DOL Settlement Provides Roadmap for Handling Supplemental Life Benefits

On Wednesday, April 19, the U.S. Department of Labor (DOL) announced a settlement with Prudential Insurance Company of America (Prudential), the terms of which signal what DOL will be looking for from insurers, plan administrators, and recordkeepers in their administration of supplemental life insurance benefits. 

The settlement resolves a DOL investigation into Prudential's denials of supplemental life insurance claims based on deficient or absent "evidence of insurability" (EOI), despite its having collected premiums for the extra coverage, sometimes for years. Supplemental group life insurance policies, such as the ones at issue in the Prudential investigation, generally require that the covered employee (or the employee's dependent for dependent coverage) submit EOI to the insurer, establishing that the employee (or dependent) is in good health before the coverage goes into effect. Many policies place the responsibility for securing and submitting EOI on third-party recordkeepers or an employer or plan administrator when acting as a recordkeeper. 

According to the settlement agreement, Prudential denied benefit claims on the basis that EOI was not properly submitted or approved, "despite the employer deducting the premium from the employee's pay and forwarding those amounts to Prudential." DOL contends that Prudential was an ERISA fiduciary with a duty to "ensure that it makes eligibility determinations ... for supplemental coverage at or near the time Prudential receives premiums for such coverage."  Prudential neither admits nor denies that it is an ERISA fiduciary or that it failed to discharge any fiduciary duties, according to the settlement.

Under the settlement, Prudential agrees not to deny supplemental coverage based solely on EOI when it has received premiums for the coverage for three or more months. When Prudential has received less than three months of premiums and denies coverage due to a lack of EOI, it agrees to return the premiums and give notice of the basis for denial. That notice must also contain instructions to the beneficiary to contact Prudential if more than three months of premiums or EOI were submitted. The settlement also allows Prudential to request missing EOI from living enrollees up to one year from when it first received premiums for supplemental coverage from the enrollee, but it cannot base its eligibility determinations on information related to the health status of an enrollee after the first date of receipt of those premiums. If eligibility is denied under such circumstances, Prudential must return all premiums it collected.

Employers and those responsible for plan administration and recordkeeping should take heed that under the agreement, Prudential must notify ERISA group life insurance policyholders that they must not collect any premiums from any employee or their eligible dependent for supplemental coverage that requires EOI without first confirming that Prudential has approved the employee's or their eligible dependent's EOI, and that in the event they collect premiums from any employee for supplemental coverage that requires EOI without first confirming that Prudential has approved such EOI, they may be liable to the beneficiaries of any such employee or their eligible dependent. The settlement expressly states that Prudential's coverage denials are "without prejudice to any claims an employee or their eligible dependent's beneficiary may assert against any party other than Prudential," signaling that employers, plan administrators, and third-party recordkeepers may still be liable for any improper handling of EOI. 

DOL's investigation found that from 2017-2020, Prudential denied more than 200 claims for supplemental life insurance based on the failure to provide EOI. The DOL press release announcing the settlement states that Prudential will voluntarily reprocess denied claims dating back to June 2019 and provide benefits for the claims previously denied based solely on lack of EOI. 

Plans should review their procedures and practices relating to the handling of EOI to ensure they comply with the terms of the supplemental insurance policies and the expectations of DOL set forth in the recent settlement agreement. As the settlement makes clear, employers, plan administrators, and recordkeepers will continue to face potential liability when EOI and eligibility determinations are not properly administered and benefits are denied. 

Mifepristone Access Remains Up in the Air

Last week, we reported on the uncertainty created by dueling decisions issued on April 7, 2023 – one by Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas, and another by Judge Thomas Rice of the Eastern District of Washington – addressing the FDA's 2000 approval of the abortion medication mifepristone. Judge Kacsmaryk preliminarily enjoined the FDA's approval of the drug, whereas Judge Rice did the opposite and preliminarily enjoined the FDA from "altering the status quo and rights as it relates to the availability of [m]ifepristone."  

On April 14, two days after a three-judge panel of the Fifth Circuit partially blocked Judge Kacsmaryk's decision, the U.S. Department of Justice (DOJ) and the drug's manufacturer, Danco Laboratories, LLC, asked the Supreme Court to pause the court-ordered restrictions. That request went to Justice Samuel Alito, who is assigned to handle emergency matters from the Fifth Circuit and who administratively stayed Judge Kacsmaryk's decision and preserved the status quo "until 11:59 p.m. (EDT) on Wednesday, April 19, 2023." Justice Alito also ordered "that any response to the application [for a stay] be filed on or before Tuesday, April 18, 2023, by 12 p.m. (EDT)."  

Along with the Alliance for Hippocratic Medicine's response and subsequent replies from the FDA and Danco, more than two dozen amicus briefs were filed. On the afternoon of April 19, Justice Alito entered a second administrative stay "until 11:59 p.m. (EDT) on Friday, April 21, 2023."  

Upcoming Speaking Engagements

Joanne Roskey will present, as part of a panel, "No Surprises Act Enforcement: How to Prepare for a DOL Audit," an ABA webinar on April 25, 2023, at 1 p.m. ET. This program will discuss the No Surprises Act (NSA) and how it impacts ERISA plans and their administration.

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