The federal Department of Labor (DOL) has announced new proposed regulations that, if finalized, will require internal and external claims and appeals procedures very similar to those required of medical claims under the ACA, complete with required use of accredited independent review organizations (IROs). While many employers insure their disability coverages, this regulatory change is not limited to benefits normally referred to as "disability benefits." These regulations affect not only employers with self-insured short-term and long-term disability coverage, but also employers with any benefit change or enhancement that is conditioned on a disability, such as medical continuation coverage for disabled employees or early access to benefits for retirees like healthcare reimbursement arrangements (HRAs) and pension plans. As the regulatory process unfolds, we'll update this post accordingly.
To What Benefits Do the Requirements Apply?
As clarified in Q&A-9 of this DOL FAQ, "A benefit is a disability benefit under the regulation, subject to the special rules for disability claims, if the plan conditions its availability to the claimant upon a showing of disability. It does not matter how the benefit is characterized by the plan or whether the plan as a whole is a pension plan or a welfare plan. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the regulation."This is a broad definition that would require special handling of disability-related issues beyond just short-term and long-term disability insurance—in particular, retirement-related health and pension benefits. Many employers that provide retiree medical coverage of some kind have provisions accelerating a retiree's access to those benefits if he/she is disabled. Those plans typically have medical-type claims language for the underlying medical or HRA coverage, but they usually do not have any special language for the disability determination itself.
The DOL's new regulations change that, and it is unlikely an employer can escape liability by simply piggybacking off of the insured disability benefit determination. The employer and insurer of insured disability coverage are technically co-fiduciaries under ERISA—the employer as plan administrator and the insurer as a functional fiduciary. However, the insurer's fiduciary status ends with the insurance contract; it is not a fiduciary with respect to any other benefit. So an employer that simply takes the insurer's determination for one benefit and uses it for another does so at its own risk.
What's Changing?
A lot. Basically, the proposed regulations incorporate into the disability benefits rules many of the procedural protections for medical claims that were required by ACA. Here's a short list:- Procedures for ensuring the independence and impartiality of the person making the disability determination. In particular, employers nor insurers will be prohibited from providing bonuses to a claims adjudicator based on the number of denials.
- Denial notices with more detail. If the plan does not grant the employee or retiree whatever it is that's conditioned on disability, it must provide a notice with a full discussion of the basis for denial and the standards behind the decision and specifically explaining why the plan’s decision is contrary to the finding of the claimant’s doctor.
- Claimants must be given access to the entire claims file and be permitted to present evidence and testimony during the review process.
- Claimants must be given notice of any new evidence (such as, for example, photos or video of an allegedly disabled claimant snowboarding that the plan or insurer may have found on the claimant's social media page). Claimants must also be given an opportunity to respond to any such new evidence reasonably in advance of an appeal decision.
- Final denials at the appeals stage would not be permitted to be based on new or additional rationales unless claimants first are given notice and a fair opportunity to respond.
- Just as with medical claims and appeals, claimants would be deemed to have exhausted administrative remedies if the plan fails to comply with the claims processing rules.
- Certain rescissions must be treated as adverse benefit determinations, subject to appeals procedures.
- DOL added a "culturally and linguistically appropriate manner" provision. In short, if a claimant’s address is in a county where 10 percent or more of the population residing in that county, as determined based on American Community Survey (ACS) data published by the United States Census Bureau, are literate only in the same non-English language, notices of adverse benefit determinations to the claimant would have to include a prominent one-sentence statement in the relevant non-English language about the availability of language services. Such services should include (i) oral language services in the non-English language, such as through a telephone hotline, (ii) written notices in the non-English language upon request, and (iii) answering questions and providing assistance with filing claims and appeals in any applicable non-English language.