Like it or not, the new DOL Final Rule amending the disability claims handling and appeal procedure at 29 C.F.R. §2560.503-1 will work a significant change in the administration of ERISA-covered disability claims. The Department of Labor states that these procedures largely parallel those used for group health benefit claims under the Affordable Care Act. The Rule became effective on January 18, 2017 and applies to all disability claims filed on or after January 1, 2018.
The preamble to the rule – which is an interesting historical overview and summarizes many comments that were submitted in response to the first version of the rule – states:
“Even though fewer private-sector employees participate in disability plans than in group health and other types of plans, disability cases dominate the ERISA litigation landscape today. An empirical study of ERISA employee benefits litigation from 2006 to 2010 concluded that cases involving long-term disability claims accounted for 64.5% of benefits litigation whereas lawsuits involving health care plans and pension plans accounted for only 14.4% and 9.3%, respectively.”
This is pretty old news, and many would object to the fairness of the comparison, but it nevertheless informed the DOL’s decision to move forward. The preamble to the rule describes its major provisions as follows:
(1) Claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the benefit determination;
(2) [B]enefit denial notices must contain a complete discussion of why the plan denied the claim and the standards applied in reaching the decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, or with disability benefit determinations by the Social Security Administration (SSA);
(3) [C]laimants must be given timely notice of their right to access to their entire claim file and other relevant documents and be guaranteed the right to present evidence and testimony in support of their claim during the review process;
(4) [C]laimants must be given notice and a fair opportunity to respond before denials at the appeals stage are based on new or additional evidence or rationales;
(5) [P]lans cannot prohibit a claimant from seeking court review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan failed to comply with the claims procedure requirements unless the violation was the result of a minor error;
(6) [C]ertain rescissions of coverage are to be treated as adverse benefit determinations triggering the plan’s appeals procedures; and
(7) [R]equired notices and disclosures issued under the claims procedure regulation must be written in a culturally and linguistically appropriate manner.
The DOL has issued a handy Fact Sheet (pdf copy above) providing an overview of the final rule. Also above is the full 28-page commentary concluding with three pages of the actual changes as posted in the Federal Register.
The DOL states in the preamble to the final rule that one of many goals in historical revisions was to reduce litigation. At this time, one goal is to strengthen consumer protection. Will the new rule result in more litigation? Will it increase costs of coverage to employers and consumers? Will the whole thing change again with the new administration and promises to change the Affordable Care Act? Only time will tell.