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New Rules for Disability Claims Will Take Effect on April 1, 2018 - February 2018
On Jan. 5, 2018, the Department of
Labor (DOL) announced
that, effective April 1, 2018,
employee benefit plans must comply with new requirements for disability benefit
In 2016, the 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
was scheduled to apply to claims that are filed on or after Jan. 1, 2018. However,
on Nov. 24, 2017, the DOL delayed the final rule for 90 days—until April
1, 2018—to give stakeholders the opportunity to submit comments on the final
rule’s benefits and costs.
According to the DOL, the information
it received during the delay period did not justify modifying or rescinding the
final rule. Thus, the final rule will take effect without change.
plans that include disability benefits must comply with the new procedural
protections, effective for claims that are submitted after April 1, 2018.
Entities that administer disability benefit claims, including issuers and
third-party administrators, will need to revise their claims procedures to
comply with the final rule.
Section 503 of ERISA requires
every employee benefit plan to:
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
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.
Additional 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.
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 used.
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 respond.
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 people 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 benefit claims.
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.
Delay of Final Rule
On Nov. 24, 2017, the DOL delayed
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 would impair workers’ access to these benefits by driving up
costs. The DOL concluded that, consistent with President Donald Trump’s policy
on alleviating unnecessary regulatory burdens, it was appropriate to give the
public an additional opportunity to submit comments on the potential impact of
the final rule.
Jan. 5, 2018, the DOL announced
the final rule will take effect on April 1, 2018, without any changes.
According to the DOL, it received over 200 letters from stakeholders regarding
the final rule. However, the information it received did not establish that the
final rule imposes unnecessary regulatory burdens or significantly impairs
workers’ access to disability insurance benefits.