For Immediate Release
January 10, 2017 Boston, Massachusetts After for than one-year considering comments from individuals, labor, insurance companies and employers, on December 19, 2016 the Secretary of Labor released final new regulations revising the claims procedures under the Employee Retirement Income Security Act of 1974 (ERISA) for employee benefit plans providing disability benefits. In part, the Secretary of Labor wrote, “The final rule revises and strengthens the current rules primarily by adopting certain procedural protections and safeguards for disability benefit claims that are currently applicable to claims for group health benefits pursuant to the Affordable Care Act. This rule affects plan administrators and participants and beneficiaries of plans providing disability benefits, and others who assist in the provision of these benefits, such as third-party benefits administrators and other service providers.”
Although the revised regulations do not take effect until January 1, 2018, expect Courts to adopt the provisions as gap-fillers sooner, as the regulations are the position of the Secretary of Labor. This happened in a notable decision more than 6 months before the final regulations had been released. “We hold that, when denying a claim for benefits, a plan’s failure to comply with the Department of Labor’s claims-procedure regulation, 29 C.F.R. § 2560.503–1, will result in that claim being reviewed de novo in federal court.” Halo v. Yale Health Plan, Director of Benefits & Records Yale University, 819 F.3d 42, 60 (2d Cir. 2016)
Everyone loves a Top Ten List so here is one for the new regulations.
- Incentives to deny claims are prohibited. Bonuses based on the number of claim denials are not allowed. Decision-makers need to act impartially throughout the process.
- Adverse decisions must fully explain the reasons for the denials and why evidence of the claimant was disagreed with by the decision-maker.
- Impartiality of physicians (in-house and out-house), vocational specialists and other consultants is required. This extends to avoiding shopping by plans for favorable experts.
- Denial letters must include an explanation stating why the opinions offered by the claimant’s health care provider or vocational expert have been rejected in favor of another evaluator.
- Denial letters must explain with particularity why a disability determination made by the Social Security Administration (SSA) has not been adopted by the ERISA fiduciary, particularly when the SSA determination of functionality is based on a definition similar to the one found in the ERISA plan.
- Denial letters must inform the claimant about the right to obtain the claim file, and other relevant documents. The denial letter should state any internal rules or guidelines the claims administrator relied upon in deciding the claim. If no such internal rule or guideline exists, the letter should disclose this as well.
- During an appeal, the claimant must be given notice and a fair opportunity to respond if the appeal denial is based on new or additional rationales or evidence. The claimant, and not the fiduciary, gets the last word.
- The appeal denial letter must specify plan imposed deadlines for filing a lawsuit, and the date the contractual limitations or statute of limitations period expires. A limitations period that expires before the conclusion of the plan’s internal appeals process on its face violates ERISA section 503’s requirement of a full and fair review process.
- If the ERISA fiduciary fails to follow its own claims procedures, then a claimant can sue without exhausting administrative remedies, and the determination is likely to be de novo. See Halo v. Yale Health Plan.
- Communications must be culturally and linguistically appropriate for the participants.
With a new administration taking over on January 20, 2017, or by Congressional action, under either the Congressional Review Act of 1996 or The Midnight Rule Relief Act of 2016 (passed by the House on January 4, 2017 and waiting for Senate action), these new regulations may change, or vanish, before January 1, 2018. The Midnight Rule Relief Act of 2016, designed for mass demolition, allows Congress to stitch together multiple regulations and revoke them all in one swoop.
We’ll keep you posted.