plan and the insured. The application is then assigned to an external appeal agent who will render a decision on the appeal within thirty days. A more expedient timeline is available for the most urgent cases under the legislation, requiring a determination by the external agent within three days if the patient’s life is seriously threatened without treatment.
In order to assist consumers with their rights under the law, the Insurance Department maintains an external appeal toll-free telephone number (1-800-400-8882) to address questions and assist with the application process. In addition, the Insurance Department website is a terrific resource for both patients and providers and can provide up-to-date information on New York’s External Appeals law.
The legislation puts a heavy emphasis on the time restrictions surrounding the external appeals process; if the appeal is not filed or completed within an established time frame, the right to an appeal may be forfeited. In order to begin an external appeal of a plan’s adverse determination, a completed application must be submitted by the patient or patient’s representative to the Insurance Department within four months of the final internal adverse determination or the plan’s written waiver of the internal appeals process. Until the July 2011 revisions, this was limited to forty-five days.
The former timeline of forty-five days continues to apply to healthcare providers, representing revision work that was only partially completed by the legislature. Where, in the past, the same time frame applied to both patients and providers, the Assembly has elected to invite previously-absent ambiguity into the statutory time frames, making a complex process even more so. Under the revision, a provider appealing in his own right must adhere to the forty-five day timeframe, however if the provider is appealing as a patient’s representative, he may avail himself of the entire four months. If the application has not arrived properly completed at the Insurance Department by the end of the time frame following an initial adverse determination by the health plan, the external appeals legislation may be inapplicable to both the provider and the patient.
Who May Externally Appeal?
The Insurance Law establishes a right to external appeal of the final adverse determination for the insured and the insured’s designee. Providers also have the right to appeal concurrent and retrospective denials on behalf of the patient; however, a provider may not appeal a prospective denial. The rights of the patient and the provider share common ground, however important distinctions apply. It is prudent to examine the rights of each in order to fully understand the nature and extent of the legislation.
A patient has the broadest ability to externally appeal. Consumers may appeal a health plan’s adverse determination when such determination was based on medical necessity, experimental or investigatory nature of the treatment, a clinical trial or a rare disease treatment.
Additionally, in certain circumstances a patient covered under a managed care health plan may also appeal denials due to out-of-network service. If the patient seeks pre-authorization of a service, only to be denied because the service is not covered in-network and the health plan recommends an in-network treatment it determines is substantially similar, the consumer may appeal such determination with the assistance of his or her physician.
The law grants an external appellate right to a provider, although it is not as robust as the consumer’s right. Such rights for a provider generally focus on an interest in reimbursement for care and, as such, applies only to “concurrent and retrospective determinations.” A provider may pursue not only their enumerated rights in external appeals, such as retrospective denials, in order to facilitate reimbursement, but also as a patient’s designee. If the patient designates the provider, possibly effectuated by a Limited Power of Attorney that could be signed upon admission, the provider may also pursue concurrent denials. This is an important distinction; recalling the time limitations peculiar to each party highlights this. Allowing the option for a patient to designate another, such as a health care provider, to pursue an external appeal is key to the legislation. If the patient was unable to designate an agent for the external appeal, or was otherwise incapacitated, and the time frame for the appeal expired before the patient regained the ability or initiative to pursue an appeal, a provider may be left empty handed with regard to reimbursement for medical services. Now that the provider may be designated and appeal concurrent denials on behalf of a patient, a substantial barrier to provider reimbursement has been removed, to say nothing about improving patient access to care.
With respect to the patient, the health plan is now permitted to assess a $25 charge to the patient when initiating an external appeal, however a patient’s cost is capped at $75 annually for all such appeals. Formerly, a patient could be charged $50 per external appeal with no annual cap. If the external appeal is resolved in favor of the insured, the health plan must refund the charge of the external appeal to the patient. The health plan may be required to waive the fee altogether for a patient who is a beneficiary of Medicaid, Child Health Plus, Family Health Plus, or if the fee would otherwise be a hardship for the patient, subject to the plans internal determination.
For provider appeal of a retrospective denial, the insurer is permitted to charge the provider a fee of up to $50; this fee must be returned to the provider by the insurer if the denial is overturned. For provider appeal of concurrent denials, the full cost of the appeal (not limited to the nominal fee above) must be paid by the health plan if the denial is overturned, the provider if the denial is upheld or split by the parties in the event of a partial reversal.
While there have been improvements to New York’s external appeal legislation, more is needed. Changes are needed in order to simplify the appeal process for a health care provider by applying the newly-elongated patient filing timeline to providers appealing in their own right as well. This simplifies the process for all involved, negating a requirement for a provider to concern itself with the segregation of external appeals, as providers, from external appeals as a patient’s representative. It also helps ensure a reduced chance of forfeiture of an external appellate right as the provider struggles to comply with further changes to the practice of medicine.
The right to externally appeal an adverse healthcare determination is an important benefit as a patient. However, it is perhaps one of the least comprehended rights New Yorkers have due to the complexity necessarily involved in the process. Length restrictions preclude this article from exploring all of the nuances peculiar to this legislation and a patient or provider should consult with the Insurance Department, or counsel, to fully understand the rights available. A right to external appeal may only benefit those who understand the full extent of the law and health insurers may not be the best source of information for the public. As providers become more active in reimbursement perhaps patient education in this area will improve, further enhancing the benefit.
 Act of July 20, 2011, S. 5800, 234th Sess. (N.Y. 2011).
 See Stuart Auerbach, Managed Care Backlash; As the Marketplace Changes, Consumers Are Caught in the Middle, Wash. Post, Jun. 25, 1996, at Z12.
 See, e.g., 1996 N.Y. Laws 3350, § 16 (codified at N.Y. Pub. Health Law § 4906 (McKinney 2010)) (establishing a public policy against agreements that are contrary to the Act).
 N.Y. Ins. Law § 4910 (McKinney 2010).
 Id. § 4908.
 Id. § 4910.
 See generally id.
 Id. § 4916.
 See generally id. § 4914.
 Id. § 4910.
 Id. § 4914(b)(2).
 Id. § 4914(b)(3).
 External Appeals – Frequently Asked Questions, Instructions and Applications, N.Y. State Dep’t of Fin. Servs., http://www.dfs.ny.gov/insurance/extapp/extappqa.htm (last visited Nov. 18, 2011).
 See generally N.Y. Ins. Law § 4914.
 Act of July 20, 2011, S. 5800, 234th Sess., § 57(1) (N.Y. 2011).
 N.Y. Ins. Law § 4914.
 § 57, S. 5800, 234th Sess.
 N.Y. Ins. Law § 4914.
 § 57, S. 5800, 234th Sess.
 See generally N.Y. Ins. Law § 4914.
 Id. § 4910.
 Id. § 4910(b)(3)(A).
 Ins. § 4910(a).
 See generally id. § 4910.
 Act of July 20, 2011, S. 5800, 234th Sess., § 65 (N.Y. 2011).
 N.Y. Ins. Law § 4910(b)(3)(c).
 § 55, S. 5800, 234th Sess.
 N.Y. Ins. Law § 4914(d)(2)(3).