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New Rules for Disability Benefit Claims May Be Delayed - October 2017
On Dec. 16, 2016, the Department of Labor (DOL) released a
final rule to strengthen the claims and appeals requirements for plans that
provide disability benefits and are subject to the Employee Retirement Income
Security Act (ERISA). The final rule is currently scheduled to apply to claims
that are filed on or after Jan. 1, 2018. However, on Oct. 12, 2017, the DOL
proposed to delay the final rule for 90
days—until April 1, 2018.
According to the DOL, concerns have been raised that the
final rule will impair workers’ access to disability benefits by driving up
costs and increasing litigation. During the delay, the DOL will review the
final rule to determine whether it is unnecessary, ineffective or imposes costs
that exceed its benefits, consistent with President Donald Trump’s executive
order on reducing regulatory burdens.
Sponsors of ERISA plans that include disability benefits
should continue to monitor the status of the final rule. If the new requirements
take effect, entities that administer disability claims will be required to
provide new procedural protections to disability claimants.
Section 503 of ERISA requires every employee benefit plan
- Provide adequate notice in writing to any
participant or beneficiary whose claim for benefits under the plan has been
denied, setting forth the specific reasons for the denial, written in a manner
calculated to be understood by the participant; and
- Afford a reasonable opportunity to any
participant whose claim for benefits has been denied for a full and fair review
by the appropriate named fiduciary of the decision denying the claim.
The DOL first adopted claims procedure regulations for
employee benefit plans in 1977. In 2000, the DOL updated its claims procedure
regulations by improving and strengthening the minimum requirements for employee
benefit plans, including plans that provide disability benefits. Effective for
plan years beginning on or after Sept. 23, 2010, the Affordable Care Act (ACA)
amended ERISA to include enhanced internal claims and appeals requirements for
group health plans.
Protections for Disability Claimants
The final rule requires that plans, plan fiduciaries and
insurance providers comply with additional procedural protections when dealing
with disability benefit claimants. The final rule includes the following
requirements for the processing of claims and appeals for disability benefits:
to Basic Disclosure Requirements: Benefit denial notices must contain a
more complete discussion of why the plan denied a claim and the standards used
in making the decision.
- Right to
Claim File and Internal Protocols: Benefit denial notices must include a
statement that the claimant is entitled to receive, upon request, the entire
claim file and other relevant documents. Benefit denial notices also have to
include the internal rules, guidelines, protocols, standards or other similar criteria
of the plan that were used in denying a claim or a statement that none were
- Right to
Review and Respond to New Information Before Final Decision: The final rule
prohibits plans from denying benefits on appeal based on new or additional
evidence or rationales that were not included when the benefit was denied at
the claims stage, unless the claimant is given notice and a fair opportunity to
Conflicts of Interest: Plans must ensure that disability benefit claims and
appeals are adjudicated in a manner designed to ensure the independence and
impartiality of the persons involved in making the decision. For example, a
claims adjudicator or medical or vocational expert could not be hired,
promoted, terminated or compensated based on the likelihood of the person denying
Exhaustion of Claims and Appeal Processes: If plans do not adhere to all
claims processing rules, the claimant is deemed to have exhausted the
administrative remedies available under the plan, unless the violation was the
result of a minor error and other specified conditions are met. If the claimant
is deemed to have exhausted the administrative remedies available under the
plan, the claim or appeal is deemed denied on review without the exercise of
discretion by a fiduciary and the claimant may immediately pursue his or her
claim in court.
Coverage Rescissions Are Adverse Benefit Determinations Subject to the Claims Procedure
Protections: Rescissions of coverage, including retroactive terminations
due to alleged misrepresentation of fact (for example, errors in the
application for coverage), must be treated as adverse benefit determinations
that trigger the plan’s appeals procedures. Rescissions for nonpayment of
premiums are not covered by this provision.
Written in a Culturally and Linguistically Appropriate Manner: Similar to
the ACA standard for group health plan notices, the final rule requires that
benefit denial notices be provided in a culturally and linguistically
appropriate manner in certain situations.
On Oct. 10, 2017, the DOL issued a proposed rule that would
delay the applicability of the final rule by 90 days—until April 1, 2018.
According to the DOL, after the final rule was published, concerns were raised
that its new requirements will impair workers’ access to these benefits by
driving up costs.
The DOL concluded that, consistent with President Trump’s
policy on alleviating unnecessary regulatory burdens, it is appropriate to give
the public an additional opportunity to submit comments on the potential impact
of the final rule. The DOL stated that it will review these comments as part of
its effort to examine regulatory alternatives. Based on its review, the DOL may
decide to allow all or part of the final rule to take effect as written,
propose a further extension, withdraw the final rule or propose amendments to
the final rule.