As I have previously explained, in December 2016 the United States Department of Labor (“DOL”) released a new rule amending 29 C.F.R. §2560.503-1, the federal regulations for claims procedures of ERISA-governed disability insurance plans. These rules will generally affect all group long-term disability plans that are obtained through an employer. The new rules were scheduled to go in effect in January 1, 2018, but as I discussed this past January, the effective date was delayed to April 1, 2018. Now that the new rules have arrived, I am re-upping my previous explanation highlighting the new rules.
Improvement to Basic Disclosure Requirements. Benefit denial notices must contain a more complete discussion of why the plan denied a claim and the standards used in making the decision.
In addition to the already existing requirements that an adverse benefit decision must be in writing and provide the specific reason for the denial, make reference to the specific plan provision that decision is based upon, explain any additional information necessary for the claimant to perfect the claim, and explain the plan’s review procedures and the claimant’s right to bring a lawsuit, the Final Rule has created a number of new requirements specifically for disability plans. The new requirements include an explanation of (1) why the plan disagrees with the claimant’s treatment providers and vocational professionals; (2) the views of all medical or vocational experts involved in the claim evaluation; and (3) any disagreement with a Social Security decision.
Right to Claim File and Internal Protocols. Benefit denial notices must include a statement that the claimant is entitled to receive, upon request, the entire claim file and other relevant documents … Benefit denial notices also have to include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were used in denying a claim or a statement that none were used.
The claim file and other relevant documents specifically include, but are not limited to, any document, record, or other information relied upon in making the benefit decision or was submitted, considered, or generated in the course of making the benefit decision.
Right to Review and Respond to New Information Before Final Decision.The final rule prohibits plans from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
During the appeal process, the plan will be required to provide the claimant with any new or additional evidence considered, relied upon, or generated in connection with the claim. This evidence must be provided “as soon as possible and sufficiently in advance” in order to provide the claimant with a “reasonable opportunity to respond” within the required time frame. The rule does not define “as soon as possible and sufficiently in advance” or “reasonable opportunity,” therefore, it will be left to future litigation on the matter to determine these time frames.
Avoiding Conflicts of Interest. Plans must ensure that disability benefits claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision.
The rule specifically explains any individual involved in the decision making process cannot have their hiring, compensation, termination, promotion, or similar matters based on the likelihood they will support denying disability benefits. The rule gives claims adjudicators, medical experts, and vocational experts as examples of the types of individuals this rule applies to.
Deemed Exhaustion of Claims and Appeal Processes. If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other specified conditions are met. If the claimant is deemed to have exhausted administrative remedies available under the plan, the claim or appeal is deemed denied on review without the exercise of discretion by a fiduciary and the claimant may immediately pursue his or her claim in court.
Should the plan administrator not follow all aspects of the rule, then the claimant is essentially permitted to forgo the remainder of the appeal process and immediately proceed to court. However, the rule then explains “de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant” do not count as violations of the rule allowing the claimant to immediately proceed to court. The rule does not define what would constitute a de minimis violation, therefore, it will also be left to future litigation on the matter to determine what qualifies as a de minimis violation.
Certain Coverage Recissions are Adverse Benefit Determinations Subject to the Claims Procedure Protections. Rescissions of coverage, including retroactive terminations due to alleged misrepresentation of fact must be treated as adverse benefit determinations, thereby triggering the plan’s appeals procedures.
Should the plan rescind disability coverage, for any reason other than failure to pay premiums, then the Claim Procedure rules will apply and the recission will be treated as an adverse benefit determination.
Notices Written in a Culturally and Linguistically Appropriate Manner. The final rule requires that benefit denial notices have to be provided in a culturally and linguistically appropriate manner in certain situations.
The newly revised Claims Procedure rule, whose changes and additions are outlined above goes into effect on January 18, 2017. However, most of the changes described above will only apply to claims for disability benefits filed under an applicable plan on or after January 1, 2018. While the onus is on the plan administrators and disability insurance companies to follow these newly expanded rule, it is important for the claimant to understand the requirements and hold the companies accountable.