HR employees typically begin planning for next year before autumn of the current year because choices about the next year’s benefits are made months before it begins. Whether you’re making many or few changes to the benefits you offer, your preparations for open enrollment provide a good opportunity to confirm that your benefits plans are up to date and compliant. This year, your to-do list should include updating your claims and appeals procedures for disability benefits claims—if you haven’t already done so.
Claims and Appeals Procedures are Required for ERISA Plans
The Employee Retirement Income Security Act (ERISA), a federal law that applies to many benefits offered to employees, requires that an employee benefits plan establish and maintain procedures that govern how a participant files a claim for benefits and how disputes over benefits are handled. A benefits plan must have procedures addressing how to file a claim or an appeal, how claims and appeals are reviewed, and what happens when a claim or appeal is denied.
The ERISA requirements have changed over the years. In 2002, revisions were made to designate one set of rules for group health insurance plans, one set for disability benefits, and one for all other claims and appeals.
Beginning in 2010, the Affordable Care Act (ACA) revised the requirements that apply to claims and appeals of group health insurance benefits. In December 2016, the U.S. Department of Labor (DOL) published final regulations that revise the requirements for disability benefits—specifically, adopting some of the procedural changes the ACA made to group health insurance plans.
Those new rules, which became final in January 2017, apply to all claims for disability benefits filed on or after January 1, 2018.
New Rules for Disability Benefits Claims
The DOL has increased its audit activity, and health and welfare plan compliance is high on its audit checklist. Add to that the regulations’ preamble, in which the DOL states that disability claims “dominate the ERISA litigation landscape today” and cites a concern that plans and insurers “may be motivated to aggressively dispute” disability claims in order to contain costs. As a result, complying with the new rules, in both word (the plan document and summary plan description, or SPD) and deed (operational compliance), should be a priority.
The changes ushered in by the new regs include:
- A benefits denial notice must include additional elements such as:
- Why the decision differs from (1) the views presented by the claimant (e.g., a treating physician’s report), (2) the advice of vocational experts consulted by the plan even if the advice wasn’t a factor in the decision, or (3) a disability determination made by the Social Security Administration (SSA);
- The internal rules or protocols that were used in denying the claim (if none exists, the notice must state that none exists);
- The claimant’s right to request and receive, without cost, copies of the documents, records, and other information relevant to the claim; and
- The date any plan-based statute of limitations expires for the claim.
- Before a plan makes a final decision on appeal, the claimant must be affirmatively provided any new or additional evidence considered by the decision maker and any new or additional rationale on which the denial is based. Not only must the new evidence or rationale be provided as soon as possible, but the claimant must receive it in enough time ahead of the final decision to have a reasonable opportunity to respond to it.
- Notices and disclosures must be provided in a culturally and linguistically appropriate manner. For instance, if the claimant lives in a county in which 10 percent or more of the population is literate only in the same non-English language, the plan must provide:
- A tagline that indicates how to access the plan’s non-English language assistance;
- A telephone number for a customer assistance hotline that answers questions and provides assistance in filing claims and appeals, all in the non-English language; and
- Upon request, a notice translated into the non-English language.
- If a plan fails to “strictly adhere” to the new rules, a claimant may file a lawsuit requesting that a court review the claim, without first being required to exhaust the plan’s claims and appeals procedures. This is a departure from the “substantial compliance” standard that applies for other types of ERISA claims and appeals. Consequently, if your plan fails to comply with the revised rules, then a court—not the plan administrator—will determine whether disability benefits should be paid.
Here are some issues that should be addressed before the new rules take effect:
- Review your employee benefits plans to identify which of them require a determination of disability for a claimant to qualify for benefits. The new rules apply to any ERISA plan that is required to determine whether a claimant is disabled. You may prefer to change the definition of “disability” in your retirement plans to simplify plan administration.
- Insurers should revise the procedures that apply to fully insured long-term disability and short-term disability plans. Make sure you have been given updated documents for your plan files.
- For all other ERISA plans that involve a determination of disability, talk with your service provider (e.g., a third-party administrator, or TPA). However, keep in mind that compliance is ultimately your responsibility. An experienced benefits attorney can assist you in reviewing and revising your plan procedures and drafting the appropriate participant communications.
- Confirm that the insurer, the TPA, or you, in your capacity as plan administrator, distribute an updated SPD or a summary of material modifications for each plan to participants and beneficiaries in compliance with ERISA’s disclosure requirements.
- Retain copies of those documents in each plan’s files.
Remember that an investment in compliance now may help you avoid expensive litigation later.
Since this article was written, the DOL has announced that it is reviewing the final regulations “for questions of law and policy.” Such an announcement is not typical—so, despite the fact that the final quarter of 2017 is nigh, we do not know whether the DOL will amend, delay, withdraw, or permit these regulations to go into effect, as scheduled, for claims filed on and after January 1, 2018. Consult with your benefits counsel to decide what the best course of action is for your ERISA plans.