Recently, the DOL released proposed amendments to the current procedural rules for employees claiming disability benefits under an ERISA plan. The proposed rules enhance existing procedures, mirror the procedural protections for claimants contained in the PHS 2719 Final Rule, and update the ERISA claims procedures (set forth in ERISA Section 503) to align with these standards.
Summaries of the major provisions follow:
- Independence and Impartiality – avoiding conflicts of interest. All claims must be adjudicated in a manner which ensures that the persons making the decision are independent and impartial. The proposed rules specify that this independence and impartiality requirement mandates that decisions involving the hiring, compensation, termination, promotion, or similar matters of individuals making claims-related decisions, such as a claims adjudicator or medical experts, cannot be made based on the likelihood that the individual will support the denial of disability benefits.
- Enhanced Basic Disclosure Requirements. To assist claimants with fully evaluating whether an appeal is worth pursuing and to alleviate confusion, the proposal suggests that each adverse benefit determination notice should contain:
- A discussion of the decision, including the basis for disagreeing with a disability determination by the Social Security Administration, a treating physician, or other third party disability payor if the plan did not follow those determinations.
- The internal rules, guidelines, protocols, standards, or other criteria which were used to deny the claim, or a statement that these do not exist.
- A statement that the claimant is entitled to receive, upon request, relevant documents. Under the current ERISA claims procedures, this statement is only required to be provided when an appeal has been denied.
- Right to Review and Respond to New Information Before Final Decision. Claimants will have a right to review (free of charge) and respond to new evidence or rationales developed by the plan during the appeal process – instead of only after the appeal has been denied.
- Deemed Exhaustion of Claims and Appeals Processes. These proposed amendments strengthen the “deemed exhaustion” provisions in the current ERISA claims procedures as follows:
- Existing standards will be replaced by the more stringent 2719 Final Rules standards which require plans to follow all the requirements of the ERISA claims procedures, with an exception only for certain minor deficiencies, in order for a claimant not to have been deemed to have exhausted his/her administrative remedies under the plan.
- If the minor errors exception does not apply, the reviewing tribunal cannot give the plan’s decision special deference and must review the dispute de novo.
- Protection will be given to claimants whose attempts to pursue remedies in court under Section 502(a) of ERISA (based on deemed exhaustion) have been rejected by a reviewing tribunal.
- There is also a proposed safeguard provision for claimants who prematurely pursued a claim before exhausting the plan’s administrative remedies. Under this safeguard, if a court rejects a claimant’s request for review, the claim will be considered re-filed on appeal once the plan receives the court’s decision. The plan must inform the claimant of the resubmission and allow the claimant to pursue the claim.
- Coverage Rescissions – Adverse Benefit Determinations. This proposal adds a new provision to address coverage rescissions not already covered under the ERISA claims procedures. The proposed rule would amend the definition of an adverse benefit determination to include a rescission of disability benefit coverage that has a retroactive effect, whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time. This definition is modeled after the definition of rescission in the 2719 Final Rule but is much broader than the 2719 Final Rule’s definition as it is not limited to rescissions based on fraud or intentional misrepresentation of material fact. The proposed rule does not prohibit rescissions; instead, it equates them to adverse benefit determinations subject to the applicable ERISA claims procedures procedural rights.
- Culturally and Linguistically Appropriate Notices. This proposal adds a new “safeguard” requirement that adverse benefit determinations must be provided in a culturally and linguistically appropriate manner in certain situations. Specifically, if a claimant is from a county where 10 percent or more of the population is only literate in the same non-English language, any notice to the claimant must include a one-sentence statement in the relevant non-English language about the availability of language services. If the proposed amendment is adopted as is, the plan will also be required to provide oral language services (such as a telephone hotline) in the non-English language and, upon request, provide written notices in the non-English language.
The proposed amendments are subject to a 60-day public comment period following publication in the Federal Register. Watch this space for further updates.