On November 29, 2017, the U.S. Department of Labor (DOL) published a Final Rule that delays implementation of new claim rules for disability benefits through April 1, 2018.11 This 90-day delay is intended to give the DOL, insurers, employers, and other interested parties additional time to review the new rules. The DOL is collecting public comments through December 11, 2017.
The new claim rules apply to disability benefits provided under plans covered by the Employee Retirement Income Security Act (ERISA); that is, plans sponsored by private sector employers. A disability benefit means the plan must make a determination of disability in order for the claimant to obtain the benefit. Group short- and long-term disability plans are the most common examples, although the rules also may apply to pension, 401(k), and deferred compensation plans if the benefit is conditioned on the plan determining that the claimant is disabled.
Assuming the DOL does not announce any further delays, the following new requirements will apply to disability claims filed after April 1, 2018:
- Improvement 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. For example, the notices must include a discussion of the basis for disagreeing with a disability determination made by the Social Security Administration if presented by the claimant in support of his or her claim.
- 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. (Previously this statement was required only in notices denying benefits on appeal, not on initial claim denials.) The notice also must 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. (Previously it was optional to include a statement that such rules and protocols were used in denying the claim and that the claimant could request a copy.)
- Right to Review and Respond to New Information Before Final Decision: Plans are prohibited 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.
- Avoiding 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 benefit claims.
- Deemed 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 exceptions for minor errors or other conditions apply). In that case, the claimant may immediately pursue his or her claim in court. Plans also must treat a claim as re-filed on appeal upon the plan’s receipt of a court’s decision rejecting the claimant’s request for review.
- Certain Coverage Rescissions Are Adverse Benefit Determinations Subject to the Claims Procedure Protections: Rescissions of coverage, including retroactive terminations due to alleged misrepresentation of fact, such as errors in the application for coverage, must be treated as adverse benefit determinations. Adverse benefit determinations trigger the plan’s appeals procedures. Coverage terminations due to non-payment of premiums are not rescissions and not covered by this provision.
- Notices Written in a Culturally and Linguistically Appropriate Manner: Benefit denial notices have to be provided in a culturally and linguistically appropriate manner in certain situations. This is consistent with the existing rule for group health benefit notices. Specifically, if a disability claimant’s address is in a county where 10 percent or more of the population is literate only in the same non-English language, benefit denial notices 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 in the non-English language and provide written notices in the non-English language upon request.
The DOL is in the process of reviewing the new claim rules, which originally had been issued by the prior Administration. While it is possible that the Department will make revisions or provide another delay before implementation, employers should take steps now to work with their carriers, third-party administrators, and advisors to review their current procedures and ensure they will be prepared to comply with the new requirements, if needed.