Decoding ERISA Disability Benefits

by | Published on May 24, 2017 | Medical Record Review

People who have a long-term disability (LTD) insurance policy, and are unable to work could be eligible for long-term disability benefits. The Employee Retirement Income Security Act (ERISA) is a federal law that governs most group LTD policies. ERISA was signed into law in 1974 by President Gerald Ford. As a law that pre-empted all state laws on employee benefits, ERISA created a uniform system of taxation and one body of law to throw light on the intricacies of employee benefits. ERISA is applicable only to disability insurance benefits offered by an employer as part of an employee benefits package. This means that it would not apply to private disability insurance plans that employees may buy on their own. In the ERISA disability claims process, a medical records review is performed to identify the primary and secondary causes of medical disability in order to focus the disability claim. While it is important for the claimant to list all medical conditions, he/she should be able to clearly articulate the medical condition(s) that primarily cause an inability to work on a full time or part-time basis.

Important Considerations

There are certain eligibility requirements disabled employees must meet before the provider pays the benefits. Here are some of the necessary requirements.

  • A minimum length of service
  • A minimum waiting period before the benefits start
  • Qualifies under the plan’s definition of total disability.

An important aspect to verify is whether the disability insurance plan is governed by ERISA; only then will the claim be valid. Employers provide disability insurance as a part of an employee’s benefits package, similar to health insurance. ERISA usually governs employer-sponsored benefit plans though it does not apply to some employers such as:

  • Religious institutions
  • Federal government
  • State governments and any political subdivisions

Then there are the dates and deadlines. Let us look at the typical timeline after the initial claim is filed.

  • A claim is approved or denied within 45 days of receiving it.
  • The particular plan may extend the 45-day time frame by up to 30 days. In this case, the insurer must inform the insured of its request for an extension within the first 45-day period. The insurer should explain why they need additional time, what additional time or info is necessary, whether there are unresolved matters, and when a final decision will be made.
  • The insured person has 45 days to respond if the insurer makes a request for additional information.
  • Once the insured provides the requested information, the claim would be decided within 30 days or as required by the plan, whichever comes first.

The Appeal Process in Case of Claim Denial

  • The applicant has a period of 180 days following the receipt of a denial notification to file an appeal.
  • An appeal must be decided within 45 days of receipt by the insurer.
  • Sometimes review of the appeal request may require additional time especially in special cases. The insurance plan can request up to an extra 45 days, providing an explanation of the circumstances and an expected date when the decision will be given.

If the appeal is denied, and all other administrative remedies are exhausted, applicants can file a lawsuit. Here also there is a time limit to adhere to, failing which the applicant has no other way to pursue his/her claim. This time limit may vary in each state.

Recently, the Department of Labor finalized new regulations codified at 29 C.F.R. §2560.503-1 and discussed at 81 Fed. Reg. 92316. These have been introduced to reduce the possibility of a conflict of interest in managing an ERISA plan, and to better inform the insured person as to why their disability benefits were denied.

  • These regulations apply only to disability benefits claims filed on or after January 1, 2018.
  • The regulations allow the insured person to file a lawsuit when a claim is “deemed denied” even if he/she has not exhausted all available administrative remedies. Once the plan fails to comply with the appropriate regulations, the claim is “deemed denied.”
  • The administrator must respond to request made by the insured regarding the alleged violation within 10 days, and provide a written explanation addressing the alleged violation.
  • The new regulations also require that the final denial adequately describe any relevant contractual limitations period, including the date that the statute of limitations to file ends.

Documentation – a Major Consideration

Medical record retrieval and medical records review have great significance in relation to ERISA and disability claim lawsuits. In a lawsuit involving employer-provided insurance plans, ERISA allows judges to review for an “abuse of discretion” only. That is, the judge’s ability to review and overturn/reject the decision being challenged is very limited. The judge will only consider the insured person’s file or administrative record with the insurance company when making a decision. This file contains all the documents associated with the insured person’s insurance plan, claims, denials, and appeals. It may also include internal reports of the plan’s own reviewing physicians and vocational consultants, generated by the insurance company itself. Therefore, providing all support information including medical reports from doctors, letters from employers and so on during the administrative appeal in very important. The judge will be able to rule in favour of the insured person only if there is adequate documentation in the file.

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