Manuals

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.