The Employee Benefits Security Administration of the U.S. Department of Labor recently published final regulations governing the ERISA claims and appeals process that will apply to all claims for disability benefits filed on or after January 1, 2018. These regulations add procedural safeguards to the claims and appeals process for disability benefits, and largely track the provisions of regulations proposed in 2015.
The new regulations add the following requirements to the claims and appeals process for disability benefits:
• Claims and appeals must be decided independently and impartially, meaning that those who decide claims should not be incentivized to deny claims. Some examples of prohibited conduct include:
o A plan providing bonuses to claims adjudicators based on the number of denials they make.
o A plan contracting with a medical expert based on his or reputation for outcomes in contested cases.
• Denial letters must include the following:
o An explanation as to why the plan did or did not agree with the views of health care and vocational professionals, or with disability determinations made by the Social Security Administration.
o Notice about claimants’ rights to access their claim file and other relevant documents.
o Any internal rules or guidelines the plan relied upon in deciding the claim. If no such internal rule or guideline exists, the letter must state that fact.
o Denial letters must be culturally and linguistically appropriate. This means that if a claimant’s address is in a county where 10% or more of the population is literate only in the same non-English language, such letters must include a prominent statement in that language about the availability of language services. Furthermore, the plan must provide a copy of the applicable letter or notice in that language upon request, and it must provide oral language services.
• Before an appeal can be denied, claimants must be given notice and a fair opportunity to respond if the appeal denial is based on new or additional rationales or evidence. Furthermore, appeal denial letters must describe any applicable plan imposed time limits on filing a lawsuit, as well as the date the limitations period expires.
• Claimants are not barred from suing due to failure to exhaust the plan’s claims procedures where the plan itself failed to comply with its claims procedures (except for certain minor failures).
• Retroactive rescissions of coverage are considered benefit denials that trigger the plan’s appeals procedures.
The new regulations apply to all ERISA-governed plans that provide disability benefits. 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 the participant is disabled, such as 401(k) plans and pension plans. For example, if a pension plan provides for a benefit conditioned upon the participant being disabled, and the plan must make a determination as to whether the participant is disabled, then the new regulations apply. In contrast, if a pension plan provides for a benefit conditioned upon the participant being disabled, but that finding is made by a party other than the pension plan (e.g., a finding of disability by the Social Security Administration or under the employer’s LTD plan) for purposes other than a benefit determination under the plan, then the new regulations would not apply.
While there may be a possibility that the new administration will try to rescind the new regulations, there is no certainty that will occur. Now is the time for plans and insurers to begin reviewing their claims and appeals procedures for compliance with the new regulations. For many plans, this will involve working with the plan’s service providers to ensure compliance.