ERISA Regulation Changes Strengthens Consumer Protections for the Disabled

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An action taken by the U.S. Department of Labor to protect the disabled fortunately passed on December 19, 2016, on the eve of the Obama’s departure and will go into effect January 1, 2018.  Claimants counsel breathed a sigh of relief when the amendments to the Employee Retirement Income Security Act of 1974 (ERISA) remained intact despite the new administration’s clawing back on many consumer rights.

We will issue several blogs on the important changes to the regulations to demonstrate how significant the changes are to repair fundamental flaws in ERISA.  The Department of Labor explained that the regulations were enacted

“to 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 be denied by plan administrators in the absence of the fuller protections provided by this final regulation.”

Impartiality of the decision-makers

Nearly ten years ago, the U.S. Supreme Court held that a plan administrator’s dual role of both evaluating and paying benefits claims creates a conflict of interest. That conflict  is to “be weighed as a facto[r] in determining whether there is an abuse of discretion.” MetLife v. Glenn 554 U.S. 105 (2008).    This consideration of the existence of a conflict has unleashed hundreds of discovery battles in disability litigation because the insurer wants there to be no discovery beyond the administrative record they have created, and the claimant seeks to establish motivation and bias that influenced the decision makers,-evidence rarely found in the claim file itself.  It remained unclear how a claimant can establish the insurer’s conflict existed and influenced the outcome if the record is closed.

For example, during ERISA litigation, insurers do not want their medical or vocational experts deposed. As a District Judge in Chicago held, “A physician’s potential biases and conflicts of opinion could directly affect the Court’s decision whether Plaintiff is or was actually disabled because they bear on the credibility and reliability of her medical opinions.” In Harding v. Hartford Ins. Co. , 2017 U.S. Dist. LEXIS 54241 (N.D.Ill. Apr. 10, 2017), The Court was skeptical of Hartford’s assertion that the administrative record contains any evidence of the hired medical reviewers’ biases and granted plaintiff’s request for his deposition.

The ERISA amendment requires that disability benefit claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Insurers must not employ individuals including medical consultant reviewers who have reputations for producing reports that lead to claim denials, or bonus them based on outcomes.  Similarly, the selection of vocational experts must be insulated from economic bias that may influence their opinions and create a conflict of interest. Insurers must actively take steps to confirm their selected reviewers are not beholden to opinions that lack objectivity or are based on retaining their stream of income from the insurance industry.

Other examples of the court’s interest in the integrity of the reviewers include Mendez v. FedEx Express, 2016 U.S. Dist. LEXIS 111329 (E.D. Mich. Aug. 22, 2016). The court held:

“Aetnas reviewing physicians were “repeat players that have a material, if not necessarily disabling, conflict of interest”. This does not automatically render Aetna’s decision arbitrary and capricious, but it is a factor that weighs against Aetna.”

In another recent case, a Court recognized the impropriety of relying on experts who are a reliable resource for denial support, holding,

“The court also notes that the financial relationship between Aetna and Dr. Sharma, through MES, does suggest the possibility of a conflict of interest.” Plaintiff points out that Dr. Sharma’s payments for reviewing Defendant’s claims nearly doubled over two years, and although this fact standing alone would not render defendants or Dr. Sharmas opinion unreasonable, but does suggest a possible (unsatisfying) explanation for why Defendant would rely on Dr. Sharma’s report despite some of its flaws discussed above.”

See Alvarado v. Aetna Life Ins. Co.,  2016 U.S. Dist. LEXIS 120275 (N.D. Ill. Sep. 6, 2016)

We expect that this regulation will loosen the tight constraints many courts have enforced to limit discovery about the decision-maker’s financial remuneration, their bias, and hold the insurers responsible for obtaining assessments that are more independent of insurers’ financial ties.   As Bonny G. Rafel LLC, the Voice for the Disabled, we will continue to advocate for fair, objective oversight of claims by the insurance companies who market and advertise that their policies will protect their insureds when disaster strikes, but often terminate or deny valid claims instead.