It has always bothered me that the appeal of a denial of Long Term Disability (LTD) benefits under a group plan is made to the same insurance company who not only has just denied the claim, but also who makes the payments. Despite this inherent conflict of interest, the ERISA statute and its effectuating Regulations compel this “appeal” step before the case can be brought into the judicial system and given an independent, unbiased review in Federal Court.
Because of the complexity and expense of Federal Court, the practical effect this has is that the insurance company makes the final decision in far too many Long Term Disability claims. For various reasons—often, involving financial practicalities—-in our practice we have had to tell too many disabled clients that theirs is not a case to be taken to Federal Court. I’m sure the same is true for every other LTD practitioner out there.
There are many ways this process could be made fairer. I’ll mention two here even though I doubt any of them will ever be enacted, due to the imbalance of power between the insurance industry versus individual disabled claimants.
A simple step would be to enact Regulations that force the insurance companies to give deference to a finding of disability made by the Social Security Administration when determining if a Long Term Disability claimant can perform his or her occupation. For reasons too complicated to discuss in this limited space, insurance carriers currently find many ways to say that such a finding does not equate with the analysis they have to make.
Another solution would be to take the appeal process out of the hands of the insurance carriers and create an “ERISA Board,” similar to the Social Security Hearing office (ODAR). A claimant would get an opportunity to have a quasi-judicial authority decide the appeal if the insurance carrier initially denied a claim or suspended benefits.
Either option creates a more level playing field that removes the inherent conflict of interest that currently exists, and that effectively terminates many claims before they are ever independently reviewed.