Article 1: I. Background: Insurers Aggressively Disputing Claims Created A Need for Even Stronger Regulations.
Claimants who are applying for or have been denied long term disability benefits provided by their employers and subject to the federal ERISA statute will want to know about the revisions to the federal regulations promulgated by the Department of Labor (DOL) that went into effect on April 1, 2018. I will review the Supplementary Information and the new provisions in a way that I hope is helpful to claimants. The following articles will track the Supplementary Information provided by the Department of Labor, which appears with the new Regulations in the Federal Register.
First, a word about the force of these Regulations. The ERISA statute grants authority to the Secretary of Labor to promulgate rule-making authority to the Secretary of Labor. You can find the statutory provisions here. Although they may be challenged, the Regulations generally operate with the force of law and for purposes of this article are treated as such.
The Background provided in the Supplementary Information section of the new regulations (I. Background), which you can find here, paints a stark picture of the systemic unfairness to claimants in the administration of disability benefit claims. It recounts that the ERISA statute as enacted (in 1974) requires a “full and fair review” of a claims denial; the DOL promulgated rules in 1977 establishing minimum requirements for claims procedures; and that it revised and updated those rules in 2000 to strengthen the minimum requirements, in order to reduce lawsuits, promote consistency and provide a non-adversarial method for claims reviews. Despite all of this, the DOL found that disability lawsuits dominated the ERISA litigation landscape based on a study of the years 2006 – 2010.
The reasons for this – which are the reasons for the recent changes – are not hard to find. First, “[i]nsurers and plans looking to contain disability costs may be motivated to aggressively dispute disability claims.” The DOL cited numerous court cases in which judges had found just that. See here.
Second, the DOL’s independent ERISA advisory group conducted a study in 2012 in which it received public input that “[n]ot all results have been positive for the participant…even though these rules were intended to protect [them].” It is hard not to be cynical at a finding that insurers that adjudicate claims might find reasons to deny meritorious claims rather than pay benefits. The DOL summed up the systemic problem this way: “The Department’s determination to revise the claims procedures was additionally affected by the aggressive posture insurers and plans can take to disability claims as described above coupled with the judicially recognized conflicts of interest insurers and plans often have in deciding benefit claims.”
To sum up: to protect disability benefits for those who need them, i.e. some of our most vulnerable citizens, those citizens almost always apply for benefits to companies that both evaluate and pay claims. After 40 years and many revisions, the companies were found still to be aggressively disputing claims in order to “contain costs,” i.e. increase profits.
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