Contributing Author: Dianne Schechter
Employers providing disability benefits to their employees should note that the U.S. Department of Labor (“DOL”) recently changed how disability benefit claims are administered. The new disability claim rule will apply to ERISA-governed disability benefits claims (i.e., claims under private-sector employee health and welfare benefit plans) that are filed on or after January 1, 2018. The new rule is designed to increase fairness and transparency, and the goal of cutting down on the number of disability lawsuits that get filed, though it remains to be seen whether the rule will have the intended effect.
Employers will want to make sure their claim administrators and providers are familiar with the new rule and ensure that their benefit plans and claim procedures comply. Disability benefit plans “must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality” of those involved in making the decision, the DOL said in the rule.
The Employee Benefits Security Administration (“EBSA”), a department of the DOL and the agency responsible for enforcing ERISA, said developments since the release of the DOL's 2000 regulation on benefit claims procedures showed that the rule was ripe for a re-examination and update. For example, disability cases dominate the ERISA plan benefits litigation landscape, even though fewer private-sector employees participate in disability plans than in group health and other types of plans. Moreover, one study showed that cases involving long-term disability claims accounted for 64.5 percent of benefits litigation, whereas lawsuits involving health-care plans and pension plans accounted for only 14.4 percent and 9.3 percent, respectively.
The final regulation (RIN:1210-AB39) adopts certain procedural protections and safeguards for disability benefit claims by borrowing from those applicable to group health plans under the Affordable Care Act, EBSA said.
According to EBSA the new rule has seven basic elements:
- basic disclosure requirements,
- right to claim file and internal controls,
- right to review and respond to new information before final decision,
- avoiding conflicts of interest,
- deemed exhaustion of claims and appeal processes,
- certain coverage rescissions are adverse benefit determinations subject to the claims procedure protections, and
- notices written in a culturally and linguistically appropriate manner.
Among its many requirements, the new rule aims to combat what it calls “expert shopping,” in which a claims administrator may take the advice of one reviewer who recommends denying a claim while discounting reviewers who suggest granting it.
Regarding disclosure requirements, EBSA indicated that plans will have to provide the internal rules, guidelines, protocols, standards or other similar criteria they relied upon in making an adverse benefit determination. The rule is scheduled for publication Dec. 19 in the Federal Register.
Contact the experienced attorneys at Butterfield Schechter LLP today if you have questions regarding the new claim regulations and how they may affect the administration of your plan. If you believe you have an entitlement to benefits under your employer-provided plan, act now and contact us today to discuss how best to proceed with your claim for benefits.