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On December 19, 2016, the Secretary of Labor (DOL) announced amended final disability claims procedure regulations, effective April 1, 2018, for ERISA-covered plans. 29 C.F.R. § 2560.503-1. The DOL had set an original implementing date of January 1, 2018, but in December of 2017, DOL delayed the implementing date to April 1, 2018. The amended regulations clarify existing regulations and impose new standards on ERISA fiduciaries to assure fairness when evaluating disability claims.
The amended DOL regulations contain four significant changes, among several others, regarding the adjudication of the disability claims under ERISA.
- Impartiality. Claims and appeals must be determined in a manner to assure independence and impartiality of the persons making the benefit decisions and their consultants.
- New Evidence. On appeal of an adverse benefit determination, claimants must be given timely notice of any new evidence “considered, relied upon, or generated” by the entity making the benefit determination and an opportunity to respond before a final determination is rendered.
- Thorough Discussion of Grounds for Denying Claim. Adverse-benefit determinations must contain a substantive discussion for a decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, and with disability benefit determinations by the Social Security Administration.
- Limitations Periods. Adverse-benefit determination letters must inform the claimant of the limitation periods on filing administrative appeals, 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.
Point number two—New Evidence—was perhaps the most controversial amendment to the regulations, at least, from the perspective of insurance companies. The amended regulations do not define what constitutes “new evidence.” In the commentary period, opponents to the proposed amended regulation posited that “new evidence” might mean new facts, or it might mean a new medical opinion based on the same facts, or something in between. DOL declined to provide a definition, leaving it to the parties and the courts to sort it out. In addition, the opponents argued that giving the claimant the last word for commenting on “new evidence” would cause an endless loop of back-and-forth and never permitting the insurance company to render a final decision.
So, what has happened after April 1, 2018? Some insurance companies have modified their appeal procedures and now routinely turn over to claimants new reports from consultants and provide claimants with a reasonable time period to respond. These companies do not distinguish claims filed or appealed, before April 1, 2018. Other insurance companies, however, take the position that the April 1, 2018 amendments to the regulations apply only to claims first filed after April 1, 2018.
On March 25, 2019, a District Court in Connecticut confronted this dilemma with an adverse-benefit determination for a claim that arose and was denied on appeal to an insurance fiduciary before April 1, 2018. Hughes v. Hartford Life and Accident Insurance Co., —F.Supp.3d—, 2019 WL 1324947 (D. Conn.2019): The Court found that the prior version of the regulations applied to the claim at issue, but nonetheless held that the “full and fair review” guaranteed by ERISA required that the insurer provide the plaintiff an opportunity to respond to new evidence prior to issuing an adverse benefits determination on appeal. Id. at *5, 14.
Patricia Hughes, a registered nurse, worked at Children’s Healthcare of Atlanta. In 2011 she developed dizziness and balance challenges, and reported that she could not walk, drive or work due to Meniere’s Disease and other ailments. Ms. Hughes applied for disability benefits with Hartford Life and Accident Insurance Company (Hartford), which administers and insures the ERISA disability benefit plan of her employer.
Hartford approved her claim and paid her benefits based on the effective disability date in 2012. Hartford gathered other evidence and terminated her claim on October 6, 2016. She appealed on March 28, 2017. Hartford sent her for a medical examination with a physician that its vendor selected. That physician sent a report to Hartford on May 23, 2017. Ms. Hughes requested a copy of the report so she could respond before Hartford made a final determination. Hartford refused and denied her appeal. The lawsuit followed.
The Court framed the case:
This is an ERISA case about what it means for an insurance company to give a “full and fair” review of a claim for disability benefits. The defendant insurance company terminated plaintiff’s disability benefits, once on an initial review and then again after plaintiff filed for an internal appeal review. But while the internal appeal was pending, the insurance company hired a doctor to examine plaintiff, and the doctor then sent the insurance company a report of his findings. Despite plaintiff’s request, the insurance company did not give plaintiff a copy of the doctor’s report, much less allow plaintiff to respond to the report. The company then denied plaintiff’s appeal, while relying heavily on the doctor’s report to do so.
Id. at *1.
The court began its analysis asking: “Just what does it mean to have a full and fair review?” In answering the question, the court remarked that the process boiled-down to “‘knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of that evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision.’” (internal citations omitted). Id. at *5. In reaching this conclusion the court turned to the specificity of the regulations, which “creates three related rights for a claimant during the appeal process.” The court summarized the rights as: (1) a right to submit information to the plan for consideration on appeal; (b) a right of access to obtain information from the plan at the appeal stage relevant to the claim for benefits; (3) a right for the plan to consider the information submitted by the claimant at the appeal stage. Id. at *5-6.
The court concluded those rights together form “essential components of what the regulation defines to be a full and fair review” and the reasons a benefit plan or fiduciary must allow a claimant the right of access to a report of the physician and to respond to the physician’s report before the fiduciary makes a final determination. To hold otherwise, the Court reasoned, would make the regulations meaningless. “Full and fair review suggests a review that is thorough, comprehensive and transparent – not one in which a plan may order up a doctor’s report at the final hour and then deny the claimant access to this information until it is too late for the claimant to respond.” Id. at *9.
The court turned to an earlier opinion in which the Eighth Circuit had been offended by what amounted to sandbagging; in that case, the Court concluded that by not disclosing a report to the claimant, the insurer had failed to provide a full and fair review. Abram v. Cargill, Inc., 395 F.3d 882, 886 (8th Cir. 2005). The court addressed the cases which Hartford had cited where courts had ruled that similar reports did not need to be disclosed before making a final benefit determination: Midgett v. Wash. Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009); Glazer v. Reliance Standard Life Ins. Co., 524 F.3d 1241 (11th Cir. 2008); Metzger v. UNUM Life Ins. Co. of Am., 476 F.3d 1161 (10th Cir. 2007). Opposing those decisions, the court found a more recent opinion in the Ninth Circuit more persuasive under the general notion that sharing information fostered full and fair review. Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 680 (9th Cir. 2011).
The court concluded that decisions of the Eighth, Tenth and Eleventh Circuits were inconsistent with the plain text of the regulations. The court cited the Secretary of Labor’s position on the timely disclosure issue as expressed in amicus briefs and in the Federal Register’s announcement of proposed changes to the regulations in 2016. The Court reasoned that the DOL’s recent regulatory amendments were made, essentially, to clarify that the DOL had always considered it “the plan’s duty to disclose new evidence on appeal,” stating that the DOL revised the regulations “in order to make explicit its prior interpretation of the rule and to correct the errant court rulings that misconstrued it.” Hughes, 2019 WL 1324947 at *14. In the end, the court concluded that Hartford’s refusal to turn-over the physician’s report violated Hughes’ right to a full and fair review and remanded the case to Hartford for reconsideration. Hughes, 2019 WL 1324947 at *14.
This is one court’s very thoughtful opinion. We cannot expect final resolution of this issue until circuit courts decide it, or so much time passes that no pre-April 1, 2018 claims exist.
This analysis is from the American Bar Association article written by Jonathan M. Feigenbaum.