December 9, 2017

Office of Regulations and Interpretations,

Employee Benefits Security Administration

Room M-5655

U.S. Dept. of Labor

200 Constitution Avenue NW

Washington D.C. 20210

Re: Re-Examination of Claims Procedure Regulations for Plans Providing

Disability Benefits

RIN No.: 1210-AB39

Regulation: 29 C.F.R. §2560.503

Dear Deputy Assistant Secretary Hauser:

I am writing to discourage the Department from modifying or further delaying the final

disability claims regulations (Final Regulation on Claims Procedure for Plans Providing

Disability Benefits, 81 Fed. Reg. 92316 (Dec. 19, 2016)) that are now scheduled to go into

effect on April 1, 2018.

I have been involved with helping claimants on their ERISA claims for over a decade now,

and have represented people across the country seeking benefits promised by their

employers and insurers. I am a licensed attorney in the states of Oregon and Tennessee,

and operate Evergreen Disability Law in Portland, Oregon, which is primarily focused on

ERISA Long Term Disability claims. I operate within the Department’s regulatory scheme

on a daily basis, and I am intimately familiar with how those regulations affect my clients.

While I am grateful for the opportunity to comment on the Department’s re-examination of

the costs of the final rules governing disability claims, the concerns raised by the industry

are not new. Rather, these objections appear to be simply re-argument of the merits of the

final rules. Where those rules are based on policy choices that have been made by Congress,

by this Department, and by the federal courts interpreting ERISA, another argument about

the merits is unnecessary.

Nevertheless, I will address the objections that have been raised that I feel are most in need

of a response.

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Costs

WillNotIncrease

The industry claims if the final rules go into effect there will be an increase in costs that will

increase premiums resulting in less access to disability benefits. These assertions do not

ring true.

This costs argument was made in various industry comments to the proposed rules before

final adoption. The Department concluded that costs would not outweigh the benefits. The

current cry of increasing costs is an argument that has already been considered and

rejected. An agency is not required to "conduct a formal cost-benefit analysis in which each

advantage and disadvantage is assigned a monetary value." Michigan v. Environmental

Protection Agency, 135 S. Ct. 1699, 2711 (2015).

Nonetheless, the Department has asked for data addressing whether costs increased in

response to the last set of rules applying to ERISA disability plans that became effective in

2002. In fact, the Department can rely upon information supplied by its own Bureau of

Labor Statistics. https://www.bls.gov/opub/btn/volume-4/disability-insurance-plans.htm.

The data shows that access and participation in employer-based disability insurance has

increased, not decreased, between 1999 and 2014. This increase occurred despite that

employment in the service industry has increased, an industry in which employees are the

least likely to have access to employer-based disability coverage. This increase also

occurred despite the 2000 disability claims regulations and a series of court decisions

addressing conflicted decision-making, deemed exhaustion, the need to discuss and explain

adverse benefits decisions, and the participants’ right to respond to new evidence. I would

therefore be suspicious of any data supplied by the industry now that suggests employers

would abandon disability coverage due to the costs of codifying these principles. This BLS

document also demonstrates that the cost of disability insurance is extremely modest.

Thus, even if costs did increase, the increase would be so small that it is unlikely to make

any difference.

The Department has also asked for data about whether disability premiums increased in

response to the adoption of statutory bans on discretionary language clauses in disability

policies by some states. Notably, during the time period of the BLS study, many states

enacted discretionary clause bans. This includes but is not limited to Arkansas Admin. Code

054.00.101-4 (2013); Cal. Ins. Code §10110.6 (2012); Colo. Rev. Stat. §16-3-1116 (2008);

50 Ill. Admin. Codes 2001.3 (2005); Md. Code ann. Ins. §12-211; Mich. Admin. Codes. R.

500.2201-2202 (2007); R.I. Gen. Law §§ 27-18-79; Tex. Admin. Code §3.1202-1203; Tex.

Ins. Code §1701.062, §1701.002 (2011); WAC §284-96-012 (2009). Notwithstanding these

statutory developments, access and participation in disability plans increased according to

the BLS data.

Also, during the period covered by the BLS document, two major insurers with significant

market share, UNUM and CIGNA, were examined by the states for poor claims handling and

became subject to fines and Regulatory Settlement Agreements that raised the bar for their

claims administration.

http://www.maine.gov/pfr/insurance/publications_reports/exam_rpts/2004/unum_multi

state/unum_multistate.html;

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http://www.maine.gov/pfr/insurance/publications_reports/exam_rpts/2009/pdf/cigna_

mcreport_2009.pdf.

https://www.insurance.ca.gov/0400-news/0100-press releases/2013/release044-13.cfm.

Nonetheless, during this period access and participation increased.

Given this history, I dispute any claim that costs will increase in response to the modest

changes in the final rules. Accordingly, I urge the Department not to change the final rules

in response to the industry’s strained logic that the costliness of the final rules will impact

access to disability benefits in the workplace.

TheBenefitsOutweightheCosts

The Department is not required to avoid all regulations that affect the market in some way.

Mkt. Synergy Grp. v. United States Dep't of Labor, 2016 U.S. Dist. LEXIS 163663, 2016 WL

6948061 (D. Kan. 11/28/2016). As well, it is not clear that, whatever the costs of the final

rules, they would outweigh the benefits. The Department has already articulated its

purposes – to make sure claims are fairly adjudicated and to prevent unnecessary financial

and emotional hardship. The Department should ignore the industry's invitation to

abandon these purposes. Moreover, these benefits cannot be outweighed by costs where

the ERISA process is already so slanted in favor of the plan administrators.

ERISA disability claimants who are denied their benefits face a process that is far below the

standard for regular civil disputes. These procedural hurdles include: (1) there are no jury

trials; (2) there is a closed record from the claims process that can rarely be supplemented

in litigation; (3) courts often apply an unfavorable standard of review, and (4) there are no

remedies to discourage unfair and self-serving behavior on the part of plans. This will

never be a level playing field much less one that favors plan participants. United States v.

Aegerion Pharmaceuticals, Inc., 2017 WL 5586728, at *7 (D.Mass. 11/20, 2017)("The

insurance industry found it could largely immunize itself from suit due to the Employee

Retirement Income Security Act (“ERISA”).) Even with the final rules in place, plan

participants will not have achieved the “higher-than-marketplace standards” that the

Supreme Court insists are required in processing ERISA claims. MetLife v. Glenn, 554 U.S.

105, 115 (2008). Any consideration the Department makes about the benefits of the final

rules relative to costs should take this “higher-than-marketplace” expectation into account

and acknowledge that ERISA exists to protect plan participants.

The Department has already acknowledged that the disability claims industry has been

needlessly adversarial toward ERISA disability plan participants and has received many

comments to that effect. The industry's argument that the final rules are bad for

participants – despite all evidence to the contrary – cannot be taken seriously. The

industry is not a credible advocate for participants.

Furthermore, from the perspective of plan participants, an inexpensive but illusory

disability plan is worse than no plan at all. It is important to note that when a disability

claimant is unfairly denied benefits that he/she thought was promised through an

employer's plan, it is too late to go out and purchase private individual insurance to cover

www.evergreendisability.com

465 NE 181st Avenue, No. 500 Phone: 503-836-1036

Portland, Oregon 97230 Fax: 503-836-1870
the risk of becoming destitute. Disabled claimants are often shocked when they are told

about ERISA's procedural hurdles. So, to the extent that increased protections bring

disability claims administration in line with the reasonable expectations of the

employee-participants, the costs are outweighed by the benefits. If there are costs

associated with the final regulations, these costs could and should be tolerated in the name

of supplying a modicum of protection for plan participants.

RequiringthePlantoDiscusstheBasisforDisagreementwithSocialSecurity

DecisionsorOtherContraryOpinionsisNotCostly.

This rule merely requires disability plans to observe a fundamental due process principle

that is imbedded in ERISA—namely the principle that a claimant is entitled to a

well-articulated explanation for the adverse benefits decision so that the participant may

fairly dispute it. The 2000 regulations require no less.

As the Department has already noted, it is doubtful that there are costs associated with the

requirement of discussing the reasons for disagreeing with a favorable Social Security

decision. ERISA disability benefits have always been deeply intertwined with the Social

Security system and mostly are simply supplemental to Social Security benefits. Most

disability plans require claimants to apply for the SSA benefit, and the plans usually

provide representation for claimants before the SSA. This is done so that the plan may take

advantage of the plan term that the SSDI benefit will offset the LTD benefit. Indeed, in

many cases the ERISA disability benefit is de minimis or non-existent once this offset is

taken. In order to decide which claimants qualify for this representation, plan claims

handlers need to know the standard that the SSA uses. Comment #114, p.8 (ACLI).

Disability claims administrators’ operational manuals devote many pages to deciding

whether the claimant is disabled enough to be referred to counsel for representation

before the Social Security Administration, and how to offset or recover the benefits once

they are successful, and how to express all of this to the claimant.

To the extent that the industry argues that increasing the cost of disability insurance will

burden the government, and more specifically the SSA, the Bureau of Labor Statistics

publication speaks to this:

It is important to note that expanding access to employer-provided disability insurance

would not necessarily relieve the burden on SSDI. The ability to access disability insurance

does not affect a worker’s eligibility for SSDI. People can receive SSDI benefits and

long-term disability payments, but the private disability insurance payment is usually

reduced by the amount of the SSDI payment.

https://www.bls.gov/opub/btn/volume-4/disability-insurance-plans.htm.

Additionally, the disability plans and insurers are required in many jurisdictions to discuss

why they are denying a disability claim when the Social Security Administration awarded

benefits under an obviously more strenuous standard. Montour v. Hartford Life & Acc.Ins

Co., 588 F.3d 623, 635-637 (9th Cir. 2009); Salomaa v. Honda Long Term Disability Plan,

642 F.3d 666, 679 (9th Cir. 2011); Bennett v. Kemper Nat. Services Inc., 514 F.3d 547,

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553-554 (6th Cir. 2008); Brown v. Hartford Life Ins. Co., 301 F. App'x 777, 776 (10th Cir.

2008). As a matter of Supreme Court precedent, it is arbitrary and capricious for the claims

administrator to advocate for Social Security benefits, reap the benefit of the Social Security

award by means of an offset, and then ignore the SSA’s determination. Metropolitan Life v.

Glenn, 554 U.S. 105 (2008). As the industry comments often acknowledged, requiring an

explanation of the reasons for disagreeing with the Social Security decision and other

contrary evidence tracks the existing standard. Logically, it should not increase costs to

simply codify this standard.

A rule clarifying that an explanation of the basis for disagreeing with a Social Security

decision is a requirement will increase uniformity and predictability in the process, which

is generally associated with costs savings and not cost increases.

TheDeemedExhaustedRuleisNotCostly

The industry’s concern about this rule seems to be that plaintiffs and their attorneys will

race into court, increasing the volume of ERISA litigation and hence the overall costs of

administering disability claims. This is incorrect. Plaintiff’s attorneys are ever mindful of

building a record on which the court will make its decision and therefore would rather

engage in the appeal process and exhaust internal remedies. This serves the dual purpose

of possibly resolving the dispute and creating a record for the court to review in case the

dispute cannot be resolved internally. Under the final rule, the plaintiff will mostly obtain a

remand with instructions for the plan to do its job. Because plaintiff’s attorneys usually

work on a contingent fee basis, it does not make sense to undertake litigation that is not

absolutely necessary and that will not result in resolving the case on the merits.

Further, a court will only award attorney fees for litigation where the plaintiff has achieved

some degree of success on the merits. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242,

255 (2010). In other words, the industry comments are seriously out of step with litigation

in the real world and how the incentives are aligned to discourage litigation. While this

rule may appear to create additional trips to court, it will not do so except in the most

extreme cases. My understanding was that addressing these extreme cases was the

purpose of the final deemed denied rule.

Additionally, as with most of the other final rules, this rule is simply a codification of

existing judge-made law. Claimants are already able to get into court when the claims

process has failed them in a meaningful way. See e.g. Brown v. J.B. Hunt Transp. Servs., 586

F.3d 1079, 1085-86 (8th Cir. 2009) (failure to respond to request for documents excused

claims from exhaustion requirement because there was no full and fair review). It is not

likely that additional costs will result from this regulation. Hall v. National Gypsum Co., 105

F.3d 225, 231-32 (5th Cir. 1997); LaAsmar v. Phelps Dodge Corp. Life, 605 F.3d 789 (10th

Cir. 2010); Nichols v. Prudential Ins. Co. of Am., 406 F.3d 98 (2d Cir. 2005); Jebian v.

Hewlett-Packard Co. Employee. Benefits Org. Income Prot. Plan, 349 F.3d 1098 (9th Cir.

2003); Dunnigan v. Metropolitan Life Ins. Co., 277 F.3d 223, 231 n.5 (2d Cir. 2002).

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Providing

theRighttoReviewandRespondtoNewEvidenceorRationaleFromthe

PlanDuringtheAppealReviewisNotCostly.

This rule is fundamental to full and fair review. The Department has already acknowledged

the importance of this rule and that it is already the standard in some jurisdictions. The

industry complains that providing the claimant with new evidence or rationales before

making a final decision is costly. The industry’s claim to cost impact is suspect for several

reasons.

First, several disability plans or insurers already provide for the right to review and

respond. They do so on a voluntary basis, as their comments to the proposed rules showed.

Second, courts require plans or insurers to do this in many cases. Last, whether they

provide this information to the claimant during the ERISA appeal process, they will have to

provide it eventually in one form or another. New reasons or evidence will need to be

included in the claim file and likely again in 26(a)(1) disclosures. Thus, the industry's

portrayal of the chaos that might ensue if they were required to supply these documents is

not credible. If the issue is the cost of mailing, such a concern should not be permitted to

interfere with such basic a due process right.

It is important to note what this rule does. It permits a claimant to respond to a disability

claims administrator’s assertions in a way that will make the response a part of the record

if the claimant has to go to court to vindicate his/her rights. This is because most ERISA

cases are decided on a closed record. Without this rule, the claims administrator’s new

evidence or rationale will be included in the record that the court reviews, but the

claimant’s rebuttal will not. Perhaps what the industry is really concerned about is the loss

of its ability to strategically withhold information that would help the claimant achieve

reversal or win his/her case in court.

There is no question in my mind, after years of experience representing ERISA claimants,

that the ability to sandbag the claimant with a new medical opinion that he/she cannot

refute, or a new plan provision to rely upon that he/she cannot counter, is a prized device

in the disability claims industry. In my own experience, claim administrators frequently

wait until after the claimant has submitted his or her favorable evidence to develop the

medical evidence supporting their own denial rationale. When one appeal is all that’s

allowed (as is typically the case), this leaves claimants seeing the evidence against their

claim for the first time after the administrator’s final denial has been issued, and with no

opportunity to rebut it. The final rule needs to be kept in place to prevent this behavior

from stamping out otherwise meritorious disability claims.

If the industry’s concern is that the claims handlers need to do more in the same amount of

time, this could be addressed by modifying the rule instead of eliminating the rule

altogether. Commenters from both sides have suggested as much.

I also dispute the industry’s comments to the effect that a second appeal, which is offered

with some plans, serves the same purpose as the right to respond to new evidence or

rationales before a final decision. This is clearly not true, as a second appeal permits the

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claims administrators the same sandbagging opportunity as the first appeal. Second

appeals are not necessarily a boon to plan participants. Additionally, second appeals are

not universal and are not required. The second appeals that the industry touts are a matter

of plan design and can be changed at any time by plan sponsors. It may be that second

appeals will become obsolete where the claimant has a true right to respond.

OtherProvisions

The Impartiality Rule

Few industry commenters complained about the proposed rule requiring that consulting

experts be impartial. Comment #76 (UNUM), Comment #92 (NFL), Comment #129 (AHIP).

This muted objections are understandable, since it is hard to argue that disability claims

administrators should be free to hire biased experts. The majority of those who object to

this rule admitted that the proposed rule reflects the existing law. Comment #76, (UNUM),

Comment #92 (NFL). The industry complaints seem to be based on the fear of increased

litigation, particularly in the form of discovery. First, federal judges are well versed at

limiting discovery in ERISA cases in proportion to the needs of the case. See e.g. Paquin v.

Prudential Ins. Co. of Am. 2017 WL 3189550 (D. Colo. 7/10/2017); Heartsill v. Ascension

Alliance, 2017 WL 2955008 (E.D. Mo. 7/11/2017; Ashmore v. NFL Player Disability and

Neurocognitive Benefit Plan, 2017 WL 4342197 (S.D. Fla. 9/27/2017); Baty v. Metropolitan

Life Ins. Co., 2017 WL 4516825 (D. Kan. 10/10/2017); Harding v. Hartford Life and Accident

Ins. Co., 2017 WL 1316264 (N.D. Ill. 4/10/2017); Hancock v. Aetna Life Ins. Co., 321 F.R.D.

383 (W.D. Wash. 2017); Kroll v. Kaiser Foundation Health Plan Long Term Disability Plan,

2009 WL 3415678 (N.D. Cal. 10/22/2009). Next, if the impartiality rule is already the law,

it is not clear how more discovery would result from codifying it. Additionally, the

credibility of experts who are opining on whether a claimant qualifies for benefits should

be subject to some sort of scrutiny. If a claimant needs to conduct discovery into whether a

physician hired by the administrator is well-known to support denials, the cost of

conducting this discovery cannot possibly outweigh the benefits. ERISA claimants are

entitled to a process that does not have a predetermined outcome based on which

reviewing physician is hired by the plan. This final rule addresses a serious problem in the

ERISA disability claims process and should remain.

The Rule Requiring Disclosure of any Internal Limitations Period

Few industry commenters focused on the final rule requiring claims administrators to

provide the claimant with the date when any internal time limit for filing suit will expire. I

am assuming, therefore, that these objectors are not claiming that this rule has a cost

impact. The claims administrators are in a position to satisfy this rule, since the expiration

date of an internal limitations period is essentially a plan term that should be accessible to

the plan administrator and not be hidden from unsuspecting plan participants. As with

most of the final rules, information respecting the period of limitations is required to be

disclosed in several jurisdictions, so it is unlikely to incur additional costs to create

uniformity. Santana-Diaz v. Metro. Life Ins. Co., 816 F.3d 172, 179 (1st Cir. 2016); Moyer v.

Metro. Life Ins. Co., 762 F. 3 503, 505 (6th Cir. 2014); Mirza v. Ins. Adm'r of America, Inc., 800

F. 3d 129, 134 (3d Cir. 2015).

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The Rule Requiring Disclosure of Internal Guidelines

Few commenters objected to the proposed rule requiring claims administrator to disclose

internal guidelines or certify that none exist. Comment #50 (DRI), Comments #76 (UNUM).

These commenters complained that internal guidelines tend to be procedural rather than

substantive, implying that the guidelines are irrelevant. As this lengthy rulemaking process

has shown, procedure affects substantive outcomes. So even if internal guidelines are

procedural, that is no reason to withhold those guidelines from claimants. The disclosure

of claims manuals and internal guidelines, which often contain additional plan terms that

are hidden from the ERISA participants, will ultimately cut down on litigation, since

discovery of these documents is often disputed. See Glista v. Unum Life Ins. Co. Of Am., 378

F.3d 113, 123-125 (1st Cir. 2004); Mullins v. AT&T Corp., 290 Fed. Appx. 642, 646 (4th Cir.

2008).

Conclusion

Overall, the regulations that were previously adopted by the Department should be allowed

to go into effect as written and as scheduled. The costs, to the extent they exist at all, are far

outweighed by the benefit to claimants, most of whom have no concept of the procedural

burdens involved in these claims before they are in a position of great medical and financial

need. Lessening these burdens and encouraging openness in claims communication can

only have a positive effect on the industry as a whole. I encourage the Department not to

change or delay the regulations any further.

Very Respectfully,

Jeremy L. Bordelon

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465 NE 181st Avenue, No. 500 Phone: 503-836-1036

Portland, Oregon 97230 Fax: 503-836-1870