RECEIVED
IACLI 707 JL 21 PA 2 08

efor ile. EXEC.
July 17, 2047 DEPT. OF
ASH. D

fie

The Honorable Alexander Acosta
Secretary

US. Department of Labor

200 Constitution Avenue, NW
Washington, DC 20210

Re: Department of Labor Disability Claims Regulation
Dear Secretary Acosta:

Thank you for the productive meeting last week. | write to follow up onan additional issue of
importance to the life insurance industry regarding a Department of Labor (DOL) final rule (81 Fed
Reg. 92316 (Dec, 16, 2016), regarding private disability claims procedures (the “Regulation”) under
the Employee Retirement income Security Act of 1974 (“ERISA”). We urge you to delay and
reexamine this Regulation, which was rushed to completion and finalized by the prior Administration
in its final days. The Regulation is consistent with congressional intent because it inappropriately
applies the Affordable Care Act (“ACA”) claims procedures to disability plans and will compromise
working Americans’ ability to protect themselves from the financial risk of a disabling illness of injury.

The DOL's basis for promulgation of the Regulation is its belief that disability claimants deserve
protections “equally as stringent” as those in place for health care participants under the ACA,
However, in setting that goal. the DOL completely ignored the facts that (1) disability claims
adjudication is fundamentally different from medical claims adjudication and (2) there are already
existing robust consumer protections applicable and available to disability claimants that have
worked for well over a decade.

The fundamental differences between health and disability claims are material to the Regulation.
The majority of medical claims are auto-adjudicated (i.e., never involving human analysis). The
administrator's benefit decision is typically based on simple procedural questions (¢.g., whether the
benefit is a covered benefit, whether the procedure required a prior authorization, whether the
health cate provider was in or outside the network, etc... Disability income claims adjudication, on
the other hand, requires a much more complex and time-consuming analysis as a claim can last
years or decades. Without limitation, disability claims may involve determining the nature of the
underlying medical condition, the extent of the individual's resulting functional deficits, and the
impact on the individuat’s ability to work. Disability claims may involve reviews by not only the
benefits analyst, but also physician consultants and vocational experts. The complexity of these
claims is why regulations that serve medical claimants will not work for disability income claimants.
Moreover, the medical and disability claims reguiations were separated by the DOL over fifteen years
ago due to the differences in claim adjudication.

The Regulation is alsa problematic because DOL failed to demonstrate that there are existing

American Council of Life insurers
404 Constinution Avenue, NW, Washington. DC 20001-2133
werw.acli.com



Page 2 of 3

problems associated with disability claims adjudication that require regulatory action. While the DOL
expresses concer about the volume of litigation related to ERISA governed disatility claims, it
completed no analysis of how the volume of litigation compares to the volume of claims that are
approved. This analysis would demonstrate that far more claims are paid and the number of claims
that result in titigation is incredibly smal! in comparison. Further, fully insured disability claims
procedures are highly regulated with many state and federal consumer protections. Disability
claimants already have a full and fair claims review process.that balances the rights of claimants
with the need for operational and cost efficiency, Despite the existing consumer protections and the
lack of evidence’ demonstrating serious or significant problems, the DOL essentially elected to apply
the ACA claims procedures to disability plans, basically to have the claims procedures be relatively
the same as medical claims procedures.

The Regulation will delay any final decision for the claimant and will significantly increase the
administrative burdens on employers and disability insurance issuers, hurting the very employee the.
rule was purporting to help. ff private disability insurance is not available or if benefits are delayed,
the employee will have to rely more on their savings, reducing their overall financial security. In fact,
the most significant cause of bankruptcy is due to sickness.

Examples of the increased administrative burden on employers and carriers that will increase the
cost of providing disability income protection are:

* The Regulation complicates the processing of disability benefits by imposing new steps
and evidentiary burdens in the adjudication of claims, and forcing plans to consider
disability standards and definitions different from those of the plan;

e The Regulation imposes these new complications without allowing any additional time in
which to consider the claim and explain the ultimate decision to the claimant;

® The Regulation explicitly tilts the balance in court cases against plans and insurers,
undoing a statutory and regulatory scheme that has worked for decades; and

e The Regulation creates perverse incentives fer plaintiff's attorneys to side-step
established procedures and clog the courts for a resolution of benefit claims.

Because of these new unnecessary burdens, fewer American workers will have access fo employer
sponsored disability insurance. The practical result is that more families and taxpayers will have to
bear the financial risk of a disabling illness or injury, jeopardizing their retirement security and
financial security overall, Additionally, the ‘majority of private disability plans provide return-to-work —
assistance to help and encourage disabled individuals return to the labor force. Without access to
disability income coverage inthe employment context, many individuals who become disabled will
not be able to avail themselves of this type of return-to-work assistance, with the result being
increased reliance on, and cost to, related state and federal public programs (such es federal Social
Security Disability insurance). Private disability insurance typically includes return-to-work
assistance, whith helps disabled individuals return to the workforce, and is generally more effective
than the government's Social Security Disability Insurance return to work programs.

Finally, the DOL failed both to qualitatively describe the benefits of the proposed regulations, and to
adequately quantify the proposed regulations’ costs, a prerequisite of Federal agency rulemaking. In
ii final Regulation preamble, the DGL stated, in part, that it closely considered the potential
economic effects, Including toth benefits and costs. However, in the very next sentence the DOL.



Page Sof 3

stated that due to data limitations and a lack of effective measures it did not have sufficient data to
quantify the benefits associated wiih the final Reguiation. And as previously mentioned, the DOL
also failed to provide a reasonable basis or compelling need for this Regulation.

‘The ACLI has always been in complete agreement that the full and fair equitable administration of
disability Incorne claims Is an important objective. However, the final Regulation does not seem to
meet that objective. Therefore, we urge DOL to take immediate action to delay and reexamine the
Regulation so that American workers will continue to have access to affordable, high quality disability
income protection.

Sincerely, my

GOVERNOR DIRK KEMPTHORNE

fa. f-