As of right now, beginning January 1, 2018, the regulations that control ERISA disability claims and appeals will change. I feel this is great news because these new regulations will provide much-needed protections to many short and long-term disability claimants.
These important changes to ERISA law are the result of the Department of Labor’s review of ERISA legal cases since 2000. With these new rules, DOL acknowledged that ERISA rules are inadequate from a claimant’s standpoint.
As the Federal Register states in the Final Rule, “…[group] disability cases dominate the ERISA litigation landscape today. …Insurers and plans looking to contain disability benefit costs may be motivated to aggressively dispute disability claims. Concerns exist regarding conflicts of interest impairing the objectivity and fairness of the process for deciding claims for group health benefits.”
Existing ERISA laws and regulations make it easy for insurers to deny valid disability claims without penalties, and the legal remedies and due process for claimants are very limited. This has resulted in many disability insurance companies handling claims in unfair and in some cases deceptive manners.
The new ERISA disability regulations will help level the playing field for claimants.
The new rules will apply to both short-term and long-term disability benefits plans provided through your employer.
There are seven main rule changes. Here is a summary of each:
Certainly, the new ERISA disability regulations come as bad news for disability insurers who do not play fair. These changes will affect their administrative costs, increase burdens of handling claims, as well as increase litigation risk, and add new legal complexities that work against them rather than for them.
- Disability Insurance claims and appeals must be adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the benefit determination.
This rule means there must be no conflict of interest, no unprincipled benefit denials, or other breaches of fiduciary duty.
This could result in significant changes to disability insurance offices and could provide a fertile area for litigation discovery to see if disability insurers are truly administering claims in an impartial manner. For example, if companies promote those who deny claims over those who pay claims, the impartiality of the persons involved could be called into question.
- Disability Insurance denial notices must contain a complete discussion of why the plan denied the claim and the standards applied in reaching the decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, or with disability benefit determinations by the Social Security Administration (SSA).
This new regulation requires the ERISA disability insurer to tell you clearly in your denial letter why your claim was denied. If the disability insurer disagrees with SSA, this regulation seems to require them to say why. If the disability insurer disputes your own doctor, this regulation seems to require them to set forth exactly why. This rule seems to require the ERISA disability insurance company to list the disagreements out and explain in detail the basis for each of their findings.
- Claimants must be given timely notice of their right to access their entire claim file and other relevant documents and be guaranteed the right to present evidence and testimony in support of their claim during the review process.
Did you know that you currently have the right to receive your entire claim file? Many who file claims do not even know to ask for their claim file. While the insurance company is required to provide your claim file to you, they are not required to explicitly tell you. Under this new rule you must be notified by the insurer of your rights to access your claim file and all other insurance company documents necessary for you to properly file and develop your claim.
- Claimants must be given notice and a fair opportunity to respond before denials at the appeals stage are based on new or additional evidence or rationales
With the new ERISA disability regulations, you will have the right to review and respond to new information before the Plan makes a decision on appeal. If your appeal is denied, and the denial is based on new or additional evidence, the insurer must give you fair notice and a fair chance to respond.
Currently, it is common for the disability insurance company to receive all of your evidence and arguments disputing their decision, and then they take that evidence and have another review that essentially refutes your evidence. You are not given another chance to dispute or refute what they have and then your claim is denied.
This rule seems to provide you a full and fair review by providing a right to review and respond to new evidence or rationale developed by the insurer during the administrative review prior to the appeal decision. This may be a very helpful rule.
- Plans cannot prohibit a claimant from seeking court review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan failed to comply with the claims procedure requirements unless the violation was the result of a minor error.
This rule takes away the insurer’s argument that you did not get a final decision from them before going to court. This is important because sometimes the insurance company’s strategy to deny a claim is to cause delays by withholding documents or information, or they may use other frustrating maneuvers like simply not responding to your appeal or claim.
The new ERISA disability regulations prevent you from being barred from suing the insurance company if you fail to complete the internal appeals process when (1) the insurance company behaves wrongly or (2) procedural errors occur. If that happens, the court reviews the disputed decision without regard for the insurer’s decision.
- Certain rescissions of coverage are to be treated as adverse benefit determinations triggering the plan’s appeals procedures.
This rule amends the definition of an “adverse benefit determination” to now include a rescission (withdrawal) of disability benefit coverage that has a retroactive effect. So, a retroactive rescission of coverage is considered to be a denial of benefits that sets off the Plan’s appeal process.
- Required notices and disclosures issued under the claims procedure regulation must be written in a culturally and linguistically appropriate manner
Disability denial letters must be written in a manner and language that is understandable to the claimant, or otherwise include information on the availability of language services.
Certainly, the new ERISA disability regulations come as bad news for disability insurers who do not play fair.
These changes will affect their administrative costs, increase burdens of handling claims, as well as increase litigation risk, and add new legal complexities that work against them rather than for them.