The basic concept of insurance is that it functions as a pooling of risk for policyholders and the insurer. Policyholders pay into a common fund to be drawn upon at a later date if needed. The money in the common fund belongs to policyholders and the insurer earns a fee for managing it. However, in application, the insurer regards income generated from premiums as its own and works steadfastly to avoid returning it to policyholders. This means claims made by policyholders are often denied.
A compliant denial letter
A claim denial letter, while not the desired response, still provides valuable information for the policyholder. When a claim is denied by an insurer, ERISA requires the denial letter to include the specific reasons for the denial that are written in a way that can be understood by a layman.
The denial letter must include the insurance plan provisions for the denial and what additional information the company would need to consider a different determination on the claim. The letter also needs to include information regarding how a plan participant can submit an appeal.
Recovery of benefits
Policyholders may wish to take action when they have been denied benefits, the insurer violated the plan or there was a breach of fiduciary duty. Before filing a lawsuit, all administrative procedures available under the plan should be completed.
Plan administrators are required to follow the procedural rules governing the administration of benefits. These procedures must be compliant with federal laws and regulations. Under these regulations, both plan participants and beneficiaries can recover benefits under the terms of the plan. Other damages awarded include the recovery of attorney fees and equitable relief, which are awarded on a case by case basis.
Timelines plan administrators must follow
In order to be compliant with ERISA regulations, plan administrators are required to handle claims decisions within 90 days, but they can request one 90 day extension. For disability claims, a decision must be made within 45 days and two 30 day extensions can be requested. A review request needs to be filed within 180 days of the claim denial.
While the financial interests of an insurance provider so frequently contradict the interests of policyholders, failure to uphold the terms of the plan is inexcusable. If your claim has been denied, seeking legal counsel will aid you in your fight for just compensation.