WHAT IS AN APPEAL?
An appeal is a claims process whereby insurers are asked to review their previous denial decisions to determine if the original denials were correct. Through supplementation of the Administrative Record or claim file insureds and claimants have the right (ERISA), or are given the opportunity (Non-ERISA) to “make their case” for continued payment of benefits beyond the termination date.
The burden of proof, therefore, is for insureds and claimants to provide insurers with sufficient medical, occupational, and financial information as of the date of termination that they were totally disabled and unable to work ON THAT DATE and are unlikely to successfully re-enter a competitive workforce in the future due to total or residual disability.
Unfortunately, insurers have used the appeal process to begin, or engage in entirely new investigations on an ad hoc (after-the-fact) basis that are entirely inappropriate. Consider, for example, the insurer who failed to request an Independent Medical Evaluation prior to rendering a denial decision, but requests one after an appeal is filed.
I have always been of the opinion that if an insurer opens a new investigation of a claim on appeal then it should pay benefits while the new investigation is pending. Again, the purpose of an appeal is to determine whether the insurance company’s original denial decision was the correct decision to make.
Nevertheless, most insurers will respond that “the purpose of the new investigation” is to determine whether insureds are likely to be disabled in the future – a conflict of definition as to what an appeal really is.
Currently, the U.S. Department of Labor is attempting to restrict the appeal process to the original denial decision. Although these and other ERISA changes favorable to claimants were due to take place in January 2018, insurance lobby groups continue to oppose actions that would ensure a fair system of appeal review.
ERISA Plan participants have 180 days to supplement the Administrative Record with new information clearly documenting their incapacity for work. Documentation may not be allowed in the Record after the 180 days has expired. Frankly, DCS, Inc. “supplements” the Administrative Record of our clients on an ongoing basis so that if claims are denied, the Record is already as complete as it can be before referring to an appeal attorney.
IDI contract insureds are not limited to 180 days, but are limited only by the statute of limitations within their respective states. There are a few insurers, such as Unum, that may attempt to hold IDI insureds to a 180-day administrative review. Unum and other insurers should always be reminded that contracts are not subject to ERISA and have no such limitations for review or submission of new information.
Several insurers have a preliminary appeal process called “Reconsideration” that in my opinion only delays appeals even more than they sometimes already are. Insureds and claimants are permitted to submit additional information directly to the same claims handler who denied the claim for “reconsideration” of the denial decision.
Usually, after another 45-day review period, a letter is sent to insureds indicating, “the information did not change the original denial decision and your claim is now forwarded to the appeals unit.” The reconsideration is for most cases, a colossal waste of time.
The process of appeal by “reconsideration” is best utilized for a “failure to provide denial” since claims are usually paid once the overdue or late information is received and reviewed. In this way claim appeals can be overturned quickly and benefits restored avoiding a lengthy appeal process.
In practice, most but not all, insurers have separate appeal units and departments that are an “arm’s length” away from the claims handlers who originally denied the claims. Other insurers allow the same denial handlers and managers to make appeal decisions subjecting the appeal to a very prejudicial and biased appeal process. Those insurers who do have separate appeals departments will let you know that they do.
ERISA allows insurers 45 days to make decisions on appeals; however, insurers often extend this timeline another 45 days if they have not concluded their investigation of the appeal. IDI appeal decisions are not subject to any timeline and insurers can take as much time as they want, subject to any existing state laws of course.
There are only three possible outcomes for any appeal submitted to an insurance company:
- The claim denial is overturned and all benefits are restored. Past benefits should be restored with interest, and future benefits paid. The claim is placed back into the “risk management barrel” and can be subjected to updates, surveillance, field visits etc.
- The claim denial is upheld, no future benefits are payable. The only option left is to find an attorney willing to take the case and file a lawsuit.
- During the claims appeal process, insureds and claimants, through their attorneys, agree to accept a lump-sum buyout of their claims. This ends any future relationship insureds have with the insurance company.
In summary, a disability claims appeal is:
- A request to an insurance company to reconsider its previous denial decision in light of new information showing continued incapacity for work beyond the denial date.
- An opportunity to supplement the Administrative Record (ERISA claims) with all available information pertinent to the insureds continued disability. Claimants have 180 days to “supplement” the record, and insurers have 45 days to make a decision.
- IDI insureds notify insurers there is a breach of contract, or breach of applicable state laws sufficient that benefits should be restored amicably prior to filing a lawsuit. There are no timeline requirements except they exist in state law.
It is very important for both insureds and claimants to realize that disability claim appeals are very complicated matters often involving both federal and state laws. DCS, Inc. highly recommends attorney involvement in the appeals process.
IS FILING AN APPEAL WORTH IT?
Once you receive a claim denial letter from your insurance company it is always a good idea to put pencil to paper and determine whether the cost of an appeal justifies the cost of the outcome.
Here are a few claim situations where it might be prudent NOT to appeal a disability claim denial:
- If the maximum duration of an ERISA claim is to age 65 and the claimant is over 60, it may not be advantageous to appeal.
- If a claimant is looking forward to returning to work in some capacity in the future it may not be worth it for him/her to repay the SSDI overpayment when the claim is reinstated on appeal, assuming it would be.
- It may not be worth the cost of an appeal if the monthly benefit is very low. If the loss of benefit income can be “made-up” from another source, in some cases it is too costly to appeal for little gain.
Some claimants are so angry that regardless of the cost, they proceed with litigation even when the outcomes are uncertain and unprofitable. Although most attorneys avoid low benefit claims, there are a few who convince claimants to “hang in there” and litigate against insurers with very low odds of success.
In addition, as a Consultant I’ve also observed attorneys who accept cases on appeal, do nothing to be successful, but rush into litigation later because that’s where their money is. Claimants should decide for themselves whether an “appeal” or expensive litigation is right for them.
INTERESTING NOTE: It is generally not considered a gain to claimants if the cost of filing an appeal exceeds the overall cost. Yet, some claimants are so angered by the denial they often “cut off their noses to spite their face.” The appeal process should only be engaged in IF the ultimate outcome exceeds the cost, such as in cases where paid health insurance is integrated with their employer’s LTD benefits. Anger and spite can be very costly in the long run.
FINALLY: ERISA and rights under ERISA are constantly changing. This article is not intended to describe every possible aspect of law, but rather to give a general overview of what is involved in filing appeals. We continue to recommend that claimants seek out experienced and successful attorneys to assist with appeals and ERISA litigation.