The Office of General Counsel issued the following opinion on May 17, 2004, representing the position of the New York State Insurance Department.
Re: New York External Appeal Law
Is a self-funded employer sponsored health benefit plan subject to New Yorks External Appeal Law, New York Insurance Law Article 49 (McKinney 2000) and New York Public Health Law Article 49 (McKinney 2002)?
Such a plan is not subject to New Yorks External Appeal Law, but is subject to regulations promulgated in accordance with the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 et seq. (West 1999 and 2003 Supplement).
The inquirer is retired from employment with a former employer who does business nationwide. The inquirer continues to be covered under the former employers health benefit plan for employees. The plan is totally self-funded and receives contributions from at least both the former employee and retired employees. As a retired employee, the inquirer contributes what he understands to be 40% of the aggregate cost of the benefits. The plan is administered by an insurer that operates both commercial insurers and a Health Maintenance Organization in New York.
The inquirer has been denied coverage for a prescription drug on the grounds that the use to which the drug will be put is not the use for which the United States Food & Drug Administration approved it. The inquirer believes that the denial is in error, since numerous articles in medical journals support the use to which the drug will be put in the inquirers case.
The inquirer has appealed the denial and has been informed by both the former employer and the insurer/administrator that both levels of appeal will be handled by the insurer/administrator. Since the inquirer has doubts about the fairness and impartiality of the insurer/administrator, the inquirer has inquired if he has any rights under New Yorks External Appeal Law.
It appears that the inquirers plan is a employee welfare benefit plan, as that term is defined in ERISA, 29 U.S.C.A. § 1002(1) (West 1999), and that as a retired employee you are a participant under the plan. 29 U.S.C.A. § 1002(7). In accordance with ERISA, 29 U.S.C.A. § 1144(a) (West 1999), ERISA generally supersedes state insurance laws. In addition, the New York External Appeal Law, New York Insurance Law § 4910 et seq. (McKinney 2000) and New York Public Health Law § 4910 et seq. (McKinney 2002), is, as is New Yorks Internal Appeal Law, specifically made not applicable to ERISA plans. New York Insurance Law § 4908 (McKinney 2000) and New York Public Health Law § 4908 (McKinney 2002).
In effectuation of ERISA, the United States Department of Labor has promulgated a claims settlement regulation. 29 C.F.R. § 2560.503-1 (2000). The Department of Labor regulation, 29 C.F.R. § 2560.503-1(h), establishes criteria that must be met by plans in handling appeals of adverse determinations. Among the criteria, is 25 C.F.R. § 2560.503-1(h)(3)(iii):
Provide that, in deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, including determinations with regard to whether a particular treatment, drug, or other item is experimental, investigational, or not medically necessary or appropriate, the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.
While the Department of Labor regulation does not require external appeals, in accordance with ERISA, 29 U.S.C.A. § 1132(a)(1)(B) (West 1999 and 2003 Supplement), if a participant is unsatisfied with the plans determination, he or she may bring a court action to secure the required benefit.
Any questions concerning ERISA requirements, including the claims settlement regulation, should be addressed to:
Employee Benefit Security Administration
United States Department of Labor
Boston, MA 02203.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.