In Jan. 2017, it was reported that the Department of Labor (DOL) published final regulations governing the ERISA claims and appeals process that will apply to all claims for disability benefits. The effective date of the rule has been delayed from Jan. 1, 2018 to April 1, 2018. These regulations mirror amendments to the claims procedures for group health plans added under the Affordable Care Act. The amendments require plans to satisfy additional procedural and notice requirements for disability claims. The Department determined the need to revise regulations to provide greater transparency and accountability, since disability cases dominate the ERISA litigation field.
Overview of Final Rules
The new regulations apply to all ERISA-governed plans that provide disability benefits, if the plan conditions its availability to the claimant upon showing of disability. This not only includes short-term and long-term disability plans, but it can also include other plans that condition the availability of benefits upon the plan’s determination that a disability exists, such as 401(k) plans and pension plans. If the determination of a disability is made by a person or entity other than the plan, then the disability claim is not subject to the final rule.
The new regulations include the following improvements for the processing of claims and appeals for disability benefits:
– Avoiding Conflicts of Interest. Plans must ensure that disability claims and appeals must be decided independently and impartially, meaning claim decision makers should not be incentivized to deny claims.
– Disclosure Requirements. Benefit denial notices must contain a complete discussion on a decision, including:
o Why the plan agreed/disagreed with views of health care and vocational professionals, or with disability determinations made by the Social Security Administration.
o Statement that the claimant is entitled to access relevant documents and their claim file.
o The plan’s internal rules, guidelines, protocols or standards used in deciding the claim. If none exist, the letter must state that fact.
o Benefit denial letters have to be provided in a culturally and linguistically appropriate manner.
– Right to Review and Respond to New Information Before Final Decision. Claimants must be given notice and a fair opportunity to respond if the appeal denial is based on new or additional rationales or evidence that were not included when the benefit was denied at the claims stage.
– Exhaustion of Claims and Appeals Processes. Claimants are not barred from suing due to failure to exhaust the administrative remedies under the plan when the plan itself failed to comply with its claims procedures (except for
certain minor failures).
– Coverage Rescissions are Adverse Benefit Determinations. Retroactive rescissions of coverage are considered benefit denials that trigger the plan’s appeals procedures.
What Employers Need to Consider
• The final regulations apply to claims for disability benefits filed on or after April 1, 2018.
• Know which plans (besides short or long term disability) have disability triggers which require compliance with the final rules.
• Review whether the terms of the plan should be amended to rely on the disability determination by another party (such as the Social Security Administration) to avoid compliance with the final rule.
• Ensure that your Plan Document, Summary Plan Description and any communication materials are in compliance with the rule.
• Reach out to any vendors administering disability benefits as to their denial letter, including right to access a claim file and a fair opportunity to respond to any new or additional evidence relating to the claim.
The enhanced claims procedures for disability benefits affect plan administrators, participants, beneficiaries and third party administrators of disability benefit plans. The details of the final regulations need to be studied and new procedures implemented before the applicability date of April 1, 2018. Thus, employers should begin to review their disability benefit programs to ensure compliance with these final rules.