Can ERISA Complicate Health Insurance Claims?

A federal law that became an Act in 1974, the Employee Retirement Income Security Act of 1974 (ERISA) regulates retirement and employer-sponsored health plans to provide protection for those who are enrolled in the plans. The law, which falls under the purview of the U.S. Department of Labor, protects retirement savings from mismanagement and abuse, in addition to protecting health care and other employee benefits. With nearly 136 million enrollees, health plans regulated by ERISA are a major part of the U.S. health insurance industry.

how does ERISA work?

Plan administrators are required to be transparent with enrollees and provide them with a summary plan description (SPD) that includes information on plan rules, financial information, as well as plan management and operation. ERISA requires:

• That plans provide enrollees with plan information, including plan features and funding
• Minimum standards for participation, vesting, benefit accrual and funding
• Provides fiduciary responsibilities for those who manage and control plan assets
• That plans establish a grievance and appeals process, so participants get benefits from their plans
• Ensure participants have the right to sue for benefits and breaches of fiduciary duty
• If a benefit plan is terminated, guarantee payment of certain benefits through Pension Benefit Guaranty Corporation  

Participants can also expect a summary annual report each year, which summarizes the plan’s annual financial information, either from the plan administrator (free of cost) or by submitting a request to the U.S. Department of Labor (for nominal copying charges).

So, What Are Some Problems With ERISA?

ERISA is built with the mission of creating a special class of protected plans, which clashes with the Affordable Care Act (ACA) that aims to create more uniformity. As a result, some health plans are protected by ERISA and are not subject to state-mandated benefit laws. While ERISA-regulated health plans have largely remained untouched by the ACA, some reforms were required:

• Employers with 50 or more full-time employees are required to offer affordable health insurance to their employees who work at least 30 hours/week
• Out-of-pocket costs have to be capped (it was $8,159 for an individual and $16,300 for a family in 2020)
• No lifetime limit on essential health benefits
• Coverage for all pre-existing health conditions
• Children can remain on the parent’s plan till they turn 26

Group health plans (employer-benefit plans), which are managed by an insurance company on behalf of large employers (where the employer is actually the insurer), are required to be managed at the federal level, whereas other private plans are regulated by state laws. State laws mandate additional benefits than federal laws, and ERISA protects many plans from these requirements. This often leads to ERISA-regulated plans denying reimbursement and disability claims.

insights from legal specialist

During a conversation with Patients Rising about ERISA, Glenn Kantor, Founding Partner, Kantor & Kantor LLP, said that patients with chronic conditions who want to go on disability are often challenged by the heath plan on their ability to work. “They use ERISA as a sword and a shield,” Kantor explained. Often, when a disability claim is denied, the enrollee has 180 days to approach the reinsurance company to reconsider the denial before filing a lawsuit. According to Kantor, most people are unaware of this or how to go about challenging the denial and a majority will simply give up. When health care claims are denied, such as replacing a brand name drug with a generic drug, Kantor said that patients will typically just accept the replacement and not fight against their health plan.

Guidance for Patients With Chronic Conditions

Kantor shared the following tips regarding ERISA and those on employer-sponsored health insurance:

• Be transparent about your chronic condition with your employer. Inform your supervisor or HR if you are struggling with health issues.
• Be transparent about the severity of your health condition with your healthcare provider
• When making a claim with your health insurance plan, consult with an ERISA lawyer

Here Are Some Additional Resources:

Detailed guidance on filing a claim for your retirement benefits.

Answers to commonly asked questions about retirement plans.