The US Department of Labor (DOL) recently announced that it is moving forward with implementing its final rule on disability claims procedures effective April 1, 2018. The final rule imposes procedural protections and consumer safeguards on disability claims similar to those that apply to group health plans under the Affordable Care Act.
What plans are subject to the final rule?
A benefit is a disability benefit, subject to the final rule, if the plan conditions its availability to the claimant upon a showing of disability. To be subject to the final rule, the important inquiry is not how a plan is characterized (as either a welfare plan or a pension plan) but rather how the determination for disability is made under the terms of the plan. For example, if a claims adjudicator must make a determination of disability in order to decide a claim, the plan is subject to the final rule. In contrast, if the determination of a disability is made by a party other than the plan itself (such as the Social Security Administration or the employer’s long-term disability plan), then a claim for such benefits is not treated as a disability claim and is not subject to the final rule. For example, if a pension plan determination for disability is conditioned on the determination for disability under the plan sponsor’s long-term disability plan, then the pension plan is not subject to the final rule. Note, however, that the long-term disability plan in this example is still subject to the final rule.
What are the new requirements under the final rule?
The final rule specifically requires the following:
- Avoid conflict of interest. Disability claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the benefit determination.
- Notice requirements. Disability benefit denial notices must contain a complete discussion of why the plan denied the claim and the standards applied in reaching the decision, including the basis for disagreeing with the views of healthcare professionals or vocational professionals or with Social Security Administration disability benefit determinations.
- Right to access claim file. Claimants must be given timely notice of their right to access their entire claim files and other relevant documents and be guaranteed the right to present evidence and testimony in support of their claims during the review process.
- Right to respond during appeal stage. Claimants must be given notice and a fair opportunity to respond to new or additional evidence or rationale that was not included when the benefit was denied at the claims stage before the plan can deny an appeal based on the new evidence or rationale.
- Right to court review. Disability plans cannot prohibit a claimant from seeking court review of a claim denied based on a failure to exhaust administrative remedies under the plan if the plan fails to comply with the claims procedure requirements (unless it was a result of minor error).
- Rescission of coverage. Certain rescissions of coverage are to be treated as adverse benefit determinations triggering the plan’s appeals procedures.
- Culturally and linguistically appropriate manner. The required notice and disclosures issued under the final rule must be written in a culturally and linguistically appropriate manner similar to the rules that currently apply to group health plan benefits. Specifically, if 10% or more of the population where the claimant resides is literate only in the same non-English language, applicable notices and disclosures must include a statement prominently displayed in the appropriate non-English language detailing how the claimant can access language services. The plan is also required to provide verbal customer assistance in the non-English language and to provide written notices in the non-English language upon request.
The DOL has also issued a Fact Sheet on the final rule that plan sponsors may find helpful.
What are action items for plan sponsors?
Action items for plan sponsors include the following:
- Identify which plans (beyond long-term disability) have disability triggers and whether they need to independently satisfy the new rules or can rely on a disability determination outside of the plan, such as a Social Security Administration determination or a long-term disability plan’s determination of a disability.
- Consider potentially amending a plan to rely on the disability determination of another plan (such as the disability determination of the Social Security Administration or a long-term disability plan) if the plan sponsor wants to avoid complying with the final rule for that plan.
For plans subject to the final rule, additional action items for plan sponsors include the following:
- Review and update disability claims procedures in plan documents, summary plan descriptions, and other participant communication materials as necessary to comply with the final rule.
- Discuss compliance with any third party vendors who administer disability benefits.
- Review and update any template denial letters, as necessary, to ensure compliance with the final rule.