Federal Employees Health Benefits Program: Filing Claims; Disputed Claims Procedures and Court Actions

SUMMARY: The Office of Personnel Management (OPM) is issuing final

regulations revising the requirement that legal actions to recover on a

claim under the Federal Employees Health Benefits (FEHB) Program should

be brought against the health benefits carrier rather than OPM and

clarifying the procedures for filing claims for payment or service

under the FEHB Program. The purpose of these final regulations is to

prescribe that if a covered individual chooses to bring legal action

pertaining to a denial of an FEHB benefit, such legal action should be

brought against OPM, and to clarify the administrative review process

that must precede legal action in the courts.

EFFECTIVE DATE: May 6, 1996.

FOR FURTHER INFORMATION CONTACT: Margaret Sears, (202) 606-0004.

SUPPLEMENTARY INFORMATION: On March 29, 1995, OPM published interim

regulations in the Federal Register (60 FR 16037) that require

individuals who want to bring suit concerning the denial of their

health benefits claims to bring such suits against OPM instead of the

health benefits carrier, as had been the case previously. The interim

regulations also clarified the administrative review procedures that

must precede legal action in the courts, the circumstances under which

suits may be brought against OPM, and that the court's review is

limited to the record that was before OPM when it made its decision.

OPM received 11 comments on the interim regulations. Three

commenters suggested that we amend the regulations to clarify that the

regulations apply to providers to whom the covered individual has

assigned the right to pursue the claim. We have not accepted this

suggestion because the right of access to the disputed claims process

belongs to the covered individual. We have amended the interim

regulations to clarify that another person or entity, whether or not a

provider, can gain access to the disputed claims process only when

acting on behalf of the covered individual and with the covered

individual's specific written consent.

Two commenters thought that the one-year period for initiating the

disputed claims process was too long. They suggested a 90-day period

instead. The one-year period has been OPM's policy since the disputed

claims process was created in 1975. However, we believe that the period

can now be reduced to 6 months if there are sufficient safeguards to

protect the interests of individuals who, because of medical problems

or for other reasons are unable to request reconsideration within the 6

months time limit. Therefore, we are modifying the regulations to

require that covered individuals who want to ask the plan to reconsider

its denial must do so within 6 months after the denial unless the

covered individual shows that he or she was prevented by a cause beyond

his or her control from making the request within that time period. In

addition, we are adding a provision to allow OPM to reopen a decision

it made concerning a disputed claim if it receives evidence that was

unavailable at the time OPM made its decision.

Two commenters said that the amount of time carriers have to

respond to requests for reconsideration--30 days--is too short,

especially when the issue is medical necessity. They suggested that the

carriers be allowed 45 days, with the option to extend the period for

an additional 30 days, if necessary. They further suggested that the

carriers be given 45 days rather than 30 to review additional

information received from the covered individual or provider. In both

cases, the 30-day period has been in place for a number of years and

has been working well enough that we believe that extending the time

period to 45 days would unnecessarily lengthen the time required to

complete the disputed claims process. Therefore, we have not accepted

these suggestions.

Two commenters said that the time period for seeking judicial

review should be tied to the date the covered individual receives OPM's

decision rather than the date the care or service was provided. One

commenter supported the provision basing the time limit on the date the

care or service was provided and asked us not to change it. The interim

regulations provide that legal action on a disputed claim may not be

brought later than December 31 of the 3rd year after the year in which

the care or service was provided. After considering these three

comments we have decided not to modify our regulations at this time.

This timeframe reflects our brochure language over the past several

years. It is our experience that this timeframe works well; however, we

will continue to monitor all timeframes in these regulations and make

changes as warranted.

Four commenters suggested that the regulations should explicitly

state that court actions are not to be brought against a carrier or a

carrier's subcontractors. One commenter suggested that we amend the

regulations to state that the carrier is an indispensable party to the

lawsuit. After considering these five comments, we have modified the

regulations to specify that court action is not to be brought against

the carrier or the carrier's subcontractors. Since it is OPM's

decision, not the carrier's, that is being contested, it is appropriate

that OPM, rather than the carriers, be the focus of lawsuits related to

denial of benefits.

Two commenters said that the interim regulations should be set

aside because they adversely affect the covered individual's right: (1)

Of access to State courts, (2) to seek monetary compensation for

damages, (3) under State law to require insurer to prove that notice

was given concerning changes in benefits and that contract language is

clear, (4) to have the option to go to court without seeking OPM

review, (5) to present evidence that OPM did not have when it made its

determination, and (6) to seek an expedited ruling by the court when

life or health is at issue. OPM's regulations have never offered

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such ``rights.'' The interim regulations simply clarified that these

opportunities are not available to covered individuals under the FEHB

program. The FEHB law includes a provision specifically stating that

FEHB contract provisions that relate to the extent of coverage or

benefits supersede and preempt any State law that relates to health

insurance or plans to the extent that such law is inconsistent with

FEHB contractual provisions. Therefore, we believe the interim

regulations accurately reflect the intent of the FEHB law. Further, it

has been OPM's policy, and will continue to be OPM's policy, to

expedite the dispute resolution process when there are issues of life

and health at stake. Premature involvement of the courts at such time

is unnecessary. The only real change made by the interim regulations

was which party to the FEHB contracts should be named in a suit.

Two commenters said that the interim regulations should be set

aside because they violated the Administrative Procedure Act in that

they became effective before completing a comment period. The interim

regulations were promulgated to provide immediate guidance and

information to alleviate any burden on the FEHB enrollees in cases of

possible litigation. It was OPM's view that immediate implementation of

regulations that clarify and more fully explain the proper judicial

review of an OPM decision sustaining a health benefit plan's denial of

coverage would minimize unnecessary litigation and uncertainty. Thus,

the interim regulations were intended to more clearly specify a review

procedure that sometimes appeared to be unclear and was not always

applied consistently.

One commenter inquired whether the interim regulations removed a

restriction so that there was good cause for issuing them in this form.

It was OPM's view that the interim regulations remove the restriction

requiring that enrollees sue a health benefits carrier when contesting

an OPM decision that affirmed the carrier's determination that the

benefit is not covered under the carrier's plan. Previously, enrollees

could not bring suit against OPM directly even though they ultimately

were contesting OPM's decision.

One commenter asserted that the regulations should specify that

they have no impact on an individual's rights under the Federal Sector

Equal Employment Opportunity rule set forth in 29 CFR Part 1614. That

is, individuals who believe they have been discriminated against in

regard to insurance benefits because of disability or another protected

basis are not required to pursue or exhaust the administrative remedy

provided by these regulations before pursuing their rights under 29 CFR

Part 1614. Since OPM has no authority concerning the provisions of

title 29 of the Code of Federal Regulations, it would not be

appropriate to address an individual's rights under title 29 in title

5. Instead, the circumstances under which one may access remedies

related to title 29 should be included in title 29.

One commenter felt that the interim regulations do not expressly

prescribe time limits when the carrier fails to make its decision

within 60 days after requesting, but not receiving, information from

the covered individual. We have modified the regulations to clarify

that this circumstance is included in the administrative process.

One commenter objected to the requirement that the claimants must

express their reasons in terms of the brochure provisions because

enrollees sometimes do not have brochures. Since a dispute about a

claim must be based on whether or not the claim was payable under the

FEHB contract and the brochure sets forth those contract provisions,

individuals need a brochure in order to know whether they have a

dispute. They also need a brochure to obtain information on the

procedures for disputing carriers' denials of claims. Further,

brochures are easily obtainable from the plan. We find that this

requirement is important in encouraging the individual to express his

or her reasons in a manner that will facilitate a successful result

when there is a valid dispute.

Two commenters suggested that the regulations be revised to require

that OPM's decision contain a notice of the covered individual's right

to bring suit. We are not adopting that suggestion because we are

adding that information to the brochures. The brochures will give

complete information about the disputed claims process from the initial

request to the carrier for reconsideration through the requirements for

bringing suit when OPM concurs with the carrier's reconsideration

decision to deny the claim.

We have also modified the regulations at Sec. 890.107(c) to clarify

that recovery in the FEHB Program is accomplished through a directive

from OPM to the carrier to make payment according to the court's order.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because the

regulations primarily affect individuals enrolled under the Federal

Employees Health Benefits Program.

List of Subjects in 5 CFR Part 890

Administrative practice and procedure, Government employees, Health

facilities, Health insurance, Health professions, Hostages, Iraq,

Kuwait, Lebanon, Reports and recordkeeping requirements, Retirement.

Office of Personnel Management.

James B. King,

Director.

Accordingly, OPM is amending 5 CFR part 890 as follows:

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

1. The authority citation for part 890 continues to read as

follows:

Authority: 5 U.S.C. 8913; Sec. 890.803 also issued under 50

U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; subpart L also issued

under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended.

2. In Sec. 890.101 paragraph (a) is amended by adding a definition

of ``covered individual'' to read as follows:

Sec. 890.101 Definitions; time computations.

(a) * * *

Covered individual means an enrollee or a covered family member.

* * * * *

3. Section 890.105 is revised to read as follows:

Sec. 890.105 Filing claims for payment or service.

(a) General. (1) Each health benefits carrier resolves claims filed

under the plan. All health benefits claims must be submitted initially

to the carrier of the covered individual's health benefits plan. If the

carrier denies a claim (or a portion of a claim), the covered

individual may ask the carrier to reconsider its denial. If the carrier

affirms its denial or fails to respond as required by paragraph (c) of

this section, the covered individual may ask OPM to review the claim. A

covered individual must exhaust both the carrier and OPM review

processes specified in this section before seeking judicial review of

the denied claim.

(2) This section applies to covered individuals and to other

individuals or entities who are acting on the behalf of a covered

individual and who have the covered individual's specific written

consent to pursue payment of the disputed claim.

(b) Time limits for reconsidering a claim. (1) The covered

individual has 6 months from the date of the notice to the covered

individual that a claim (or

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a portion of a claim) was denied by the carrier in which to submit a

written request for reconsideration to the carrier. The time limit for

requesting reconsideration may be extended when the covered individual

shows that he or she was prevented by circumstances beyond his or her

control from making the request within the time limit.

(2) The carrier has 30 days after the date of receipt of a timely-

filed request for reconsideration to:

(i) Affirm the denial in writing to the covered individual;

(ii) Pay the bill or provide the service; or

(iii) Request from the covered individual or provider additional

information needed to make a decision on the claim. The carrier must

simultaneously notify the covered individual of the information

requested if it requests additional information from a provider. The

carrier has 30 days after the date the information is received to

affirm the denial in writing to the covered individual or pay the bill

or provide the service. The carrier must make its decision based on the

evidence it has if the covered individual or provider does not respond

within 60 days after the date of the carrier's notice requesting

additional information. The carrier must then send written notice to

the covered individual of its decision on the claim. The covered

individual may request OPM review as provided in paragraph (b)(3) of

this section if the carrier fails to act within the time limit set

forth in this paragraph (b)(2)(iii).

(3) The covered individual may write to OPM and request that OPM

review the carrier's decision if the carrier either affirms its denial

of a claim or fails to respond to a covered individual's written

request for reconsideration within the time limit set forth in

paragraph (b)(2) of this section. The covered individual must submit

the request for OPM review within the time limit specified in paragraph

(e)(1) of this section.

(4) The carrier may extend the time limit for a covered

individual's submission of additional information to the carrier when

the covered individual shows he or she was not notified of the time

limit or was prevented by circumstances beyond his or her control from

submitting the additional information.

(c) Information required to process requests for reconsideration.

(1) The covered individual must put the request to the carrier to

reconsider a claim in writing and give the reasons, in terms of

applicable brochure provisions, that the denied claim should have been

approved.

(2) If the carrier needs additional information from the covered

individual to make a decision, it must:

(i) Specifically identify the information needed;

(ii) State the reason the information is required to make a

decision on the claim;

(iii) Specify the time limit (60 days after the date of the

carrier's request) for submitting the information; and

(iv) State the consequences of failure to respond within the time

limit specified, as set out in paragraph (b)(2) of this section.

(d) Carrier determinations. The carrier must provide written notice

to the covered individual of its determination. If the carrier affirms

the initial denial, the notice must inform the covered individual of:

(1) The specific and detailed reasons for the denial;

(2) The covered individual's right to request a review by OPM; and

(3) The requirement that requests for OPM review must be received

within 90 days after the date of the carrier's denial notice and

include a copy of the denial notice as well as documents to support the

covered individual's position.

(e) OPM review. (1) If the covered individual seeks further review

of the denied claim, the covered individual must make a request to OPM

to review the carrier's decision. Such a request to OPM must be made:

(i) Within 90 days after the date of the carrier's notice to the

covered individual that the denial was affirmed;

(ii) If the carrier fails to respond to the covered individual as

provided in paragraph (b)(2) of this section, within 120 days after the

date of the covered individual's timely request for reconsideration by

the carrier; or

(iii) Within 120 days after the date the carrier requests

additional information from the covered individual, or the date the

covered individual is notified that the carrier is requesting

additional information from a provider. OPM may extend the time limit

for a covered individual's request for OPM review when the covered

individual shows he or she was not notified of the time limit or was

prevented by circumstances beyond his or her control from submitting

the request for OPM review within the time limit.

(2) In reviewing a claim denied by the carrier, OPM may:

(i) Request that the covered individual submit additional

information;

(ii) Obtain an advisory opinion from an independent physician;

(iii) Obtain any other information as may in its judgment be

required to make a determination; or

(iv) Make its decision based solely on the information the covered

individual provided with his or her request for review.

(3) When OPM requests information from the carrier, the carrier

must release the information within 30 days after the date of OPM's

written request unless a different time limit is specified by OPM in

its request.

(4) Within 90 days after receipt of the request for review, OPM

will either:

(i) Give a written notice of its decision to the covered individual

and the carrier; or

(ii) Notify the individual of the status of the review. If OPM does

not receive requested evidence within 15 days after expiration of the

applicable time limit in paragraph (e)(3) of this section, OPM may make

its decision based solely on information available to it at that time

and give a written notice of its decision to the covered individual and

to the carrier.

(5) OPM, upon its own motion, may reopen its review if it receives

evidence that was unavailable at the time of its original decision.

4. Section 890.107 is revised to read as follows:

Sec. 890.107 Court review.

(a) A suit to compel enrollment under Sec. 890.102 must be brought

against the employing office that made the enrollment decision.

(b) A suit to review the legality of OPM's regulations under this

part must be brought against the Office of Personnel Management.

(c) Federal Employees Health Benefits (FEHB) carriers resolve FEHB

claims under authority of Federal statute (5 U.S.C. chapter 89). A

covered individual may seek judicial review of OPM's final action on

the denial of a health benefits claim. A legal action to review final

action by OPM involving such denial of health benefits must be brought

against OPM and not against the carrier or carrier's subcontractors.

The recovery in such a suit shall be limited to a court order directing

OPM to require the carrier to pay the amount of benefits in dispute.

(d) An action under paragraph (c) of this section to recover on a

claim for health benefits:

(1) May not be brought prior to exhaustion of the administrative

remedies provided in Sec. 890.105;

(2) May not be brought later than December 31 of the 3rd year after

the year in which the care or service was provided; and

(3) Will be limited to the record that was before OPM when it

rendered its

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decision affirming the carrier's denial of benefits.

[FR Doc. 96-8373 Filed 4-4-96; 8:45 am]

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