Deemed exhaustion: when the plan breaks its own procedure
If a plan fails to follow the claims-procedure rules (wrong deadlines, missing disclosures, no qualified reviewer), you are treated as having exhausted its internal appeals and may go straight to external review or court. Minor, harmless errors do not count, but a pattern of them does.
When it applies
- Employer plans under ERISA
- ACA-compliant individual and marketplace plans, which carry a parallel rule under 45 CFR 147.136(b)(2)(ii)(F)
- Plans that miss decision deadlines, send bare denials, or ignore a documented request for the claim file
Where it does not
- Errors that are de minimis, non-prejudicial, for good cause and part of an ongoing good-faith exchange with you
- Original Medicare and Medicaid, which have their own timeliness rules
The sentence to put in the appeal
“The plan did not [decide the appeal within the required timeframe / identify the criteria relied on / provide the claim file requested on [date]]. Under 29 CFR 2560.503-1(l)(2)(i), the claims procedure is deemed exhausted and I am entitled to pursue external review and any available remedies without further internal appeal. I ask that the plan state in writing, within ten days, its specific reason for the failure as section (l)(2)(ii) permits me to request.”
Replace the bracketed parts with your facts. Cite the regulation exactly as written; quote the plan’s own wording next to it.
How to use it
- Step 1
Document the failure precisely
Dates sent, dates due, what was missing. The rule turns on facts, so the appeal file should read like a timeline.
- Step 2
Ask for the plan's explanation
The regulation lets you request a written explanation of the violation; the plan must respond within ten days. Silence or a weak answer strengthens the record.
- Step 3
Do not stop appealing while you invoke it
Keep the internal appeal moving in parallel so no deadline is missed if a reviewer later finds the error was minor.
Worked example
A post-service appeal went unanswered for 90 days against a 60-day requirement. The member requested external review citing deemed exhaustion, attached the timeline, and the plan reversed before the reviewer was assigned.
Illustrative composite; details vary by plan and record. Outcomes are not guaranteed.
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Sources
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