CMS-10338_Supporting_Statement_30-Day Notice

Supporting Statement Part A
Affordable Care Act Internal Claims and Appeals and External Review Procedures for Non-grandfathered
Group Health Plans and Issuers and Individual Market Issuers for Paperwork Reduction Act Submission
(CMS-10338/OMB Control Number 0938-1099)

A. Background
The Patient Protection and Affordable Care Act, Public Law 111-148, (the Affordable Care Act) was
enacted by President Obama on March 23, 2010. As part of the Act, Congress added PHS Act section
2719, which provides rules relating to internal claims and appeals and external review processes. On July
23, 2010 an interim final rule (IFR) implementing section 2719 of the PHS Act was published. The
interim final rule was amended in June 24, 2011. The amended IFR specified rules governing the internal
claims and appeals and external review processes. The Departments of Health and Human Services, Labor
and Treasury (the Departments) finalized the IFR on November 18, 2015. The 2015 final rule (FR)
clarifies consumer rights and aligns the appeals process across all types of plans, starting in 2018. The
2015 final rule will be hereinafter referred to as the Appeals regulation.

B. Justification
1.

Need and Legal Basis

With respect to internal claims and appeals processes for group health coverage, PHS Act section 2719
and paragraph (b)(2)(i) of the Appeals regulation provide that group health plans and health insurance
issuers offering group health insurance coverage must comply with the internal claims and appeals
processes set forth in 29 CFR 2560.503-1 of the Department of Labor (DOL) claims procedure regulation,
and update such processes in accordance with standards established by the Secretary of Labor in
paragraph (b)(2)(ii) of the regulation. Paragraph (b)(3)(i) requires issuers offering coverage in the
individual health insurance market to also comply with the DOL claims procedure regulation as updated
by the Secretary of Health and Human Services (HHS) in paragraph (b)(3)(ii) of the Appeals regulation
for their internal claims and appeals processes.
The DOL claims procedure regulation requires plans to provide participants and beneficiaries (claimants)
who are denied a claim with a written or electronic notice that contains the specific reasons for the denial, a
reference to the relevant plan provisions on which the denial is based, a description of any additional
information necessary to perfect the claim, and a description of steps to be taken if the participant or
beneficiary wishes to appeal the denial. The DOL claims procedure regulation also requires that any
adverse benefit determination made upon review be in writing (including electronic means) and include
specific reasons for the decision, as well as references to relevant plan provisions. Paragraph (b)(3)(ii)(C) of
the Appeals regulation adds an additional requirement that non-grandfathered ERISA-covered group health
plans provide to the claimant, free of charge, any new or additional evidence considered or relied upon, or

1

generated by the plan or issuer in connection with the claim 1. PHS Act section 2719 also requires that nongrandfathered group health plans and health insurance issuers offering non-grandfathered group or
individual coverage comply with either a state external review process or a federal external review process.
The Appeals regulation provides a basis for determining when plans and issuers must comply with an
applicable state external review process and when they must comply with the federal external review
process.
The Appeals regulation provided temporary rules to permit states to operate their external processes until
January 1, 2018 to avoid unnecessary disruption while states worked to adopt the consumer protections set
forth by the PHS Act section 2719 and the Appeals regulation. Starting in 2018, all issuers are required to
comply with the federal consumer protection standards for the appeals process. To the extent the state in
which the issuer operates does not meet the minimum federal external review standards, or the plan or
issuer is not subject to a state external review process, the plan or issuer may choose to either contract with
Independent Review Organizations (IROs) (also referred to as Private, Accredited IROs), as described in
section 45 CFR 147.136(d)(2) of the Appeals regulation, or participate in the HHS-administered federal
external review process described in section 45 CFR 147.136(d)(4) of the Appeals regulation.
Claimants may submit a request via a web-based portal, mail, email, or fax directly to HHS, if claimants
belong to plans that elect to participate in the HHS-administered federal external review process. The webbased portal may be used to request an external review of a plan or issuer’s determination and to check on
the status of their submitted request. Claimants who request a review online are required to attach
documentation that supports their request.
The DOL claims procedure regulation imposes information collection requirements as part of the
reasonable procedures that an employee benefit plan must establish regarding the handling of a benefit
claim. These requirements include third-party notice and disclosure requirements that the plan must satisfy
by providing information to participants and beneficiaries of the plan. The Appeals regulation includes
additional requirements that must be met or exceeded.
2.

Information Users

The information collection requirements included in the DOL claims procedure regulation and the
Appeals regulation ensure that claimants receive adequate information regarding the plan’s claims
procedures and the plan’s handling of specific benefit claims. Claimants need to understand plan
procedures and plan decisions in order to appropriately request benefits and/or appeal benefit denials. The
information collected in connection with the HHS-administered federal external review process is
collected by HHS, and is used to provide claimants with an independent external review.
3.

Use of Information Technology

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Such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit
determination on review is required to be provided to give the claimant a reasonable opportunity to respond prior to that date.
Additionally, before the plan or issuer can issue an adverse benefit determination on review based on a new or additional rationale,
the claimant must be provided, free of charge, with the rationale. The rationale must be provided as soon as possible and
sufficiently in advance of the date on which the notice of adverse benefit

2

The DOL claims regulation and the Appeals regulation do not restrict plans’ use of electronic technology to
process and pay claims, to maintain information on the basis for claim determination, and to generate
correspondence related to claims processing decisions.
Starting in 2018, the Appeals regulation provides consumers a secure, online portal, which may be used as
an additional tool to request and process HHS-administered federal external review requests.
This burden estimate incorporates the Departments’ assumptions, which are described in the response to
item 12 below, concerning the rate of use by plans and issuers, and claimants, of electronic means of
communication.
4.

Duplication of Efforts

No duplication with other federal statutes exists. In some circumstances, states may require substantially
similar information to be provided to insured persons. However, no duplication occurs because the same
information disclosure may be used to satisfy duplicative or overlapping requirements.
5.

Small Businesses

The regulation applies to all employee benefit plans and therefore is likely to affect small entities that
provide benefits. For the purposes of the FR, small entities that fall under HHS’ regulatory authority
would include small health insurance insurers and small self-insured nonfederal governmental health
plans.
We believe that few, if any, insurance companies underwriting comprehensive health insurance policies are
small entities. Using data from the 2009 Current Population Survey, HHS estimates that the Appeals
regulation will affect an estimated 5.73 percent of nonfederal governmental health plans that qualify as
small plans. The Departments took into account the potential burden on small entities in structuring the
regulation by permitting plan sponsors the maximum possible flexibility in designing their plans, including
the possibility of hiring third-party service providers to carry out these administration responsibilities in
order to make use of the lowest cost method of compliance available. A large majority of small plans
purchase claims administration services from insurers, HMOs, and other service providers, and the
Departments has taken this fact into account in deriving its burden estimates. These service providers
typically develop a single claims processing system to service a large number of customers, including small
entities. The cost of revising and implementing the procedures is therefore spread widely over a large
number of small plans, minimizing burden on those plans. Moreover, small plans and their respective
enrollees benefit equally from the service provider’s expertise and ability to provide improved accuracy and
timeliness in claims and appeals determinations.
6.

Less Frequent Collection

The information collection requirements arise in connection with the occurrence of individual claims for
benefits, and consist of third-party notices and disclosures. No information is reported to the federal
government other than that which is necessary for HHS to facilitate an external review. The information
collection provisions of the regulation ensure that sufficient information is provided to claimants so that
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they may fully exercise their rights under their coverage. The information collection is necessary to ensure
that claimants in plans or policies in states whose external review processes do not meet the requirements of
2719(b)(1) and 2719(b)(2), as well as plans not subject to a state external review process across the country,
can access their rights as described in PHS Act Section 2719.
7.

Timing of Notification

The DOL claims procedure regulation, the Appeals regulation and federal external review process
guidelines together impose special timing requirements for the handling of claims in the fully insured and
small group markets, self-funded nonfederal governmental health plans, and plans not subject to a state
external review process in cases where the state does not have an external review process that meets federal
requirements. 45 CFR 147.136(b)(2) of the Appeals regulation also provides a basis for special timing
requirements set forth by the DOL claims procedure regulation.
First, for claims involving “urgent care”, the Appeals regulation provides processes set forth by the DOL
claims procedure regulation, which requires, in general, that claimants be notified of health benefit
determinations “as soon as possible, but not later than 72 hours after receipt of the claim by the plan. . . .”
45 CFR 147.136(b)(2)(ii)(B). In cases involving urgent care where the health claim is a request to extend
the time period or number of treatments of ongoing medical care, this period is 24 hours,
Second, for “pre-service” claims, the Appeals regulation, incorporates the requirement that claimants be
notified of health benefit determinations “within a reasonable period of time appropriate to the medical
circumstances, but not later than 15 days after receipt of the claim by the plan.” 45 CFR 147.136(b)(1).
Pre-service claims involve plan requirements that a claimant obtain approval from the plan prior to
receiving health care services or products in order to maintain eligibility for benefits.
Third, for “post-service” health benefit claims, the Appeals regulation requires that notification of an
adverse benefit determination “within a reasonable period of time, but not later than 30 days after receipt
of the claim.” Even though 30 days is the maximum response time for these claims, a plan must provide a
determination sooner if it is reasonable to do so. Disability benefit claims are subject to a similar
construct, except that the maximum response time is 45 days. 45 CFR 147.136(b)(1)
To facilitate external review for claimants in plans or coverage not subject to a state external review
process, the plans or issuers are required to electronically notify HHS as to whether they are subject to a
federal external review process under PHS Act 2719 and to specify the insurance package(s) to which it
applies. If the package is subject to a federal external review process under PHS Act Section 2719, the
plan or issuer is required to notify HHS which federal external review process they are using and provide
contact information for designated personnel in their appeals department, including names, mailing
address, telephone numbers, facsimile numbers and electronic mail addresses. Issuers and self-funded
nonfederal governmental health plans that elect to use the HHS-administered federal external review
process will also be required to provide the claimants’ relevant files to the HHS external review contractor
in fewer than five days, upon request.
These timing requirements are related to policy objectives in an area of important public concern. For
example, the shortest time frame for “urgent care” claims applies only under circumstances in which
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delay could seriously jeopardize the life or health of the claimant or the ability of the claimant to regain
maximum function, or where delay would subject the claimant to severe pain. The next shortest time
frame applies under pre-service claims in which medical care, while not urgent, has not been provided to
a claimant who needs treatment for a medical problem, and where the plan itself requires pre-approval of
the medical care before providing coverage. Post-service health claims and disability claims also involve
important concerns relating to the sick and disabled, but under these circumstances plans may take at
least 30 days to respond if it is reasonably necessary to do so.
Another reason why these time frames are important is that these notices relate to the payment of money
by a plan to claimants to whom fiduciary responsibilities are owed. Without enforcement of reasonable
deadlines, payers could be given a financial incentive to delay the payments, and this would likely be
inconsistent with appropriate fiduciary standards.
8.

Federal Register/Outside Consultation

A 60-day notice published in the Federal Register on August 15, 2019 (84 FR 41723). No
comments were received.
The 30-day Federal Register notice will be published on [xx xx, 2019].
9.
Payments/Gifts to Respondents
No payments or gifts are associated with these ICRs.
10.

Confidentiality

This information collection request (ICR) involves disclosures of information by issuers to
enrollees. Issues of confidentiality between third parties do not fall within the scope of this
information collection request.
11.

Sensitive Questions

These ICRs involve no sensitive questions.
12.

Burden Estimates (Hours & Wages)

The Department estimates that this information collection will affect an average 109,653 respondents
per year, over the next three years. HHS expects the number of respondents will increase over time as
more plans relinquish grandfathered status and must comply with the regulations. The frequency of
response will be on occasion, mirroring the frequency of benefit claims that require responses, resulting
in an estimated average hourly burden of 1,195,529 hours and with an associated average cost of $184
million per year over the next three years. It is expected that there will be an increase in the hour burden
and associated cost as grandfathered plans continue to lose that status in future years.
Under PHS Act section 2719, all sponsors of non-grandfathered group health plans and health insurance
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issuers offering group or individual health insurance coverage must comply with all requirements of the
DOL claims regulation as well as the new standards that are established by the Secretary of Labor and the
Secretary of Health and Human Services in paragraphs (b)(2) and (b)(3) of the 2015 FR. These estimates
include only ongoing costs of compliance with the statute, the DOL claims regulation, and the Appeals
regulation. Average labor costs are calculated using data from the Bureau of Labor Statistics 2.
Adjusted Hourly Wages Used in Burden Estimates

Occupation Title
Secretaries and Administrative
Assistants, Except Legal, Medical,
and Executive
Family and General Practitioner
Lawyer
Human Resources Manager
Medical Secretaries

Occupational
Code

Mean
Hourly
Wage
($/hour)

Adjusted
Hourly
Wage
($/hour)

43-6014
29-1062
23-1011
13-1070
43-6013

$17.38
$95.54
$67.5
$31.20
$16.85

$52.09
$162.63
$133.29
$78.73
$42.55

Ongoing burdens are a function of claims volume, as well as the denial and appeal rates of all plans.
Each covered individual was estimated to generate 10.2 claims on average per year 3, 82 percent of which
were filed electronically. The Departments then assumed that 15 percent of these claims were denied. 4
The Departments assume that three percent of these claims were pre-service with the remaining being
post-service claims. The number of post-service claims extended was based on the share of ‘‘clean’’
claims that took more than 30 days to complete processing. The share of denials expected to be appealed,
0.2 percent, was based on a RAND study. 5 The Departments expect half of these appeals to be reversed,
and those not reversed were divided between ‘‘medical claims’’ (28.9 percent) and ‘‘administrative
claims’’ (71.1 percent).
The transaction burden will vary widely with the type and complexity of the claim in question, but
the mix of claims and associated burdens generally are expected to be similar across plans of the
same type. The average time required for the information collection associated with any particular
type of health benefit claim transaction will range from one minute for certain routine automatic
notices to four and a half hours for certain disclosures on requests related to adverse benefit
determinations.
2

May 2016 Occupational Employment Statistics found at https://www.bls.gov/oes/2016/may/oes_stru.htm#43-0000. Adjusted
hourly wages are calculated as follows: (2016 BLS mean wage rate)/(ECEC ratio)*(Overhead load factor)*(inflation
rate)^2(inflated 2 years from base year).[PLEASE CHECK THIS WITH DOL]
3
Used previous estimates of 10.2 claims per enrollee to find number of claims and 3% as the share pre-service. Electronic vs.
Paper based on AHIP's May 2006 study
4
Share of denials based on HIAA (now AHIP) March 2003 report on Claims Payment Processes (and EBSA assumptions on
appeals)
5
Share of denials appealed based on RAND 2004 study entitled "Inside the Black Boc of Managed Care Decisions"

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The Departments attributed costs to notifying individuals of denied claims and processing appeals.
Initial denials were assumed to only take a few minutes for a clerical worker to draft and send an
adverse benefit determination notice based on the model notice issued by the Departments that
does not require any information to be included that cannot be auto-populated.
Appealed denials deemed “medical” in nature will require a physician 4.5 hours (at a rate of
$162.63) to review relevant appeals materials, make a determination, and draft a one page response,
resulting in an estimated cost of $731.84 per “medical” denial. Appealed denials deemed
“administrative” in nature will require a legal professional (at a rate of $133.29) approximately 2
hours to review the relevant materials and make a decision related to a reversal or approval of a
denial and draft a two page response, resulting in an estimated cost of $266.58. Each notice of
adverse benefit determination and notice of the decision of an internal appeal will incur a mailing
cost estimated at $0.65 per notice including, printing ($0.05 per page), and postage costs ($0.55
postage).
The Departments estimates that approximately 93 percent of large group health and all small group
health plans administer claims using a third-party provider. Approximately 5 percent of individuals
covered by group health insurance, as well as all people covered in the individual market insurance
claims, are administered in-house. In-house administration burdens are accounted for as hours,
while purchased services are accounted for as dollar costs. The hourly burden as well as mailing
costs for plans processing claims in-house is described below:
TABLE 1.--Hour and Cost Burden (in thousands)

Claims
Government
Sector ESI

Claims
Individual
Market

InHouse
Burden
Hours

In-House
Burden
Hours
Equivalent
Costs

InHouse
Burden
Mailing
Costs

OutHouse
Burden
Mailing
Cost

Out-House
Burden
Labor
Costs

In and Out
House
Cost
Burden
Total Cost
Burden

Pre-Service Claim
Approved

9,635

3,530

58.8

$3,065

$413.0

$1,066

$7,906

$4,895.9

Pre-Service Claim
Denied

1,700

623

20.8

$1,082

$72.9

$188

$2,791

$1,537.3

Post-Service Claim
Denied

54,977

20,144

671.5

$34,976

$2,356.8

$6,080

$90,226

$49,707.5

Post-Service Claim
Extended

13,634

6,422

107.0

$5,575

$751.4

$1,508

$11,188

$7,013.9

Denial Appeal
Total

77.8

36.6

186.8

$21,870

$23.8

$80

$43,887

$51,714.0

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InHouse
Burden
Mailing
Costs

OutHouse
Burden
Mailing
Cost

Out-House
Burden
Labor
Costs

In and Out
House
Cost
Burden
Total Cost
Burden

Claims
Government
Sector ESI

Claims
Individua
l Market

Appeal Upheld

51.9

24.4

47.9

$7,776.2

$17.7

$31.9

$13,978

$14,0276

Appeal Denied

77.8

36.6

160.6

$24,414.9

$26.6

$41.8

$43,887

$43,955.4

Medical Sub-Total

37.5

17.6

149.7

$24,352.0

$12.8

--

$43,774

$43,786.8

Claim Upheld

15.0

7.1

47.3

$7,690.1

$5.1

--

$13,823

$13,828.1

Claim Denied

22.5

10.6

102.5

$16,661.9

$7.7

--

$29,951

$29,958.7

Admin Sub Total

92.2

43.4

58.8

$7,839.2

$31.5

--

$14,091

$14,122.5

Claim Upheld

36.9

17.4

0.6

$86.1

$12.6

--

$155

$167.6

Claim Denied

55.3

26.1

58.2

$7,753.0

$18.9

--

$13,936

$13,954.9

90.8

42.8

4.0

$207.2

$16.6

$29.9

$304.2

$323.7

2.2

0.2

0.1

$15.9

$0.2

$1.4

$103.0

$104.6

80,415

30,939

1,671

$163,157

Fair and Full
Review
Notice of Decision
External Review
Total
•

In-House
Burden
Hours
Equivalent
Costs

InHouse
Burden
Hours

$3,751.0 $8,997
$329,696
$415,023
0
Assumed that 7 percent of large plan process these claims in-house in the Group Market. Large plans account for
69.5 percent of policy-holders and therefore 4.9 percent of claims are processed in-house.

Used previous estimates of 10.2 claims per enrollee to find number of claims and 3% as the share pre-service.
Electronic vs. Paper based on AHIP's May 2006 study
•

Share of denials based on HIAA (now AHIP) March 2003 report on Claims Payment Processes (and EBSA
assumptions on appeals)

•

Share of denials appealed based on RAND 2004 study entitled "Inside the Black Boc of Managed Care Decisions"

•

Share requesting external review and the reversal statistics taken from the January 2006 AHIP report on State
External Review Programs

•

Share of claims requiring extension based on the number of claims requiring more than 30 day to process, taken
from AHIP January 2010 study "A Survey of Health Care Claims Receipt and Processing Times, 2009."

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Non-English Language Assistance
As a result of the Appeals final regulation, plans and issuers must provide claimants who reside in
a county where ten percent or more of the population residing in the county is literate only in the
same non- English language with a one-sentence statement in all notices written in the applicable
non-English language about the availability of language services. In addition to including the
statement, plans and issuers are required to provide a customer assistance process (such as a
telephone hotline) with oral language services in the non-English language and provide written
notices in the non-English language upon request.
The Departments expects that the largest cost associated with the rules for culturally and
linguistically appropriate notices will be for plans and issuers to provide notices in the applicable
non-English language upon request. Based on the American Community Survey (ACS), 6 the
Departments estimates that there are about 9.3 million individuals living in covered counties that
are literate only in a non-English Language. The ACS does not have insurance coverage
information. Therefore, to estimate the percentage of the 8.7 million affected individuals who were
insured, the Departments used the percent of the population in the state that reported being insured
by nonfederal government employer insurance from the 2014 CPS. 7 This results in an estimate of
approximately 2.1 million individuals who are eligible to request translation services.
In discussions with the regulated community, the Departments found that experience in California,
which has a state law requirement for providing translation services, indicates that requests for
translations of written documents average 0.098 requests per 1,000 members. While the California
law is not identical to the federal regulations, and the demographics for California do not match
other counties nationally, for purposes of this analysis, the Departments used this percentage to
estimate the number of translation service requests that plans and issuers can expect to receive.
Industry experts also told the Departments that while the cost of translation services varies, $500
per document is a reasonable approximation of translation cost.
Using the ACS and the CPS, the Departments estimate that there are 11.6 million individuals
insured through nonfederal governmental employer sponsored insurance or through the individual
insurance market living in the affected counties. Based on the foregoing, the Departments estimate
that the cost to provide translation services will be approximately $567,251 annually (11,576,541
lives * 0.098/1000 * $500).
External Review Process
This ICR also accounts for the added burden of the disclosure requirements of the federal external
6

Data are from the 2009-2013 American Community Survey, view more data here. Individuals counted reside in counties
where at least 10 percent of the county speak a particular non-English language and speak English less than “very well”
are counted.
7
Please note that using state estimates of insurance coverage could lead to an over estimate if those reporting in the
ACS survey that they speak English less than “very well” are less likely to be insured than the state average.

9

review process for health insurance issuers in states where state external review processes do not
meet the (b)(1) or (b)(2) standard of PHS Act 2719 [see “Guidance on External Review for Group
Health Plans and Health Insurance Issuers Offering Group and Individual Health Coverage and
Guidance for States on State External Review Processes” on the CCIIO website at
http://cciio.cms.gov], and self-funded nonfederal governmental plans not subject to a compliant
state or territory external review process [see “Instructions for Self Insured Non- Federal
Governmental Health Plans and Health Insurance Issuers Offering Group and Individual Health
Coverage on How to Elect a federal external review process” on the CCIIO website at
http://cciio.cms.gov]. Note that both health insurance issuers and self-funded nonfederal
governmental health plans have an option of contracting with Independent Review Organizations
(IROs) as described in the HHS Technical Release 2011-02 8.
Both health insurance issuers in states that are non-compliant with federal external review process
standards, and plans not subject to a state external review process must disclose electronically to
HHS whether they will use the HHS-administered federal external review process or are following
the process outlined in HHS Technical Release 2011-02. This burden is accounted for in this ICR.
Health insurance issuers in states that do not have a compliant external review process and plans
not subject to a state external review process that have opted to use the HHS-administered federal
external review process or the Department of Labor’s federal external review process (“applicable
plans and issuers”) will be required to notify HHS as to which federal external review process they
will be using via the Health Insurance Oversight System (HIOS). If they are using the HHSadministered federal external review process, they will also be required to electronically submit to
HHS all notices pertaining to external review rights including the notice of adverse benefit
determinations and the notice of final internal adverse benefit determinations. If these notices are
updated at any time, updated copies of these notices will need to be submitted to HHS.
The HHS-administered federal external review process also requires that; 1) the CMS appointed
examiner (“the examiner”) must conduct a preliminary review of a claimant’s eligibility for
external review; 2) applicable plans and issuers must provide the examiner with documentation
and other information considered in making adverse benefit determinations or final adverse benefit
determinations; 3) the examiner must notify the claimants who are ineligible for external review
that they are ineligible; 4) the examiner must forward to the applicable plan or issuer any
information submitted by the claimant;
5) that if the applicable plan or issuer reverses its decision, it must notify the claimant and the
examiner; 6) the examiner must notify claimant and the applicable plan or issuer of result of final
external review (burden previously accounted for); and 7) the examiner must maintain records for
six years.
Health insurance issuers and self-funded nonfederal governmental plans in states where the state
external review processes do not meet the (b)(1) or (b)(2) standard of PHS Act 2719 that decide to
follow the external review process will be subject to the following different set of requirements as
8

Guidance on External Review for Group Health Plans and Health Plans and Health Insurance Issuers Offering Group
and Individual Health Coverage, and Guidance for States on States on State External Review Processes here.

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described in section 45 CFR 147.136(d)(2) of the Appeals regulation,: 1) Issuers must conduct a
preliminary review of claimant requests for external review in order to determine eligibility; 2)
following the preliminary review, issuers must notify the claimant whether or not they are eligible
for external review; 3) if the claimant is eligible, the issuer must forward to the IRO all
documentation and other information considered when making its adverse benefit determination; 4)
the IRO must forward all information submitted by the claimant back to the issuer; 5) next, the IRO
must notify claimant and the applicable plan or issuer of the result of the final external review; and
6) finally, the IRO must retain its records for six years.
It is estimated that there will be 4,049 external reviews conducted in a year for the affected
population. 9 The total hour burden associated with the federal external review process for affected
self-funded nonfederal governmental health plans and health insurance issuers is 1,788 with an
equivalent cost of $128,876. HHS made reasonable estimates for the amount of time it would take
for each of the steps outlined above, assuming that a clerical worker could prepare most of the
documents that would need to be sent forward. HHS used salary data provided by the Department
of Labor National Occupational Employment Survey.
There is no record retention burden placed on self-funded nonfederal governmental plans and
health insurance issuers that elect the HHS process because CMS’s contractor retains all records.

Summary
Total burden hours are estimated at 1,195,626 hours annually for 2018, 2019 and 2020.
Equivalent costs are estimated at $83,629,389 million annually for 2018 2019 and 2020.
TABLE 2. -- Summary of Burden
Number of respondents (issuers and Plans)
Number of responses (Notice)
Total hour burden
Equivalent costs of total hour burden
Total cost burden
13.

109,653
516,626,544
1,195,626
$83,629,389
$184,134,300

Capital Costs

As indicated in question 12, the bulk of Group Market claims will be processed by third-party
service providers. Total cost is estimated by multiplying the number of responses by the amount of
time required to prepare the documents and then multiplying this by the appropriate hourly cost of

9
Rate of external reviews is 0.013%. AHIP Center for Policy Research, “An Update on State External Review Programs,
2006,” July 2008. North Carolina Department of Insurance “Healthcare Review Program: Annual Report,” 2013.

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either clerical workers ($52.09). 10, doctors ($162.63) 11or lawyers ($ 133.29) 12, and then adding the
cost of copying and mailing responses ($0.65) 13 each for those not sent electronically) . These costs
are described in Table 1 in answer 12. The total estimated cost burden for those plans that use
service providers, including the cost of mailing all responses (including mailing costs for those
prepared in-house listed in Table 1), is $184.1 million annually. 14
Federal External Review Process
It is estimated that there will be an annual administrative cost burden of $59,826 on average over
the next three years associated with the federal external review process. This administrative cost
burden is a result of sending the files and notices required by the proposal to the independent
examiner for health insurance issuers and self-funded nonfederal governmental health plans using
the federal external review process.
14.

Cost to Federal Government

Government program staffing costs, to provide technical assistance to respondents, are based on one
14 Grade/Step 1 in the Washington D.C. area.
GS-14: hourly rate $52 at 1.3 hours a week:
15.

Annual cost: $ 66,545

Changes to Burden

The overall burden has decreased from 1,702,817 hours to 1,195,626 hours, resulting in a total
burden decrease of -507,191 hours. The decrease is mainly attributed to the decrease in the time it
takes to complete the review process.

10

Secretaries, Except Legal, Medical, and Executive (43-6014): $17.38(2016 BLS Wage rate)/0.675(ECEC ratio)
*1.2(Overhead Load Factor) *1.023(Inflation rate) ^2(Inflated 2 years from base year) = $52.09
11
Family and General Practitioner (29-1062): $96.54(2016 BLS Wage rate) /0.69(ECEC ratio) *1.35(Overhead Load
Factor) *1.023(Inflation rate) ^2(Inflated 2 years from base year) = $162.63
12

The Department's estimated 2015 hourly labor rates include wages, other benefits, and overhead are calculated as
follows: mean wage from the 2013 National Occupational Employment Survey (April 2014, Bureau of Labor Statistics
11
cost of copying and mailing responses (0.54 each for those not sent electronically) . These costs are described in Table
1 in answer 12
13
$0.55 for USPS First Class Postage and $0.05 per page of materials costs for two pages of paper.
14
http://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the Employer
Cost for Employee Compensation (June 2014, Bureau of Labor Statistics
http://www.bls.gov/news.release/ecec.t02.htm); overhead as a multiple of compensation is assumed to be 25 percent of
total compensation for paraprofessionals, 20 percent of compensation for clerical, and 35 percent of compensation for
professional; annual inflation assumed to be
2.3 percent annual growth of total labor cost since 2013 (Employment Costs Index data for private industry, September
2014 http://www.bls.gov/news.release/eci.nr0.htm).14

12

16.

Publication/Tabulation Dates

There are no plans to publish the outcome of the information collection.
17.

Expiration Date

The collection of information will display a valid expiration date and OMB control number.

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