The Department of Labor (the “DOL”) has proposed new disability benefit claims procedure rules designed, in the words of the DOL, to “uplift” the current rules to “better align” with procedural safeguards and protections of the Affordable Care Act (“ACA”). Once the final new rules become final, the following changes will be required to all ERISA plans that provide a disability benefit (including plans for which disability benefits are ancillary, such as qualified retirement plans and non-qualified deferred compensation plans):
Independence/Impartiality: Claims procedures must ensure that independent and impartial decision-makers adjudicate claims and appeals.
Plan may not hire, compensate or terminate claims adjusters/medical experts “based upon the likelihood that the individual will support the denial of benefits.”
Full Discussion in Decisions: Claims denials notices must contain a full discussion of the basis of decision and the standards behind the decision.
The denial notice, among other things, must explain why the decision maker did not follow or agree with the views of the claimant’s health care professionals or the decision of other “payers of benefits” in favor of the claimant such as a Social Security Administration decision.
Full Access to Claims File: Claims procedures must give a claimant full access to the plan’s entire claim file and the right to present evidence and testimony as part of the claims and appeals process.
Full Opportunity to Be Heard on Appeal: Claims procedures must provide that before the plan may issue a decision on appeal, a claimant is provided free of charge any new evidence and/or any new rationale developed by the plan within a reasonable time period and provide a reasonable opportunity for the claimant to respond.
Deemed Exhaustion of Administrative Remedies: Claimants will be deemed to have exhausted administrative remedies (and therefore be entitled to initiate a lawsuit) if the plan fails to comply with the claims processing rules unless the failure was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of noncompliance.
Rescission as Claims Denial: Certain rescissions of coverage (but not a rescission for failure to pay premiums) must be treated as a denial that is subject to the plan’s appeals procedures.
Culturally and Linguistically Appropriate Notices: All decisions must be written in a “culturally and linguistically appropriate manner” which means, among other things, that a Plan must provide, upon request, a notice in any applicable non- English language (in a county where at least ten percent of residents are literate only in a non-English language.)
The proposed rules may be found Here.
The comment period for the proposed rules ended in January and the final rules will take effect 60 days after they are published in the Federal Register. Plan Sponsors should be on the lookout for the final rules and make sure that your plan claims procedures are updated to reflect them.
© Boutwell Fay LLP 2016, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of April 30, 2016.