What's New in Claims Procedure for Disability Benefits
What's New: The Department of Labor issued a final rule on December 16, 2016 that amends the claims procedure regulation for disability benefits claims. The aim of the new rule is to give disability benefit claimants the same level of procedural protections that group health benefit claimants have after the enactment of the Affordable Care Act. The new requirements are meant to protect disability claimants from conflicts of interest, to ensure that claimants have an opportunity to respond to the evidence and reasoning behind an adverse determination, and to increase transparency. In general, the final rule's new requirements are applicable to disability claims made on and after January 1, 2018.
What Commentators Are Saying: Some commentators observe that it is possible that the incoming administration will rescind this rule. However, even if rescinded, adoption of the rule's provisions make it less likely that a plaintiff's attorney will be willing to challenge an adverse disability benefit claim determination in court, because the new rule incorporates many of the rationales given by courts for overturning such determinations.
What's Required: Under the final rule, disability plans must incorporate the following new requirements into the plan's claims procedures.
Changes to a plan's claims processing system:
• A plan cannot hire, compensate, promote or terminate a claims adjudicator or a vocational or medical expert based on that individual's or entity's record of denying claims or the likelihood of their future denial of claims.
• A plan's failure to follow all required claims procedures will result in a deemed exhaustion of the claims process, unless the failure is minor. A deemed denial under these circumstances means that the denial was done so without the exercise of discretion on the part of the fiduciary, and the claimant is free to pursue a lawsuit immediately. A subsequent decision of the court to reject the claimant's request for review must be treated by the plan as a re-filed claim on appeal.
• Rescissions of coverage, except for non-payment of premiums, must be treated as adverse benefit determinations subject to the plan's claim procedures.
• Prior to a plan's final determination, a claimant must be given the opportunity to respond to new or additional evidence or rationales that were not already included in a benefit denial notice at an earlier stage.
Changes to notice requirements:
• If a disability claimant resides in a county where 10 percent or more of the population is literate in the same non-English language, the benefit denial notices must include a prominent statement in the applicable non-English language regarding the availability of language services.
• Benefit denial notices, in addition to notices of a denial on appeal, must state that the claimant may receive, upon request, the entire claim file and any other relevant documents.
• Denial notices must include the internal rules, guidelines, protocols, standards and other similar criteria of the plan that were used in the claim denial, or state that none were used. Such internal rules can no longer be incorporated by reference and available upon request.
• Benefit denial notices must include more complete explanations of the reasoning of the claims adjudicator including, if applicable, the bases for disagreements with the plan's medical or vocational experts, or a Social Security Administration determination, whether or not relied upon by the plan.
• Benefit denial notices must include any relevant timing requirements for claims processing, including any limitation on a claimant's right to bring a lawsuit in the event of an adverse final determination.