The Importance of Appealing Denials and Terminations of Disability Benefits and What You Need To Do.

You can hear a podcast about this topic hosted by two ERISA attorneys here.

Appealing denials and terminations of disability benefits is absolutely crucial to having disability benefits reinstated. 

If your disability insurance is governed by the federal ERISA statute then failing to appeal a denial of benefits is fatal to your claim.  You have to appeal any denial or termination to the administrator of the claim (typically the insurer that denied it) and they must issue a final determination before you can go to court.  If you try to go to court before there has been a final determination the court will not hear your case because you have not yet ‘exhausted your administrative remedies.’  If your policy states that you must apply within 180 days (and virtually all such policies do) and you have failed to submit a timely appeal, then the administrator will not accept a late appeal and will not issue a final determination.  You claim for benefits is at that point dead.

You must file a timely appeal.  But you must also submit any and all documentation necessary to establish your disability as part of your appeal.  This is absolutely vital to wining an appeal.  Here is why:  If your appeal is denied and you go to court a judge, with few exceptions, will decide the case based on a review of the information the administrator had when it made its determination.  There will be no trial.  You will not be allowed to submit additional medical records or other evidence later.  You must do it during the appeal. 

The administrator of your claim is almost invariably the insurer that has to pay your benefits if you are found disabled.  They lose money if you win your claim.  It is your burden to establish your right to benefits.  Even if the administrator and its ‘representative’ tells you it is gathering medical records and requesting that your providers complete disability forms, it is ultimately your responsibility to submit evidence to support your claim.  An argument to a judge after the fact that “they were supposed to gather medical records” will not succeed.

Lawyers often obtain and submit many documents and reports in addition to medical records.  Narrative reports from physicians, specialized forms, affidavits from claimants and others, functional capacity examinations, neuropsychological exams, vocational assessments.  This article is not legal advice and you should consult an attorney who understands ERISA disability claims litigation as soon as possible if you have been denied disability benefits and are appealing that denial. 

Insurers Found Not To Give Full and Fair Reviews of Disability Claims

The Background provided in the Supplementary Information section of the new regulations, 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 must 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.  Next we’ll look at why this is particularly problematic given the way that these claims are litigated when they go to federal court.

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

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The Statute: 29 U.S.C. §1133. Claims procedure

In accordance with regulations of the Secretary, every employee benefit plan shall—

(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and

(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.In accordance with regulations of the Secretary, every employee benefit plan shall—(1)provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and(2)afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.

THE REGULATIONS:

(h)Appeal of adverse benefit determinations -

(1)In general. Every employee benefit plan shall establish and maintain a procedure by which a claimant shall have a reasonable opportunity to appeal an adverse benefit determination to an appropriate named fiduciary of the plan, and under which there will be a full and fair review of the claim and the adverse benefit determination.

(2)Full and fair review. Except as provided in paragraphs (h)(3) and (h)(4) of this section, the claims procedures of a plan will not be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures -

(i) Provide claimants at least 60 days following receipt of a notification of an adverse benefit determination within which to appeal the determination;

(ii) Provide claimants the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits;

(iii) Provide that a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section;

(iv) Provide for a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(4)Plans providing disability benefits. The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless, in addition to complying with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section, the claims procedures -

(i) Provide that before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) in connection with the claim; such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date; and

(ii) Provide that, before the plan can issue an adverse benefit determination on review on a disability benefit claim based on a new or additional rationale, the plan administrator shall provide the claimant, free of charge, with the rationale; the rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i)of this section to give the claimant a reasonable opportunity to respond prior to that date.

(p) Applicability dates and temporarily applicable provisions.

(3) Paragraphs (b)(7), (g)(1)(vii) and (viii), (j)(4)(ii), (j)(6) and (7), (l)(2), (m)(4)(ii), and (o) of this section shall apply to claims for disability benefits filed under a plan on or after January 1, 2018, in addition to the other paragraphs in this rule applicable to such claims.

(4) With respect to claims for disability benefits filed under a plan from January 18, 2017 through December 31, 2017, this paragraph (p)(4) shall apply instead of paragraphs (g)(1)(vii), (g)(1)(viii), (h)(4), (j)(6) and (j)(7).

(i) In the case of a notification of benefit determination and a notification of benefit determination on review by a plan providing disability benefits, the notification shall set forth, in a manner calculated to be understood by the claimant -

(A) If an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion; or a statement that such a rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol, or other criterion will be provided free of charge to the claimant upon request; and

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge upon request.

(ii) The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures comply with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section.

ERISA Claims Procedure Regulations (Full Text)

29 CFR §2560.503-1   Claims procedure.

(a) Scope and purpose. In accordance with the authority of sections 503 and 505 of the Employee Retirement Income Security Act of 1974 (ERISA or the Act), 29 U.S.C. 1133, 1135, this section sets forth minimum requirements for employee benefit plan procedures pertaining to claims for benefits by participants and beneficiaries (hereinafter referred to as claimants). Except as otherwise specifically provided in this section, these requirements apply to every employee benefit plan described in section 4(a) and not exempted under section 4(b) of the Act.

(b) Obligation to establish and maintain reasonable claims procedures. Every employee benefit plan shall establish and maintain reasonable procedures governing the filing of benefit claims, notification of benefit determinations, and appeal of adverse benefit determinations (hereinafter collectively referred to as claims procedures). The claims procedures for a plan will be deemed to be reasonable only if—

(1) The claims procedures comply with the requirements of paragraphs (c), (d), (e), (f), (g), (h), (i), and (j) of this section, as appropriate, except to the extent that the claims procedures are deemed to comply with some or all of such provisions pursuant to paragraph (b)(6) of this section;

(2) A description of all claims procedures (including, in the case of a group health plan within the meaning of paragraph (m)(6) of this section, any procedures for obtaining prior approval as a prerequisite for obtaining a benefit, such as preauthorization procedures or utilization review procedures) and the applicable time frames is included as part of a summary plan description meeting the requirements of 29 CFR 2520.102-3;

(3) The claims procedures do not contain any provision, and are not administered in a way, that unduly inhibits or hampers the initiation or processing of claims for benefits. For example, a provision or practice that requires payment of a fee or costs as a condition to making a claim or to appealing an adverse benefit determination would be considered to unduly inhibit the initiation and processing of claims for benefits. Also, the denial of a claim for failure to obtain a prior approval under circumstances that would make obtaining such prior approval impossible or where application of the prior approval process could seriously jeopardize the life or health of the claimant (e.g., in the case of a group health plan, the claimant is unconscious and in need of immediate care at the time medical treatment is required) would constitute a practice that unduly inhibits the initiation and processing of a claim;

(4) The claims procedures do not preclude an authorized representative of a claimant from acting on behalf of such claimant in pursuing a benefit claim or appeal of an adverse benefit determination. Nevertheless, a plan may establish reasonable procedures for determining whether an individual has been authorized to act on behalf of a claimant, provided that, in the case of a claim involving urgent care, within the meaning of paragraph (m)(1) of this section, a health care professional, within the meaning of paragraph (m)(7) of this section, with knowledge of a claimant's medical condition shall be permitted to act as the authorized representative of the claimant; and

(5) The claims procedures contain administrative processes and safeguards designed to ensure and to verify that benefit claim determinations are made in accordance with governing plan documents and that, where appropriate, the plan provisions have been applied consistently with respect to similarly situated claimants.

(6) In the case of a plan established and maintained pursuant to a collective bargaining agreement (other than a plan subject to the provisions of section 302(c)(5) of the Labor Management Relations Act, 1947 concerning joint representation on the board of trustees)—

(i) Such plan will be deemed to comply with the provisions of paragraphs (c) through (j) of this section if the collective bargaining agreement pursuant to which the plan is established or maintained sets forth or incorporates by specific reference—

(A) Provisions concerning the filing of benefit claims and the initial disposition of benefit claims, and

(B) A grievance and arbitration procedure to which adverse benefit determinations are subject.

(ii) Such plan will be deemed to comply with the provisions of paragraphs (h), (i), and (j) of this section (but will not be deemed to comply with paragraphs (c) through (g) of this section) if the collective bargaining agreement pursuant to which the plan is established or maintained sets forth or incorporates by specific reference a grievance and arbitration procedure to which adverse benefit determinations are subject (but not provisions concerning the filing and initial disposition of benefit claims).

(7) In the case of a plan providing disability benefits, the plan must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Accordingly, decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical or vocational expert) must not be made based upon the likelihood that the individual will support the denial of benefits.

(c) Group health plans. The claims procedures of a group health plan will be deemed to be reasonable only if, in addition to complying with the requirements of paragraph (b) of this section—

(1)(i) The claims procedures provide that, in the case of a failure by a claimant or an authorized representative of a claimant to follow the plan's procedures for filing a pre-service claim, within the meaning of paragraph (m)(2) of this section, the claimant or representative shall be notified of the failure and the proper procedures to be followed in filing a claim for benefits. This notification shall be provided to the claimant or authorized representative, as appropriate, as soon as possible, but not later than 5 days (24 hours in the case of a failure to file a claim involving urgent care) following the failure. Notification may be oral, unless written notification is requested by the claimant or authorized representative.

(ii) Paragraph (c)(1)(i) of this section shall apply only in the case of a failure that—

(A) Is a communication by a claimant or an authorized representative of a claimant that is received by a person or organizational unit customarily responsible for handling benefit matters; and

(B) Is a communication that names a specific claimant; a specific medical condition or symptom; and a specific treatment, service, or product for which approval is requested.

(2) The claims procedures do not contain any provision, and are not administered in a way, that requires a claimant to file more than two appeals of an adverse benefit determination prior to bringing a civil action under section 502(a) of the Act;

(3) To the extent that a plan offers voluntary levels of appeal (except to the extent that the plan is required to do so by State law), including voluntary arbitration or any other form of dispute resolution, in addition to those permitted by paragraph (c)(2) of this section, the claims procedures provide that:

(i) The plan waives any right to assert that a claimant has failed to exhaust administrative remedies because the claimant did not elect to submit a benefit dispute to any such voluntary level of appeal provided by the plan;

(ii) The plan agrees that any statute of limitations or other defense based on timeliness is tolled during the time that any such voluntary appeal is pending;

(iii) The claims procedures provide that a claimant may elect to submit a benefit dispute to such voluntary level of appeal only after exhaustion of the appeals permitted by paragraph (c)(2) of this section;

(iv) The plan provides to any claimant, upon request, sufficient information relating to the voluntary level of appeal to enable the claimant to make an informed judgment about whether to submit a benefit dispute to the voluntary level of appeal, including a statement that the decision of a claimant as to whether or not to submit a benefit dispute to the voluntary level of appeal will have no effect on the claimant's rights to any other benefits under the plan and information about the applicable rules, the claimant's right to representation, the process for selecting the decisionmaker, and the circumstances, if any, that may affect the impartiality of the decisionmaker, such as any financial or personal interests in the result or any past or present relationship with any party to the review process; and

(v) No fees or costs are imposed on the claimant as part of the voluntary level of appeal.

(4) The claims procedures do not contain any provision for the mandatory arbitration of adverse benefit determinations, except to the extent that the plan or procedures provide that:

(i) The arbitration is conducted as one of the two appeals described in paragraph (c)(2) of this section and in accordance with the requirements applicable to such appeals; and

(ii) The claimant is not precluded from challenging the decision under section 502(a) of the Act or other applicable law.

(d) Plans providing disability benefits. The claims procedures of a plan that provides disability benefits will be deemed to be reasonable only if the claims procedures comply, with respect to claims for disability benefits, with the requirements of paragraphs (b), (c)(2), (c)(3), and (c)(4) of this section.

(e) Claim for benefits. For purposes of this section, a claim for benefits is a request for a plan benefit or benefits made by a claimant in accordance with a plan's reasonable procedure for filing benefit claims. In the case of a group health plan, a claim for benefits includes any pre-service claims within the meaning of paragraph (m)(2) of this section and any post-service claims within the meaning of paragraph (m)(3) of this section.

(f) Timing of notification of benefit determination—(1) In general. Except as provided in paragraphs (f)(2) and (f)(3) of this section, if a claim is wholly or partially denied, the plan administrator shall notify the claimant, in accordance with paragraph (g) of this section, of the plan's adverse benefit determination within a reasonable period of time, but not later than 90 days after receipt of the claim by the plan, unless the plan administrator determines that special circumstances require an extension of time for processing the claim. If the plan administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the plan expects to render the benefit determination.

(2) Group health plans. In the case of a group health plan, the plan administrator shall notify a claimant of the plan's benefit determination in accordance with paragraph (f)(2)(i), (f)(2)(ii), or (f)(2)(iii) of this section, as appropriate.

(i) Urgent care claims. In the case of a claim involving urgent care, the plan administrator shall notify the claimant of the plan's benefit determination (whether adverse or not) as soon as possible, taking into account the medical exigencies, but not later than 72 hours after receipt of the claim by the plan, unless the claimant fails to provide sufficient information to determine whether, or to what extent, benefits are covered or payable under the plan. In the case of such a failure, the plan administrator shall notify the claimant as soon as possible, but not later than 24 hours after receipt of the claim by the plan, of the specific information necessary to complete the claim. The claimant shall be afforded a reasonable amount of time, taking into account the circumstances, but not less than 48 hours, to provide the specified information. Notification of any adverse benefit determination pursuant to this paragraph (f)(2)(i) shall be made in accordance with paragraph (g) of this section. The plan administrator shall notify the claimant of the plan's benefit determination as soon as possible, but in no case later than 48 hours after the earlier of—

(A) The plan's receipt of the specified information, or

(B) The end of the period afforded the claimant to provide the specified additional information.

(ii) Concurrent care decisions. If a group health plan has approved an ongoing course of treatment to be provided over a period of time or number of treatments—

(A) Any reduction or termination by the plan of such course of treatment (other than by plan amendment or termination) before the end of such period of time or number of treatments shall constitute an adverse benefit determination. The plan administrator shall notify the claimant, in accordance with paragraph (g) of this section, of the adverse benefit determination at a time sufficiently in advance of the reduction or termination to allow the claimant to appeal and obtain a determination on review of that adverse benefit determination before the benefit is reduced or terminated.

(B) Any request by a claimant to extend the course of treatment beyond the period of time or number of treatments that is a claim involving urgent care shall be decided as soon as possible, taking into account the medical exigencies, and the plan administrator shall notify the claimant of the benefit determination, whether adverse or not, within 24 hours after receipt of the claim by the plan, provided that any such claim is made to the plan at least 24 hours prior to the expiration of the prescribed period of time or number of treatments. Notification of any adverse benefit determination concerning a request to extend the course of treatment, whether involving urgent care or not, shall be made in accordance with paragraph (g) of this section, and appeal shall be governed by paragraph (i)(2)(i), (i)(2)(ii), or (i)(2)(iii), as appropriate.

(iii) Other claims. In the case of a claim not described in paragraphs (f)(2)(i) or (f)(2)(ii) of this section, the plan administrator shall notify the claimant of the plan's benefit determination in accordance with either paragraph (f)(2)(iii)(A) or (f)(2)(iii)(B) of this section, as appropriate.

(A) Pre-service claims. In the case of a pre-service claim, the plan administrator shall notify the claimant of the plan's benefit determination (whether adverse or not) within a reasonable period of time appropriate to the medical circumstances, but not later than 15 days after receipt of the claim by the plan. This period may be extended one time by the plan for up to 15 days, provided that the plan administrator both determines that such an extension is necessary due to matters beyond the control of the plan and notifies the claimant, prior to the expiration of the initial 15-day period, of the circumstances requiring the extension of time and the date by which the plan expects to render a decision. If such an extension is necessary due to a failure of the claimant to submit the information necessary to decide the claim, the notice of extension shall specifically describe the required information, and the claimant shall be afforded at least 45 days from receipt of the notice within which to provide the specified information. Notification of any adverse benefit determination pursuant to this paragraph (f)(2)(iii)(A) shall be made in accordance with paragraph (g) of this section.

(B) Post-service claims. In the case of a post-service claim, the plan administrator shall notify the claimant, in accordance with paragraph (g) of this section, of the plan's adverse benefit determination within a reasonable period of time, but not later than 30 days after receipt of the claim. This period may be extended one time by the plan for up to 15 days, provided that the plan administrator both determines that such an extension is necessary due to matters beyond the control of the plan and notifies the claimant, prior to the expiration of the initial 30-day period, of the circumstances requiring the extension of time and the date by which the plan expects to render a decision. If such an extension is necessary due to a failure of the claimant to submit the information necessary to decide the claim, the notice of extension shall specifically describe the required information, and the claimant shall be afforded at least 45 days from receipt of the notice within which to provide the specified information.

(3) Disability claims. In the case of a claim for disability benefits, the plan administrator shall notify the claimant, in accordance with paragraph (g) of this section, of the plan's adverse benefit determination within a reasonable period of time, but not later than 45 days after receipt of the claim by the plan. This period may be extended by the plan for up to 30 days, provided that the plan administrator both determines that such an extension is necessary due to matters beyond the control of the plan and notifies the claimant, prior to the expiration of the initial 45-day period, of the circumstances requiring the extension of time and the date by which the plan expects to render a decision. If, prior to the end of the first 30-day extension period, the administrator determines that, due to matters beyond the control of the plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to an additional 30 days, provided that the plan administrator notifies the claimant, prior to the expiration of the first 30-day extension period, of the circumstances requiring the extension and the date as of which the plan expects to render a decision. In the case of any extension under this paragraph (f)(3), the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information.

(4) Calculating time periods. For purposes of paragraph (f) of this section, the period of time within which a benefit determination is required to be made shall begin at the time a claim is filed in accordance with the reasonable procedures of a plan, without regard to whether all the information necessary to make a benefit determination accompanies the filing. In the event that a period of time is extended as permitted pursuant to paragraph (f)(2)(iii) or (f)(3) of this section due to a claimant's failure to submit information necessary to decide a claim, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(g) Manner and content of notification of benefit determination. (1) Except as provided in paragraph (g)(2) of this section, the plan administrator shall provide a claimant with written or electronic notification of any adverse benefit determination. Any electronic notification shall comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). The notification shall set forth, in a manner calculated to be understood by the claimant—

(i) The specific reason or reasons for the adverse determination;

(ii) Reference to the specific plan provisions on which the determination is based;

(iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

(iv) A description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review;

(v) In the case of an adverse benefit determination by a group health plan—

(A) If an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion; or a statement that such a rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol, or other criterion will be provided free of charge to the claimant upon request; or

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge upon request.

(vi) In the case of an adverse benefit determination by a group health plan concerning a claim involving urgent care, a description of the expedited review process applicable to such claims.

(vii) In the case of an adverse benefit determination with respect to disability benefits—

(A) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(i) The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant;

(ii) The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant's adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and

(iii) A disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration;

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge upon request;

(C) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist; and

(D) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section.

(viii) In the case of an adverse benefit determination with respect to disability benefits, the notification shall be provided in a culturally and linguistically appropriate manner (as described in paragraph (o) of this section).

(2) In the case of an adverse benefit determination by a group health plan concerning a claim involving urgent care, the information described in paragraph (g)(1) of this section may be provided to the claimant orally within the time frame prescribed in paragraph (f)(2)(i) of this section, provided that a written or electronic notification in accordance with paragraph (g)(1) of this section is furnished to the claimant not later than 3 days after the oral notification.

(h) Appeal of adverse benefit determinations—(1) In general. Every employee benefit plan shall establish and maintain a procedure by which a claimant shall have a reasonable opportunity to appeal an adverse benefit determination to an appropriate named fiduciary of the plan, and under which there will be a full and fair review of the claim and the adverse benefit determination.

(2) Full and fair review. Except as provided in paragraphs (h)(3) and (h)(4) of this section, the claims procedures of a plan will not be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures—

(i) Provide claimants at least 60 days following receipt of a notification of an adverse benefit determination within which to appeal the determination;

(ii) Provide claimants the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits;

(iii) Provide that a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section;

(iv) Provide for a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(3) Group health plans. The claims procedures of a group health plan will not be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless, in addition to complying with the requirements of paragraphs (h)(2)(ii) through (iv) of this section, the claims procedures—

(i) Provide claimants at least 180 days following receipt of a notification of an adverse benefit determination within which to appeal the determination;

(ii) Provide for a review that does not afford deference to the initial adverse benefit determination and that is conducted by an appropriate named fiduciary of the plan who is neither the individual who made the adverse benefit determination that is the subject of the appeal, nor the subordinate of such individual;

(iii) Provide that, in deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, including determinations with regard to whether a particular treatment, drug, or other item is experimental, investigational, or not medically necessary or appropriate, the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment;

(iv) Provide for the identification of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant's adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination;

(v) Provide that the health care professional engaged for purposes of a consultation under paragraph (h)(3)(iii) of this section shall be an individual who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual; and

(vi) Provide, in the case of a claim involving urgent care, for an expedited review process pursuant to which—

(A) A request for an expedited appeal of an adverse benefit determination may be submitted orally or in writing by the claimant; and

(B) All necessary information, including the plan's benefit determination on review, shall be transmitted between the plan and the claimant by telephone, facsimile, or other available similarly expeditious method.

(4) Plans providing disability benefits. The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless, in addition to complying with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section, the claims procedures—

(i) Provide that before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) in connection with the claim; such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date; and

(ii) Provide that, before the plan can issue an adverse benefit determination on review on a disability benefit claim based on a new or additional rationale, the plan administrator shall provide the claimant, free of charge, with the rationale; the rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date.

(i) Timing of notification of benefit determination on review—(1) In general. (i) Except as provided in paragraphs (i)(1)(ii), (i)(2), and (i)(3) of this section, the plan administrator shall notify a claimant in accordance with paragraph (j) of this section of the plan's benefit determination on review within a reasonable period of time, but not later than 60 days after receipt of the claimant's request for review by the plan, unless the plan administrator determines that special circumstances (such as the need to hold a hearing, if the plan's procedures provide for a hearing) require an extension of time for processing the claim. If the plan administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 60-day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the plan expects to render the determination on review.

(ii) In the case of a plan with a committee or board of trustees designated as the appropriate named fiduciary that holds regularly scheduled meetings at least quarterly, paragraph (i)(1)(i) of this section shall not apply, and, except as provided in paragraphs (i)(2) and (i)(3) of this section, the appropriate named fiduciary shall instead make a benefit determination no later than the date of the meeting of the committee or board that immediately follows the plan's receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting. In such case, a benefit determination may be made by no later than the date of the second meeting following the plan's receipt of the request for review. If special circumstances (such as the need to hold a hearing, if the plan's procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the committee or board following the plan's receipt of the request for review. If such an extension of time for review is required because of special circumstances, the plan administrator shall provide the claimant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The plan administrator shall notify the claimant, in accordance with paragraph (j) of this section, of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.

(2) Group health plans. In the case of a group health plan, the plan administrator shall notify a claimant of the plan's benefit determination on review in accordance with paragraphs (i)(2)(i) through (iii), as appropriate.

(i) Urgent care claims. In the case of a claim involving urgent care, the plan administrator shall notify the claimant, in accordance with paragraph (j) of this section, of the plan's benefit determination on review as soon as possible, taking into account the medical exigencies, but not later than 72 hours after receipt of the claimant's request for review of an adverse benefit determination by the plan.

(ii) Pre-service claims. In the case of a pre-service claim, the plan administrator shall notify the claimant, in accordance with paragraph (j) of this section, of the plan's benefit determination on review within a reasonable period of time appropriate to the medical circumstances. In the case of a group health plan that provides for one appeal of an adverse benefit determination, such notification shall be provided not later than 30 days after receipt by the plan of the claimant's request for review of an adverse benefit determination. In the case of a group health plan that provides for two appeals of an adverse determination, such notification shall be provided, with respect to any one of such two appeals, not later than 15 days after receipt by the plan of the claimant's request for review of the adverse determination.

(iii) Post-service claims. (A) In the case of a post-service claim, except as provided in paragraph (i)(2)(iii)(B) of this section, the plan administrator shall notify the claimant, in accordance with paragraph (j) of this section, of the plan's benefit determination on review within a reasonable period of time. In the case of a group health plan that provides for one appeal of an adverse benefit determination, such notification shall be provided not later than 60 days after receipt by the plan of the claimant's request for review of an adverse benefit determination. In the case of a group health plan that provides for two appeals of an adverse determination, such notification shall be provided, with respect to any one of such two appeals, not later than 30 days after receipt by the plan of the claimant's request for review of the adverse determination.

(B) In the case of a multiemployer plan with a committee or board of trustees designated as the appropriate named fiduciary that holds regularly scheduled meetings at least quarterly, paragraph (i)(2)(iii)(A) of this section shall not apply, and the appropriate named fiduciary shall instead make a benefit determination no later than the date of the meeting of the committee or board that immediately follows the plan's receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting. In such case, a benefit determination may be made by no later than the date of the second meeting following the plan's receipt of the request for review. If special circumstances (such as the need to hold a hearing, if the plan's procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the committee or board following the plan's receipt of the request for review. If such an extension of time for review is required because of special circumstances, the plan administrator shall notify the claimant in writing of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The plan administrator shall notify the claimant, in accordance with paragraph (j) of this section, of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.

(3) Disability claims. (i) Except as provided in paragraph (i)(3)(ii) of this section, claims involving disability benefits (whether the plan provides for one or two appeals) shall be governed by paragraph (i)(1)(i) of this section, except that a period of 45 days shall apply instead of 60 days for purposes of that paragraph.

(ii) In the case of a multiemployer plan with a committee or board of trustees designated as the appropriate named fiduciary that holds regularly scheduled meetings at least quarterly, paragraph (i)(3)(i) of this section shall not apply, and the appropriate named fiduciary shall instead make a benefit determination no later than the date of the meeting of the committee or board that immediately follows the plan's receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting. In such case, a benefit determination may be made by no later than the date of the second meeting following the plan's receipt of the request for review. If special circumstances (such as the need to hold a hearing, if the plan's procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the committee or board following the plan's receipt of the request for review. If such an extension of time for review is required because of special circumstances, the plan administrator shall notify the claimant in writing of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The plan administrator shall notify the claimant, in accordance with paragraph (j) of this section, of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.

(4) Calculating time periods. For purposes of paragraph (i) of this section, the period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is filed in accordance with the reasonable procedures of a plan, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing. In the event that a period of time is extended as permitted pursuant to paragraph (i)(1), (i)(2)(iii)(B), or (i)(3) of this section due to a claimant's failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(5) Furnishing documents. In the case of an adverse benefit determination on review, the plan administrator shall provide such access to, and copies of, documents, records, and other information described in paragraphs (j)(3), (j)(4), and (j)(5) of this section as is appropriate.

(j) Manner and content of notification of benefit determination on review. The plan administrator shall provide a claimant with written or electronic notification of a plan's benefit determination on review. Any electronic notification shall comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). In the case of an adverse benefit determination, the notification shall set forth, in a manner calculated to be understood by the claimant—

(1) The specific reason or reasons for the adverse determination;

(2) Reference to the specific plan provisions on which the benefit determination is based;

(3) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section;

(4)(i) A statement describing any voluntary appeal procedures offered by the plan and the claimant's right to obtain the information about such procedures described in paragraph (c)(3)(iv) of this section, and a statement of the claimant's right to bring an action under section 502(a) of the Act; and,

(ii) In the case of a plan providing disability benefits, in addition to the information described in paragraph (j)(4)(i) of this section, the statement of the claimant's right to bring an action under section 502(a) of the Act shall also describe any applicable contractual limitations period that applies to the claimant's right to bring such an action, including the calendar date on which the contractual limitations period expires for the claim.

(5) In the case of a group health plan—

(i) If an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion; or a statement that such rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of the rule, guideline, protocol, or other similar criterion will be provided free of charge to the claimant upon request;

(ii) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge upon request; and

(iii) The following statement: “You and your plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.”

(6) In the case of an adverse benefit decision with respect to disability benefits—

(i) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(A) The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant;

(B) The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant's adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and

(C) A disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration;

(ii) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of change upon request; and

(iii) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.

(7) In the case of an adverse benefit determination on review with respect to a claim for disability benefits, the notification shall be provided in a culturally and linguistically appropriate manner (as described in paragraph (o) of this section).

(k) Preemption of State law. (1) Nothing in this section shall be construed to supersede any provision of State law that regulates insurance, except to the extent that such law prevents the application of a requirement of this section.

(2)(i) For purposes of paragraph (k)(1) of this section, a State law regulating insurance shall not be considered to prevent the application of a requirement of this section merely because such State law establishes a review procedure to evaluate and resolve disputes involving adverse benefit determinations under group health plans so long as the review procedure is conducted by a person or entity other than the insurer, the plan, plan fiduciaries, the employer, or any employee or agent of any of the foregoing.

(ii) The State law procedures described in paragraph (k)(2)(i) of this section are not part of the full and fair review required by section 503 of the Act. Claimants therefore need not exhaust such State law procedures prior to bringing suit under section 502(a) of the Act.

(l) Failure to establish and follow reasonable claims procedures—(1) In general. Except as provided in paragraph (l)(2) of this section, in the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.

(2) Plans providing disability benefits. (i) In the case of a claim for disability benefits, if the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan, except as provided in paragraph (l)(2)(ii) of this section. Accordingly, the claimant is entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under section 502(a) of the Act under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.

(ii) Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies available under a plan with respect to claims for disability benefits will not be deemed exhausted based on de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant. This exception is not available if the violation is part of a pattern or practice of violations by the plan. The claimant may request a written explanation of the violation from the plan, and the plan must provide such explanation within 10 days, including a specific description of its bases, if any, for asserting that the violation should not cause the administrative remedies available under the plan to be deemed exhausted. If a court rejects the claimant's request for immediate review under paragraph (l)(2)(i) of this section on the basis that the plan met the standards for the exception under this paragraph (l)(2)(ii), the claim shall be considered as re-filed on appeal upon the plan's receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the plan shall provide the claimant with notice of the resubmission.

(m) Definitions. The following terms shall have the meaning ascribed to such terms in this paragraph (m) whenever such term is used in this section:

(1)(i) A “claim involving urgent care” is any claim for medical care or treatment with respect to which the application of the time periods for making non-urgent care determinations—

(A) Could seriously jeopardize the life or health of the claimant or the ability of the claimant to regain maximum function, or,

(B) In the opinion of a physician with knowledge of the claimant's medical condition, would subject the claimant to severe pain that cannot be adequately managed without the care or treatment that is the subject of the claim.

(ii) Except as provided in paragraph (m)(1)(iii) of this section, whether a claim is a “claim involving urgent care” within the meaning of paragraph (m)(1)(i)(A) of this section is to be determined by an individual acting on behalf of the plan applying the judgment of a prudent layperson who possesses an average knowledge of health and medicine.

(iii) Any claim that a physician with knowledge of the claimant's medical condition determines is a “claim involving urgent care” within the meaning of paragraph (m)(1)(i) of this section shall be treated as a “claim involving urgent care” for purposes of this section.

(2) The term “pre-service claim” means any claim for a benefit under a group health plan with respect to which the terms of the plan condition receipt of the benefit, in whole or in part, on approval of the benefit in advance of obtaining medical care.

(3) The term “post-service claim” means any claim for a benefit under a group health plan that is not a pre-service claim within the meaning of paragraph (m)(2) of this section.

(4) The term “adverse benefit determination” means:

(i) Any of the following: A denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of a participant's or beneficiary's eligibility to participate in a plan, and including, with respect to group health plans, a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit resulting from the application of any utilization review, as well as a failure to cover an item or service for which benefits are otherwise provided because it is determined to be experimental or investigational or not medically necessary or appropriate; and

(ii) In the case of a plan providing disability benefits, the term “adverse benefit determination” also means any rescission of disability coverage with respect to a participant or beneficiary (whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time). For this purpose, the term “rescission” means a cancellation or discontinuance of coverage that has retroactive effect, except to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.

(5) The term “notice” or “notification” means the delivery or furnishing of information to an individual in a manner that satisfies the standards of 29 CFR 2520.104b-1(b) as appropriate with respect to material required to be furnished or made available to an individual.

(6) The term “group health plan” means an employee welfare benefit plan within the meaning of section 3(1) of the Act to the extent that such plan provides “medical care” within the meaning of section 733(a) of the Act.

(7) The term “health care professional” means a physician or other health care professional licensed, accredited, or certified to perform specified health services consistent with State law.

(8) A document, record, or other information shall be considered “relevant” to a claimant's claim if such document, record, or other information

(i) Was relied upon in making the benefit determination;

(ii) Was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination;

(iii) Demonstrates compliance with the administrative processes and safeguards required pursuant to paragraph (b)(5) of this section in making the benefit determination; or

(iv) In the case of a group health plan or a plan providing disability benefits, constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit for the claimant's diagnosis, without regard to whether such advice or statement was relied upon in making the benefit determination.

(n) Apprenticeship plans. This section does not apply to employee benefit plans that solely provide apprenticeship training benefits.

(o) Standards for culturally and linguistically appropriate notices. A plan is considered to provide relevant notices in a “culturally and linguistically appropriate manner” if the plan meets all the requirements of paragraph (o)(1) of this section with respect to the applicable non-English languages described in paragraph (o)(2) of this section.

(1) Requirements. (i) The plan must provide oral language services (such as a telephone customer assistance hotline) that include answering questions in any applicable non-English language and providing assistance with filing claims and appeals in any applicable non-English language;

(ii) The plan must provide, upon request, a notice in any applicable non-English language; and

(iii) The plan must include in the English versions of all notices, a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services provided by the plan.

(2) Applicable non-English language. With respect to an address in any United States county to which a notice is sent, a non-English language is an applicable non-English language if ten percent or more of the population residing in the county is literate only in the same non-English language, as determined in guidance published by the Secretary.

(p) Applicability dates and temporarily applicable provisions. (1) Except as provided in paragraphs (p)(2), (p)(3) and (p)(4) of this section, this section shall apply to claims filed under a plan on or after January 1, 2002.

(2) This section shall apply to claims filed under a group health plan on or after the first day of the first plan year beginning on or after July 1, 2002, but in no event later than January 1, 2003.

(3) Paragraphs (b)(7), (g)(1)(vii) and (viii), (j)(4)(ii), (j)(6) and (7), (l)(2), (m)(4)(ii), and (o) of this section shall apply to claims for disability benefits filed under a plan after April 1, 2018, in addition to the other paragraphs in this rule applicable to such claims.

(4) With respect to claims for disability benefits filed under a plan from January 18, 2017 through April 1, 2018, this paragraph (p)(4) shall apply instead of paragraphs (g)(1)(vii), (g)(1)(viii), (h)(4), (j)(6) and (j)(7).

(i) In the case of a notification of benefit determination and a notification of benefit determination on review by a plan providing disability benefits, the notification shall set forth, in a manner calculated to be understood by the claimant—

(A) If an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion; or a statement that such a rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol, or other criterion will be provided free of charge to the claimant upon request; and

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge upon request.

(ii) The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures comply with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section.

Deciders of Claims and Outside Experts Must be Independent or Impartial

The Regulations: § 2560.503-1 Claims procedure.

b)Obligation to establish and maintain reasonable claims procedures. Every employee benefit plan shall establish and maintain reasonable procedures governing the filing of benefit claims, notification of benefit determinations, and appeal of adverse benefit determinations (hereinafter collectively referred to as claims procedures). The claims procedures for a plan will be deemed to be reasonable only if -

(7) In the case of a plan providing disability benefits, the plan must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Accordingly, decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical or vocational expert) must not be made based upon the likelihood that the individual will support the denial of benefits.

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There are five revisions to the amendments to the ERISA claims regulations promulgated by the Department of Labor that went into effect April 18, 2018.  In providing its overview of the rule revisions, the Department of Labor described the first revision as providing that “[c]laims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the person involved in making the benefit determination.”  In order to accomplish this aim, according to the DOL, “…this final rule requires that decisions regarding hiring, compensation, termination, promotion, or similar matters with respect to any individual must not be made based upon the likelihood that the individual will support the denial of disability benefits.”  In plain terms, it means that insurers and self-insurers cannot, for example, “plan bonuses based on the number of denials made by a claims adjudicator…[or] contract with a medical expert based on the expert’s reputation for outcomes in contested cases…”  It is worth contemplating that this revision was necessary to “address practices and behavior [by insurers and self-insurers] which cannot be reconciled with the ‘full and fair review’ guarantee [in the ERISA statute].”

In addition to its own claims adjusters and any medical experts it hires, this new rule will apply to vocational experts.  The DOL also emphasized that the rule is not limited to persons responsible for making the decision, and therefore would apply to “consulting experts.”  The rule also applies to individuals hired or compensated by parties engaged by the insurer or self-insurer: insurers and self-insurers cannot avoid the rule by hiring a third party agency which itself engages in the practice of hiring experts likely to side with them. 

The DOL also addressed the concern that this revision may lead to claimants asking the insurer or self-insurer to provide the claimant with the statistics relevant to their compliance with this rule, presumably on the theory that it should be part of the administrative record.   The DOL also addressed the related concern that claimants may seek that information during litigation.  The DOL essentially punted on this issue, stating that the rule does not change the scope of “relevant documents” subject to disclosure under the rule as written, meaning that it does not change what documents constitute the administrative record.  Nor, according to the DOL, does it prescribe limits (or expand them) with respect to the kinds of documents already discoverable in litigation.  What is happening here seems to be that the DOL recognized that insurers and self-insurers have engaged in the practices of incentivizing employees to deny meritorious claims and of seeking experts known to deny claims, and have addressed them.  But they have chosen not to prescribe rules about how claimants can enforce the new rule, instead leaving it to courts to determine what rights claimants will have to discover whether the insurers or self-insurers are playing by the new rules.

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

What if the Insurer Disagrees with My Health Care Providers or Vocational Experts?

The Regulation:

29 CFR § 2560.503-1 Claims procedure.

(g)Manner and content of notification of benefit determination.

(1) Except as provided in paragraph (g)(2) of this section, the plan administrator shall provide a claimant with written or electronic notification of any adverse benefit determination. Any electronic notification shall comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). The notification shall set forth, in a manner calculated to be understood by the claimant -

(vii) In the case of an adverse benefit determination with respect to disability benefits -

(A) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(ii) The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant's adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and…

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In Section II.B.2. of the Supplementary Information which precedes the new ERISA regulations in the Federal Register, there is a discussion about the new disclosure requirements.  There is a lot packed into these comments and this second provision of the new rules.  Let’s break them down, starting with the requirement that an adverse benefit determination must include an explanation for agreeing with or not following “[t]he views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant[.]” 

This rule can be found at 29 CFR 2560.503-1(g)(1)(vii)(A)(i) and 29 CFR 2560.503-1(j)(6)(i)(A).  It appears twice in the rules, once to cover initial adverse benefit determinations, whether a claimant applies for benefits and is immediately denied or is paid benefits for a time and then has his benefits terminated, and once to cover adverse benefit determinations on review, meaning a denial of after an appeal from either kind of initial adverse determination.  The rule also expressly applies to views presented by any vocational experts submitted by the Claimant.

This is in our opinion the most important revision of the rules.  The Supplementary Information rightly points out that the existing disability claims procedure regulation already imposes a requirement that denial notices include a reasoned explanation for the denial.  They also point out that some plans are providing disability claim notices that are not consistent with the current Regulation.  Here is how this typically plays out:  A claimant submits medical records from her providers supporting her disability.  The plan administrator pays an outside physician (which it calls an ‘independent medical examiner’ or IME) who gives an opinion that she is not disabled.  The plan administrator adopts the findings of the IME report, ignores the findings of the treating physician and upholds its initial denial.  The claimant then goes to court.  The judge reviews the insurer’s decision for any ‘abuse of discretion’ and finds none, because the insurer relied the findings of an ‘independent medical examination.’

If this sounds infuriating and unfair, that is because it is.  These revisions promise to end that practice.  If there is one sentence in the Supplemental Information upon which claimants may put their hopes for more fair outcomes, it is this one:  “This provision in the final rule would not be satisfied merely by stating that the plan or a reviewing physician disagrees with the treating physician or health care professional.  Rather, the rule requires that the adverse benefit determination must include a discussion of the basis for disagreeing with the health care professional’s view.”  If interpreted and enforced in this way, this revision will result in a much more transparent and fair claims benefit process for claimants.

One additional point: The Department of Labor appears to have kept the onus on the claimant for ensuring that the plan provide its basis for disagreeing with the views of the claimant’s health care providers.  The DOL wrote that the rule revisions require that adverse benefit determinations contain a discussion of the basis for disagreeing with the views of health care professionals who evaluated the claim “when the claimant presents those views to the plan.”  Claimants would do well to ‘present those views’ to the Plan by submitting all medical records and by providing a notice of appeal that includes a discussion of how those records prove that the claimant is entitled to benefits.

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Disagreeing with Social Security Disability Award

The Regulation:

29 CFR § 2560.503-1 Claims procedure.

(g)Manner and content of notification of benefit determination.

(1) Except as provided in paragraph (g)(2) of this section, the plan administrator shall provide a claimant with written or electronic notification of any adverse benefit determination. Any electronic notification shall comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). The notification shall set forth, in a manner calculated to be understood by the claimant -

(vii) In the case of an adverse benefit determination with respect to disability benefits -

(A) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(iii) A disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration…

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Among the most important revisions to the ERISA Claims Procedures for Plans Providing Disability Benefits is the requirement that adverse determinations contain a discussion of the basis for disagreeing with a favorable Social Security Administration disability determination regarding the claimant presented by the claimant to the plan.  The revised regulations provide that the notification shall set forth a discussion of the decision, including an explanation of the basis for disagreeing with or not following a “[a] disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration[.]”  29 CFR 2560.503-1(g)(1)(vii)(A)(iii) and 29 CFR 2560.503-1(j)(6)(C).  This rule applies to both initial adverse benefit determinations and adverse benefits determinations on review (meaning determinations made after a claimant has received and appealed an initial adverse determination). 

These revisions bring a much needed change.  As it stands, Plan provisions typically require claimants to apply for SSA benefits.  They also provide that the insurer or self insurer can reduce its monthly payments to the insured by the amount of any Social Security benefits obtained by the claimant.  But then it still can terminate the Plan benefits despite the finding of disability by the SSA. 

This is difficult to imagine, unless you understand that the company that administers the plan and the company that pays the benefits are typically one and the same company.  Then it makes sense that a Plan might take the money due to the claimant from the award of SSA benefits (as provided for in the plan documents) but disagree with that SSA decision and terminate Plan benefits. 

Here is what happens: A Plan provides that claimants must apply for SSA benefits if they are receiving Plan benefits.  It also provides that Plan benefits are reduced by the amount of any SSA benefits awards.  It can take much longer to obtain SSA benefits than Plan benefits.  A person may receive Plan benefits for two or three years at, for example, $3,000 a month.  Then the person is awarded SSA benefits of, for example, $2,400 a month.  The Plan is then only obligated to pay $600 a month ($3,000 - $2,400) going forward.  The claimant will begin getting monthly checks from Social Security, but will also get a large check from them for all of the months that she should have been receiving SSA disability checks but was not because her claim had not yet been approved.  That Plan is entitled to that money too, because had she been awarded SSA benefits right away, the Plan would have had a right to reduce its payments each month by same amount.  The Plan will now tell the claimant that she has an ‘overpayment’ in the amount of that large Social Security check.  The Plan can now pursue the claimant for the overpayment.  But it can also continue administering the claim and can at any time determine that the claimant is no longer disabled and terminate Plan benefits.  And plans have done just that. 

The courts have recognized the inherent hypocrisy in this practice for many years.  Nevertheless that practice has persisted.  These new revisions will not end this practice.  But what they do is require the Plan to explain why it disagreed with the Social Security Administration’s decision, while making it clear that “[i]t [will] not be sufficient for the benefit determination merely to include boilerplate text about possible differences in applicable definitions, presumptions, or evidence.  A discussion of the actual differences [will] be necessary.”  This will not end the practice entirely: Plans will no doubt in some instances still claim a right to retroactive SSA benefits while maintaining that a claimant is not disabled any longer under the Plan.  But now they will be obligated to provide their basis for disagreeing with the SSA decision, so that claimants can challenge their reasoning. 

A few final observations:  Plans will still be able to require claimants to submit their SSA determinations if they want a Plan to address it in any adverse determination.  But the revision is intended to require Plans working with an apparently deficient administrative record to inform the claimant of the deficiency and provide claimants an opportunity to “resolve the stated problem by furnishing missing information.”  It is not clear where in the revision to the rules this requirement appears.  However, claimants would be well counseled to provide Plans with any SSA award, along with the entire SSA claim file, and request that the Plan inform her of any apparent deficiency in the administrative record, citing this language in the Supplementary Information to the Rules revisions.

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Including Internal Rules, Guidelines, etc. Relied Upon in Denial or Termination


The Regulation: 29 CFR § 2560.503-1 Claims procedure.

(g)Manner and content of notification of benefit determination.

(1) Except as provided in paragraph (g)(2) of this section, the plan administrator shall provide a claimant with written or electronic notification of any adverse benefit determination. Any electronic notification shall comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). The notification shall set forth, in a manner calculated to be understood by the claimant -

(vii) In the case of an adverse benefit determination with respect to disability benefits -

(C) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist…

(j)Manner and content of notification of benefit determination on review. The plan administrator shall provide a claimant with written or electronic notification of a plan's benefit determination on review. Any electronic notification shall comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). In the case of an adverse benefit determination, the notification shall set forth, in a manner calculated to be understood by the claimant -

(6) In the case of an adverse benefit decision with respect to disability benefits -

(iii) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.

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The revised regulations require that, in both initial denials or terminations of benefits and in denials of appeals, plan adjudicators include “[e]ither the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist[.]”  29 CFR 2560.503-1(g)(1)(C) and 29 CFR 2560.503-1(j)(6)(iii)

This appears to be a modest addition to the rules.  The rules already required the production of relevant documents, where relevant is defined as including statements of policy or guidance with respect to the plan concerning the denied benefit.  29 CFR 2560.503-1(m)(8)(iv).  It also already required that an adverse benefit determination advise that such rules, etc. were relied upon and that a copy would be provided upon request.  29 CFR 2560.503-1(g)(v)(A).  The new rule simply requires the plan to put the internal rule, etc. into the actual adverse determination.  Also, if no such internal rules, etc., were relied upon, the plan would have to state that they do not exist.

These revisions may significantly change the landscape of adverse determinations and litigation pertaining to them, however.  Plans will now likely comply with this requirement because if they do not they will have conceded that they used no rules to make the determination.  As the Department of Labor suggests in its Supplementary Information, “[this] would present substantial questions about whether the plan or claims adjudicator complied with ERISA’s fiduciary standards if a claim was denied without the claims adjudicator having considered a rule…intended to govern the determination of the claim.”  Moreover, once the plan has to put the relevant rules into the determination, it will have to show how they apply to the facts of the claim.  This is how lawyers and judges work, and plans will not be able to avoid this level of scrutiny once the rules are laid out along with the facts of the claim that should also be laid out in the adverse determination.

The Department of Labor provided some additional Supplementary Information that savvy claimants can use to their advantage.  The DOL wrote that the term “relevant documents” includes general policy or guidance generated by the Plan concerning the denied benefit that would contribute to deciding generally whether to pay the claim.  This seems to stretch the definition of relevant: a document showing recovery rates on certain illness, for example, would not provide any evidence with respect to whether a particular claimant has recovered, but it would be relevant under this view of the rules.  If courts agree, it could mean that adverse denials will have to include as relevant any of these kinds of materials or risk having courts decide that the plan ignored them, which could be some evidence of an unreasonable claims procedure.

One final thought:  The plan must also provide these kinds of statements of policy or guidance “without regard to whether [they] were relied upon in making the benefit determination.”  29 CFR 2560.503-1(m)(8)(iv).  This seems to cover the third alternative: that the plan has an internal guideline, etc., but did not use it.  So whether they have no guidelines, have them and did not use them or do not have them at all, the claimant should be so informed. 

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Right To Review and Respond to New Information Before Final Decision.

The Regulation: 29 CFR § 2560.503-1 Claims procedure.

(h)Appeal of adverse benefit determinations -

(4)Plans providing disability benefits. The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless, in addition to complying with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section, the claims procedures -

(i) Provide that before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) in connection with the claim; such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date; and

(ii) Provide that, before the plan can issue an adverse benefit determination on review on a disability benefit claim based on a new or additional rationale, the plan administrator shall provide the claimant, free of charge, with the rationale; the rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i)of this section to give the claimant a reasonable opportunity to respond prior to that date.Under the newly revised ERISA benefit claims regulations, claimants will have a right to review and respond to new evidence considered, relied upon or generated during the appeal.  That evidence must be provided to the claimant sufficiently in advance of the date by which the claimant must be notified of the decision to allow the claimant to respond prior to that date.  29 CFR 2560.503-1(h)(4)(i).  Before a plan adjudicator can issue an adverse determination based on a new rationale, it must provide the rationale, again sufficiently in advance of the date by which the claimant must be notified of the decision to allow the claimant to respond prior to that date.  29 CFR 2560.503-1(h)(4)(ii). 

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The need for this rule is straightforward.  The statute provides for a full and fair review of an initial adverse determination, and the notice of the adverse determinationd must set forth the reasons for the denial. 

In accordance with regulations of the Secretary, every employee benefit plan shall—

(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and

(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.

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29 U.S. Code § 1133.  If a plan adjudicator bases a denial on appeal on either new evidence or a new rationale, then that new evidence or rationale obviously was not in the initial denial.  That would render the initial denial did not comply with the ERISA statute set forth above.  This revision of the regulation explicitly prohibits this practice by claims adjudicators.

The DOL, in its Supplementary Information to the new revisions, addressed the criticism of this provision that it could create an ‘endless loop’ of review and re-review that would be costly and time-consuming.  Interestingly, this ‘criticism’ suggested that such an endless loop is a problem for the plan adjudicator.  In practice it is a problem for the claimant.  This is something that any lawyer who handles these claims has encountered:  The lawyer refutes each and every reason given in an initial denial, only to have the plan adjudicator obtain a new third party review by a physician or other expert, and/or provide a reason for the denial on appeal that was nowhere in the initial denial.  If the claims adjudicator gives an opportunity for a voluntary appeal, the lawyer is left with the prospect of spending more time and perhaps having to have the treating physician or other treating professional review and comment on the new third party report.  Of course, the plan adjudicator can and almost invariably does just go and get yet another third party review which becomes the new basis for a denial of the voluntary appeal. 

The DOL response to this plan criticism of the endless loop from the perspective of the plan adjudicator gets to the cynical nature of the ‘criticism’: 

“The fiduciary obligation to pay benefits in accordance with the terms of the plan does not require a fiduciary to endlessly rebut credible evidence supplied by a claimant that, if accepted, would be sufficient to justify granting the claim.  In fact, an aggressive claims processing practice of routinely rejecting or seeking to undermine credible evidence supplied by a claimant raises questions about whether a fiduciary, especially one operating under a conflict of interest, is violating the fiduciary’s loyalty obligation under ERISA to act solely in the interest of the plan’s participants and beneficiaries.” Federal Register/Vol. 81 No. 243 at 92326.  

For lawyers handling these claims, this provision – and the commentary quoted here – should limit what those lawyers tend to think of as a game of whack-a-mole that is endlessly frustrating.

A note on the way the new provision would work.  The DOL Supplementary Information describes the process as one in which the plan adjudicator would send any new evidence or rationales to the claimant once she determines that she is going to deny the claim on appeal based on the new information or rationale.  This must be done during the 45 day review period or at most during the second 45 day period that a plan adjudicator may take under ‘special circumstances.’ 29 CFR 2560.503-1(i)(3)(i).  This revision maintains the efficient adjudication of claims, but it also incentivizes plan adjudicators to provide all of its reasons for its decision in the initial denial and dissuades them from attempting to win a game of attrition in which they can always pay for one more third party opinion to justify a denial.

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Deemed Exhaustion of Claims and Appeals Process.

The Regulation: 29 CFR § 2560.503-1 Claims procedure.

(l)Failure to establish and follow reasonable claims procedures -

(1)In general. Except as provided in paragraph (l)(2) of this section, in the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.

(2)Plans providing disability benefits.

(i) In the case of a claim for disability benefits, if the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan, except as provided in paragraph (l)(2)(ii) of this section. Accordingly, the claimant is entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under section 502(a) of the Act under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.

(ii) Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies available under a plan with respect to claims for disability benefits will not be deemed exhausted based on de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant. This exception is not available if the violation is part of a pattern or practice of violations by the plan. The claimant may request a written explanation of the violation from the plan, and the plan must provide such explanation within 10 days, including a specific description of its bases, if any, for asserting that the violation should not cause the administrative remedies available under the plan to be deemed exhausted. If a court rejects the claimant's request for immediate review under paragraph (l)(2)(i) of this section on the basis that the plan met the standards for the exception under this paragraph (l)(2)(ii), the claim shall be considered as re-filed on appeal upon the plan's receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the plan shall provide the claimant with notice of the resubmission.

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The revised claims procedure regulations for ERISA governed plans providing disability benefits includes a strengthened procedure available to claimants when a disability plan administrator fails to establish or follow reasonable claims procedures.  Under the revised rule, if a plan fails to strictly adhere to all the requirement of the claims regulations, the claimant is deemed to have exhausted her administrative remedies available under the plan and can seek remedies in federal court.  The claim or appeal is “deemed denied on review without the exercise of discretion by an appropriate fiduciary.”  29 CFR 2560.503-1(l)(2).  Available remedies would not be deemed exhausted in the case of de minimis violations unless it is part of a pattern of violations by the plan.  The claimant may, but need not, request an explanation for the violation, in which case the plan must provide one within 10 days. 

The rules prior to the revisions already provided that violations would result in a claimant’s available remedies under the plan being deemed exhausted, giving the claimant the right to seek remedies in federal court.  This revision enhances protections for claimants by establishing that the matter is deemed exhausted “without the exercise of discretion” by the plan administrator.  This is important because most plans have “discretionary clauses.”  The Supreme Court Decision in Firestone Rubber v. Bruch established that plans, as fiduciaries, may grant themselves deference in administering the terms of the plan.  If there is no discretionary clause, a federal court would review a claimant’s denial de novo (anew), meaning that the court would make its own determination of the claim.  If there is a discretionary clause, the judge must give deference to the decision of the plan administrator unless it was unreasonable.  The judge is thus reviewing the decision of the plan administrator for reasonableness rather than making her own determination on the merits.  Discretionary authority greatly improves a plan’s chances of winning in federal court.  This rule therefore provides a powerful incentive to plans to adhere to the rules so that they retain discretionary authority to determine claims.

The revised rules could have, but did not, simply provide for a de novo review of any claims that were deemed exhausted.  The Department of Labor in the Supplementary Information to the revised rules explained why it did not add such a provision.  “The Department does not intend to establish a general rule regarding the level of deference that a reviewing court may choose to give a fiduciary’s decision…[But] [t]he legal effect of the definition [of what constitutes a denied claim] may be that a court would conclude that de novo review is appropriate because of the regulation that determines as a matter of law that no fiduciary discretion was exercised in denying the claim.”  29 CFR 2560.503-1(l)(2) at 92328.  The DOL seems to be saying that they do not want to – and perhaps may not have the authority – to tell judges what standard of review should be applied to these cases.  Instead, it is directing essentially that violations of the rules are not fiduciary acts as a matter of law.  As such, courts are unlikely to decide that the fiduciaries are entitled to deference with respect to those acts. 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Definition of Adverse Benefit Determinations, Recision of Benefits

The Regulation: 29 CFR § 2560.503-1 Claims procedure.

(m)Definitions. The following terms shall have the meaning ascribed to such terms in this paragraph (m) whenever such term is used in this section:

(4) The term “adverse benefit determination” means:

(i) Any of the following: A denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of a participant's or beneficiary's eligibility to participate in a plan, and including, with respect to group health plans, a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit resulting from the application of any utilization review, as well as a failure to cover an item or service for which benefits are otherwise provided because it is determined to be experimental or investigational or not medically necessary or appropriate; and

(ii) In the case of a plan providing disability benefits, the term “adverse benefit determination” also means any rescission of disability coverage with respect to a participant or beneficiary (whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time). For this purpose, the term “rescission” means a cancellation or discontinuance of coverage that has retroactive effect, except to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.The revisions to the ERISA regulations regarding disability benefits claims amends the definition of an adverse benefit decision to include a rescission of benefits, including retroactive rescissions, except for rescissions for failure to make required premium payments.  29 CFR 2560.503-1(m)(4).  This is the case even if there is no adverse effect on any particular benefit as a result of the rescission.  An example of a rescission would be a determination that a plan participant’s coverage is cancelled because the plan concluded that the participant’s application included a material misstatement, assuming that the policy includes a provision giving the plan the right to cancel a participant’s policy under such circumstances.  Under the newly revised rules, the plan must comply with the claims procedures since the rescission would now be considered an adverse benefit determination.

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The Department of labor in its Supplementary Information addressed the question of whether an adjustment or suspension of benefits that reduces or eliminates a disability pension benefit under section 305 of ERISA would be a rescission under the newly revised regulation.  The DOL’s position is that it would not be a rescission within the meaning of 29 CFR 2560.503-1(m)(4), but that if a claims adjudicator had to make a disability determination in order to decide a claim, then the claim must be treated as an adverse benefit determination under the newly revised rules. 

One final point.  The DOL addressed a commentator’s question about a situation that does not directly relate to rescissions.  The question was whether a limited award of benefits would be considered a rescission.  For example, if a plan’s policy limited benefits to 24 months for disabilities caused by a mental illness and the plan adjudicator notified the claimant that her benefits would end after 24 months based on the limitation, would that be considered a rescission.  The DOL’s position is that it would not be.  Its position, previously set out in an FAQ, is that any claimant request for payment beyond the specified period would be constitute a new claim.  The position of the DOL in an FAQ does not have the same force as a regulation.  Claimants would therefore be well advised to immediately apply for benefits for the specified period and receive a determination before the time period for an appeal would otherwise have run, and to submit a notice of appeal with a submission of evidence in support of the appeal if the plan adjudicator does not make an initial determination on the ‘new claim’ in a timely fashion.

Culturally and Linguistically Appropriate Notices

The Regulation: 29 CFR 2560.503-1 Claims Procedure.

(o)Standards for culturally and linguistically appropriate notices. A plan is considered to provide relevant notices in a “culturally and linguistically appropriate manner” if the plan meets all the requirements of paragraph (o)(1) of this section with respect to the applicable non-English languages described in paragraph (o)(2) of this section.

(1)Requirements.

(i) The plan must provide oral language services (such as a telephone customer assistance hotline) that include answering questions in any applicable non-English language and providing assistance with filing claims and appeals in any applicable non-English language;

(ii) The plan must provide, upon request, a notice in any applicable non-English language; and

(iii) The plan must include in the English versions of all notices, a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services provided by the plan.

(2)Applicable non-English language. With respect to an address in any United States county to which a notice is sent, a non-English language is an applicable non-English language if ten percent or more of the population residing in the county is literate only in the same non-English language, as determined in guidance published by the Secretary. 

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The newly revised ERISA claims procedures include requirements for plans to provide (1) culturally and linguistically appropriate oral language services, (2) notices in any applicable non-English language (upon request); and (3) statements in the English version of notices, written in the applicable non-English language, clearly indicating how to access the language services provided in the plan.  A non-English language is an applicable non-English language under the plan if the address to which a notice is sent is in a county in which ten percent or more of the population residing is literate only in that non-English language.

Presumably this revision is aimed at culturally and linguistically insular communities in the United States, as opposed to being aimed at accommodating every plan participant who happens to have English as a second language or who happens to be non-English speaking regardless of where she lives.  A non-English speaking person whose language is not an applicable language under the plan because her county does not fit the criteria set forth in the rule would presumably be allowed by the plan to use the oral language services available to those who speak her non-English language and live in a county which makes the language an applicable language under the plan.  But she would not have a right to obtain notices in her language.  Nor would a notice in her language informing her of these rights appear in the English version of notices she receives. 

One final note.  The Department of Labor in its Summary Information identifies, but does not directly address, the problem that could arise if the English and the applicable non-English language notices are conflicting.  Courts will have to decide which notice is the operative one for claims and litigation purposes.  This would be a problem analogous to cases in which the summary plan description differs from the plan itself, though it may be the case that not only the rules of the plan but also the reasoning in an adverse determination or the facts as set forth may differ in the English and applicable non-English versions of notices.   

 

Appellate Review Standard

“We review the district court’s grant of summary judgment de novo.”  http://media.ca1.uscourts.gov/pdf.opinions/14-1450P-01A.pdfDutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015)(citing) Cusson v. Liberty Life Assurance Co. of Bos., 592 F.3d 215, 223) (1st Cir. 2010).

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Discretionary Clauses

“Where, as here the administrator of an ERISA plan is imbued with discretion in the interpretation and application of plan provisions, its use of that discretion must be accorded deference.”  Colby v. Union Sec. Ins. Co. & Mgmt. Co. for Merrimack Anesthesia Assocs. Long Term Disability Plan, 705 F.3d 58, 61 (1st Cir. 2013).    “…the plan administrator’s determinations must be ‘reasoned and supported by substantial evidence.’”  Id. at 62 (citation omitted). 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Policy Exclusions or Limitations.

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Holding an insurer to its explanation for denying benefits articulated during its internal claims review process.

“In Glista, we held an insurer to its internal claims review process.”   Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015)(citing Glista v. Unum Life Insurance Co. of America, 378, F.3d 113, 132 (1st Cir. 2004). 

 

The court has a range of options available to it in such circumstances.  Glista v. Unum Life Insurance Co. of America, 378, F.3d 113, 116 (1st Cir. 2004). 

 

The court reasoned in Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015) that the insurer’s reliance on the limited conditions provision in the plan took place before there was any litigation and that plaintiff had adequate notice during the administration process, in declining to find the insurer’s use of the provision during litigation to be a post hoc rationalization.

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Burden of Proof Shifting for limitations period provisions.

The court did not have to decide whether to characterize such provisions as exclusions (which would presumably lead to burden shifting) or limitations (which presumably would not) because the insurer would prevail regardless.  Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015)

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Reimbursement Provisions in ERISA Disability Policies

Alesia v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981). New Jersey state law preempted allowing enforcement of plan language offsetting workers' compensation benefits from vested pension benefits. Not contrary to ERISA because vested benefits were not "forfeited" only the amount of the vested benefit was reduced. Case allowed broad pre-emption of a state law that prohibited offset of workers' compensation from vested pension benefits.

 

Massachusetts Mutual Life Insurance Company v. Russell, 473 U.S. 134 (1985).

 

Mertens v. Hewitt Associates, 508 U.S. 248 (1993). (Scalia)

 

Great-West Life &Annuity Insurance Company v. Knudsen, 534 U.S. 204 (2002). (Scalia). Plan attempted to enforce an equitable lien by obtaining a money judgment, however, the Defendants had never come into possession of a fund. The third party settlement went to the defendants' attorneys and to a restricted trust. (Claim and remedy were equitable therefore plan could not recover under section 502(a)(3)).  [502(a)(3) authorizes a civil action for other appropriate equitable relief.  Court says it must mean something less than all relief.  Says in Mertins it must refer to categories of relief typically available in equity.  Here the plan sought an amount of money owed from the participant but the participant’s settlement had gone into a trust.  Court said the plan was therefore seeking money owed which is an action at law.  Plan said it was seeking restitution.  Court said restitution actions can be at law or in equity.  Depends on the basis of the claim and the remedy sought.  Actions in which plaintiff cannot assert a right to possession of particular property are essentially viewed as actions at law for breach of contract.  But where money or property in defendant’s possession can be identified as belonging to plaintiff, the action is in equity.  What is sought is to restore to plaintiff the particular funds in defendant’s possession.  Since here the plan was seeking money to which they were contractually entitled, not some particular funds held by the participant, their claim was a law and therefore not available under 502(a)(3).

 

(Line of cases read by lower courts to preclude remedy under ERISA in situations where wrongful plan administration in violation of ERISA fiduciary obligations causes so-called extra-contractual damage such as physical harm, expense or other suffering. E.g., Bast v Prudential Ins. Corp. of Am., 150 F.3d 1003 (9th Cir. 1998). Holding ERISA section 502 (a)(3) prevents recovering damages as "appropriate equitable relief." Delay in approving medical treatment caused death.)

 

See, Langbein, What ERISA Means by "Equitable": The Supreme Court's Trail of Error in Russell, Mertens, and Great-West, 103 Columbia L. Rev. 1317 (2003).

 

Sereboff v. Mid Atlantic Medical Services, Inc. 547 U.S. 356, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006). Reimbursement claims by Heath-care benefit plans are analogous to enforcement of attorney lien claims, and the right to reimbursement attaches to settlement funds prior to distribution. Claims were equitable because the beneficiaries agreed to reimburse funds from third party settlement and funds were held in a separate account.  (Fund becomes a "thing"). The fund was an identifiable thing within the possession and control of the beneficiaries and not recoverable from "assets generally."  Court looks for an action typically available in equity, and to do that looks at both the basis and the remedy sought.  The problem with Great-West/Knudson – attempting to recover a sum of money instead of a specific fund, which made the remedy legal and not equitable – was not present here.  The bigger question was whether the basis for the claim was equitable.  The Court cited the equitable rule that a contract to convey a specific object even before it is acquired will make the contractor a trustee as soon as he gets title to the thing.  Here the plan terms specified a particular fund and a particular share thereof, so the plan could follow that into the hands of the participant.  The Court construed this to be an equitable lien by agreement, not a lien for equitable restitution (where defendant wrongly obtains the fund), and therefore strict tracing rules did not apply.  Court also addressed the participant’s argument that it should have equitable defenses arising from principles of subrogation.  The Court said since this action qualified as an equitable remedy because it was to enforce an equitable lien by agreement and not a subrogation lien, which is a lien impressed on moneys on the ground that they ought to go to the insurer, subrogation defenses did not apply.

 

CIGNA Corp. v. Amara, 563 U.S. 421 (2011).

 

 

 

US Airways, Inc. v. McCutchen, 569 U.S. ....., 133 S.Ct. 1537 (2013). (Kagan, Scalia dissenting). Inter-Alia, absent specific language in the plan, the plan pays its proportionate share of fees and costs. This is the "common fund" rule and is the default rule. This was another equitable lien by agreement enforced against a third party automobile accident injury settlement in which the Court held the make-whole doctrine not applicable and that the plan had a right to enforce its lien against the fund even though the amount was wholly inadequate to compensate for the injury.  The attorney took the third party settlement, took attorney fees and put the rest in escrow.  The suit sought a lien on the escrow money and the attorney fee amount ‘in the participant’s possession’ (which is weird b/c it was in the attorney’s possession).  The plan called for full reimbursement.  The Court said that this was an equitable lien by agreement just like in Sereboff, because in both cases they claimed specifically identifiable funds – a portion of the third party settlement.  The court skipped over the fact that the attorney funds were no longer identifiable and were never in the participants’ possession.  It went on to address equitable defenses of unjust enrichment (or double recovery) and the common fund doctrine which says an attorney who recovers a common fund for persons other than his client is entitled to a reasonable attorney fee from the fund as a whole.  In Sereboff the participant did not argue that although the relief was equitable it was not appropriate because it contravened principles like the make whole doctrine.  The Court explained that enforcing a lien by agreement arises from and carries out a contract’s provisions, and these equitable rules do not trump the agreement.  But in this case the plan was silent on the allocation of attorney’s fees, and in such a case the common-fund doctrine provides the best indication of the parties’ intent. 

 

Montile v. National Elevator, 577 U.S. __, (2016).  Thomas.  Montanile got a third party settlement for $500,000, the health plan had a subrogation provision, attorneys took $260,000, put the rest in escrow, negotiations broke down, they distributed it to the participant after a 14 day notice, plan sued to enforce an equitable lien.  Participant still had some of the settlement funds.  Held that the plan cannot enforce an equitable lien against participant’s general funds.  The lien was equitable but the remedy is not. The treatises re equity treatises establish that plaintiffs can enforce an equitable lien only against specifically identified funds that remain in defendant’s possession or against traceable items purchased with the fund.  All that plaintiff has here is a personal claim against the wrongdoer – an action at law.  So Montile differes from Sereboff in that the participant dissipated some of the funds.  In Sereboff the Court said strict tracing rules do not apply to liens by agreement.  But they were responding to an argument by the participant.  In Montile they seemed to hold that strict tracing rules do in fact apply to liens by agreement.  I think it’s clear that where the participant stipulates that there is an identifiable amount that is the fund or part of the fund, then it is.  It must be traced at least that far.  Montile holds that once comingled or dissipated it is general assets and cannot be subject to the lien.

 

 

 

Lyme Disease

“We need not and do not decide whether crhonic Lyme disease is a valid diagnosis in general, or as applied to Dutkewych specifically.”  Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015). 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

The Limited rights of Claimants in ERISA Claims According to the Department of Labor

In the Supplementary Information to the revision of the claims procedure regulations under the ERISA statute for employee benefit plans providing disability benefits, The Department of Labor noted the extremely limited rights of claimants to litigate denied claims.  The DOL pointed out that, under the ERISA statutes, as interpreted by the courts, “claims are often reviewed by a court under an abuse of discretion standard based on the administrative record.” 

Let’s break down this statement.  The first part of the statement is that when you get to federal court your claim will be ‘reviewed by a court.’  That’s curious.  Aren’t courts supposed to be where you get to prove your case at a trial?  Not so under ERISA law. You don’t get to have a trial.  You don’t get a jury.  You don’t get to depose witnesses or request that the insurer or self-insurer produce all relevant documents.  You don’t get to file motions, bring in experts and do all the things that have come to represent a full and fair trial.  You just get a review by a judge.

The second part of the statement is that the court will review the case ‘under an abuse of discretion standard.’  What that means in lay terms is that the judge can only overturn the insurer’s decision if it was ‘irrational,’ or is not supported by substantial evidence.  The judge must defer to the insurer’s decision unless you can show that it doesn’t have reasonable support based on the administrative record.  The judge does not get to determine whether the claimant is disabled or not.  She only gets to decide whether the adverse determination was reasonable.  Exactly why the system leaves so much power in the hands of insurers to review and decide the claims when they are the ones who must pay benefits on approved claims is hard to understand without taking a very pro-business view of the economy. 

The last part of the statement is that what the court is reviewing is ‘the administrative record.’  Generally, the documents provided by you during the appeal process, if any, along with the documents obtained or generated by the insurer or self-insurer, constitute the administrative record for your claim.  That record can only be supplemented under very narrow circumstances.  If you are not savvy enough to submit medical records, neuropsychological exams, FCE exams, sworn statements or anything else that a sophisticated lawyer might obtain and submit on your behalf, you are very unlikely to have enough evidence in the record to show that the insurer or self-insurer abused its discretion in denying your benefits. 

As you can imagine, with this system firmly in place the Department of Labor has limited power to add protections for claimants.  But in the next article we will review what they have done, or tried to do, with these new Regulations.

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

 

A Guide To The New ERISA Regulations In Effect As Of April 1, 2018

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. 

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.