Benefits July 31, 2024

Health Claim Denial Appeal Rates Should be Higher, Experts Argue

ERISA Advisory Council hears from experts about the reasons why health plan participants often fail to challenge denied claims.

Reported by

The ERISA Advisory Council in a hearing earlier this month highlighted serious issues with the appeals process for health insurance claim denials that might not be widely appreciated by the sponsors of those plans.

The council, which advises the Department of Labor and make recommendations on the department’s functions under the Employee Retirement Income Security Act, hosted experts on July 8-10 to discuss the issue of health plan claim denials and related appeals.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The witnesses at the hearing characterized the process of appeals as needlessly complicated and opaque such that very few health insurance plan participants know that they can appeal, how to appeal, or have any confidence that an appeal would be taken seriously.

The three-day hearing also discussed potential reforms to qualified default investment alternatives.

Representatives of the DOL’s Employee Benefits Security Administration addressed the council to explain some of the basic legal requirements for claim-denial appeals. Jeffrey Turner, the director for the Office of Regulations and Interpretations at EBSA, explained that “adverse benefit determination letters have a lot of requirements.” For example, a participant must have at least 180 days to file an appeal and “a fundamentally fair appeal is a basic right.” Urgent care appeals must be decided in 72 hours, and the insurer must accept the provider’s assertion that a claim is urgent.

In practice, however, things are not as simple. Meiram Bendat, the founder and president of PsychAppeal, a law firm that specializes in mental health insurance advocacy, explained to the council that urgent status determinations are “legally binding” and “there is no legal basis for health plans to second guess these judgements.”

“But in practice [second guessing] happen[s] fairly regularly,” Bendat explained, and insurers “routinely override such decisions, particularly with respect to outpatient services.” Bendat said that appeals to the DOL are unrealistic and “the DOL takes far too long to address complaints,” that is, if participants are even aware of their right to try.

Participants can appeal claims denials to independent review organization through an external review process to obtain benefits. But Bendat characterizes this process as riddled with conflicts and being deliberately hidden from participants such that it is “exceedingly difficult to access,” and insurers provide “no clearly visible web links” to access external review.

Bendat made two policy recommendations to the council. First, DOL should issue a FAQ clarifying that urgent cases are not limited to inpatient procedures, because urgent claim denials are disproportionately related to outpatient care. Second, since plans cannot change the urgent status determination of a provider, if a plan fails to respond within the required 72 hours, a claim should be automatically approved.

Brian King, the founder of the Brian S. King Law Office, said insurance companies are under a lot of pressure “to find reasons to deny claims,” and “there is a financial incentive for insurers to provide as little information as possible” to participants, such that participants often do not understand how to appeal or on what basis they can appeal.

He adds that participants challenging denials can often find plaintiffs’ attorneys who can work on contingency, but many claim denials for smaller amounts of money never get challenged because it is not economical to hire an attorney.

A statement provided by the Leukemia and Lymphoma Society to the Council agreed: “appeals are vanishingly rare, yet some research on appeals outcomes suggests that insurers may be issuing denials without sufficiently examining the validity or necessity of a claim before denying it.”

The Leukemia and Lymphoma Society said that only “a miniscule number” of appeals are made, estimating that about 90,000 of the 48 million denied claims are appealed. “Even when consumers do appeal, the process is daunting, opaque, and exhausting,” according to the statement.

The advisory council will likely issue later this year a report from the hearing that may contain policy recommendations to the DOL.

Products July 31, 2024

Franklin Templeton Partners With Insurer Pacific Life on In-Plan Income Option

A longstanding collaboration leads to a defined contribution managed account with an annuity investing option for participants.

Reported by

Franklin Templeton (Franklin Resources Inc.) and Pacific Life Insurance Co. on Tuesday announced their entrance into the defined contribution lifetime income market through a defined contribution managed account.

The firms’ partnership will see Franklin Templeton’s Goals Optimization Engine advice offering guide participant’s to “determine how much should be allocated” to a deferred fixed-income annuity provided by Pacific Life. The offering is designed for participants to accumulate during their working years a future income stream for their retirement years.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“Once participants are ready to retire, they will then have the ability to turn that income stream on while receiving draw down advice on the remainder of their portfolio,” the firms wrote in an emailed statement. “This innovative approach to providing lifetime income to DC participants does so in a simple, holistic and personalized way.”

Franklin Templeton and Pacific Life enter an increasingly crowded field of DC retirement income options backed in various forms by direct annuity purchases or the option of annuitizing savings. While a popular topic in the retirement industry, the “pension-like” solutions are still in early stages of development, with firms such as Morningstar and Broadridge have recently developing methods of benchmarking and evaluating how they might work if implemented by plan sponsors.

Franklin Templeton and Pacific Life’s managed account can be set up by plan sponsors either as a participant opt-in or a qualified default investment alternative, according to the firms. It will be set up through a collective investment trust, which can offer lower fees when compared to investments such as mutual funds; the firms did not immediately respond to request for a fee range for the offering.

If participants leave the plan, they will “preserve the guarantees they’ve accumulated,” according to the firms’ email response. The firms also noted that they are using a middleware provider for the annuity that can integrate across multiple recordkeepers if those recordkeepers partner on offering the investment.

“Participants who leave their employer can retain their interest in the in-plan annuity until retirement, sell their investment and roll over to an IRA, or, if they are past [age 59.5], opt to take the annuity with either an immediate or deferred (up to age 73) payout,” the firms wrote.

As of now, Franklin Templeton and Pacific Life have a plan sponsor agreement to offer the solution and are working with that sponsor’s recordkeeper on implementing it, the firms wrote. They are also in conversations with other recordkeepers to start offering the investment on their platforms.

“This is a significant time for retirement income, and [we are] committed to partnering with advisors, consultants, asset managers and recordkeepers to connect plan sponsors with innovative lifetime income solutions,” the firms wrote.

The offering, the firms also noted, is the results of years of collaboration. Pacific Life noted in the announcement that studies it has conducted found 58% of respondents prefer “incremental lifetime income purchases” instead of a larger purchase of an annuity at retirement.

“The design of Income Horizon aligns with this preference for incremental purchases over time,” said Brian Woolfolk, executive vice president and head of institutional business at Pacific Life, in a statement. “When integrated with GOE, [it] creates a simple, holistic, and personalized approach to securing lifetime income in retirement for plan participants. This innovative solution built with Franklin Templeton is a significant advancement over the traditional one-size-fits-all approach.”

 

«