I am happy to report a rare positive development for disability claimants, one that is important to get behind. As most of you know, the rules under the Employee Retirement Income Security Act (“ERISA”) regarding employees’ long-term disability (“LTD”) claims are abysmal; the deck is clearly stacked against claimants. It seems, that the U.S. Department of Labor (“DOL”) has taken notice and is attempting to level the playing field somewhat. On Wednesday, November 18, 2015, the DOL published proposed regulations, which, if and when adopted, would provide employees who claim disability benefits under their LTD plan with additional procedural protections and safeguards that would afford some claimants benefits that would otherwise have been improperly denied, as happens all too often. I will discuss the proposal in more detail below, but here is the bottom line: While there still won’t be punitive damages—in my opinion, the most needed change under ERISA—or the right to a jury trial (Neither are in the purview of the DOL, but would require legislative changes to the statute instead.), the proposed changes would impose significant additional restrictions on LTD plans that would make it more difficult for them to improperly deny LTD benefits, which they are so highly motivated to do for obvious financial reasons.
In order for the DOL to move forward with enacting the proposal, it is crucial that it receive comments from the public in support of the proposed changes. Even just a few dozen public comments could tip the scale. If there is no expression of support from the public, that will substantially decrease the likelihood of the proposal being put into place because it is a near certainty that disability carriers and representatives of employer organizations will provide comments opposing these regulations, lobbying to retain the status quo that favors them so heavily. The easiest way to provide comments is by email to e-ORI@dol.gov. Comments have to include “RIN-1210-AB39” (best placed (also) in the subject line) and the agency name, “Department of Labor.” Comments need to be submitted within 60 days. Please note that all comments will be published online without redactions; therefore, do not include any sensitive information.
Unlike HHS and its component agencies, such as CDC and NIH, the DOL seems genuinely interested in effecting desperately-needed change. Citing the “aggressive posture” of LTD insurers and plans, the agency took the initiative to attempt to strengthen the current procedural requirements imposed on LTD plans “[b]ecause of the volume and constancy of litigation in this area….” In fact, the department realized that “disability cases dominate the ERISA litigation landscape today.” Therefore, the DOL “recognized a need to revisit, reexaime, and revise the current regulations in order to ensure that disability benefit claimants receive a fair review of denied claims….,” as “insurers and plans looking to contain disability benefit costs are often motivated to aggressively dispute disability claims.” As opposed to comments sent to HHS or its component agencies, which are completely ignored as a matter of course, comments to the DOL on this matter have a real chance of making a meaningful difference for future claimants and those currently in the claims process. Therefore, in addition to input from individuals, this strikes me as an excellent and unprecedented opportunity for our advocacy organizations to potentially effect some meaningful change. It’s a low-hanging fruit.
As a matter of background, employer-sponsored LTD plans are required, under ERISA, to have in place so-called claims procedures that set forth the process for disabled employees to make claims and appeal the denial of claims under an LTD plan. These requirements have been in place since ERISA was implemented in the mid-1970s. Recently, comparable rules for health plans were strengthened as a result of provisions in the Affordable Care Act (“ACA” or Obamacare, as it has come to be known). What the DOL is proposing with these new disability plan claims procedure rules is to apply many of the stricter ACA health-plan rules to LTD claims.
Note: These proposed regulations do not apply to Social Security disability claims.
Here is a summary of the key aspect of the proposed regulations:
- Independence and impartiality—avoiding conflicts of interest.
The proposal explicitly requires that plans ensure—in the interest of a “full and fair review”—that all disability benefit claims are adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the decision. More specifically, the proposal requires that claims adjudicators and so-called “medical experts” utilized by the plan not be hired, compensated, terminated or promoted based on the likelihood of their denying disability benefits or supporting the denial of such benefits. Tying bonuses for claims adjudicators to the number of denials would not be permissible anymore. Furthermore, the hiring of a medical expert based on his or her reputation for outcomes in contested cases rather than based on his or her expertise would no longer be allowed. I predict that this provision would knock out pretty much every “medical expert” currently engaged regularly by LTD insurance companies because most of them are squarely in the insurance industry’s pocket. This new rule would be much more than an inconvenience for the insurance industry; it could change the game and is, thus, a crucial potential improvement.
- Improved disclosure to claimants
Adverse determination of claims would be required to contain a discussion of the decision, including the basis of disagreement with a disability determination by the Social Security Administration or a treating physician. This would constitute a big shift, as LTD benefits are often denied despite the fact that Social-Security benefits have been approved and/or in disregard of the opinion of the treating physician, with no or little explanation of the disagreement. Adverse determination notices would also have to contain the internal rules, guidelines, protocols, standards or similar criteria of the plan that were used to deny the claim. Further, a notice of claim denial would have to contain a statement that the claimant is entitled to receive, at that stage, all relevant documentation supporting denial of the claim. Currently, this is required only at a later stage, upon the denial of benefits on appeal. These new provisions would aid in claimants fully understanding the reason for a denial and meaningfully assessing the likelihood of success of an appeal.
- Right to review and respond to new information before final decision is made
Claimants must be given the right to review, free of charge, and respond to new evidence or rationales developed during the appeal process and not only after the claim has been denied on appeal. The evidence would have to be made available as soon as possible and sufficiently in advance of the deadline and the plan would be obligated to consider the claimant’s evidence and written testimony in response to the plan’s new information.
- Changes to technical rules regarding the requirement that claimants go through all the plan’s procedural requirements (in legalese, “exhaust administrative remedies”) before taking their claim to court
These changes generally allow a claimant to proceed straight to court without first jumping through more hoops on the administrative level when the plan has not followed all the procedural requirements of the regulations and also provide that the reviewing court consider the matter “de novo” in those cases where the plan has not followed the correct procedures. “De novo” means that the court gives no deference to the plan’s determination denying the claim; instead, it sets aside the plan’s decision and uses its own judgment based on its own review of the evidence. It is a much more favorable standard for claimants than the usual abuse-of-discretion standard under ERISA, which merely reviews whether the plan’s decision was arbitrary and capricious.
- Culturally and linguistically appropriate notices
The added language safeguards would require that adverse-benefit determinations include a prominent one-sentence statement in the relevant language about the availability of language services if the claimant resides in a county where at least 10% of the population are literate only in the same non-English language.
There are other aspects of the proposed regulations, but those described above are the most significant. Taken together, they should provide ammunition to those whose disability claims have been denied by the insurance carrier administering the applicable LTD plan.
This quote from preamble of the proposal sets out an overview of all the proposed changes:
The major provisions in the proposal largely adopt … provisions that seek to ensure that (1) claims and appeals are adjudicated in a manner designed to ensure independence and impartiality of the persons involved in the making the decisions; (2) benefit denial notices contain a full discussion of why the plan denied the claim and the standards behind the decision; (3) claimants have access to their entire claim file and are allowed to present evidence and testimony during the review process; (4) claimants are notified of and have an opportunity to respond to any new evidence reasonably in advance of an appeal decision; (5) final denials at the appeals stage are not based on new or additional rationales unless claimants first are given notice and a fair opportunity to respond; (6) if plans to do not adhere to all claims processing rules, the claimants 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; (7) rescissions of coverage are treated as adverse benefit determinations, thereby triggering the plan’s appeals procedures; and (8) notices are written in a culturally and linguistically appropriate manner.