Having an employee benefit plan gives you peace of mind and ensures that you retire in relative comfort. As beneficial as these plans are, insurers deny claims without giving a valid reason.
The Employee Retirement Income Security Act (ERISA) is a federal law that was enacted in 1974 to protect beneficiaries such as you against being exploited by private insurance providers.
Overview of ERISA
In the years since its enactment, ERISA has been reviewed a few times to make it as comprehensive as possible. It’s important to note that this law doesn’t mandate your employer to have a health benefit plan in place but rather sets rules for how such plans are to be administered should they be in place.
Various federal government agencies are tasked with interpreting and enforcing ERISA including the Internal Revenue Service (IRS), the US Department of Labor as well as the Pension Benefit Guaranty Corporation (PBGC).
ERISA does not cover group health plans set up by public entities or faith-based organizations for their employees. The same is true for projects that are set up for the sole purpose of complying with unemployment regulations, disability laws or applicable workers compensation.
Notable Amendments to ERISA
These are some of the most notable changes to ERISA that have had an impact on health coverage plans:
- Consolidated Omnibus Budget Reconciliation Act (COBRA) passed in 1985. It allows you to continue enjoying the benefits of health insurance coverage while in between jobs. Your coverage doesn’t automatically expire just because you’ve resigned or have been fired.
- Health Insurance Portability and Accountability Act (HIPAA) enacted in 1996. This law removed some restrictions concerning pre-existing medical conditions.
- Newborns' and Mothers' Health Protection Act, also known as the Newborns' Act. Passed in 1996, it specifically addresses health plans that offer maternity coverage. After childbirth, this law compels your insurer to pay for a minimum of either 48 or 96 hours hospital stay, depending on whether you gave birth naturally or via cesarean section.
- Mental Health Parity and Addiction Equity Act (MHPAEA). Enacted in 2008, this amendment requires health coverage providers to treat mental health conditions like any other illnesses. It removed previous restrictions that insurers placed on policyholders with mental health and substance abuse disorders.
- Women's Health and Cancer Rights Act (WHRCA) came into law in 1998. The amendment requires insurers who provide coverage for a mastectomy to also provide coverage for breast reconstructive surgery as well as other medical needs that might arise from the procedure.
Apart from a few exceptions, ERISA overrides state laws that relate to private health care plans.
How ERISA Protects Your Benefits
Unfortunately, some insurers have been known to act in bad faith and deny your claims on flimsy grounds.
ERISA grants you certain guarantees that go a long way in protecting your policy. Some of them include:
- Access to all documentation relating to any healthcare plan you sign up. This contains relevant information regarding the plan’s features as well as cost.
- An established code of conduct regarding your relationship with plan fiduciaries. You have the right to sue the fiduciary if they mismanage your plan.
- Well-articulated legal remedies in case an insurance provider acts in bad faith.
What Plans are Covered under ERISA?
In the past, private companies had different insurance plans for their employees. This gave them a lot of flexibility in determining the benefits available to beneficiaries. With the passing of ERISA, the private insurance sector became streamlined to the employee’s benefit. Today various plans are protected by the Act, including:
- Health care plans
- 401(k) and pension plans
- Short- and long-term disability plans
- Long term care insurance plans
- Life insurance plans
- Housing assistance plans
- Prescription drug plans
- Health reimbursement accounts
This list is not complete because the available plans differ from one employer to the next and also depends on your needs as a potential policyholder.
What is Required of Plan Administrators under ERISA?
The law largely exempts you from the many regulatory requirements set by ERISA. The company you have a policy with acts as plan administrator and is responsible for complying with regulations. There are three significant aspects of this compliance:
- Reporting: Plan administrators are required to file accurate and up to date information about your policy with both the IRS and the Department of Labor.
- Disclosure: They should share information with both regulators and beneficiaries whenever the parties request for it.
- Paying claims: ERISA requires administrators to have a mechanism for processing claims for benefits. They should also promptly inform you in case your request is denied. A denial notice must include the reasons for denial as well as point out the exact policies that informed this decision.
Options for Receiving Your Benefits
ERISA provides you with three primary options for receiving your benefits:
- As a single or lump sum payment.
- As a transfer to a new employer’s insurance plan.
- As a transfer to an Individual Retirement Account (IRA)
While you might be tempted to opt for a lump sum payment, you should know that this option might attract an income tax. This applies especially to beneficiaries who are below 59 ½ years old and choose not to transfer their funds to another employer’s plan or IRA.
What is Expected of Plan Fiduciaries?
ERISA expects fiduciaries to act in the best interests of the parties involved in the plan. They are also likely to avoid conflict of interest by performing their duty skillfully, diligently and in a transparent manner.
Since your fiduciary is acting in your best interests, he or she is ideally expected to administer the plan in a way that increases the value of its assets and puts its expenses at a minimum.
If a plan makes losses due to a fiduciary’s failure to follow guidelines, they could be held liable for such losses.
Measures against Losing Benefits
The law requires your employer to inform you of any changes in their benefits policies. The legal jargon contained in such correspondence might confuse or overwhelm you to the point of ignoring such documents. This might prove costly in the future since you lose your benefits due to changes you weren’t aware.
Fortunately, you’re allowed to check the status of your plan at regular intervals. This is applicable whether you’re currently in employment, formerly employed or already retired and waiting for a payout. The Department of Labor encourages you to do this at least once every three years.
A document known as a summary plan description gives you a breakdown of your plan, contributions made so far as well as any changes that might have occurred to the policy. You can get this document by requesting for it from your employer or coverage provider.
Does ERISA Allow You to Sue?
Under the law, you can sue your plan fiduciary or benefits provider for various reasons, including:
- Denial of your benefits claims even after going through the appeals process.
- To compel them to furnish you with plan documents that you requested for but never received.
- To bring an end to activities by the policy provider that are in clear violation of ERISA.
- To clarify the terms of your contract with the provider.
Claiming Benefits under ERISA
Your summary plan description has detailed instructions for processing claims as well as appealing denied claims. The procedure you undertake will mostly depend on precisely what kind of benefit you’re pursuing. You should be sure about whether you want to apply for a lump sum, transfer to another plan or an IRA.
Most times, your company’s HR department will be more than willing to assist with this process. An essential first step is to ensure you meet all requirements as spelled out by the SPD. Such conditions include the number of years in employment, age at the time of application and the exact value of your plan.
After filing your claim, the law gives your provider 90 days to assess it before giving you feedback. This process will be concluded in less than 90 days. If for some reason your provider can’t process your claim within this period, you must be informed of the cause in writing.
The law grants your plan 90 more days to assess your claim, bringing the total to 180 days. If your application is denied after this extension, you must be informed of the specific reason why that decision was taken. Furthermore, you must also be furnished with the procedure for filing an appeal including the deadline.
How to Appeal a Denied Claim
Your claim might be rejected for a variety of reasons. These include:
- You have not participated in the plan for the required number of years.
- You do not meet the age requirements.
- More information is needed about you to proceed.
Apart from giving you a reason for denying your claim, the plan will also give you up to 60 days to launch an appeal against that decision.
Other than the claim denial notice, you’re also entitled to receive from your insurer all documents and any additional information that is deemed relevant to your appeal. Make sure to file your appeal within the recommended period.
The Appeal Process
An internal appeal by your provider shouldn’t take more than 60 days. If it takes longer, you’ll be notified in writing. The extended period should ideally last not more than 60 more days unless your appeal is being reviewed by a board of trustees. The board meets quarterly, meaning your request might last longer.
Once a decision is arrived at, you must be informed in a language you can easily understand to avoid any misunderstanding. If it’s another denial, you must be given a specific reason as well as the plan policies that informed the decision. The denial notice should also guide you on the next step to take.
If after following all these guidelines your claim is still denied, you should consider escalating the matter. If your plan has ignored your requests for documents or other clarifications you sought, you should report them to the Employee Benefits Security Administration (EBSA).
Only after exhausting all these options should you resort to a lawsuit.
ERISA’s Effects on the Health Insurance Industry
Denial of claims under ERISA doesn’t just affect the patient but physicians as well because it makes it harder for medical practitioners to claim reimbursements from insurers. Due to preemption, the Act also renders state laws powerless. So even if state law supports a policyholder’s right to sue for damages or other penalties, federal law takes away that right.
During a lawsuit involving an ERISA covered claim denial, the physician’s opinion doesn’t matter. The court will not require your doctor to testify on the importance of a medical procedure that was denied. Instead, only policy documents and those submitted during the appeal process will be considered.
Insurers offering ERISA-governed health plans also include clauses granting themselves broad powers to interpret policies which end up working against you the policyholder in the long run. An insurer who applies such broad interpretations is more likely to deny claims because they can only twist the meaning of a policy then accuse you of going against it.
To avoid being taken advantage of by cunning insurers, you should contact a lawyer who is conversant with ERISA even before getting to the litigation stage. Expert legal advice even during the review and appeal process bolsters your chances of succeeding should you opt for a lawsuit in future.
Some High-Profile ERISA Settlements
Litigation against unfair ERISA plans has been growing in the recent past. Some class action lawsuits have resulted in agreements worth hundreds of millions of dollars. Other than punishing insurers who act in bad faith such lawsuits force them to change their approach towards dealing with individual policyholders.
Lawyers who represent plaintiffs in such trials rarely ask for upfront fees instead they prefer to receive a percentage of any settlement fee awarded. This motivates them to work hard towards achieving the highest settlement possible as it will mean more for them in attorney fees.
In one of the most significant ERISA settlements ever approved against a single company, defense contractor Lockheed Martin was ordered to pay $62 million in favor of its employees. The company was accused of mismanaging specific plans offered to its employees as well as charging participants excessive fees that all but canceled any returns the programs might have earned said, employees.
From 2016 ERISA related lawsuits had new trends in the form of allegations made by participants against plans. Other than accusing plans of charging them excessive fees, they placed more emphasis on the way plan fiduciaries managed their funds.
As well as reminding employers and insurers to play fair, these lawsuits set precedents that your attorney can count on should you ever choose to sue for wrongful claim denial.
Why Hire an ERISA Lawyer?
ERISA is a complicated federal law that has broad applications. For that reason, it is susceptible to conflicting interpretations depending on the circumstances. Filing a lawsuit is also a complicated procedure that has many restrictions concerning time limits and submission of evidence.
State laws that would have otherwise protected you can easily get pre-empted by ERISA, which might work in favor of the company you’re suing. Just because ERISA is federal law doesn’t mean it’s interpreted and applied the same way across all states, so do not assume a one-size-fits-all approach will use in the litigation process.
Under ERISA, you’re not granted your Seventh Amendment right to a trial by jury. You do not have the opportunity to argue your case to a group of your peers who might turn out to be more sympathetic to your plight. Instead, you’ll do so at a bench trial where only the judge will decide your fate.
A judge who has presided over countless trials is more likely to treat your case like just another day at the office as opposed to a jury which might express more interest and empathize more with you. Unfortunately, federal courts have consistently maintained that ERISA cases should be heard at bench trials.
ERISA also does nothing to punish insurers in the event of wrongful death as a result of delayed benefit claims. Even if the courts prove that death could have been avoided had the company not denied the policyholder’s request, the plan will not be penalized for wrongful death.
For these and other reasons, it’s vital that you get a lawyer who understands the intricacies involved with ERISA lawsuits. A reasonable attorney also understands the peculiarities of every state’s interpretation of federal laws and can use this knowledge to present your case convincingly.
ERISA Benefits Denial Attorneys Near Me
ERISA benefits regulations are different from those of other insurance laws. As such you need a lawyer who is conversant with litigating under such unusual circumstances. Having a competent and experienced lawyer by your side will dramatically increase your chances of a favorable ruling.
At Stop Health Insurance Denial, our attorneys have years of experience and expertise concerning ERISA benefits litigation. We look forward to putting those skills to good use in defending your right to access the benefits you’ve worked for. You can reach us at 310-695-5241. We offer our services in California and all of the United States.