Many employer-sponsored disability plans must update their claims and appeals procedure, effective for claims filed after April 1, 2018. The updates are required for disability plans subject to the Employee Retirement Income Security Act (ERISA)—including most private employers' long-term disability plans and their short-term disability plans that are insured or paid through a trust. The updates generally are not required for disability plans required by state law or for salary continuation arrangements that constitute employer "payroll practices." In addition, other ERISA plans that vest or pay out upon a finding of disability—such as retirement plans and deferred compensation plans—may also need to update their claims procedure.
In December 2016, the Department of Labor published a final rule (the "Rule"), amending the claims procedure applicable to disability determinations by ERISA plans. The Rule was scheduled to take effect on January 1, 2018, but the effective date was deferred.
The Rule was intended to provide more transparency in the claims process and includes the following key changes:
- A rescission of coverage is considered a denial.
- At both the claim and appeal levels, benefit denial notices must thoroughly disclose the reasons and criteria used in making the decision. In particular, the notice must explain the basis for disagreeing with or not following the views presented (if any) by the claimant's treating physician, other experts who evaluated the claimant, medical or vocational experts consulted by the Plan, and any disability determination from the Social Security Administration.
- At both the claim and appeal levels, individuals involved in adjudication must be impartial and independent (for example, compensation cannot be based on the amount or number of denied claims).
- Before denying an appeal, the Plan must give the claimant a reasonable opportunity to review and respond to any new evidence or new rationale. Appeal denial notices must explain any limits the Plan imposes on the claimant's right to bring a lawsuit seeking benefits related to the claim.
- The Plan must provide its claim and appeal denial notices in a "culturally and linguistically appropriate manner." If the claimant is located in a county where at least 10% of the population is literate only in the same non-English language (the current list of counties is available here), the Plan must take all of the following steps: (1) On notices provided in English, the Plan must prominently display a notice, in that non-English language, explaining how to access the Plan's language services. (2) Upon request, the Plan must provide the notice in the non-English language. (3) The Plan must provide claims assistance (including a telephone customer assistance hotline) in that non-English language.
In addition to increasing transparency, the Rule increases the negative consequences for plans that fail to comply with the claims procedure requirements. If a plan "fails to strictly adhere" to the claims requirements (with some modest exceptions), the claimant is deemed to have exhausted his or her administrative remedies and may proceed to litigation.