People who make a disability claim in the U.S. will have stronger protections when a new rule goes into effect April 1, 2018. Late last year, the Department of Labor released a final rule to strengthen the claims and appeals requirements for plans that provide disability benefits.
A big reason for the change: The Department acknowledged that ERISA disability rules were inadequate from a claimant’s standpoint and the intent of the regulations is to improve the fairness, transparency and accuracy of the disability claims process. ERISA stands for The Employee Retirement Income Security Act of 1974 and is a federal United States tax and labor law that establishes minimum standards for employee benefit plans in private industry.
The new rule revises and strengthens the current rules in place primarily by adopting certain procedural protections and safeguards for disability benefit claims that are currently applicable to claims for group health benefits following the Affordable Care Act. It includes the following seven main requirements for processing of claims and appeals for disability benefits:
- Improve disclosure: Disability benefit denial notices must provide a more complete discussion of why the claim has been denied and the standards used in making the decision then previously required.
- Notice of right to documentation: The disability benefit denial must give notice of the right to access to the claim file and internal rules, guidelines, protocols, standards or other criteria of the plan that were used in denying a claim.
- Right to respond to new information: Claimants must be given notice and an opportunity to respond to new or additional evidence or rationales that was not included when the benefit was originally denied. This is a significant change for how claims have been handled in the Eighth Circuit, which includes Minnesota, and should have a significant impact on the success rate for claimants.
- Avoidance of conflicts of interest: There are greater protections to ensure the independence and impartiality of the persons involved in making benefit decisions to meet the full and fair review requirement of ERISA and the basic fiduciary standards under the claims procedures.
- Deemed exhaustion of claims process: ERISA requires claimants to exhaust the claims and appeals process before filing an action in court. The new rules provide that if the administrators do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available, unless the violation is considered a minor error. If the administrator fails to comply and the claimant is deemed to have exhausted the administrative remedies, then the claimant is free to file an action in court. The court is then permitted to review the matter de novo (similar to most cases where plaintiffs have the burden to prove based on evidence, rather than when a court defers to the decision by the administrator or insurer).
- Certain coverage rescissions are deemed adverse benefit determinations: Actions to rescind coverage, including retroactive terminations of coverage due to alleged misrepresentation of fact must be treated as adverse benefit determinations that trigger the plan’s appeal procedures. This would be triggered, for example, for errors in the application for coverage. However, this would not occur where a claim was invalidated for not paying a premium.
- Notices must be written in a culturally and linguistically appropriate manner: The change in the rule is similar to the ACA standard for group health plan notices and is intended to provide more access to information.
The disability benefit claim process can be challenging for claimants especially while dealing with a difficult medical situation. We recommend that claimants seek an attorney’s advice early — well before filing a disability benefit claim — so there is a good understanding of the options available, the provisions of the Long Term Disability policy, the expectations for proof of disability, and the steps of the disability process.
Denise Y. Tataryn is an employment law attorney who helps her clients through the often-times difficult claims process and works to secure as many of the benefits they are eligible to receive. Contact her at 952-460-9243 or [email protected] to schedule your consultation.