Significant changes to the Department of Labor’s (“DOL”) rules regulating disability claims procedures are now in force. These new rules apply to claims filed on or after April 1, 2018.
ERISA directs the Secretary of Labor to establish and maintain rules which ensure that plan fiduciaries and insurance providers fully and fairly review claims for ERISA-governed benefits. The DOL’s rules regulating claims procedures are set forth at 29 C.F.R. § 2560.503-1, which contains detailed direction as to the claims handling process for both group health plans and disability plans. Historically, 29 C.F.R. § 2560.503-1 imposed similar obligations on group health plans and disability plans. That changed in 2010, however, with the implementation of the Affordable Care Act, under which claims procedures for group health plans were significantly modified, while procedures for disability plans remained untouched.
In the years that followed, the DOL concluded that disability claim regulations should be modified as well, and proposed an initial set of enhanced regulations in November 2015. Previous posts detailing the administrative development of the DOL’s new disability claim regulations may be found here, here, here and here.
Among the DOL’s more substantive revisions are a series of requirements mandating that:
- Adverse benefit and appeal determinations must provide an “explanation of the basis for disagreeing with or not following” the “views” of treating and consulting medical and vocational specialists. 29 C.F.R. § 2560.503-1(g)(1)(vii)(A), (j)(6)(i).
- Adverse benefit and appeal determinations must provide: “Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.” 29 C.F.R. § 2560.503-1(g)(1)(vii)(B), (j)(6)(ii).
- Adverse benefit and appeal determinations must provide an “explanation of the basis for disagreeing with or not following” SSDI determination. 29 C.F.R. § 2560.503-1(g)(1)(vii)(A), (j)(6)(i).
- Before making an adverse appeal determination, the plan must disclose to the claimant “any new or additional evidence considered, relied upon, or generated” by the plan “in connection with the claim”, as well as any “new or additional rationale.” These materials must be disclosed “as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required … to give the claimant a reasonable opportunity to respond prior to that date[.]” 29 C.F.R. § 2560.503-1(h)(4).
- Appeal decision letters must “describe any applicable contractual limitations period that applies to the claimant’s right to bring such an action, including the calendar date on which the contractual limitations period expires for the claim.” 29 C.F.R. § 2560.503-1(j)(4)(ii).
In addition, the DOL has clarified that “decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical or vocational expert) must not be made based upon the likelihood that the individual will support the denial of benefits.” 29 C.F.R. § 2560.503-1(b)(7). The DOL has stated that this rule covers “consulting experts” and “individuals hired or compensated by third parties engaged by the plan with respect to claims.”
Perhaps most notable, however, is the DOL’s new “deemed exhausted” rule, under which a claimant is deemed to have exhausted the administrative remedies available under a plan – and is therefore permitted to proceed immediately to litigation – if a plan fails to strictly adhere to any of the claims procedures outlined in 29 C.F.R. § 2560.503-1. An exception to this rule exists if the plan can show all of the following: (i) the violation is de minimis; and (ii) the violation does not cause, and is not likely to cause, prejudice or harm to the claimant; and (iii) the violation was for good cause or due to matters beyond the control of the plan; and (iv) the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant. 29 C.F.R. § 2560.503-1(l)(1) and (l)(2). Moreover, if a claimant requests an explanation from the plan for why it failed to follow the plan’s claims procedures, the plan must respond in writing in ten (10) days or less. 29 C.F.R. § 2560.503-1(l)(2)(ii). If the court finds that the exception applies, the claim will be remanded to the plan and considered as re-filed on appeal. 29 C.F.R. § 2560.503-1(l)(2)(ii).
The foregoing selections are illustrative – not exhaustive – of the significant change to the regulatory landscape of ERISA-governed disability claims now in effect.
Interestingly, the DOL states it was in part motivated to implement these changes based on the concern that “disability cases dominate the ERISA litigation landscape today.” Yet, it is hard to see how these changes will reduce litigation of disability claims, or minimize the complexity of issues raised in litigation.