How are Long-term Disability Policies Regulated? ERISA Explained
What You Need to Know About ERISA and LTD Policies
Author: Attorney Lonnie Roach
If you cannot work due to an illness or injury, long-term disability insurance (LTD) can provide approximately 50% – 60% of your salary while you are disabled. LTD policies vary in their terms and conditions, but perhaps the most important difference is that while long-term disability insurance may be purchased individually through an insurance company, most LTD plans are sponsored by an employer.
ERISA law does not apply to private long term disability benefits policies purchased directly by an individual from an insurance agent.
Employer-sponsored plans, called “ERISA plans,” are controlled by a federal law enacted to protect employees by regulating procedures for plan administrators, filing claims, appeals and the right to sue, and directly impacts how any LTD claim you may have is handled. If you have employer sponsored disability insurance and intend to file a claim it is crucial that you fully understand what ERISA is and how it will affect your chances to win benefits.
What is ERISA?
In 1959, Congress enacted the Welfare and Pension Plan Disclosures Act (WPPDA) which required employers to make employee benefit plan descriptions and financial reports available to government and plan participants in order to make plan administrators more accountable.
The Employee Retirement Income Security Act of 1974 (ERISA) expanded on the WPPDA by providing pension plans, insurance companies, and private employers with guidelines on how to administer employee benefit plans. ERISA applies to all private-sector employers who sponsor retirement and healthcare plans for workers, requiring trustees and plan administrators to manage funds for the benefit of plan participants and expanding reporting procedures. ERISA does not apply to benefit plans sponsored by government entities or churches. The law also does not relate to state laws such as workers compensation or unemployment.
If you have been denied disability don’t give up! Contact a Disability lawyer at 512-454-4000 for a free consultation and get the benefits you deserve.
Amendments to ERISA over the years have added protections for mental health issues, longer coverage and reconstructive surgery.
For example, the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 allows employees who resign or are let go under certain circumstances to continue their healthcare coverage for a period of time.
ERISA is administered by the Employee Benefits Security Administration (EBSA), a branch of the United States Department of Labor. Regulatory oversight is divided among three department of government:
- The Department of Labor creates rules and duties for plan managers regarding disclosures and reporting;
- The Internal Revenue Service oversees fund qualifications of retirement plans and vesting rules; and
- Pension Benefit Guaranty Corporation (PBGC) which acts as the insurer or guarantor of private pension funds.
Why is ERISA important?
ERISA administrators often Deny Disability Benefits based on One opinion from a doctor chosen by the Insurance Company.
ERISA law was intended by its sponsors to ensure that pension plans were managed responsibly, so that employees would actually receive the benefits they were expecting. They wanted to restrict shady investment practices and increase the transparency of plan management. The law was later interpreted to apply to health and disability benefits plans.
Unfortunately, the application of ERISA law to long term disability insurance plans has reduced rather than expanded the legal protections available to policyholders.
It left the field wide open for insurance companies to implement a claims policy that is best described as, “When in doubt, deny the claim.”
ERISA law preempts state laws that can provide a higher level of protection to employees in situations in which an insurance company unjustly denies benefits.
Under state law, an employee has a right to a jury trial, and could receive damage awards in addition to the benefits due under their policy. Damages could be compensatory, punitive, and, if applicable, based on emotional distress.
ERISA law permits the long term disability insurance plan administrator to decide if a claimant is disabled, using the language of the insurance policy and the medical evidence in the claims file.
Claimants must exhaust the 180-day appeals process prescribed by the ERISA statute before they can file a lawsuit to obtain benefits. To make matters worse, the courts will usually assume that the plan administrator has made a reasonable decision unless it has acted in an arbitrary or capricious manner.
It is not unusual for an ERISA plan administrator to deny disability benefits based on one dissenting opinion from a doctor or nurse chosen by the long term disability insurance company.
This can happen even if the doctor or nurse is not a specialist, or is less qualified in that medical specialty than the patient’s own doctor.
In spite of these legal obstacles, those disabled from working can be protected under existing law.
Under ERISA, employees must be notified of benefit plan terms including funding, coverage, costs, and protection from financial wrongdoing. Plan participants have a right to sue if a plan is mismanaged. ERISA requires each plan to notify participants in writing about how to file a claim and must notify participants of significant changes to any plan. Participants must be informed of the requirements they must meet for benefits to vest; for example, how quickly they must file a claim when injured in order to be covered. ERISA also protects employees from wrongdoing by plan administrators. If a plan loses money because of mismanagement, a plan administrator may be personally liable to restore the loss.
ERISA standards include:
- Providing employees with facts about health and retirement plans
- Reporting guidelines
- Document filing guidelines
- Fiduciary responsibilities
- Complaint and appeals processes
- Creating trust accounts for plan assets
- The right to sue for breach of fiduciary duty
Long-term disability insurance (LTD) that is provided by private employers is governed by ERISA.
If you are unable to work because of an illness or injury and have an LTD policy, you may be eligible for benefits to replace some lost income. However, getting a claim approved by an insurance company may not be easy. Before filing a claim, you should know the definition of “disability” as stated in your LTD policy, as well as the amount of time you must wait before receiving benefits, called the “elimination period” (usually 90 – 180 days).
Insurance companies may also employ a variety of tactics to deny or reduce the amount of benefits:
- An insurance company may refuse to give you a copy of your insurance policy and insist the policy must be obtained from your employer.
- An insurance company will employ their own medical providers to review medical claims resulting in biased decisions.
- An insurance company will review social media or hire an investigator to find any evidence to prove you are not disabled and deny your claim.
- After two years, when a policy usually converts to “any occupation” from “own occupation” an insurance company will hire a vocational consultant to review your training, education and work experience. These consultants are almost always employed by the insurance company and likely to determine a claimant can perform some type of work.
The insurance company or its plan administrator decides to approve or deny a claim.
If a claim is denied, the claimant can file an internal appeal. If the appeal is denied and all internal appeal processes have been exhausted, only then can a claimant file suit in federal court. A federal judge will review the case and base their decision on the administrative record – all the evidence and medical records in the claimant’s file up to that point. Once a case goes to federal court, no new evidence can be added or considered in the matter.
Why should I consult an attorney if I have an LTD claim?
Because ERISA has specific procedures and deadlines to follow when filing a claim, a long-term disability attorney experienced in ERISA matters should be consulted as soon as a claimant becomes disabled.
If an LTD claim is denied, an attorney is absolutely necessary to prepare an appeal; an ineffective or untimely appeal may result in a lost opportunity to pursue the claim in court. If a case proceeds to trial, the skills of an appellate attorney will be needed.
The Department of Labor announced in 2018 new regulations for long-term disability ERISA claims.
If a plan fails to follow the new requirements, the claimant will be deemed to have exhausted his or her administrative remedies and may file suit against the plan on the basis that the plan did not provide a reasonable claims procedure.
Specifically, the rule provides the following improved procedures for processing disability benefit claims and appeals:
- Improvement to Basic Disclosure Requirements. If a claim is denied, the claimant must receive a clear explanation of why the claim was denied as well as the standards and other criteria used to reach the determination.
- Right to Claim File and Internal Protocols. Claim denials must include a notice that the claimant has a right to a complete copy of their file. The denial must also include a copy of the protocol used in denying the claim including internal guidelines, standards, and other criteria, or a statement saying none were used.
- Right to Review and Respond to New Information Before Final Decision. A plan may not deny benefits on appeal based on new or additional evidence that was not included when the benefit was denied at the claims stage unless the claimant is given notice and a fair opportunity to respond.
- Avoiding Conflicts of Interest. A claims adjudicator cannot be hired, promoted, terminated or compensated based on the likelihood of denying claims.
- Deemed Exhaustion of Claims and Appeals Process. Plans cannot prohibit a claimant from seeking court review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan fails to comply with the claims procedure requirements unless the violation was the result of a minor error.
- Certain Coverage Rescissions are Adverse Benefit Determinations Subject to the Claims Procedure Protections. Certain withdrawals of coverage shall be treated as adverse benefit determinations (denials) triggering a plan’s appeals procedures. Rescissions for non-payment of premiums is not covered under this provision.
- Notices Written in a Culturally and Linguistically Appropriate Manner. This provision adopts the ACA standard for group health benefits notices and provides that claim denials and appeal denials may need to include a statement in a non-English language regarding the availability of language assistance.
Lonnie Roach is Board Certified in Personal Injury law and an authority in ERISA cases.
Having published several opinions concerning LTD law which are used to determine how ERISA claims are decided, he is considered one of the top attorneys in ERISA law in the state of Texas. Many of Mr. Roach’s clients are referrals from other attorneys, who, knowing the complexity of ERISA want to do what is best for their clients and confidently send them to Bemis, Roach & Reed. Mr. Roach is admitted to the United States District Courts for the Northern District of Texas, the Southern District of Texas, the Eastern District of Texas, and the Western District of Texas, as well as the United States Court of Appeals for the Fifth Circuit. Mr. Roach successfully overturned denials of disability benefits at trial in U.S. District Court and the United States Court of Appeals. Lonnie Roach will consult with you as soon as soon as you become disabled and help you avoid common mistakes.
Disability Insurance & Erisa Law Explained
“My partner, Lonnie Roach, is probably the preeminent ERISA lawyer in the state of Texas. It is an extremely complicated, very difficult practice area. It’s only in federal court, and by the way, our law firm is licensed in every federal district in the state of Texas, so we have a statewide ERISA practice.”
– Greg Reed
Bemis, Roach and Reed has successfully handled cases against the following insurance companies:
Connecticut General Life
Life Insurance Co. of North America
Disability benefits are an important source of income for those who are unable to work. If you are not able to work due to accident or illness, you may be eligible for Social Security Disability or Long Term Disability benefits. If you have applied for benefits and been denied, contact the attorneys at Bemis, Roach and Reed for a free consultation. Call 512-454-4000 and get help NOW.
Author: Attorney Lonnie Roach has been practicing law for over 29 years. He is Superlawyers rated by Thomson Reuters and is Top AV Preeminent® and Client Champion rated by Martindale Hubbell. Through his extensive litigation Mr. Roach obtained board certifications from the Texas Board of Legal Specialization. Lonnie is admitted to practice in the United States District Court – all Texas Districts and the U.S. Court of Appeals, Fifth Circuit. Highly experienced in Long Term Disability denials and appeals governed by the “ERISA” Mr. Roach is a member of the Texas Trial Lawyers Association, Austin Bar Association, and is a past the director of the Capital Area Trial Lawyers Association (Director 1999-2005) Mr. Roach and all the members of Bemis, Roach & Reed have been active participants in the Travis County Lawyer referral service.
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