2018 Changes to ERISA's Disability Claims Procedures: Increased Protections Against Abuse by Insurance Plans

New procedural requirements for administration of disability benefit claims governed by the Employee Retirement Income Security Act (“ERISA”) went into effect on April 1, 2018. These new regulations impose new standards on ERISA fiduciaries to assure fairness when evaluating disability claims.

Specifically, the new regulations include four significant changes, among others, regarding the adjudication of disability claims under ERISA.

  • Impartiality: Claims and appeals must be processed in a manner to assure independence and impartiality of the people making the benefit decisions and their physician reviewers, vocational experts and other consultants. For example, claims administrators and consultants cannot be hired or receive additional compensation based on the likelihood that such persons will support denial of a claim.
  • New Evidence: On appeal of an adverse benefit decision, claimants must be given timely notice of any new evidence “considered, relied upon, or generated” by the insurance company and an opportunity to respond before a final determination is issued.
  • Thorough Discussion of Rationale for Denying Claim: Adverse benefit determinations must contain a substantive explanation for the decision, including the basis for disagreeing with the opinions of treating health care providers, vocational professionals, and with disability benefit determinations by the Social Security Administration.
  • Limitations Periods: Adverse benefit decision letters must inform the claimant of the limitation periods for filing an administrative appeal and, in the case of an adverse determination on review, of the calendar date on which any applicable contractual limitations period for filing a lawsuit expires.

What happens if an insurance company fails to comply with the new regulations?

Normally, a claimant must exhaust the claim and appeals process before filing an action in court to challenge the denial of a claim for benefits. However, a claimant can immediately file a complaint in federal court if the disability insurer failed to establish or does not follow the claims processing rules. In addition, the plan will not receive the benefit of the deferential “arbitrary and capricious” standard of review of the claims administrator's decision which would otherwise apply under ERISA if the lawsuit had been brought following exhaustion of the plan’s (properly-followed) claims procedures.

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