New DOL Rule Seeks to Boost Fairness in Disability Benefit Claims

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Sean Forbes

The Department of Labor has taken another step in its long-running goal to minimize conflicts of interest in the employee benefits world with a final rule released Dec. 16 that requires full and fair reviews of disability claims.

Disability benefit plans “must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality” of those involved in making the decision, the DOL said in the rule.

Developments since the release of the DOL’s 2000 regulation on benefit claims procedures showed that the rule was ripe for a re-examination and update, said the new regulation, put out by the department’s Employee Benefits Security Administration. For example, disability cases dominate the Employee Retirement Income Security Act plan benefits litigation landscape, even though fewer private-sector employees participate in disability plans than in group health and other types of plans, the EBSA said. One study showed that cases involving long-term disability claims accounted for 64.5 percent of benefits litigation, whereas lawsuits involving health-care plans and pension plans accounted for only 14.4 percent and 9.3 percent, respectively, the EBSA said.

The final regulation (RIN:1210-AB39) adopts certain procedural protections and safeguards for disability benefit claims by borrowing from those applicable to group health plans under the Affordable Care Act, the EBSA said. The agency is responsible for enforcing ERISA.

The rule has seven basic elements, the EBSA said in a fact sheet:

  •  basic disclosure requirements,
  •  right to claim file and internal controls,
  •  right to review and respond to new information before final decision,
  •  avoiding conflicts of interest,
  •  deemed exhaustion of claims and appeal processes,
  •  certain coverage rescissions are adverse benefit determinations subject to the claims procedure protections, and
  •  notices written in a culturally and linguistically appropriate manner.
Among its many requirements, the rule aims to combat what it calls “expert shopping,” in which a plan may take the advice of one reviewer who recommends denying a claim while discounting reviewers who suggest granting it.

Regarding disclosure requirements, plans will have to provide the internal rules, guidelines, protocols, standards or other similar criteria they relied upon in making an adverse benefit determination, the EBSA said.

The rule is scheduled for publication Dec. 19 in the Federal Register. The rule takes effect Jan. 18, 2017, and will apply to claims for disability benefits filed on or after Jan. 1, 2018.

To contact the reporter on this story: Sean Forbes in Washington at sforbes@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information

Text of the rule is at http://src.bna.com/kNO. The fact sheet is at http://src.bna.com/kOv.

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