When a health plan denies a claim, Michigan law may offer an independent review.
Michigan’s independent review applies to insured plans, while self-funded plans follow a federal process. This guide explains the difference and what employers should do.
Eight Pages To Read Alongside This One.
General information, not legal advice. Each page below covers one piece of how employer health plans handle denials and disputes.
Internal Appeals And External Review
How the plan appeal works first and where outside review picks up.
ERISA Claims Procedure And Appeals
The federal claims rule that sets notice contents and appeal rights.
Summary Plan Description Guide
What the SPD has to say about how claims and appeals work.
Fully Insured, Level-Funded And Self-Funded Plans
Three funding models side by side, and why funding decides which review applies.
Michigan Self-Funded Plan Rules
Where state law stops and federal law takes over for self-funded plans.
Employee Notices
The notices employees receive and how to keep them current.
No Surprises Act For Employers
Federal protections that have their own dispute process.
Affordable Care Act For Employers
The 2010 law that added the external review requirement.
Where Things Stand.
When a health plan denies a claim and the internal appeal fails, many employees assume the decision is final. It often is not. Michigan’s Patient’s Right to Independent Review Act, which begins at MCL 550.1901, lets a covered person ask the state to send certain denials to an independent reviewer. Whether that route is open depends mainly on one fact about your plan: whether it is insured or self-funded.
The Act is built around two terms. An adverse determination is a decision by a health carrier, or its utilization review organization, that a covered service does not meet the carrier’s requirements for medical necessity, appropriateness, setting, level of care or effectiveness, so that payment is denied, reduced or ended. A final adverse determination is an adverse determination the carrier has upheld after completing its internal grievance process. Both definitions are in MCL 550.1903.
Federal law sets a parallel rule. Section 2719 of the Public Health Service Act, 42 U.S.C. 300gg-19, requires group health plans and issuers to provide external review, through either a state process or a federal one. Employers sit in the middle, because the plan documents and denial notices they distribute are where employees first learn the route exists.
Who The Michigan Process Covers.
The Act is directed at health carriers (MCL 550.1905). Michigan defines a health carrier as an entity subject to Michigan insurance law or the jurisdiction of the director of the Department of Insurance and Financial Services that contracts to pay for or arrange health care services, such as an insurer, an HMO or a nonprofit health care corporation. State agencies that administer a plan of medical assistance are excluded. For an employer, the clearest fit is a fully insured plan, where a carrier issues the policy and makes the coverage decision.
Self-funded plans are different. ERISA section 514 preempts state laws that relate to employee benefit plans, 29 U.S.C. 1144(a). Two parts of that section matter here. The savings clause leaves in place state laws that regulate insurance, 29 U.S.C. 1144(b)(2)(A). The deemer clause says a covered employee benefit plan is not to be treated as an insurer under those state laws, 29 U.S.C. 1144(b)(2)(B). The practical result is that a state insurance law can reach the carrier that insures a plan but cannot be applied to a self-funded plan simply because it provides benefits.
The federal regulation reflects this. A self-insured plan follows a state external review process only if that process binds the plan and meets the minimum protections. Otherwise the plan must use the federal process, 29 CFR 2590.715-2719. Product labels such as level-funded do not settle the question by themselves, so ask the carrier or ERISA counsel how your plan is classified.
How It Differs From Federal External Review.
Section 300gg-19(b) gives plans two options. They can follow a state process that includes at least the consumer protections of the NAIC Uniform External Review Model Act and that binds the plan. If the state has no qualifying process, or the plan is self-insured and not subject to state insurance regulation, the plan or issuer must run an external review process that meets standards set by the Secretary and is similar to the state model.
Who Runs It
In Michigan, the request goes to the director, who checks the request and, when the issue involves medical necessity or clinical review criteria, assigns an approved independent review organization (MCL 550.1911). Under the federal process, the plan or issuer runs its own external review under the federal standards.
Who Can Ask
Under MCL 550.1911, the covered person or the covered person’s authorized representative files the request with the director. The director notifies the carrier and sends it a copy.
Timing And Outcome
A Michigan request must be filed within 120 days of receiving notice of an adverse or final adverse determination. If the director’s decision reverses the denial, the carrier must immediately approve the coverage. We did not confirm the federal process timelines at a primary source, so use the dates printed in the notice an employee received.
The Internal Appeal Comes First.
Both routes generally begin inside the plan. The director checks whether the internal grievance process was exhausted, unless exhaustion is not required, and the federal rule says a claimant generally must exhaust the internal appeal before external review can proceed.
Group health plans must run an internal claims and appeals process that meets 29 CFR 2560.503-1 plus added requirements, including urgent care decisions within 72 hours and continued coverage for ongoing treatment while an appeal is pending (29 CFR 2590.715-2719). The claims regulation gives claimants at least 180 days to appeal a group health plan denial.
If a plan does not strictly follow these requirements, the claimant is generally treated as having exhausted the internal process and may go straight to external review or court. A narrow exception covers minor, good-faith violations that cause no prejudice. That is a practical reason to run the internal process by the book.
What Employers Should Do.
Explain The Process In Plan Documents
The claims regulation requires the summary plan description to describe all claims procedures and their time frames. Federal rules also expect plan materials to describe the internal appeal and external review processes and to give contact information for any consumer assistance office or ombudsman.
Check The Denial Letters
Denial notices must state the specific reasons, cite the plan provisions relied on and describe the review procedures and time limits. Ask your carrier or administrator for a current sample and read it as an employee would.
Point Employees To The Carrier’s Notice
The notice an employee received controls the next step. Your role is routing: tell employees to follow the instructions in it, and give them the name of the person at the carrier or administrator who handles appeals.
Help Gather Records
Offer to help locate enrollment dates, eligibility records and plan documents. Let the employee decide how much medical detail to share with you. The request itself goes to the carrier or the state, not to HR.
Do Not Interfere
Do not discourage, delay or comment on the merits of an appeal. The claims regulation requires reasonable procedures that do not unduly hinder claims or appeals.
Tell Us About Patterns
If denials cluster around one drug, provider or service, tell your broker. Patterns can inform the renewal conversation and plan design. General information, not legal advice; talk to ERISA counsel about your specific plan.
Laws And Sources
MCL 550.1901: Short title of the Patient’s Right to Independent Review Act.
MCL 550.1903: Definitions, including health carrier, adverse determination, final adverse determination and independent review organization.
MCL 550.1905: Scope of the Act.
MCL 550.1911: How a covered person files an external review request with the director and how the review proceeds.
42 U.S.C. 300gg-19: Public Health Service Act section 2719: internal appeals and external review for group health plans and issuers.
29 CFR 2590.715-2719: Internal claims and appeals and external review standards, including state and federal processes.
29 CFR 2560.503-1: ERISA claims procedure regulation: notice contents, appeals and the SPD description of procedures.
29 U.S.C. 1144: ERISA section 514: preemption, the savings clause and the deemer clause.
Michigan Department of Insurance and Financial Services: State insurance regulator home page with consumer health insurance resources.
Quick Answers.
Brief answers to what employers ask about denied claims and independent review.
Does the Michigan independent review process apply to our self-funded plan?
Generally not by its own terms. The Act is directed at health carriers, and the ERISA deemer clause keeps state insurance law from treating a self-funded plan as an insurer. A self-insured plan not bound by a qualifying state process uses the federal external review process instead. Confirm how your plan is classified with the carrier or ERISA counsel.
Does an employee have to appeal to the plan before asking for outside review?
Generally yes. Michigan’s director checks whether the internal grievance process was exhausted unless exhaustion is not required, and the federal rule also expects the internal appeal to come first. If a plan does not follow the internal claims rules, the employee may be treated as having exhausted that step.
How long does an employee have to ask the state for review of an insured plan denial?
Under MCL 550.1911, a request must be filed within 120 days of receiving notice of an adverse or final adverse determination. The carrier’s notice is where employees should look first, so keep a copy of it with the claim file.
What should our summary plan description say about claim denials?
The claims regulation requires the SPD to describe all claims procedures, including the time frames that apply. Federal rules also expect plan materials to describe the internal appeal and external review processes and how to start an appeal.
Can HR help an employee who is appealing a denial?
Yes, with the right limits. HR can explain where to find the notice, help locate enrollment and plan records and point the employee to the carrier or administrator. HR should not discourage the appeal, slow it down or comment on its merits.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →
Cookies on This Site
We use cookies to keep the site working properly and to understand how it is used. You can decline anything that is not essential. See our Privacy Policy for the detail.
- Essential — needed for the site to load and for you to move around it. These cannot be switched off.
- Analytics — tell us which pages get read, so we know what is worth writing more of.
- Advertising — set by third parties such as ad and social platforms to measure and target campaigns.