Employee Retirement Income Security Act of 1974; Rules and Regulations
for Administration and Enforcement; Claims Procedure; Final Rule [07/09/2001]
Volume 66, Number 131, Page 35885-35888
[[Page 35885]]
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Part VI
Department of Labor
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Pension and Welfare Administration
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29 CFR Part 2560
Employee Retirement Income Security Act of 1974; Rules and Regulations
for Administration and Enforcement; Claims Procedure; Final Rule
[[Page 35886]]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
29 CFR Part 2560
RIN 1210-AA61
Employee Retirement Income Security Act of 1974; Rules and
Regulations for Administration and Enforcement; Claims Procedure
AGENCY: Pension and Welfare Benefits Administration, Department of
Labor.
ACTION: Final Regulation; delay of applicability date.
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SUMMARY: This action delays for at least six months and not more than
one year the applicability date for the regulation governing minimum
requirements for benefit claims procedures of group health plans
covered by Title I of the Employee Retirement Income Security Act. As
published on November 21, 2000, the benefit claims procedure would be
applicable to claims filed on or after January 1, 2002. The current
action amends the regulation so that it will apply to group health
claims filed on or after the first day of the first plan year beginning
on or after July 1, 2002, but in no event later than January 1, 2003.
This action provides a limited additional period within which group
health plan sponsors, administrators, and service providers can bring
their claims processing systems into compliance with the new
requirements. A postponement of the applicability date with respect to
group health claims will allow a more orderly transition to the new
standards and will avoid the confusion and additional expense that
would be caused if certain pending Congressional bills are enacted
before or soon after the original applicability date. This action does
not apply to pension plans or plans providing disability or welfare
benefits (other than group health). For these plans, the regulation
will continue to be applicable to claims filed on or after January 1,
2002.
EFFECTIVE DATE: July 9, 2001.
FOR FURTHER INFORMATION CONTACT: Susan G. Lahne, Office of Regulations
and Interpretations, Pension and Welfare Benefits Administration,
Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210, telephone (202) 219-7461. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
A. Background
On November 21, 2000, the Department of Labor (the Department)
published in the Federal Register (65 FR 70246) a final regulation,
designated as Sec. 2560.503-1 of Title 29 (the regulation), which
revised the minimum requirements for benefit claims procedures of all
employee benefit plans covered under Title I of the Employee Retirement
Income Security Act of 1974 (ERISA). In particular, the regulation made
substantial changes in the way in which employee benefit plans must
process claims for group health benefits. These changes include shorter
time frames for decisionmaking, new procedural standards for appeals of
denied claims, and increased disclosure to claimants. The regulation
also made changes to the procedural requirements for processing
disability claims. With respect to other types of benefits, the
regulation largely continued the standards applicable under the
previous regulation, which has been in force since 1977.
Since the publication of the regulation, a number of issues have
been raised by plan sponsors, service providers, state regulators, and
others concerning the interpretation and application of the various
provisions and requirements of the regulation that apply to group
health plans. In this regard, the Department has been requested to
provide additional guidance concerning the regulation in order to
ensure efficient and effective implementation of the new rules. In
addition, it has been argued that a delay of the regulation's
applicability date is necessary for group health plans and service
providers to better understand the requirements of the regulation, as
well as to take into account clarifying guidance from the Department,
and to efficiently implement the significant systems and other changes
required by the new rules. It also has been argued that an extension of
the regulation's applicability date is necessary to enable entities
subject to state regulation (e.g., insurers, managed care
organizations) to obtain state-level reviews and approvals of claims
processes and other changes required by the regulation. In addition,
concerns have been expressed about group health plans having to incur
substantial costs to make the procedural, systems, and other changes
necessary to accommodate the new rules while Congress is actively
considering Patients' Bill of Rights legislation that, if enacted,
would require new and additional changes to the same procedures and
systems.
The Department is committed to ensuring that participants and
beneficiaries are afforded fair and timely reviews of their benefit
claims. At the same time, the Department recognizes that an orderly,
efficient, and cost-effective implementation of the claims procedure
rules by group health plans will ultimately benefit all affected
parties, including plan participants and beneficiaries. In this regard,
the Department is persuaded that plans, service providers, and state
regulators would benefit from additional guidance from the Department
concerning the application of the claims procedure rules to group
health plans. The Department also is persuaded that the magnitude of
the procedural, systems, and other changes required by the regulation,
in conjunction with the need to obtain state-level approvals with
respect to such changes, may necessitate more time than was originally
thought necessary when the rules were adopted in November, 2000. The
Department also believes that there is a significant likelihood that
Patients' Bill of Rights legislation directly affecting the procedural
requirements for group health plans addressed in the final rules will
be enacted before, or shortly after, the January 1, 2002, applicability
date of the regulation. For these reasons, the Department has
determined that a limited and temporary deferral of the applicability
date of the claims procedure regulation for group health plans is
warranted. It should be noted, however, that this action does not apply
to pension plans or plans providing disability or welfare benefits
(other than group health). For these plans, the regulation will
continue to be applicable to claims filed on or after January 1,
2002.\1\
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\1\ As noted above, the rules applicable to pension plans (and
welfare plans other than group health and disability) have remained
essentially unchanged from the 1977 regulation. Further, issues
raised with respect to group health plans, including the impact of
Patients' Bill of Rights legislation, have not been raised with
respect to plans providing disability or other welfare benefits.
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Under the amendment, the regulation will apply to group health
claims filed on or after the first day of the first plan year beginning
on or after July 1, 2002, but in no event later than January 1, 2003.
The effect of this amendment will be to provide plans an additional
compliance period for group health claims of at least six months (from
January 1, 2002, to July 1, 2002). For group health plans with plan
years beginning on July 1, 2002, the regulation will begin to apply to
new claims filed under those plans as of that date; group health plans
with plan years beginning from July 2, 2002, through December 31, 2002,
will need to begin processing new claims under the regulation as of the
beginning of that plan year. Calendar year group health plans and all
other
[[Page 35887]]
group health plans will be required to comply with respect to all new
claims filed on or after January 1, 2003.
During the period before the relevant applicability dates, the
Department expects plans, at a minimum, to continue to comply with the
procedural rules that were in effect before promulgation of the
regulation. For those periods, compliance with either the claims
procedure regulation published on November 21, 2000, or as in effect
prior to January 20, 2001, will be considered by the Department to be
in compliance with the requirements of section 503 of ERISA.
This amendment is published as a final rule, effective as of the
date of publication in the Federal Register. The Department's
implementation of this rule without opportunity for public comment is
based on the good cause exception in 5 U.S.C. 553(b)(3)(B). The
Department has determined, for the following reasons, that seeking
public comment would be impracticable and contrary to the public
interest.\2\
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\2\ An agency may find that a comment period is impractical when
it would impede the due and timely execution of the agency's
function. A comment period is contrary to the public interest when
the interest of the public would be defeated by any requirement of
advance notice. U.S. Dept. of Justice, Attorney General's Manual on
the Administrative Procedure Act 30-31 (1947).
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Absent the temporary postponement provided herein, the affected
parties would have to be ready to comply with the regulation by January
1, 2002, a date that is less than six months distant from the date of
publication. Therefore, for this action to serve its intended purpose,
it must become effective as soon as possible. If the Department
published this action in proposed form with a period for notice and
comment, the affected parties would remain in doubt concerning whether
compliance could be postponed. Given the imminence of the regulation's
applicability date, the period for notice and comment would exhaust
most of the remaining compliance period without providing certainty to
the regulated public. Because the delay would exacerbate the pressures
on employers, plan administrators, service providers, state regulators,
and others affected by the rules and increase their confusion as to
when compliance with the new procedural standards is mandatory, and
because this action merely delays application of the standards for a
limited period of time, the Department believes publication of the
final action without notice and comment is justified under 5 U.S.C.
553(b).
The Department has also determined that good cause exists to make
this rule effective upon publication without providing the 30-day
period between publication and the effective date contemplated by 5
U.S.C. 553(d). The purpose of a delayed effective date is to afford
persons affected by a rule a reasonable time to prepare for compliance.
Because this action has precisely that effect--giving affected parties
additional time within which to comply with the new standards--the
delay contemplated by section 553(d) would not serve this purpose, the
Department finds that good cause exists to make this amendment
effective upon publication.
B. Economic Analysis
1. Executive Order 12866
Under Executive Order 12866, the Department must determine whether
the regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the Office
of Management and Budget (OMB). Under section 3(f), the order defines a
``significant regulatory action'' as an action that is likely to result
in a rule: (1) Having an annual effect on the economy of $100 million
or more, or adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or state, local or tribal governments or communities (also
referred to as ``economically significant''); (2) creating serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raising novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
Pursuant to the terms of the Executive Order, it has been
determined that this action is ``significant'' as defined above, and
accordingly was reviewed by the Office of Management and Budget. By
delaying the applicability date of the claims procedure regulation for
group health plans, this action will slightly alter the timing of the
regulation's economic effects for such plans, but generally will not
alter the magnitude or nature of those effects. In particular, this
action will allow group health plans to spread the start-up cost of
complying with the regulation for six to twelve months beyond January
1, 2002. Once the regulation is applicable, its ongoing costs and
benefits are expected to be the same as originally estimated.
2. Regulatory Flexibility Act
Because this amendment is being published as a final rule without
prior notice and a period for comment, the Regulatory Flexibility Act
does not apply.
3. Paperwork Reduction Act
This action is not subject to the requirements of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) because it does not
contain a ``collection of information'' as defined in 44 U.S.C.
3502(3). This final rule will not substantially or materially change
the information collection provisions of 29 CFR Sec. 2560.503-1 as
currently approved by OMB control number 1210-0053.
4. Unfunded Mandates Reform Act
Because this amendment is a final rule, section 202 of the Unfunded
Mandates Reform Act of 1995, 2 U.S.C. 1531 (UMRA), does not apply. For
purposes of Executive Order 12875, this rule does not include a Federal
mandate that may result in expenditures by state, local or tribal
governments.
5. Small Business Regulatory Enforcement Fairness Act
This final rule is subject to the provisions of the Small Business
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.)
(SBREFA). The rule is not a major rule, as that term is defined by 5
U.S.C. 804, and has been transmitted to Congress and the Comptroller
General for review.
List of Subjects in 29 CFR Part 2560
Employee benefit plans, Employee retirement income security act,
benefit claims procedures
For the reasons set out in the preamble, 29 CFR part 2560 is
amended as follows:
PART 2560--RULES AND REGULATIONS FOR ADMINISTRATION AND ENFORCEMENT
1. The authority citation for part 2560 continues to read as
follows:
Authority: Secs. 502, 505 of ERISA, 29 U.S.C. 1132, 1135, and
Secretary's Order 1-87, 52 FR 13139 (April 21, 1987).
Section 2560-502-1 also issued under sec. 502(b)(1), 29 U.S.C.
1132(b)(1).
Section 2560-502i-1 also issued under sec. 502(i), 29 U.S.C.
1132(i).
Section 2560-503-1 also issued under sec. 503, 29 U.S.C. 1133.
2. Revise paragraph (o) of Sec. 2560.503-1 to read as follows:
[[Page 35888]]
Sec. 2560.503-1 Claims Procedure.
* * * * *
(o) Applicability dates.
(1) Except as provided in paragraph (o)(2) of this section, this
section shall apply to claims filed under a plan on or after January 1,
2002.
(2) This section shall apply to claims filed under a group health
plan on or after the first day of the first plan year beginning on or
after July 1, 2002, but in no event later than January 1, 2003.
Signed at Washington, DC, this 3rd day of July, 2002.
Ann L. Combs,
Assistant Secretary, Pension and Welfare Benefits Administration, U.S.
Department of Labor.
[FR Doc. 01-17145 Filed 7-5-01; 11:26 am]
BILLING CODE 4510-29-P
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