Disability Claim Benefit Rules Updated by Department of Labor
By Mark Johnson, Ph.D., J.D.
The U.S. Department of Labor has revised its procedures for disability benefit claims that fall under the Employee Retirement Income Security Act (ERISA). The amended rules will apply to all claims for disability benefits filed on or after January 1, 2018.
The rule applies to plan administrators for disability benefit programs, as well as the participants and beneficiaries of those plans. Third-party benefits administrators and other service providers who assist in disability benefit plan administration are also subject to the rules.
The revisions, according to the U.S. Department of Labor’s Employee Benefits Security Administration, are intended to improve the claims and appeals process for disability claimants. Between 2006 and 2010, long -term disability benefit claims accounted for some 65 percent of ERISA benefits litigation, according to a BNA news report. Comparatively, healthcare plans accounted for 14 percent, while pension plans hovered around 9 percent.
Based on the high percentage of disability claimants who file lawsuits, the Labor Department concluded that it needed to review the rules governing disability benefit claims.
The ERISA Advisory Council in 2012 undertook a study on issues relating to managing disability in an environment of individual responsibility.
In 2015, proposed new rules revising claims procedure regulations were published in the Federal Register. Public comments — submitted by plan participants, insurers, trade groups and others — were considered by the Advisory Council.
The Employee Benefits Security Administration publishedthe final rule on claims procedures in the December 19, 2016 issue of the Federal Register. The revised regulation has adopted similar procedural protections and safeguards as those contained in the Affordable Care Act.
Some key features in the revised claim procedures include:
- More comprehensive explanations of benefit denial notices, which must now include the standards applied in making the decision as well as an explanation for disagreeing with the Social Security Administration’s disability determination, if applicable.
- Notification that the claimant is entitled to the entire claim file and other relevant documents concerning the denial. (Presently, only notices denying benefits on appeal receive this notification). Benefit denial notices must also specify the “internal rules, guidelines, protocols, standards or other similar criteria of the plan” relied upon to deny a claim. If none were used that must also be cited.
- Claimants will have the right to review and respond to new information before a final decision is made.
- To avoid conflicts of interest, there must be impartiality in the adjudication process. This has been a hot button issue, Bloomberg reports, noting that the rule is designed to mitigate situations in which a plan may consider the input of several reviewers before selecting from among multiple recommendations.
- If plans fail to follow procedural rules, the claim will be considered denied and the claimant may immediately pursue it in court.
- Benefit denial notices must be written in easy-to-understand language. If the claimant lives in a county where 10 percent or more of the population speaks the same non-English language, the denial notice must prominently display information about the availability of language services written in the relevant language.
Transition Planning for the New Disability Claim Rules
While the rule does not take effect until 2018, plan administrators and third party service providers will want to carefully review existing procedures during 2017 and plan for the implementation of changes required for compliance.
Claims filed during this interim period must comply with the following requirements:
- In the event of an adverse determination, the decision maker must identify any “internal rule, guideline, protocol, or other similar criterion” that was used in making the determination.
- If a medical necessity or experimental treatment is involved in the claim denial, additional information must be provided.
- A“full and fair review of a claim” will be determined in part by its compliance with certain specified provisions of the new regulation.
Indeed, 2017 will be a busy year for disability benefit plan administrators and service provider. Internal procedures will need to be thoroughly updated, documented, and administered in conformity with the final rule on disability claims procedures.
ABOUT THE AUTHOR: Mark Johnson, J.D., Ph.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.
ERISA Benefits Consulting, Inc. by Mark Johnson provides benefit consulting and advisory services and does not engage in the practice of law.
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