Final Disability Claims and Appeals Regulations – Be Prepared to Comply

by Foley & Lardner LLP
Contact

Foley & Lardner LLP

In December 2016, the Department of Labor issued final regulations under ERISA governing claims procedures for group disability plans, which will become effective January 1, 2018. Generally, these regulations were drafted to be consistent with the regulations governing claims procedures for group health plans, as enhanced by the Patient Protection and Affordable Care Act. The new requirements under the final regulations are summarized below.

Most employers have fully-insured long-term disability plans, so in such a case, the employer’s obligation will be to ensure that its insurance carrier will be ready to comply with these new rules. An employer with a self-insured plan will likewise need to ensure that its third party claims administrator will be compliant with the new requirements.

1. 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 applies to both medical and vocational experts.

Example: A plan cannot provide bonuses based on the number of denials made by a claims adjudicator.

Example: A plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases, rather than based on the expert’s professional qualifications.

2. Disclosure Requirements. Denial notices must include the following:

a. Disagreement with Experts. The notice must include a discussion of the basis for disagreeing with any health care professionals treating the claimant or any medical/vocational experts who evaluated the claimant.

The discussion must include explaining 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 upon when making the determination. This is designed to prevent “expert shopping” – which is when a plan continues to hire experts until an expert supports the denial of disability benefits.

b. Disagreement with SSA. If the claimant is considered disabled for Social Security purposes, the plan must discuss why it disagrees with the Social Security Administration (“SSA”) determination. A more detailed justification is required if the SSA definitions are similar to those under the plan.

c. Medical Necessity/Experiment Treatment. For denials based on medical necessity or experimental treatment, the denial notice must contain 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.

d. Internal Guidelines or Standards. If internal rules, guidelines or standards were relied upon, the plan must provide such rules, guidelines and standards.

This disclosure requirement is more onerous than the requirements applicable to group health plans. You must affirmatively provide the rule, guideline or standard (or state that none was relied upon). It is not sufficient to simply state that it will be provided upon request.

e. 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.

f. Contractual Limitations for Bringing Suit. For appeal denials, the notice must describe any time limit for filing suit in court set forth in the plan documents, and include the specific date by which a lawsuit must be filed to be considered timely.

Example: If a disability plan document provides that a claimant must file suit within one year after exhausting the plan’s internal claims procedure, this one year limit must be expressly referenced in the appeal denial and the notice must include the actual calendar date upon which the time period for filing suit expires.

3. Right to Respond to New Evidence or Rationales. A claimant must be given the right to respond to new evidence or rationales relied upon 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.

4. Deemed Exhaustation. If a plan fails to comply with these rules, the claimant is deemed to have exhausted the plan’s claims procedure, unless the violation was the result of a minor error and other conditions are met. If a claimant is deemed to have exhausted a plan’s claims procedure, the claim or appeal is deemed denied on review without the exercise of discretion by a fiduciary and the claimant may immediately file suit in court.

Important: In most lawsuits involving disability claims under ERISA, the court will defer to the plan’s determination, unless the determination is found to be arbitrary or capricious (which is unlikely). However, the DOL suggests that deemed exhaustion might result in a court not providing any deference to the plan and instead reaching its own independent ruling.

5. 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 utilize 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.

6. Translation Requirements. If a denial notice is being mailed to a county where ten percent 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 a verbal customer assistance process (e.g., telephone hotline) in the non-English language and provide written notices in the non-English language upon request.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley & Lardner LLP | Attorney Advertising

Written by:

Foley & Lardner LLP
Contact
more
less

Foley & Lardner LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.