New ERISA Disability Claim Regulations – Part 3

Disability Insurance Benefits

New ERISA Disability Claim Regulations – Part 3

On April 1, 2018, a new disability claim regulation came into effect. The regulation was promulgated by the United States Department of Labor (referred to herein as “DOL”) under the authority of the Employee Retirement Income Security Act of 1974 (“ERISA”) and applies to all employee benefit plans that provide disability benefits.

This is the third in a series of nine blog posts that will summarize important features of the new regulation. The new regulation amended the existing regulation in the following eight areas:

1. Conflicts of interest involving claims adjudicators and medical and vocational consultants.
2. Additional disclosures required with denial notices.
3. Disclosure of plan criteria.
4. Requires notifications to be made in a “culturally and linguistically-appropriate manner.”
5. Disclosure of new evidence and new rationales prior to denial on review.
6. Disclosure of contractual limitations period deadline.
7. Enhanced remedy for a plan’s violation of the regulation.
8. Expansion of the definition of “adverse benefit determination.”

The last blog post discussed the provisions of the new regulation that are designed to insure the independence and impartiality of persons involved in making the claim decision, including the plan’s claims personnel and medical and vocational consultants. This week’s blog will discuss the second change to the regulation – the requirement that plans make additional disclosures in their denial letters.

I. Summary of the Changes to the 503 Regulation


B. Additional Disclosures Required with Notices of Denial

1. Disclosure of Basis of Disagreements with Providers, Consultants, and the Social Security Administration

a. The Rule

The Regulation provides that in the case of an adverse benefit determination, whether on the claim or an appeal, the notification must include a discussion of the basis for disagreeing with or not following the views of the claimant’s health care professionals and vocational consultants, the views of the plan’s medical or vocational consultants, and a disability determination made by the Social Security Administration. The plan must provide:

(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. DOL Comments

This amendment addresses a huge problem in ERISA disability cases – the plan’s medical experts and the plan itself almost never explain the basis for their rejection of the opinions of the claimant’s medical team. This is often a point of contention in litigation, and courts have criticized the plan’s medical consultants for failing to explain the basis of their disagreement with treating providers. See, e.g., Gorski v. ITT Long Term Disability Plan for Salaried Employees, 314 Fed. Appx. 540 (4th Cir. 2008) where the Court stated:

The problem with Dr. Soriano’s opinion is that Dr. Soriano never explained on what basis he doubted the veracity of Gorski, whom he had never examined. To the extent that he did not believe that Gorski’s physical problems would cause the intense pain of which she complained, he never revealed why he rejected the view of the other doctors that dislodged surgical hardware was irritating surrounding nerve tissue, resulting in debilitating pain for Gorski. . . . Without such a discussion, Dr. Soriano’s report is simply an unreasoned and unexplained rejection of the objective evidence in the record, Gorski’s claims regarding her level of pain and functionality, and the opinions of Drs. Huffmon and Faircloth that she was totally disabled.

314 Fed. Appx. at 547 (emphasis added).

Given the failure of plans historically to explain the basis for refusing to follow treating providers’ recommendations, it is a bit surprising to read that “commentators 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 amended Regulation requires disclosure of the plan’s basis for not following advice provided by its own consultants. Interestingly, the DOL commented that its experience in enforcing the current regulation revealed instances of “expert shopping” by plans, “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.” Plans will be required to disclose materials related to such consultations in response to a “request for relevant documents.”

Importantly, the rule is not limited to a provider’s conclusions about whether a claimant 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.

(emphasis added). Presumably, “foundational information” would include such things as the treating provider’s clinical observations and test results, the provider’s decision to credit the claimant’s descriptions of her symptoms, and the provider’s diagnosis. To require a discussion of the basis for any disagreements is a matter of “basic fiduciary accountability.”

The Regulation requires a discussion of the basis for disagreeing with or not following disability determinations of the SSA or other payors of disability benefits. This discussion must be more than “boilerplate text about possible differences in applicable definitions, presumptions, or evidence.” Regarding SSA disability determinations specifically, “a more detailed justification would be required in a case where the SSA definitions were functionally equivalent to those under the plan.” Courts have criticized plans for failing to follow decisions of the SSA. 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.’’).

The DOL expressly declined to adopt a rule that required deference to a treating physician’s opinion because, inter alia, “a treating physician rule is not necessary to guard against arbitrary decision-making by plan administrators.”

c. Implications

The requirement that plans explain the basis for their disagreements with treating providers, the plan’s own consultants, and decisions of the SSA is a huge leap forward for claimants. The adequacy of the plan’s explanations of the basis for its disagreements with treating providers, consultants, and other disability providers will be the new battleground.

2. Explanation of Medical Necessity or Experimental Treatment Determinations

The Regulation now requires that if an adverse benefit determination is based on a medical necessity or experimental treatment limitation or exclusion, the denial notice must contain 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.

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