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Addressing conflicts of interest, the final rule requires decisions regarding hiring, compensation, termination, or promotion of persons involved in making claim decisions not be based on the likelihood the individual will support denial of benefits.
"Persons involved" in making the decision include, but are not limited to, "claims adjudicator[s]" and "medical or vocational expert[s]." The rule is not limited to persons "directly hire[d]" by the administrator or to those who were "responsible for making the decision," but also extends to employees of third party service providers. Administrators must "take steps (e.g., in the terms of its service contract and ongoing monitoring) to ensure that the service provider" does not make employment or compensation decisions based on the likelihood the person will support denial of benefits.
Addressing disclosure and communication requirements, the final rule requires both initial benefit denial letters and appeal denial letters to include:
The final rule expanded the definition of "adverse benefit determination" to include "any rescission of disability coverage," including "cancellation or discontinuance of coverage that has a retroactive effect."
Finally, failure to "strictly adhere" to these new requirements will result in the claim being deemed denied, remedies exhausted, and a resultant de novo standard of review, unless the violation is de minimis. Such minor violations will "not cause, and or not likely to cause, prejudice or harm to the claimant," and the administrator must demonstrate that it "was for good cause or due to matters beyond the control of the plan," occurred "in the context of an ongoing good faith exchange of information between the plan and the claimant" and was "not part of a pattern and practice of violations..."
Click here to the section of the Federal Register discussing the final rule on pages 92316-92343.
If you would like to further discuss this client alert, please contact Aaron Pohlmann at 404.962.7530 or APohlmann@wcsr.com or any Womble Carlyle attorney with whom you normally work.