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

The Deemed Exhausted Rule is Not Costly

The industry’s concer 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


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Employee Benefits Security Administration
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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.

The Rule Reguiring 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. 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).

The Rule Requiri is Inter! uidelines

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 (1s Cir. 2004); Mullins
v. AT&T Corp., 290 Fed. Appx. 642, 646 (4in Cir. 2008).

Thank you for the opportunity to be heard on these very important issues. Feel free to contact me
with any questions.

Very truly yours,
JEFFREY C. METZGER

A Law Corporation
JCM/


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Employee Benefits Security Administration
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Page 4

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 the risk of becoming destitute. Disabled
claimants are often shocked when they are told about ERISA's procedural hurdles, many of
whom unwittingly have failed to comply though giving their best efforts. But, it is difficult for
them when the insurers do not tell them of their right to an attorney (or worse, tell them that the
do not need an attorney), or they are trying to appeal a claim denial on their own though not
provided with the required notifications that the current regulations require. 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.

Requiring the Plan to Discuss the Basis for Disagreement with Social Security Decisions or
Other Contrary Opinions is Not Costly.

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


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Employee Benefits Security Administration
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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. | take it that
addressing these extreme cases is 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 (Sth 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).

Providing the Right to Review and Respond to New Evidence or Rationale From the
Plan During the Appeal Review is Not Costly.

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 ona
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 chafing 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.


Lo oA OW O F

CT METZGE

December 11, 2017
Sent by email to e-ORI@dol.gov

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 am an attorney who has represented claimants seeking disability insurance benefits governed by
ERISA for over 30 years. | was prevailing attorney in Laventure v. Prudential Insurance
Company, 237 F.3d 1042 (9" Cir. 2001), Cisneros v. UNUM Life Insurance Co. of America, 134
F.3d 939 (9" Cir. 1998), and Sandy v. Reliance Standard Insurance Company, 222 F.3d 1202 (9"
Cir. 2000), all of which established important principles protecting the rights of ERISA
claimants.

While | 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, | will address the objections that have been raiscd that I feel are most
in need of a response

Costs Will Not Increase

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 are false.

5120 CAMPUS DRIVE ¢ SUITE 150 ¢ NEWPORT BEACH, CA 92660 ¢ (949) 756-1196 * FAX (949) 756-0830

mail@metzgerlaw.com www.metzgerlaw.com



Office of Regulations and Interpretations,
Employee Benefits Security Administration
December 11, 2017

Page 7

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. / see it in virtually every case in one fashion or another. The final
tule 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 claims administrators the
same sandbagging opportunity as the first appeal. They just wait a little longer.

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.

Other Provisions
ta rtiality Rule

Few industry commenters complained about the proposed rule requiring that consulting experts
be impartial. Comment #76 (UNUM), Comment #92 (NFL), Comment #129 (AHIP). 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


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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 III. 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_multista
te/unum_multistate.html;
http:/Awww.maine.gov/pfr/insurance/publications_reports/exam_rpts/2009/pdf/cigna_mer


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Employee Benefits Security Administration
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eport_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, 1 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.

The Benefits Outweigh the Costs

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