Under ERISA claims procedure regulations, group health plans must provide a “full and fair” review of all claims submitted by plan participants. These claims procedure regulations provide a list of minimum standards, including determinations within a certain timeframe, specific content requirements of adverse notifications, and the opportunity to submit evidence through an internal administrative appeal process.
When group health plan administrators do not adhere to claims procedure minimum standards, it is possible that the administrator did not provide the claimant the required “full and fair” review. The regulations provide instances under which claimants may seek judicial review without exhausting administrative remedies due to the administrator’s failure to strictly comply with minimum standards. Courts have also interpreted this “deemed exhaustion” provision to mean that administrators forfeit any delegated authority to interpret the plan, and as a result, courts must review the claims determination under the less deferential de novo standard.
On the other hand, courts have long held that so long as an administrator “substantially complies” with claims procedure minimum standards, the administrator does not forfeit a deferential (arbitrary-and-capricious) standard of review. But recently, courts have questioned whether due to changes to the claims procedure regulations in 2002 and 2011, this substantial compliance doctrine still aligns with the regulations.
Through litigation, claimants have argued that the 2002 regulations abrogated the substantial compliance doctrine because in the preamble, the Department of Labor (DOL) meant “to clarify that the procedural minimums of the regulation are essential to procedural fairness and that a decision made in the absence of the mandated procedural protections should not be entitled to any judicial deference.” In fact, the provision explaining the consequences for failing to follow the minimum procedural protections required “strict adhere[nce]” to the claims procedure requirements.
But in 2011, the DOL appears to have returned to the “substantial compliance” position following negative comments from employers, plan issuers, and plan sponsors. Specifically, the DOL stated procedural violations that are “de minimis,” “non-prejudicial,” “attributable to good cause or matters beyond the plan’s or issuer’s control,” “in the context of an ongoing good-faith exchange of information,” and “not reflective of a pattern or practice of non-compliance” will not permit a claimant to seek immediate judicial review and should not result in forfeiture of deferential review. The DOL amended the regulations accordingly.
Currently, the Tenth Circuit is set to hear a case in which the claimant requests the court abrogate the substantial compliance doctrine. In Ian C. et al v. UnitedHealthcare Insurance Company, the claimant’s opening brief relies on the 2002 version of the claims procedure regulations and, while references are made to the 2011 amendments, relies on case law applying the 2002 version.
Troutman Pepper will continue to monitor the briefing and hearing schedule and provide further updates.