New Claims Procedures Scheduled for ERISA Disability Plans
Additional consumer protections for private-sector workers making claims for benefits from their employer’s disability insurance plans will become effective on April 1, 2018.
Under the Final Rule issued by the U.S. Department of Labor (“DOL”), Section 503 of the Employee Retirement Income Security Act of 1974 (“ERISA”) requires employee benefit plans to provide to any participant or beneficiary written notice for benefits claims that have been denied and to provide the claimant a full and fair process for a claims denial appeal.
The Final Rule amends the DOL’s claims procedure regulation for disability benefits to require plans, plan fiduciaries, and insurance providers to abide by the additional consumer protections the Final Rule will impose.
Originally scheduled to take effect on January 1 of this year, the DOL announced on November 29, 2017that it would delay implementation for 90 days. Employee benefit plans must be in compliance with the Final Rule by April 1, 2018.
The requirements listed below are the most notable changes contained within the Final Rule.
IMPROVEMENTS TO BASIC DISCLOSURE REQUIREMENTS
The disclosure requirements will be improved in three ways. First, it will be expressly required that denied claims contain an explanation of the decision. For example, if a disability determination made by the Social Security Administration supports the claimant and the claim is later denied by the DOL, then the written notice containing the denial must include a discussion of the basis for disagreeing with the Social Security Administration’s determination.
Second, written notices of a denial of benefits must contain the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were relied upon in denying the claim.
Third, a written notice of a denial of benefits at the initial claims stage must contain a statement that the claimant is entitled to receive, upon request, relevant documents.
RIGHT TO REVIEW AND RESPOND TO NEW INFORMATION BEFORE FINAL DECISION
The Final Rule requires that claimants have a right to review and respond to new evidence or rationales that were not included during the appeals process, and have an opportunity to present their claim to the administrative appeals board.
INDEPENDENCE AND IMPARTIALITY - AVOIDING CONFLICTS OF INTEREST
The Final Rule requires that all plans must ensure that disability benefits claims and appeals are handled in a way that ensures independence and impartiality of the individuals involved in the disability benefits claims process. Decisions regarding hiring, compensation, termination, promotion, or similar personnel actions with respect to any claim processor or medical claim review expert must not be made based upon the likelihood that the individual will support the denial of disability benefits.
DEEMED EXHAUSTION OF CLAIMS AND APPEALS PROCESSES
A claimant is deemed to have exhausted all administrative remedies when the plan does not adhere to all claims processing rules, unless the violation was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance.
If the claimant is deemed to have exhausted all available administrative remedies under the plan, the claim or appeal is deemed as denied and the claimant may immediately pursue his or her claim in court. The Final Rule also requires that a plan must deem a claim as re-filed on appeal when the plan receives a court decision rejecting the claimant’s request for review.
CERTAIN COVERAGE RESCISSIONS ARE ADVERSE BENEFIT DETERMINATIONS SUBJECT TO THE CLAIMS PROCEDURE PROTECTIONS
Recissions of coverage, including retroactive terminations due to an alleged misrepresentation of fact must be treated under the Final Rule as adverse benefit determinations, which will trigger the plan’s appeals procedures.
CULTURALLY AND LINGUISTICALLY APPROPRIATE NOTICES
The Final Rule requires plans to provide notice to claimants in a culturally and linguistically appropriate manner. For example, if a claimant’s address is in a county where ten percent or more of the population residing in the county are literate only in the same non-English language as determined in guidance based on American Community Survey data published by the United States Census Bureau, then notices of adverse benefit determination to the claimant must include a statement prominently displayed in the non-English language clearly indicating how to access language services provided by the plan.
ABOUT THE AUTHOR: Mark Johnson, Ph.D., J.D.
Mark Johnson, Ph.D., J.D., is a highly experienced ERISA expert. As a former ERISA Plan Managing Director and plan fiduciary for a Fortune 500 company, Dr. Johnson has practical knowledge of plan documents as well as an in-depth understanding of ERISA obligations. He works as an expert consultant and witness on 401(k), ESOP and pension fiduciary liability; retiree medical benefit coverage; third party administrator disputes; individual benefit claims; pension benefits in bankruptcy; long term disability benefits; and cash conversion balances.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.