In December 2016, the Department of Labor issued final regulations under ERISA governing claims procedures for group disability plans, which became effective Jan. 1, 2018. The new regulations govern employee benefit plans subject to ERISA that offer disability benefits, not just disability plans. ERISA plans must strictly comply with the new regulations for all claims filed on or after Jan. 1, 2018, including any necessary amendments to plan documents and internal claims-handling procedures. However, some parts of the regulation took effect Jan. 18, 2017.
Although the DOL announced on July 20, 2017, that the new regulations might be amended or delayed, they were scheduled to take effect for all claims for disability benefits filed on or after
Jan. 1, 2018. These new disability claims regulations would not apply if a plan does not make the determination of disability, but instead relies on a third party’s determination of disability, such as a determination of disability made by the Social Security Administration or the employer’s long-term disability plan. Further, the new regulations do not apply when parties to a collective bargaining agreement have agreed to use a grievance and arbitration process to adjudicate disability claims.
For claims filed between Jan. 18 and Dec. 31, 2017, the DOL is imposing the following additional standards (as applicable) on denial notices to ensure a full and fair review has occurred.
- The notice either needs to provide (i) the specific rule, guideline, etc., that was relied upon in making the adverse determination relied; or (ii) a statement that that such a rule was relied upon and notice that a copy will be provided for free upon request.
- If the claim is denied based upon medical necessity, experimental treatment or a similar exclusion or limit, the notice must provide (i) an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical situation; or (ii) a statement that the explanation will be provided for free upon request. (Note: this standard will continue to apply in 2018.)
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For claims filed on or after Jan, 1, 2018, these are the new requirements:
- Loss of discretionary authority. If a plan violates any of the rules for disability claims, the claim is deemed denied without the
exercise of discretionary authority. This gives the claimant the right to file a lawsuit without further delay and will allow a court to decide the merits of the claim de novo, without any deference to the fiduciary who violated the rules. The only exception to this rule is if the plan’s violation was: (i) minor; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of a continuing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance. In addition, a claimant may request that the plan explain in writing any violation. The plan must respond within 10 days by specifically explaining the violation and why it believes the claimant should not be permitted to file a lawsuit at that time.
- Impartiality. A plan’s claims procedure must be designed to ensure impartiality. This means that a plan cannot
make hiring, compensation, promotion or termination decisions based on the likelihood that a claim adjudicator or supporting expert will support the denial of disability benefits. This rule also applies to vocational experts, medical consultants and in-house medical reviewers.
- Disclosure Requirements. Denial notices must include the following:
- Disagreement with Experts. A discussion of the basis for disagreeing with any healthcare professionals treating the claimant or any medical/vocational experts who evaluated the claimant. The discussion must include an explanation of why the plan disagrees with any medical/vocational experts whose advice was obtained in connection with the determination process, regardless of whether the advice was relied on when making the determination (This is designed to prevent “expert shopping”).
- Disagreement with SSA. If the Social Security Administration (SSA) has determined the claimant is disabled for Social Security purposes, the plan must discuss why it disagrees with the SSA’s determination. If the plan’s definition of “disabled” is similar to the SSA’s definition, the plan must provide a more detailed justification.
- Medical Necessity/Experiment Treatment. If a denial is based on medical necessity or experimental treatment, the notice must include an explanation of the scientific or clinical judgment used for the denial, or a statement that such explanation will be provided free of charge upon request.
- Internal Guidelines or Standards. If internal rules, guidelines or standards were relied on in making the plan decision, the plan must provide such rules, guidelines and standards. This disclosure requirement is more onerous than the requirements applicable to group health plans. The claims decision maker must affirmatively provide the rule, guideline or standard (or state that none was relied on). It is not sufficient to simply state that it will be provided upon request.
- Relevant Documents. For claim denials, the notice must provide that all documents relevant to the claim denial will be provided upon request. This requirement already exists for appeal denials.
- Contractual Limitations for Bringing Suit. All appeal denial notices must describe any time limit for filing suit in court set forth in the plan documents (any contractual limitations), and must include the specific date by which a lawsuit must be filed to be considered timely.
- Right to Respond to New Evidence or Rationales. A claimant must be given the right to respond to new evidence or rationales relied on or generated during the pendency of an appeal (even if supportive of the claimant). The plan must provide such evidence and rationales to the claimant as soon as possible and sufficiently in advance of the date on which the plan will reach its determination, so that the claimant has the opportunity to respond prior to the plan’s appeal decision.
- Rescissions of Coverage. Rescissions of coverage (the termination of coverage with a retroactive effect) must be treated as a denial of a claim. As such, a participant is entitled to use the plan’s claims procedure to appeal a rescission of coverage. This does not apply to retroactive termination of coverage for failure to pay premiums.
- Translation Requirements. If a denial notice is being mailed to a county where 10% or more of the population is literate only in the same non-English language, the denial notice must include a prominent statement in the relevant non-English language about the availability of language services. The plan would also be required to provide an oral customer assistance process (i.e., telephone hotline) in the non-English language and provide written notices in the non-English language upon request.
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PLEASE NOTE – On Oct. 6, 2017, the Department of Labor signed a proposed rule “to delay for ninety (90) days – through April 1, 2018 – the applicability of the final rule amending the claims procedure requirements applicable to ERISA-covered employee benefit plans that provide disability benefits.”
There is a 60-day period to submit comments providing data and other relevant information regarding the merits of rescinding, modifying or retaining the final rule. The DOL has received many complaints about the added costs to benefit plans (estimated at 6% to 10% increase in premiums, according to several insurance carriers). In light of these complaints, the DOL believes it is appropriate to seek additional public input and additional reliable data.
I believe there will be some changes to the final rule and do not believe they will just scrap it.