Recently, it was announced that the Obama administration is changing and improving the way customers appeal to their health insurance companies when they’re denied a claim or when their health insurance coverage gets canceled. According to an article in the Associated Press entitled, “Feds move to improve health insurance appeals,” the legislation will start in 2011, to give time to insurance companies so they can deal with its complexities.

The new protections will apparently protect at least forty million people when they take affect next year. The downside is that these protections don’t cover plans that were already in effect when the new health care legislation took place, as most of these are employer-provided health insurance plans. These are mostly meant to help those who are mandated to get individual health insurance over the next several years. However, Assistant Labor Secretary Phyllis Borzi said rules for appeals under employer-based health insurance plans will be getting revised as well in the future.

So how does the new process work? First, customers are required to appeal directly to their health insurance company. If they’ve denied for a second time, they will then have the option to take their appeal to an independent, third-party reviewer, whose decision will be binding.

States have until next July to bring their laws in line with these federal guidelines, so they have a year to get their act together. Personally, I can’t really see a downside to consumer protections such as these. Allowing the customer to have another avenue of appeal for their claims — one that’s legally binding — can only help customers who having issues with their insurance companies. One would also hope that this would make insurance companies more accountable for their actions so as to avoid this appeals process altogether. It’ll be interesting to see how this plays out once it takes effect.