- The ACA requires health plans to comply with strict requirements for determining benefit claims and adjudicating appeals.
- According to the DOL, disability benefit claimants deserve the same claims procedures protections.
- The proposed rule would revise and strengthen existing claims procedures for disability benefits to make them more consistent with the ACA’s requirements for health benefits.
On Nov. 18, 2015, the Department of Labor (DOL) issued a proposed rule to strengthen the claims and appeals requirements for plans that provide disability benefits.
Because disability and lost earnings can create severe hardships for individuals, the DOL believes that disability benefit claimants deserve protections as stringent as those that apply to health care claimants.
The DOL will accept comments on the proposed rule until Jan. 19, 2016, and may make changes to the proposed rule before it is finalized. The new guidance on disability benefit claims procedures is expected to take effect 60 days after it is issued in final form.
For purposes of the proposed rule, a benefit is considered a “disability benefit” if the claimant has to be disabled in order to obtain the benefit. It does not matter how the benefit is characterized or whether the plan as a whole is a pension plan or a welfare plan. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the DOL’s claims procedures.
ERISA Claims Procedures
Section 503 of ERISA requires every employee benefit plan to:
- Provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for the denial, written in a manner calculated to be understood by the participant; and
- Afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.
The DOL first adopted claims procedure regulations for employee benefit plans in 1977. In 2000, the DOL updated its claims procedure regulations by improving and strengthening the minimum requirements for employee benefit plans, including plans that provide disability benefits.
Effective for plan years beginning on or after Sept. 23, 2010, the Affordable Care Act (ACA) amended ERISA to include enhanced internal claims and appeals requirements for group health plans. In July 2010, the DOL published an interim final rule on the ACA’s enhanced claims procedures for group health plans. The DOL issued a final rule on the ACA’s claims procedure requirements on Nov. 18, 2015—the same time it issued the proposed rule on disability benefit claim procedures.
Additional Protections for Disability Benefit Claimants
According to the DOL, even though fewer private-sector employees participate in disability plans than in other types of plans, disability cases “dominate the ERISA litigation landscape today.”
Aging workers initiate more disability claims, as the prevalence of disability increases with age. As a result, insurers and plans looking to contain disability benefit costs often aggressively dispute disability claims. This aggressive position, coupled with the inherently factual nature of disability claims, motivated the DOL to propose strengthening the claims procedure requirements for disability benefit claims.
The proposed rule would extend the ACA’s procedural requirements for health care claimants to disability benefit claimants. These requirements include provisions that seek to ensure that:
- Claims and appeals are adjudicated in manner designed to ensure independence and impartiality of the persons involved in making the decision;
- Benefit denial notices contain a full discussion of why the plan denied the claim and the standards behind the decision;
- Claimants have access to their entire claim file and are allowed to present evidence and testimony during the review process;
- Claimants are notified of and have an opportunity to respond to any new evidence reasonably in advance of an appeal decision;
- Final denials at the appeals stage are not based on new or additional rationales unless claimants are first given notice and a fair opportunity to respond;
- If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other specified conditions are met;
- Certain rescissions of coverage are treated as adverse benefit determinations, thereby triggering the plan’s appeals procedures; and
- Notices are written in a culturally and linguistically appropriate manner.
Source: DOL, Employee Benefits Security Administration (EBSA)