Long-Term Disability Management, or How to Get Ready for 2018 ERISA Changes

You’re no stranger to illness and injury management. When a serious health condition arises, you print out the applicable FMLA forms. No one does interactive process like you do, and your best friend is named JAN (see askjan.org). You carry COBRA continuation notices wherever you go. But when it comes to the complicated provisions in your ERISA-covered benefits plan, there are experts that get it done. Coming in 2018: higher standards for plan sponsors and administrators for issuing denials of disability benefits claims. Time to up your game.

The basics: ERISA Section 503 has long set the requirements for evaluating, denying, and communicating denials of disability benefits claims. It was beefed up in 1977 and again in 2000. Since then, numerous court decisions have imposed an ever-increasing range of requirements for communicating “adverse disability determinations” to claimants under the plan. In 2015, the Department of Labor proposed a new rule to expand the regulatory protections in Sec. 503. You may remember our basic overview of the rule.

The main thrust of the rule was to provide the following protections:

  • Independence and impartiality on the part of decision-makers;
  • Enhanced notice requirements;
  • A right by claimants to fully and fairly respond to denials at the appellate level;
  • A right for claimants to pursue judicial review when the decision-maker fails to adhere to the plan’s procedural requirements;
  • Inclusion of “coverage rescission” decisions, including those that are retroactive, in the types of decisions to which Section 503 applies;
  • Requirements for “culturally and linguistically appropriate” communications; and
  • Disclosure requirements for limitations periods.

The rule produced extensive commentary. Some of the commentary suggested revisions. The Final Rule contains some of these revisions. Here’s what it means for you.

First, ensure that your decision-makers and experts are not subject to practices that impede their impartiality and independence. While the original rule applied this standard to medical experts, the Final Rule specifically notes that vocational experts are also subject to the independent and impartiality provisions. Disability claim decision-makers should not be provided with bonuses based on their number of employer-favorable decisions. Medical experts, even those who are contractors, should not be retained based on their track record of denials. Vocational experts should not be promoted based on their percentage of recommendations that find that a claimant is not entitled to benefits. Message: review your practices with respect to claim decision-makers, including experts on whose opinion you rely, to ensure that there is nothing that would give the appearance of a lack of impartiality and independence.

Second, be on the lookout for updated notices, or if you steer your own disability benefits claim process, ensure that your notices are updated. There are numerous changes. Foremost, notices must include an “adequate discussion” of the reasons why a claim is denied. If any rules or procedures are relied upon in reaching the adverse decision, they must be cited. If none was relied upon, the notice must affirmatively state so. Evidence, including medical opinions, that stands contrary to the denial decision (e.g., an opinion from a medical provider indicating that the claimant is disabled) must be discussed and reasons for reaching a contrary conclusion laid forth, provided that the decision-maker is aware of this evidence at the time of the denial. If a decision was reached by the Social Security Administration finding a claimant to be disabled, it must also be specifically discussed and the contrary conclusion explained. The notice must include a statement that the claimant has the right to review the evidence and appeal the decision.  

There are two further requirements for notices. The first is related to the limitations period within which judicial review of a claim might be sought. This limitations period is not set forth in ERISA. Rather, it has been governed by a complicated interface of state laws on the topic or plan terms. In 2013, the Supreme Court determined that state law may govern unless the plan terms specify a limitations period1. Notices must also now specify the applicable limitations period and the date by which judicial review must be sought.

With respect to cultural and linguistic relevance: if you are in a community, according to the American Community Survey, in which 10 percent or more of the population is composed of monolingual non-English speakers, then the notice must also be furnished in the other language(s).

The disability benefits claim process must allow for a full and fair right to respond to claim denials. The Final Rule states that claimants must receive copies of the information “relied upon, considered, or generated” by the plan for denial of the claim, free of charge. The information must be provided in a timely fashion.

If you haven’t done so already, ensure that decisions in which coverage was rescinded, even retroactively, are included in this expanded review process, unless the rescission was due to premium non-payment.

Last and importantly: Don’t want to end up in court? Make sure that you follow the procedures outlined in your plan! The Final Rule includes a hotly contested provision allowing claimants to immediately seek judicial review when a benefits decision-maker fails to adhere to the procedural requirements of the plan.

1Heimeshoff v. Hartford Life & Accident Ins. Co. (U.S. 2013).