Proposed rule strengthens internal claim procedures for disability benefits

The Employee Benefit Security Administration (EBSA) has issued proposed regulations that would enhance existing disability benefit claims procedures under Sec. 503 of the Employee Retirement Income Security Act (ERISA). In issuing these proposed regulations, EBSA hopes to apply to disability benefits many of the claims procedural protections and safeguards that have been applied to group health plans under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148).

The ACA added Sec. 2719(a)(1) to the Public Health Service Act (PHSA), which addresses internal claims and appeals and process for group health plans and health insurance issuers. Under the ACA, group health plans must have an “effective” internal claims and appeals process and employee notification process in place. The purpose of the proposed regulation would improve the current procedural protections for workers who become disabled and make claims for disability benefits from an employee benefit plan.

Major changes. The proposed regulations make the following major changes to disability benefits internal claims procedures:

• Claims and appeals would be adjudicated in manner designed to ensure independence and impartiality of the persons involved in making the decision. For example, plans would not be permitted to provide bonuses to a claims adjudicator based on the number of denials.

• Benefit denial notices would contain a full discussion of why the plan denied the claim and the standards behind the decision.

• Claimants would have access to their entire claim file and would be allowed to present evidence and testimony during the review process.

• Claimants would be notified of and would have an opportunity to respond to any new evidence reasonably in advance of an appeal decision. EBSA is considering whether ERISA’s timing rules will need to be adjusted to allow for dialogue between the plan and the claimant about the new evidence.

• Final denials at the appeals stage would not be based on new or additional rationales unless claimants first are given notice and a fair opportunity to respond.

• If plans did not adhere to all claims processing rules, the claimant would be 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. These exceptions include circumstances where the violation was: de minimis; non-prejudicial; attributable to good cause or matters beyond the plan’s control; in the context of an ongoing good-faith exchange of information; and not reflective of a pattern or practice of non-compliance;

• Certain rescissions of coverage would be treated as adverse benefit determinations, thereby triggering the plan’s appeals procedures.

• Notices would have to be written in a culturally and linguistically appropriate manner.

Comments. EBSA is requesting comments on the proposed rule. Comments should be identified by RIN 1210-AB39 and may be sent through the Federal eRulemaking Portal at http://www.regulations.gov; or submitted to Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210, Attention: Claims Procedure Regulation Amendment for Plans Providing Disability Benefits.

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