New DOL ERISA Changes

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9
Metropolitan Life Ins. Co.
v.
Glenn,
554 U.S. 105
(2008) (insurance company plan administrator of an
ERISA long-term disability plan that both evaluates
and pays claims for the employer has a conflict of
interest that courts must consider in reviewing
denials of benefit claims).
10
80 FR 72014.
11
80 FR 72192 (Nov. 18, 2015).
Department to re-examine the disability
claims process. Specifically, in 2012,
the ERISA Advisory Council undertook
a study on issues relating to managing
disability in an environment of
individual responsibility. The Council
concluded based on the public input it
received that ‘‘[n]ot all results have been
positive for the participant under
ERISA-covered plans and the
implementing claim procedures
regulations, even though these rules
were intended to protect participants’’
and noted that ‘‘[t]he Council was made
aware of reoccurring issues and
administrative practices that
participants and beneficiaries face when
appealing a claim that may be
inconsistent with the existing
regulations.’’ The Advisory Council’s
report included the following
recommendation for the Department:
Review current claims regulations to
determine updates and modifications,
drawing upon analogous processes described
in health care regulations where appropriate,
for disability benefit claims including: (a)
Content for denials of such claims; (b) rule
regarding full and fair review, addressing
what is an adequate opportunity to develop
the record and address retroactive rescission
of an approved benefit; (c) alternatives that
would resolve any conflict between the
administrative claims and appeals process
and the participants’ ability to timely bring
suit; (d) the applicability of the ERISA claim
procedures to offsets and eligibility
determinations.
2012 ERISA Advisory Council Report,
Managing Disability Risks in an
Environment of Individual
Responsibility,
available at
www.dol.gov/sites/default/files/ebsa/
about-ebsa/about-us/erisa-advisory-
council/2012ACreport2.pdf.
The Department agreed that the
amendments to the claims regulation for
group health plans could serve as an
appropriate model for improvements to
the claims process for disability claims.
Those amendments aimed to ensure full
and fair consideration of health benefit
claims by giving claimants ready access
to the relevant evidence and standards;
ensuring the impartiality of persons
involved in benefit determinations;
giving claimants notice and a fair
opportunity to respond to the evidence,
rationales, and guidelines for decision;
and making sure that the bases for
decisions are fully and fairly
communicated to the claimant. In the
Department’s view, these basic
safeguards are just as necessary for a full
and fair process in the disability context
as in the health context. Moreover, as in
the group health plan context, disability
claims are often reviewed by a court
under an abuse of discretion standard
based on the administrative record.
Because the claimant may have limited
opportunities to supplement the record,
the Department concluded that it is
particularly important that the claimant
be given a full opportunity to develop
the record that will serve as the basis for
review and to respond to the evidence,
rationales, and guidelines relevant to
the decision.
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.
9
In light of these concerns, the
Department concluded that
enhancements in procedural safeguards
and protections similar to those
required for group health plans under
the Affordable Care Act were as
important, if not more important, in the
case of claims for disability benefits.
The Department decided to start by
proposing to amend the current
standards applicable to the processing
of claims and appeals for disability
benefits so that they included
improvements to certain basic
procedural protections in the current
Section 503 Regulation, many of which
already apply to ERISA-covered group
health plans pursuant to the
Department’s regulations implementing
the requirements of the Affordable Care
Act.
On November 18, 2015, the
Department published in the
Federal
Register
a proposed rule revising the
claims procedure regulations for plans
providing disability benefits under
ERISA.
10
The Department received 145
public comments in response to the
proposed rule from plan participants,
consumer groups representing disability
benefit claimants, employer groups,
individual insurers and trade groups
representing disability insurance
providers. The comments were posted
on the Department’s Web site at
www.dol.gov/agencies/ebsa/laws-and-
regulations/rules-and-regulations/
public-comments/1210-AB39.
After
careful consideration of the issues
raised by the written public comments,
the Department decided to adopt the
improvements in procedural protections
and other safeguards largely as set forth
in the November 2015 proposal. The
Department revised some of the
requirements in response to public
comments as part of its overall effort to
strike a balance between improving a
claimant’s reasonable opportunity to
pursue a full and fair review and the
attendant costs and administrative
burdens on plans providing disability
benefits.
The Department believes that this
action is necessary to ensure that
disability claimants receive a full and
fair review of their claims, as required
by ERISA section 503, under the more
stringent procedural protections that
Congress established for group health
care claimants under the ACA and the
Department’s implementing regulation
at 29 CFR 2590.715–2719 (‘‘ACA Claims
and Appeals Final Rule’’).
11
This final
rule will promote fairness and accuracy
in the claims review process and protect
participants and beneficiaries in ERISA-
covered disability plans by ensuring
they receive benefits that otherwise
might have been denied by plan
administrators in the absence of the
fuller protections provided by this final
regulation. The final rule also will help
alleviate the financial and emotional
hardship suffered by many individuals
when they are unable to work after
becoming disabled and their claims are
denied.
II. Overview of Final Rule
A. Comments on Overall Need To
Improve Claims Procedure Rules for
Disability Benefits
Numerous disabled claimants and
their representatives submitted
comments stating general support for
the proposed rule. For example, some
commenters described the proposal as
reinforcing the integrity of disability
benefit plan administration and
markedly improving the claims process
by strengthening notice and disclosure
protections, prescribing more exacting
standards of conduct for review of
denied claims, ensuring claimants’ more
effective access to the claims process,
and providing safeguards to ensure full
court review of adverse benefit
determinations. Some commenters
supported the proposed amendments as
‘‘good first steps’’ towards providing
more transparency and accountability,
but advocated additional steps to
strengthen, improve, and update the
current rules. Some commenters
emphasized that disability and lost
earnings impose severe hardship on
many individuals, arguing that
disability claimants have a ‘‘poor’’
prospect of fair review under the current
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While commenters contended that disability
claim files are larger than health benefit claim files,
in the Department’s view, this is not a reason for
denying claimants the same procedural protections
and safeguards that the ACA provided for group
health benefit claims. Furthermore, in the 2000
claims regulation, the Department already
accommodated differences between health and
disability claims by allowing more time for
decisions on disability claims. See 29 CFR
2560.503–1(f)(2)(iii)(B) (up to 30 days after receipt
of claim with up to 15 days for an extension for
post-service health claims); id. § 2560.503–1(f)(3)
(up to 45 days after receipt of claim with two
possible 30-day extensions for disability claims).
regulation primarily because of the
economic incentive for insurance
companies to deny otherwise valid
claims and because plans are often able
to secure a deferential standard of
review in court.
Commenters, primarily disability
insurers and benefit providers,
commented that the disability claims
regulation should not mirror Affordable
Care Act requirements because unlike
disability claims: (i) The vast majority of
medical claims are determined
electronically with little or no human
involvement,
i.e.,
no reviewers studying
materials and consulting with varied
professionals; (ii) medical claims
typically involve only a limited
treatment over a relatively short period
of time, whereas disability claims
require a series of determinations over
a period of several years; (iii) medical
claims rarely involve a need to consult
with outside professionals; (iv) medical
claims involve an isolated issue,
whereas disability claims involve a
more complex, multi-layered analysis;
and (v) medical claim files may consist
of only a few pages of materials,
whereas disability claim files can
consist of hundreds, sometimes
thousands of pages of information. As a
result of these factors, the commenters
stressed that it can take significant time
to review and render a decision. Some
of those commenters argued that
applying ACA protections to disability
benefit claims was contrary to
Congressional intent because disability
plans were not subject to the ACA’s
group health plan provisions. Some
claimed that the proposed rules in their
current form will have unintended
consequences (undue delay and
increased costs and litigation), and will
result in expenses and burdens that will
increase the cost of coverage and
discourage employers from sponsoring
disability benefit plans. Finally, some
claimed that the increased protections
and transparency that would be
required under the proposal would
weaken protection against disability
fraud and were unnecessary because the
current regulations provide ample
protections for claimants, are written to
benefit the insured, and have worked
well for more than a decade as
evidenced by the asserted fact that the
vast majority of disability claims
incurred by insurers are paid, and, of
the claims denied, only a very small
percentage are ultimately litigated.
Some argued that technological
advances that have expedited
processing of health care claims do not
apply to disability claims adjudication,
contended that the Department had not
properly quantified or qualified the
benefits associated with the proposed
regulations or provided a sufficient cost
analysis associated with the proposed
regulations, and commented that the
Department should withdraw the
proposal until better data is collected.
After careful consideration of the
issues raised by the written comments,
the Department does not agree with the
commenters’ assertion that the ACA
changes for group health plans are not
an appropriate model for improving
claims procedures for disability
benefits. The enactment of the ACA, and
the issuance of the implementing
regulations, has resulted in disability
benefit claimants receiving fewer
procedural protections than group
health plan participants even though
litigation regarding disability benefit
claims is prevalent today. As noted
above, the Department’s Section 503
Regulation imposes more stringent
procedural protections on claims for
group health and disability benefits than
on claims for other types of benefits.
The Department believes that disability
benefit claimants should continue to
receive procedural protections similar to
those that apply to group health plans,
and that it makes sense to model the
final rule on the procedural protections
and consumer safeguards that Congress
and the President established for group
health care claimants under the ACA.
These protections and safeguards will
allow some participants to receive
benefits that might have been
incorrectly denied in the absence of the
fuller protections provided by the
regulation. It will also help alleviate the
financial and emotional hardship
suffered by many individuals when they
lose earnings due to their becoming
disabled.
Moreover, the Department carefully
selected among the ACA amendments to
the claims procedures for group health
plans, and incorporated into the
proposal only certain of the basic
improvements in procedural protections
and consumer safeguards. The proposal,
and final rule, also include several
adjustments to the ACA requirements to
account for the different features and
characteristics of disability benefit
claims.
The Department agrees with the
commenters who supported the
proposed changes who emphasized that
disability and lost earnings impose
severe hardship on many individuals.
Under those circumstances, and
considering the judicially recognized
economic incentive for insurance
companies to deny otherwise valid
claims, the Department views
enhancements in procedural safeguards
and protections similar to those
required for group health plans under
the Affordable Care Act as being just as
important, if not more important, in the
case of claims for disability benefits.
This view was supported by the
assertions by some plans and disability
insurance providers that disability
claims processing involves more human
involvement, with reviewers studying
pages of materials and consulting with
varied professionals on claims that
involve a more complex, multi-layered
analysis. Even assuming the
characteristics cited by the commenter
fairly describe a percentage of processed
disability claims, the Department does
not believe those characteristics support
a decision to treat the processing of
disability benefits more leniently than
group health benefits. The Department
believes there is potential for error and
opportunity for the insurer’s conflict of
interest to inappropriately influence a
benefit determination under highly
automated claims processing, as well as
claims processing with more human
involvement.
12
Increased transparency
and accountability in all claims
processes is important if claimants of
disability benefits are to have a
reasonable opportunity to pursue a full
and fair review of a benefit denial, as
required by ERISA section 503. Also,
and as more fully discussed in the
Regulatory Impact Analysis section of
this document, the Department does not
agree that the adoption of these basic
procedural protections will cause
excessive increases in costs and
litigation, or result in expenses and
burdens that will discourage employers
from sponsoring plans providing
disability benefits. In fact, comments
from some industry groups support the
conclusion that the protections adopted
in the final rule reflect best practices
that many insurers and benefit
providers already follow on a voluntary
basis.
Thus, while the Department has made
some changes and clarifications in
response to comments, the final rule,
described below, is substantially the
same as the proposal. Specifically, the
major provisions in the final rule
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require that: (1) Claims and appeals
must be adjudicated in a manner
designed to ensure independence and
impartiality of the persons involved in
making the benefit determination; (2)
benefit denial notices must contain a
complete discussion of why the plan
denied the claim and the standards
applied in reaching the decision,
including the basis for disagreeing with
the views of health care professionals,
vocational professionals, or with
disability benefit determinations by the
Social Security Administration (SSA);
(3) claimants must be given timely
notice of their right to access to their
entire claim file and other relevant
documents and be guaranteed the right
to present evidence and testimony in
support of their claim during the review
process; (4) claimants must be given
notice and a fair opportunity to respond
before denials at the appeals stage are
based on new or additional evidence or
rationales; (5) plans cannot prohibit a
claimant from seeking court review of a
claim denial based on a failure to
exhaust administrative remedies under
the plan if the plan failed to comply
with the claims procedure requirements
unless the violation was the result of a
minor error; (6) certain rescissions of
coverage are to be treated as adverse
benefit determinations triggering the
plan’s appeals procedures; and (7)
required notices and disclosures issued
under the claims procedure regulation
must be written in a culturally and
linguistically appropriate manner.
B. Comments on Major Provisions of
Final Rule
1. Independence and Impartiality—
Avoiding Conflicts of Interest
Consistent with the ACA Claims and
Appeals Final Rule governing group
health plans, paragraph (b)(7) of this
final rule explicitly provides that plans
providing disability benefits ‘‘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.’’ Therefore, 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. For example, a plan cannot
provide bonuses based on the number of
denials made by a claims adjudicator.
Similarly, a plan cannot contract with a
medical expert based on the expert’s
reputation for outcomes in contested
cases, rather than based on the expert’s
professional qualifications. These added
criteria for disability benefit claims
address practices and behavior which
cannot be reconciled with the ‘‘full and
fair review’’ guarantee in section 503 of
ERISA, and with the basic fiduciary
standards that must be followed in
implementing the plan’s claims
procedures. For the reasons described
below, paragraph (b)(7) of the final rule
therefore remains largely unchanged
from the proposal.
The Department received numerous
comments either generally supporting or
not objecting to the idea that the
independence and impartiality
requirements for claims procedures for
disability claims should be consistent
with the ACA’s claims procedures
requirements for group health plans.
Several commenters pointed out that
even prior to the proposal, many
disability plans had already taken
affirmative steps to ensure the
independence and impartiality of the
persons involved in the decision-
making process. Other commenters who
opposed the provision as unnecessary
similarly cited the fact that the proposed
amendments reflect current industry
practice and argued that issues
regarding the independence and
impartiality of the appeal process is
already the subject of the well-
developed body of case law. Although
the Department agrees that the proposal
was intended to be consistent with
industry best practice trends and
developing case law in the area, the
Department does not believe that
industry trends or court decisions are an
acceptable substitute for including these
provisions in a generally applicable
regulation.
Several commenters suggested that
the examples of individuals covered by
this provision should include vocational
experts. The commenters pointed out
that vocational experts are often actively
involved in the decision-making process
for disability claims and play a role in
the claims process similar to the role of
a medical or health care professional.
They noted that opinions of vocational
experts are often relied on in making
determinations on eligibility for and the
amount of disability benefits. Although
the list in the proposed provision was
intended to merely reflect examples, not
be an exhaustive list, the Department
nonetheless agrees that it would be
appropriate to add vocational experts to
avoid disputes regarding their status
under this provision of the final rule.
This clarification of the provision from
its proposed form is also consistent with
the current regulation’s express
acknowledgement of the important role
of vocational experts in the disability
claims process. Specifically, paragraph
(h)(3)(iv) of the current regulation
already requires that the claims
procedure for disability benefit claims
must 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. Accordingly, the final
rule adds ‘‘vocational expert’’ to the
examples of persons involved in the
decision-making process who must be
insulated from the plan’s or issuer’s
conflicts of interest. Decisions regarding
hiring, compensation, termination,
promotion, or other similar matters
must not be based upon the likelihood
that the individual will support the
denial of benefits.
Commenters also asked the
Department to clarify whether
‘‘consulting experts’’ are ‘‘involved in
making the decision’’ for purposes of
the independence and impartiality
requirements. Some commenters were
concerned that consulting experts
would fall outside of these requirements
because plans or claims administrators
might assert that consulting experts
merely supply information and do not
decide claims. In the Department’s
view, the text of paragraph (b)(7) is clear
that the independence and impartiality
requirements are not limited to persons
responsible for making the decision. For
example, paragraph (b)(7) of the final
rule, as in the proposal, refers to a
‘‘medical expert’’ as an example of a
person covered by the provision. The
text also refers to individuals who may
‘‘support the denial of benefits.’’ Thus,
in the Department’s view, the
independence and impartiality
requirements apply to plans’ decisions
regarding hiring, compensation,
termination, promotion, or other similar
matters with respect to consulting
experts. Although some commenters
suggested that the Department expand
the regulatory text to expressly include
‘‘consulting experts,’’ in the
Department’s view, the regulatory text is
sufficiently clear to address
commenters’ concerns especially with
the inclusion of ‘‘vocational experts’’ in
this provision of the final rule as
described above. The Department also
believes that it should avoid creating
differences in the text of parallel
provisions in the rules for group health
benefits under the ACA Claims and
Appeals Final Rule and disability
benefits absent a reason that addresses
a specific issue for disability claims
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For example, the Department noted in the
preamble to the proposed rule the fact that several
federal courts concluded that a failure to provide
a discussion of the decision or the specific criteria
relied upon in making the adverse benefit
determination could make a claim denial arbitrary
and capricious.
(like the vocational expert issue
discussed above).
Several commenters asked the
Department to clarify that the
independence and impartiality
requirements apply even where the plan
does not directly hire or compensate the
individuals ‘‘involved in making the
decision’’ on a claim. The text of the
rule does not limit its scope to
individuals that the plan directly hires.
Rather, the rule’s coverage extends to
individuals hired or compensated by
third parties engaged by the plan with
respect to claims. Thus, for example, if
a plan’s service provider is responsible
for hiring, compensating, terminating, or
promoting an individual involved in
making a decision, this final rule
requires the plan to take steps (
e.g.,
in
the terms of its service contract and
ongoing monitoring) to ensure that the
service provider’s policies, practices,
and decisions regarding hiring,
compensating, terminating, or
promoting covered individuals are not
based upon the likelihood that the
individual will support the denial of
benefits.
One commenter, who supported
applying independence and impartiality
requirements, expressed concern about
a statement in the preamble to the
proposed rule that a plan cannot
contract with a medical expert based on
the expert’s reputation for outcomes in
contested cases rather than based on the
expert’s professional qualifications. The
commenter did not object to the
prohibition on hiring a medical expert
based on a reputation for denying
claims, but expressed concern that the
statement in the preamble might result
in claimants requesting statistics and
other information on cases in which the
medical expert expressed opinions in
support of denying rather than granting
a disability benefit claims. Another
commenter who opposed the provision
also expressed concern about court
litigation and discovery regarding
‘‘reputation’’ issues arising from the text
in the preamble. In the Department’s
view, the preamble statement accurately
describes one way that the
independence and impartiality standard
could be violated. That said, the
independence and impartiality
requirements in the rule do not modify
the scope of ‘‘relevant documents’’
subject to the disclosure requirements in
paragraphs (g)(1(vii)(C) and (h)(2)(iii) of
the Section 503 Regulation, as amended
by this rule. Nor do the independence
and impartiality requirements in the
rule prescribe limits on the extent to
which information about consulting
experts would be discoverable in a court
proceeding as part of an evaluation of
the extent to which the claims
administrator or insurer was acting
under a conflict of interest that should
be considered in evaluating an adverse
benefit determination.
Several commenters urged the
Department to implement the
independence and impartiality
requirements with specific quantifiable
limitations on the relationship between
plans and consultants. For example, one
commenter suggested a medical
consultant be required to certify that no
more than 20% of the consultant’s
income is derived from reviewing files
for insurance companies and/or self-
funded disability benefit plans. Several
commenters recommended that plans be
required to disclose to claimants a range
of quantifiable information regarding its
relationship with certain consultants
(
e.g.,
number of times a plan has relied
upon the third-party vendor who hired
the expert in the past year). A few
commenters suggested that the
Department establish rules on the
qualifications, credentials, or licensing
of an expert and the nature and type of
such expert’s professional practice. For
example, one commenter suggested that
the rule provide that when a fiduciary
relies on a physician or psychologist or
other professional, such as a vocational
specialist, the person must be licensed
in the same jurisdiction where the plan
beneficiary resides. Although the
Department agrees that more specific
quantifiable or other standards relating
to the nature and type of an expert’s
professional practice might provide
additional protections against conflicts
of interest, the parallel provisions in the
claims procedure rule for group health
plans under the ACA Claims and
Appeals Final Rule do not contain such
provisions. Moreover, an attempt to
establish specific measures or other
standards would benefit from a further
proposal and public input. Accordingly,
the final rule does not adopt the
commenters’ suggestions.
2. Improvements to Disclosure
Requirements
The Department proposed to improve
the disclosure requirements for
disability benefit claims in three
respects. First, the proposal included a
provision that expressly required
adverse benefit determinations on
disability benefit claims to contain a
‘‘discussion of the decision,’’ including
the basis for disagreeing with any
disability determination by the SSA or
other third party disability payer, or any
views of health care professionals
treating a claimant to the extent the
determination or views were presented
by the claimant to the plan. Second,
notices of adverse benefit
determinations must contain the
internal rules, guidelines, protocols,
standards or other similar criteria of the
plan that were relied upon in denying
the claim (or a statement that such
criteria do not exist). Third, consistent
with the current rule applicable to
notices of adverse benefit
determinations at the review stage, a
notice of adverse benefit determination
at the initial claims stage must contain
a statement that the claimant is entitled
to receive, upon request, relevant
documents.
In the Department’s view, the existing
claims procedure regulation for
disability claims already imposes a
requirement that denial notices include
a reasoned explanation for the denial.
13
For example, the rule requires that the
notice must be written in a manner
calculated to be understood by the
claimant, must include any specific
reasons for the adverse determination,
must reference the specific provision in
governing plan documents on which the
determination is based, must include a
description of any additional
information required to perfect the
claim, must include a description of the
internal appeal process, and must
include the plan’s rules, if any, that
were used in denying the claim (or a
statement that such rules are available
upon request).
The Department’s experience in
enforcing the claims procedure
requirements and its review of litigation
activity, however, leads it to conclude
that some plans are providing disability
claim notices that are not consistent
with the letter or spirit of the Section
503 Regulation. Accordingly, the
Department believes that expressly
setting forth additional requirements in
the regulation, even if some may already
apply under the current rule, is an
appropriate way of reinforcing the need
for plan fiduciaries to administer the
plan’s claims procedure in a way that is
transparent and that encourages an
appropriate dialogue between a
claimant and the plan regarding adverse
benefit determinations that ERISA and
the current claims procedure regulation
contemplate.
Commenters generally either
supported or did not object to the
requirement to explain a disagreement
with a treating health care professional
in adverse benefit determinations. The
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Department, accordingly, is adopting
this provision from the proposal. 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 views. Several
commenters suggested, similar to their
comments described above on the need
to subject vocational experts to the
independence and impartiality
requirements, that this disclosure
provision should also apply to
vocational professionals. As noted
above, the commenters pointed out that
vocational experts have a role somewhat
similar to the role of a medical or health
care professional in the claims
determination process. The Department
agrees, and, accordingly, added
‘‘vocational professional’’ to this
provision.
An issue raised in the comments
related to whether the plan is required
to address only third party views
presented to the plan by the claimant.
The concern was that plans may not
know whether other third party views
even exist so that any requirement to
address third party views should be
limited to third party findings where
they are presented by the claimant.
Although the Department does not
believe it would be appropriate to
require plans to address views that they
were not aware of and had no obligation
to discover, the Department’s
consideration of this comment led it to
conclude that the provision needed to
be revised to include medical or
vocational experts whose advice was
obtained on behalf of the plan in
connection with a claimant’s adverse
benefit determination. The Department’s
experience enforcing the current
regulation has revealed circumstances
where claims adjudicators may consult
several experts and deny a claim based
on the view of one expert when advice
from other experts who were consulted
supported a decision to grant the claim.
Some of these cases may have involved
intentional ‘‘expert shopping.’’
Requiring plans to explain the basis for
disagreeing with experts whose advice
the plan sought would not present the
problem raised in the comments of
addressing third party views the plan
does not know even exist, but it would
be consistent with and enhance the
requirement in paragraph (h)(3)(iv) of
the current regulation which already
requires that the claims procedure for
disability benefit claims must 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. In
fact, the Department believes that a
request for relevant documents under
the current regulation would require the
plan to disclose materials related to
such a consultation. The plan would
also be required under the current
regulation to explain its basis for not
adopting views of an expert the plan
consulted who supported granting the
claim if the claimant raised the expert’s
views as part of an appeal of an adverse
benefit determination. In the
Department’s view, this is not a new
substantive element of the requirement
that plans explain the reasons for a
denial, but rather is a process
enhancement that removes unnecessary
procedural steps for claimants to get an
explanation of the reasons the plan
disagrees with the views of its own
consulting experts.
Accordingly, the final rule revises
paragraphs (g)(1)(vii)(A) and (j)(6)(i) to
require that adverse benefit
determinations on disability benefit
claims contain a discussion of the basis
for disagreeing with the views of health
care professionals who treated the
claimant or vocational professionals
who evaluated the claimant, when the
claimant presents those views to the
plan. The final rule also revises
paragraphs (g)(1)(vii)(A) and (j)(6)(i) to
clarify that adverse benefit
determinations on disability benefit
claims must contain a discussion of the
basis for disagreeing with 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.
One commenter suggested that
references to the ‘‘views’’ of treating
health care professionals is very broad
and that it is not clear what is intended
to be covered by this reference. The
commenter argued that ‘‘views’’ is not
synonymous with an opinion or
conclusion about whether a claimant is
disabled, and that, in many cases, health
care professionals do not provide an
opinion on the claimant’s disability at
all, and if they do, they are not
providing an opinion on disability as
defined by the plan. Another
commenter asserted that a health care
professional’s focus is on the patient’s
diagnosis and treatment and that the
claims adjudicator considers the long-
term effect of the individual’s condition
on their ability to work. These
commenters argued that claims
adjudicators are not necessarily agreeing
or disagreeing with medical findings by
a treating health care provider, rather
they are considering if the claimant’s
disease or illness significantly impairs
their work skills. The commenters said
that to require a plan to discuss why it
did not agree with the views expressed
by a myriad of health care professionals
does nothing to help explain why a
claims administrator found that the
claimant was not disabled under the
terms of the plan.
The Department does not believe it is
appropriate to limit the scope of the
final rule to opinions or conclusions
about whether a claimant is disabled.
Medical and vocational professionals
provide views that may be important to
the ultimate determination of whether a
person is disabled. In the Department’s
view, to the extent the claims
adjudicator disagrees with foundational
information in denying a claim, the
claimant has a right to know that fact to
the same extent the claimant should be
made aware that the claims adjudicator
disagrees with an opinion from a
medical or vocational expert that the
claimant is disabled. Further, it is part
of the fiduciary role of the ERISA claims
adjudicator to weigh input from medical
and vocational experts in reaching a
conclusion on a benefit claim. When the
claims adjudicator acting in a fiduciary
capacity disagrees with the judgments of
medical and vocational professionals in
denying a claim, the claims adjudicator
as a matter of basic fiduciary
accountability should be able to identify
those circumstances and explain the
basis for that decision. The Department
also notes that the final rule requires
this explanation in cases where the plan
or claims adjudicator disagrees with the
views of the medical or vocational
expert. There is no disagreement to
explain if, as the commenter posed, a
treating health care consultant expresses
a view only on a diagnosis or treatment
which the plan fully accepts in
evaluating the question of whether the
claimant meets the definition of a
disability under the plan. Rather, in
such a case, the plan would be under
the same obligation that exists under the
current regulation to explain why it
reached the conclusion that the
diagnosed illness or treatment did not
impair the claimant’s work skills or
ability to work or otherwise failed to
satisfy the plan’s definition of disability.
In summary, the Department believes
that an explanation of the basis for
disagreement with the judgments of
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health care and vocational professionals
is required in order to be responsive to
the information submitted by the
claimant or developed during
evaluation of the claim, and is also
necessary for a reasoned explanation of
a denial.
With respect to the requirement to
explain the basis for disagreeing with or
not following disability determinations
by the SSA and other payers of
disability benefits, several commenters
who supported the requirement pointed
out that reviewing courts in evaluating
whether a plan’s adverse benefit
determination was arbitrary and
capricious have found an SSA
determination to award benefits to be a
factor that the plan fiduciary deciding a
benefit should consider. Courts have
criticized the failure to consider the
SSA determination, especially if a
plan’s administrator operates under a
conflict of interest and if the plan
requires or encourages claimants to
pursue SSA decisions in order to offset
any SSA award against the amount they
pay in disability benefits.
See, e.g.,
Montour
v.
Hartford Life and Accident
Ins. Co.,
588 F.3d 623, 637 (9th Cir.
2009) (‘‘failure to explain why it
reached a different conclusion than the
SSA is yet another factor to consider in
reviewing the administrator’s decision
for abuse of discretion, particularly
where, as here, a plan administrator
operating with a conflict of interest
requires a claimant to apply and then
benefits financially from the SSA’s
disability finding.’’);
Brown
v.
Hartford
Life Ins. Co.,
301 F. App’x 772, 776
(10th Cir. 2008) (insurer’s discussion
was ‘‘conclusory’’ and ‘‘provided no
specific discussion of how the rationale
for the SSA’s decision, or the evidence
the SSA considered, differed from its
own policy criteria or the medical
documentation it considered’’). Other
commenters, however, urged the
Department to remove the requirement
to discuss the basis for disagreeing with
the disability determinations of the SSA
or other payers of benefits. Those
commenters argued that it would not be
reasonable to require an ERISA plan
fiduciary to go outside the plan’s
governing document and make a
judgment about a disability
determination made by some other party
that is based upon another plan or
program’s definition of disability, which
may have entirely different or
inconsistent definitions of disability or
conditions. The commenters further
argued that the plan fiduciary might not
be able to get from the SSA or other
payer of benefits the documents, case
file or other information necessary even
to try to conduct such an evaluation.
Those commenters also requested that,
if such a requirement was to be
included in the final rule, then the rule
should allow plans to take into account
in the discussion of its decision the
extent to which the claimant provided
the plan, or gave the plan a way to
obtain, sufficient documentation from
the SSA or other third party to allow a
meaningful review of such third-party
findings.
The Department is persuaded that the
final rule should limit the category of
‘‘other payers of benefits’’ to disability
benefit determinations by the SSA. The
Department accepts for purposes of this
final rule that claims adjudicators
generally are trained to understand their
own plan or insurance policy
requirements and apply those standards
to claims in accordance with the
internal rules, guidelines, policies, and
procedures governing the plan. The
Department also agrees that a
determination that an individual is
entitled to benefits under another
employee benefit plan or other
insurance coverage may not be governed
by the same definitions or criteria, and
that it may be difficult for the
adjudicator to obtain a comprehensive
explanation of the determination or
relevant underlying information that
was relied on by the other payer in
making its determination.
The Department does not believe,
however, that those same difficulties are
involved in the case of SSA
determinations. SSA determinations
may include a written decision from an
ALJ, and the definitions and
presumptions are set forth in publicly
available regulations and SSA guidance.
Accordingly, the final rule revises
paragraphs (g)(1)(vii)(A) and (j)(6)(i) to
require that adverse benefit
determinations on disability benefit
claims contain a discussion of the basis
for disagreeing with an SSA disability
determination regarding the claimant
presented by the claimant to the plan.
Although the plan’s claims procedures
may place the burden on the claimant
to submit any SSA determination that
the claimant wants the plan to consider,
claims administrators working with an
apparently deficient administrative
record must inform claimants of the
alleged deficiency and provide them
with an opportunity to resolve the
stated problem by furnishing missing
information. It also would 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
would be necessary. Further, although
the final rule does not, as some
commenters requested, require that
plans defer to a favorable SSA
determination, a more detailed
justification would be required in a case
where the SSA definitions were
functionally equivalent to those under
the plan.
Several commenters requested that
the Department adopt a rule requiring
deference to a treating physician’s
opinion for disability determinations,
with some commenters suggesting a rule
identical to the one applied under the
SSA disability program. Nothing in
ERISA or the Department’s regulations
mandates that a plan administrator give
special weight to the opinions of a
claimant’s treating physician when
rendering a benefit determination. The
Department also does not believe the
public record on this rulemaking
supports the Department imposing such
a rule. In the Department’s view, a
treating physician rule is not necessary
to guard against arbitrary decision-
making by plan administrators. In
addition to the various improvements in
safeguards and procedural protections
being adopted as part of this final rule,
courts can review adverse benefit
determinations to determine whether
the claims adjudicator acted
unreasonably in disregarding evidence
of a claimant’s disability, including the
opinions of treating physicians. Nor
does the Department believe it would be
appropriate to adopt the treating
physician rule applicable under the
Social Security disability program. That
rule was adopted by the Commissioner
of Social Security in regulations issued
in 1991, to bring nationwide uniformity
to a vast statutory benefits program and
to address varying decisions by courts of
appeals addressing the question. ERISA,
by contrast, governs a broad range of
private benefit plans to which both the
statute and implementing regulations
issued by the Secretary of Labor permit
significant flexibility in the processing
of claims. Moreover, the SSA’s treating
physician rule has not been uniformly
or generally applied even under
statutory disability programs other than
Social Security.
See
Brief for the United
States as amicus curiae supporting
petitioner,
Black & Decker Disability
Plan
v.
Nord,
538 U.S. 822 (2003).
Under the current Section 503
Regulation, if a claim is denied based on
a medical necessity, experimental
treatment, or similar exclusion or limit,
the adverse benefit determination must
include 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
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14
The current Section 503 Regulation in
paragraph (j)(5)(iii) requires a statement concerning
voluntary dispute resolution options in notices of
adverse benefit determinations on review for both
group health and disability claims. The Department
previously issued an FAQ on that provision noting
that information on the specific voluntary appeal
procedures offered under the plan must be provided
under paragraph (j)(4) of the regulation in the notice
of adverse benefit determination, along with a
statement of the claimant’s right to bring a civil
action under section 502(a) of ERISA. The
Department, therefore, stated in the FAQ that,
pending further review, it will not seek to enforce
compliance with the requirements of paragraph
(j)(5)(iii).
See
FAQs About The Benefit Claims
Procedure Regulation, D–13 (
www.dol.gov/sites/
default/files/ebsa/about-ebsa/our-activities/
programs-and-initiatives/outreach-and-education/
hbec/CAGHDP.pdf
). In light of the fact that this
proposal was limited to disability benefit claims,
the Department does not believe it would be
appropriate to modify the requirement in paragraph
(j)(5)(iii) as part of this final rule. Accordingly, the
Department will continue the enforcement position
articulated in FAQ D–13.
explanation will be provided free of
charge upon request. These
requirements in paragraphs (g)(1)(v)(B)
and (j)(5)(ii) apply to notices of adverse
benefit determinations for both group
health and disability claims. In
proposing new paragraphs (g)(1)(vii)
and (j)(6) applicable to disability claims,
these requirements were intended to be
subsumed in the general requirement in
the proposal that adverse benefit
determinations include a ‘‘discussion of
the decision.’’ The Department is
concerned, however, that removing the
explicit requirement in the disability
claims procedure to explain a denial
based on medical necessity,
experimental treatment, or similar
exclusion may be misinterpreted by
some as eliminating that requirement
(especially with the group health plan
claims procedures continuing to have
that explicit requirement). That clearly
was not the Department’s intention,
and, accordingly, the final rule
expressly sets forth in paragraphs
(g)(1)(vii)(B) and (j)(6)(ii) the
requirement of an explanation of the
scientific or clinical judgment for such
denials.
14
The Department received numerous
comments in favor of the disclosure
requirement in paragraphs (g)(1)(vii)(B)
and (j)(6)(ii) of the proposal that notices
of adverse benefit determinations
include the internal rules, guidelines,
protocols, standards or other similar
criteria of the plan that were relied upon
in denying the claim (or a statement that
such criteria do not exist). Commenters
who supported the proposal noted that
the proposed requirement should not be
onerous given that adverse benefit
determinations are already required to
include the reasons for the denial and
the applicable plan terms, and also
argued that this further level of
transparency would promote the
dialogue between claimant and plan
regarding adverse benefit
determinations that ERISA
contemplates. These commenters also
pointed out that this requirement would
address a problem confronted by some
claimants where a plan or claims
adjudicator says it is relying on an
internal rule in denying a claim, and
then refuses to disclose it to the
claimant based on an assertion that the
internal rule is confidential or
proprietary. Commenters who opposed
the provision argued that the proposal
would be overly burdensome for plans
and insurers. They read the provision as
requiring disclosure of ‘‘details of
internal processes that are irrelevant to
the claim decision and that would
provide little in the way of useful
information to claimants.’’ The
comments included concerns about the
time and cost to review claims manuals
and other internal documents that may
include rules, guidelines, protocols,
standards or other similar criteria to
determine that no provision has any
application to a claim in order to make
the statement that such internal rules,
etc.
do not exist.
The final rule, like the proposal,
provides that internal rules, guidelines,
protocols, standards or other similar
criteria of the plan relied upon in
making an adverse benefit
determination must be provided with
the adverse benefit determination. The
Department does not agree with
commenters who asserted that the
requirement will be overly burdensome
to plans. Even under the existing claims
procedure regulation, internal rules,
guidelines, protocols, standards or
similar criteria relied upon in denying
the claim already must be provided to
the claimant upon request. Although the
additional requirement to affirmatively
include them in the adverse benefit
determination adds an incremental
paperwork burden, where a plan utilizes
a specific internal rule or protocol,
understanding the terms of the specific
protocol may be crucial to a claimant’s
ability to successfully contest the denial
on review. With respect to the
comments about disclosing an internal
process that is irrelevant to the claim
decision, it is hard to see how
something that is in fact ‘‘irrelevant’’
can be something that was ‘‘relied
upon’’ in denying the claim.
Furthermore, the Department does not
agree that it should change the proposed
text based on expressed concerns about
the time and cost to review claims
manuals and other internal documents
to determine that nothing in those
materials have application to a claim.
Aside from the fact that this provision
of the final rule requires the plan to
affirmatively include only rules,
guidelines, protocols, standards or other
similar criteria that were relied on in
denying the claim, in the Department’s
view, it 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,
guideline, protocol or standard that was
intended to govern the determination of
the claim. Moreover, the current Section
503 regulation for disability plans gives
claimants the right to reasonable access
to and copies of documents, records,
and other information ‘‘relevant’’ to the
claimant’s claim for benefits. In addition
to capturing documents, records, and
other information ‘‘relied upon’’ in
making the benefit determination, the
definition of ‘‘relevant’’ also captures
information submitted, considered or
generated in the course of making the
benefit determination or that
demonstrates compliance with the
administrative processes and safeguards
designed to ensure and verify that
benefit claim determinations have been
made in accordance with governing
plan documents and that those
provisions have been applied
consistently with respect to similarly
situated claimants. In the case of plans
providing group health or disability
benefits, ‘‘relevant’’ also includes
documents, records, or other
information that constitutes a statement
of policy or guidance with respect to the
plan concerning the denied treatment
option or benefit, without regard to
whether such advice or statement was
relied upon in making the benefit
determination. Such a statement of
policy or guidance would include any
policy or guidance generated or
commissioned by the plan or issuer
concerning the denied benefit that
would or should contribute to deciding
generally whether to pay the claim (
e.g.,
studies, surveys or assessments
generated or commissioned by the plan
or issuer that implicate a denied
treatment option or benefit but do not
relate specifically to the plan itself).
Thus, in the Department’s view, even
under the current rule, plans would be
required, on request, to verify that the
plan has produced all the internal rules,
guidelines, protocols, standards or other
similar criteria concerning the denied
claim that were or should have been
considered in deciding the claim.
Another commenter argued that it did
not make sense to require plans to
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15
FAQ C–17 states: ‘‘It is the view of the
department that where a rule, guideline, protocol,
or similar criterion serves as a basis for making a
benefit determination, either at the initial level or
upon review, the rule, guideline, protocol, or
criterion must be set forth in the notice of adverse
benefit determination or, following disclosure of
reliance and availability, provided to the claimant
upon request. However, the underlying data or
information used to develop any such rule,
guideline, protocol, or similar criterion would not
be required to be provided in order to satisfy this
requirement. The department also has taken the
position that internal rules, guidelines, protocols, or
similar criteria would constitute instruments under
which a plan is established or operated within the
meaning of section 104(b)(4) of ERISA and, as such,
must be disclosed to participants and beneficiaries.
See § § 2560.503–1(g)(v) (A) and (j)(5)(i); 65 FR at
70251. Also see § § 2560.503–1(h)(2)(iii) and
2560.503–1(m)(8)(i); Advisory Opinion 96–14A
(July 31, 1996).
16
As a practical matter, these requirements to
provide claimants with evidence or rationales that
were relied on or used as a basis for an adverse
benefit determination largely conforms the rule to
the existing process by which benefits claims
should be handled in such cases.
E.g., Saffon
v.
Wells Fargo & Co. Long Term Disability Plan,
511
F.3d 1206, 1215 (9th Cir. 2008) (finding that a full
and fair review requires a plan administrator to
disclose the reasons for denial in the administrative
process); 75 FR at 43333 n.7 (noting the DOL’s
position that the existing claims procedure
regulation already requires plans to provide
claimants with new or additional evidence or
rationale upon request and an opportunity to
respond in certain circumstances).
17
See, e.g., Metzger
v.
Unum Life Ins. Co. of
America,
476 F.3d 1161, 1165–67 (10th Cir. 2007)
(holding that ‘‘subsection (h)(2)(iii) does not require
a plan administrator to provide a claimant with
access to the medical opinion reports of appeal-
level reviewers prior to a final decision on
appeal.’’).
Accord Glazer
v.
Reliance Standard Life
Ins. Co.,
524 F.3d 1241 (11th Cir. 2008);
Midgett
v.
Washington Group Int’l Long Term Disability Plan,
561 F.3d 887 (8th Cir. 2009).
affirmatively state in an adverse benefit
determination that plans did not rely on
any rule or guideline. They argued that,
if the adverse benefit determination
failed to cite reliance on such a rule or
guideline, the claimant could ask and
the plan would respond with a
statement that none were relied on.
They argued that such a process gives
the claimant the ability to obtain that
information in cases where the claimant
believes that information is important to
understanding or contesting the basis
for the denial. It is the Department’s
view, however, that an affirmative
statement would be helpful to the
claimant by providing certainty about
the existence of any applicable rule or
guideline. The Department also does not
believe the absence of a statement of
reliance in an adverse benefit statement
fairly puts a claimant on notice to
request confirmation that no rule or
guideline was relied upon. Further, the
Department does not believe merely
requiring such an affirmative statement
is burdensome on plans because the
plan should know whether it relied on
a rule or guideline in denying a claim.
Finally, the existing Section 503
regulation already requires that rules,
guidelines, protocols, standards or other
similar criteria that were relied on in
denying the claim must be disclosed to
claimants on request. Nothing in the
current regulation allows a plan
fiduciary to decline to comply with that
requirement based on an assertion that
the information is proprietary or
confidential. Indeed, the Department
has taken the position that internal
rules, guidelines, protocols, or similar
criteria would constitute instruments
under which a plan is established or
operated within the meaning of section
104(b)(4) of ERISA and, as such, must be
disclosed to participants and
beneficiaries.
See
FAQs About The
Benefit Claims Procedure Regulation, C–
17 (
www.dol.gov/sites/default/files/
ebsa/about-ebsa/our-activities/
programs-and-initiatives/outreach-and-
education/hbec/CAGHDP.pdf
).
15
Similarly, this final rule does not permit
a plan to conceal such information from
the claimant under an assertion that the
information is proprietary or constitutes
confidential business information.
The third new disclosure
requirement, set forth in paragraph
(g)(1)(vii)(C) of the proposal, adds a
requirement that an adverse benefit
determination at the initial claims stage
must include a statement that the
claimant is entitled to receive, upon
request, documents relevant to the claim
for benefits. Although the current
Section 503 Regulation provides that
claimants challenging an initial denial
of a claim have a right to request
relevant documents, a statement
advising claimants of their right to
relevant documents currently is
required only in notices of an adverse
benefit determination on appeal. No
commenters objected to the addition of
this statement to the adverse benefit
determination at the initial claims stage.
The Department believes such a
statement in the initial denial notice
simply confirms rights claimants
already have under the current claims
regulation and will help ensure
claimants understand their right of
access to the information needed to
understand the reasons for the denial
and decide whether and how they may
challenge the denial on appeal.
Accordingly, this provision was adopted
without change in the final rule.
3. Right To Review and Respond to New
Information Before Final Decision
The Department continues to believe
that a full and fair review requires that
claimants have a right to review and
respond to new evidence or rationales
developed by the plan during the
pendency of the appeal and have the
opportunity to fully and fairly present
his or her case at the administrative
appeal level, as opposed merely to
having a right to review such
information on request only after the
claim has already been denied on
appeal. Accordingly, the final rule
adopts those provisions of the proposal
with certain modifications described
below.
Paragraph (h)(4) of the final rule,
consistent with the proposal, requires
that plans provide claimants, free of
charge, with 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) during the pendency of
the appeal in connection with the claim.
Consistent with the proposal, paragraph
(h)(4) also provides a similar disclosure
requirement for an adverse benefit
determination based on a new or
additional rationale. The evidence or
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 to give the
claimant a reasonable opportunity to
address the evidence or rationale prior
to that date. These requirements already
apply to claims involving group health
benefits under the ACA Claims and
Appeals Final Rule. Further, the
Department has interpreted ERISA
section 503 and the current Section 503
Regulation as already requiring that
plans provide claimants with new or
additional evidence or rationales upon
request and provide them an
opportunity to respond in at least
certain circumstances.
16
The objective of these provisions is to
ensure the claimant’s ability to obtain a
full and fair review of denied disability
claims by explicitly providing that
claimants have a right to review and
respond to new or additional evidence
or rationales developed by the plan
during the pendency of the appeal, as
opposed merely to having a right to
such information on request only after
the claim has already been denied on
appeal, as some courts have held under
the Section 503 Regulation. These
protections are direct imports from the
ACA Claims and Appeals Final Rule,
and they would correct procedural
problems evidenced in litigation even
predating the ACA.
17
It was and
continues to be the view of the
Department that claimants are deprived
of a full and fair review, as required by
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