A pain management practice sent us a denial it had given up on. A commercial plan had refused a lumbar MRI and the injection that followed as not medically necessary, about $2,900 in allowed charges. The practice had filed a provider appeal with clinical notes and a letter, and the plan upheld the denial. The billing manager wrote it off, as she had the eleven similar denials before it that year, because "we did the appeal and they said no."
She had done one appeal, the one the participation agreement gives the practice. The patient had two more, and neither had been touched. Under the Affordable Care Act and the Employee Retirement Income Security Act (ERISA), the plan member is entitled to an internal appeal with regulatory deadlines, then to an external review by an independent organization whose decision binds the plan. Both can be pursued by the practice as the patient's authorized representative, with one signed form. Both come with a right most billers have never exercised: the plan's entire claim file, free, on request, including the clinical criteria the reviewer used and who the reviewer was.
This article explains the commercial appeal levels as they apply to an independent practice: the provider dispute, the member's internal appeal, external review, and the ERISA procedural rights that come with them, along with which denials qualify and which do not.
Key takeaways
- A provider appeal is a contract right under the participation agreement; the internal appeal and external review are the patient's rights under federal law, and the practice can exercise them as the patient's authorized representative with a signed designation.
- Members have 180 days from a denial to file an internal appeal; the plan must decide within 30 days for pre-service claims and 60 days for post-service claims, or 72 hours when urgent.
- After the final internal denial, the member has four months to request external review by an independent review organization, which decides within 45 days (72 hours if expedited), and the decision is binding on the plan.
- External review covers denials that involve medical judgment (medical necessity, appropriateness, experimental or investigational status) and rescissions; it does not cover fee schedule disputes, eligibility or contractual payment issues.
- ERISA regulations require the plan to give the claimant, on request and free of charge, every document relevant to the claim, including the internal guideline it relied on and the qualifications of the reviewer, and a plan that fails to follow its own procedures can be deemed to have exhausted them.
Three levels, three different rulebooks
The confusion starts with the word "appeal," which practices use for three different things. The provider dispute is a process the payer offers to contracted providers under the participation agreement, with whatever deadlines and scope the contract and provider manual say, commonly 90 to 180 days to file, and the payer reviewing its own decision. It is the right tool for coding disputes, bundling edits, fee schedule errors and timely filing, and often the only route for those.
The internal appeal belongs to the member. For employer-sponsored plans it is governed by the ERISA claims procedure regulation (29 CFR 2560.503-1) and, for non-grandfathered plans, the ACA's appeals rules at 45 CFR 147.136, which also apply to individual market plans. It exists because the denial is an adverse benefit determination against the patient, regardless of who submitted the claim. External review is the third level, created by the ACA for essentially all non-grandfathered plans: an independent review organization (IRO) with no financial tie to the plan reviews the medical judgment and issues a decision the plan must follow. Insured plans use the state's external review process; self-funded ERISA plans use the federal process or contract with accredited IROs directly.
| Level | Who has the right | Deadline to file | Decision deadline | What it can reach |
|---|---|---|---|---|
| Provider dispute | The contracted practice | Per contract, often 90 to 180 days | Per contract or state prompt-pay law | Coding, bundling, fee schedule, timely filing, authorization technicalities, medical necessity |
| Internal appeal | The member, or the practice as authorized representative | 180 days from the denial notice | 30 days pre-service, 60 days post-service, 72 hours urgent; group plans may split into two levels within the same totals | Any adverse benefit determination, including medical necessity, experimental status, eligibility and rescission |
| External review | The member, or the practice as authorized representative | Four months after the final internal denial | 45 days standard, 72 hours expedited | Denials involving medical judgment and rescissions; not contractual payment or fee disputes |
Becoming the patient's representative
Everything past the provider dispute requires the patient's authority. ERISA and ACA rules allow a claimant to designate an authorized representative, and most plans have a form or accept a signed letter naming the practice and identifying the claim. An assignment of benefits on the intake paperwork is not the same thing; it directs payment, and courts have disagreed about whether it conveys appeal rights, especially where the plan has an anti-assignment clause. The designation form settles the question.
Get the signature at the time of the denial, explain what you are doing, and keep the patient informed, because the plan's letters will go to them. In our experience patients are grateful; they were going to be billed for the balance otherwise, and few of them know these rights exist.
The ERISA rights nobody uses
The ERISA claims procedure regulation gives the claimant procedural rights worth more than the appeal letter. The denial notice must state the specific reason, cite the plan provision, describe any additional information needed and explain the appeal steps; "not medically necessary" alone is deficient. On request, the plan must provide, free of charge, all documents relevant to the claim, including the internal guideline or protocol relied on, the reviewer's notes and, for medical judgment denials, the identity and qualifications of the professional consulted. The appeal must be decided by someone not involved in the original denial, and a medical judgment appeal must involve a professional with appropriate training in the field.
Ask for the claim file in writing the day you file the internal appeal. What comes back is often decisive: a guideline that does not match the clinical facts, a reviewer whose specialty is unrelated to the service, or a denial citing a policy the plan had already updated. Each is an argument for the appeal and, if it fails, for external review. And under the ACA appeals rules for group plans, a plan that fails to follow its own procedures strictly is deemed to have exhausted them, which lets the member move straight to external review or, with counsel, to court under ERISA section 502(a).
External review: when it applies and how it goes
External review is for medical judgment. If the plan says the MRI was not medically necessary, that the procedure is experimental, or that the level of care was not appropriate, the IRO can decide otherwise. If the plan says the patient was not eligible on the date of service, that the service is excluded by the plan's terms regardless of medical facts, or that the practice was paid correctly under the fee schedule, the IRO has nothing to review. Rescissions, where the plan cancels coverage retroactively, are also reviewable.
The request goes to the state insurance department for insured plans, which assigns an IRO, or for self-funded plans to the federal or accredited IRO process the plan has designated; the denial letter must say which. The IRO receives the claim file, the appeal and any additional evidence, applies the plan terms and generally accepted standards of medical practice, and issues a written decision within 45 days, or 72 hours when a delay would jeopardize the patient's health. The plan must comply. Filing fees, where they exist, are small and capped by federal rules.
A worked example
Back to the pain practice. The patient, a 47-year-old with radicular leg pain after six weeks of physical therapy, had a lumbar MRI and a transforaminal epidural steroid injection. The plan denied both as not medically necessary. The practice's provider appeal, with the notes attached, was upheld on day 38. Total allowed charges denied: $2,900.
We asked the patient to sign an authorized representative designation and filed the internal appeal on day 45, inside the 180 days, with a request for the complete claim file under 29 CFR 2560.503-1(h)(2)(iii). The file showed the denial had applied the plan's imaging policy, which required six weeks of conservative therapy, and that the reviewer had written "PT duration unclear." The therapy notes with dates had never been in the claim. The appeal included them, quoted the plan's six-week requirement back to it, and noted the reviewer's specialty was family medicine. The plan upheld the denial on day 58 of its 60 without addressing the dates.
The external review request went to the state insurance department on day 110 with the claim file, the appeal and a two-page cover letter organized around the plan's own criteria. The IRO assigned a board-certified physiatrist, who reversed the denial on day 39 of the 45, and the plan paid within the following month. Total staff time across all three levels: about four hours. The eleven earlier write-offs, all still inside their four-month windows when we looked, were the more painful lesson.
Building this into the denial workflow
The change is procedural. When a medical necessity or experimental denial survives the provider dispute, the account moves to a member appeal queue instead of the write-off bucket, with three dates on it: the 180-day internal appeal deadline, the plan's decision deadline, and the four-month external review deadline. The representative form is requested at the first denial. The claim file request goes out with every internal appeal. And the appeal letter is written around the plan's criteria, because that is what the IRO will read.
Not every denial deserves three levels. A $90 office visit does not justify four hours of staff time; a $2,900 procedure or a pattern of identical denials across many patients does, and a plan that loses the same argument at external review several times tends to stop making it. If your denial management reports do not separate medical judgment denials from the rest, that is the first report to build.
Questions we hear
Can we appeal on the patient's behalf without their signature?
Not past the provider dispute. The internal appeal and external review are the member's rights, and the plan will require a designation or the patient's own signature. Ask early; most patients sign readily once they understand they would otherwise be billed.
Our patient has a self-funded employer plan. Does the state insurance department help?
Generally no. Self-funded ERISA plans are regulated by the U.S. Department of Labor, not the state, and complaints go to the Employee Benefits Security Administration. External review runs through the federal process or an accredited IRO the plan has contracted. State prompt-pay laws also do not apply, which is why the ERISA procedural rights matter more for these plans.
Does external review work for prior authorization denials before the service?
Yes, and that is often the better time to use it. A pre-service denial can go through an urgent internal appeal and expedited external review, 72 hours each, when a delay would seriously jeopardize the patient. For non-urgent denials the standard timelines apply, and a reversal means the service is covered before it is performed rather than fought over afterward.
What to do this week
- Pull every medical necessity and experimental denial written off in the last four months and check whether the external review window is still open.
- Add an authorized representative designation form to the denial packet and train the front desk to request it at the first medical necessity denial.
- Draft a standard claim file request citing 29 CFR 2560.503-1(h)(2)(iii) and attach it to every internal appeal.
- Create a member appeal queue with the 180-day, decision and four-month dates as required fields.
- Separate medical judgment denials from administrative denials in your denial report so the candidates for external review are visible.
- For the top three payers, save the appeals section of each denial letter and note whether the plan is insured or self-funded, and which external review process applies.
