Most insureds are unaware that there is a hierarchy of review that takes place on claims before any other review is done. Claims NOT passing the initial inspection are denied and no further review takes place. Before I continue, though, I need to remind you of certain facts related to ERISA claims.
Employees are NOT part of any Employer provided ERISA Plan, which is why they are called “participants”, or “beneficiaries to the Plan rather than Insureds. The two parties to an Employer provided ERISA Plan are the employer and the insurance company. When a claim is filed, the employee is referred to as a “claimant”.
Employers are required to only provide employees with an “SPD”, or Summary Plan Direction. This document is NOT the Plan itself but a summary of all of the “initial” provisions of the policy that deal with eligibility. It is this review that I would like to address in this post.
Here are a few of the initial file review provisions that are initially examined before any claim can move forward in the process.
- Class of Employee–Tiers of employees who are covered. Benefits may be different between classes of employees, such as day workers or management.
- Elimination Period–A check with the employer is made to determine the employee’s last day worked (“LDW”) and whether the employee satisfied the non-working days. Although this may appear to be straight forward, it often isn’t, such as in the case of using PTO and sick leave first before satisfying the EP, or consideration of severance pay and salary continuation, all of which affect when the EP begins and ends, and the 1st benefit pay date. Sometimes the number of non-working days needs to be counted to determine when the EP is satisfied. All information necessary to complete the EP review is obtained from the employer. Incidentally, claims handlers today are not trained to do this review and it isn’t usually done well.
- Minimum Number of Hours Worked. Some employees are so totally unaware of this provision that they may cut down the number of hours worked to the point that they aren’t eligible for STD/LTD at all. Most ERISA Plans cite 20-30 required hours worked in order to be eligible for disability coverage. Claimants going back to work after a period of disability are unaware that when they return part-time , they must work the number of required hours in order to remain covered.
- Pre-Existing Conditions. Nearly all ERISA claims cite the standard 3-12 pre-existing provisions requirement. Basically, if an employee goes out on disability within 12 months of the Effective Date of Coverage (“EDOC”), a three month look-back investigation is done to determine if the claimant took prescribed medications or received treatment with 3 months of the EDOC.
- Benefit Calculation. Not all employees receive the same percentage of benefit, and therefore, the claims handler must verify the salary or wage with the employer and then require a W-2 or other verification of earnings from the claimant. Earnings calculations is included in this review.
While there are additional items that need to be verified such as occupation, the claims handler is required to obtain all back-up documentation for the above review and make sure it is in the file. The bad news is, I doubt very seriously whether today’s claims handlers are trained enough to do this kind of review.
I mentioned earlier there was a hierarchy to the claims review which means if the claimant fails any part of the initial review, no further review or investigation is done. For example, if a claimant files for disability because they had a MI (myocardial infarction or heart attack), but doesn’t meet the Elimination Period, or hasn’t been working the required 30 hours, there is no point to investigating medical information. The claimant is not eligible for benefits even though the MI was serious.
The initial review procedure is, and should be, very detailed and exacting. But again, today’s initial review isn’t done well and I am finding more and more errors with benefit calculations and EP determinations.
It is important to remember that medical proof of claim is often NOT the most important consideration in the claim review process.If you go to my website located at: http://www.disabilityclaimssolutions.com there is a white paper there called LTD 101. If you would like more information please visit my site and read more about the initial claim review.
If you would like to learn more about how to become a DCS client please feel free to contact me at: http://www.disabilityclaimssolutions.com, or call 207-793-4593.
