Section 503 of ERISA requires employee benefit plans to provide written notice to any participant or beneficiary whose benefit claim has been denied, and to provide the claimant a full and fair review of the claim. Despite these protections, claimants face an uphill battle in attempting to overturn wrongfully denied claims. On December 16, 2016, the Department of Labor (“DOL”) announced the release of a final rule to strengthen consumer protections for workers making claims for benefits under their workplace group disability insurance plans. The final rule was to apply to claims submitted after January 1, 2018. However, after significant complaints from the insurance industry alleging, without any factual underpinnings, that the final rule would increase the cost of disability insurance, decrease workers’ accessibility to the coverage, and cause a surge in litigation, the DOL announced on November 4, 2017 that it was delaying the implementation of the final rule by 90 days. The DOL allowed the insurance industry to provide data to support its claims and permitted claimants’ advocates an opportunity to respond. The DOL was flooded with comments from claimant advocates explaining the necessity of the final rule. In contrast, the DOL found the “data” produced by the insurance industry underwhelming and determined that it simply did not support its allegations. Accordingly, the final rule will go into effect April 1, 2018.
The final rule affords claimants an extra layer of protection in the ERISA claims process, which includes:
1. Improvement to Basic Disclosure Requirements. Plans are required to provide a more complete discussion of the reasons for theirs adverse benefit determinations and the standards used to make the decisions.
2. Right to Claim File and Internal Protocols. All benefit denial correspondences must notify the claimant that he/she is entitled to receive, upon request, the entire claim file and other relevant documents. Currently this statement is required only in notices denying benefits after an appeal is submitted. Benefit denial notices 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 indicate that none were used.
3. Right to Review and Respond to New Information Before Final Decision. It is prohibited for a plan to deny benefits on appeal due to new evidence that was not included during the original claims stage, unless claimants are provided a fair opportunity to review and respond to the new information.
4. Avoiding Conflicts of Interest. The plan must ensure that the individuals involved in making the disability decision are independent and impartial.
5. Deemed Exhaustion of Claims and Appeal Processes. If the plan does not follow the claims processing rules, the claimant does not have to exhaust their administrative remedies and may file suit (unless the violation was the result of a minor error and other specified conditions are met).
6. 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) must be treated as benefit denials, thereby triggering the plan’s appeals procedures.
7. Notices Written in a Culturally and Linguistically Appropriate Manner. The final rule requires that notice be given in a culturally and linguistically appropriate manner.
While claimants will still face an uphill battle when seeking to overturn adverse disability benefit decisions under ERISA, the final rule will go a long way in improving the protections afforded to claimants.