On October 6, 2017, the Department of Labor signed a proposed Rule “to delay for ninety (90) days – through April 1, 2018 – the applicability of the Final Rule amending the claims procedure requirements applicable to ERISA-covered employee benefit plans that provide disability benefits.”
Specifically, the DOL proposes:
Section 2560.503-1 is amended by removing “on or after January 1, 2018” and adding in its place “after April 1, 2018” in paragraph (p)(3) and by removing the date “December 31, 2017” and adding in its place “April 1, 2018” in paragraph (p)(4).
The proposed rule is scheduled to be officially published on October 12, 2017. There will be a 15-day period for comments on the proposal to extend the applicability date. There will also be a 60-day period to submit “comments providing data and otherwise germane to the examination of the merits of rescinding, modifying, or retaining the rule[.]”
The DOL explained that it had limited information prior to the adoption of the Final Rule regarding the cost of the new requirements, and that “[a]fter the Department published the Final Rule, certain stakeholders asserted in writing that the Final Rule will drive up disability benefit plan costs, cause an increase in litigation, and thus impair workers’ access to disability insurance protections.” Stakeholders also argued “that the new deemed exhaustion provision ‘explicitly tilts the balance in court cases against plans and insurers’ and ‘creates perverse incentives for plaintiff’s attorneys to side-step established procedures and clog the courts for resolution of benefit claims.’”
Carriers insuring approximately 18 million LTD plan participants estimated that the Final Rule would cause average premium increases of 5% to 8% in 2018, which would be expected to result in an equivalent reduction in covered employees. In other words, insurers asserted that “the cost increases caused by the Final Rule will result in employers reducing and/or eliminating disability income benefits, and that some individuals may elect to drop or forego coverage, with the result being that fewer people will have adequate income protection in the event of disability.”
The Department stated:
In light of the foregoing, the Department has concluded that it is appropriate to seek additional public input regarding the regulatory impact analysis in the Final Rule. If additional reliable data and information is submitted, the Department will be able to consider whether it supports regulatory alternatives other than those adopted in the Final Rule.
The Department listed the specific data and information it is soliciting:
Specifically, the Department requests data that it could use to assess: (1) the number of disability claims that are filed and denial rates for such claims, including rates separately for claimants who were previously approved under the Social Security Disability Insurance Program (SSDI) and statistics on reasons for denial; (2) how often plans rely on new or additional evidence or rationales during the claims review process and the volume of the material that comprise such additional evidence or rationales; (3) the price elasticity of demand for disability insurance coverage; (4) pricing or premiums for group and individual level policies and factors that affect pricing; (5) loss ratios and the breakdown of expenses (claims, sales, claims processing, etc.); (6) aggregate, average, and median benefits paid and ages of claimants; (7) the projected litigation costs associated with the new procedural requirements for disability claims provided in the Final Rule; (8) the number of new claims that will be granted that, but for the provisions in the Final Rule, would have been denied, and the value of those benefits; (9) the systems and technology that plans and insurers use to process disability claims and cost estimates updating such systems to comply with the Final Rule; (10) statistics on steps, timing of steps, and disposition of claims from initial filing to final disposition, including claims filed but never perfected or decided, up to and including claims denied though appeal and litigated; and (11) information regarding the costs for non-English services and the estimated population of claimants that might be expected to use such services.
The Department recognized that much of this information is proprietary, and stated that it “is willing to work with stakeholders to ensure that any trade secrets and proprietary business information are protected from public disclosure and that the data collection process is designed to ensure that no violations of antitrust or other federal or state laws occur.”