What is ERISA?

An individual’s insurance claim often falls under a federal law called ERISA. This law dramatically curtails what a policyholder can do and how a policyholder can do it. In short, you have fewer rights under ERISA.

The Law Offices of Scott Glovsky takes non-ERISA cases

Teachers, first responders, police officers, firefighters, government employees, business owners, people working for religious organizations and individuals who obtain their own insurance are the people most likely NOT impacted by ERISA.

Non-ERISA insurance holders fall into one of five categories below:

You’re a Government Employee
• Employees of government entities – local, county, city, state, or federal
Individually Obtained Insurance Policy
• You purchased your own insurance as an individual, not part of any business
You Work For a Religious Organization
• Employees of religious organizations
You’re a Business Owner – And Your Policy Covers no Employees Other Than the Business Owners
• Individually issued to an owner of business where no other employee is insured under the policy

ERISA stands for the “Employee Retirement Income Security Act of 1974.” It is a federal law which was designed to federalize and unify the field of employee benefits and applies to most insurance obtained as an employee benefit from an employer. Originally ERISA was targeted at employee pension plans and provided employee protections. Over the years, the law has been amended numerous times and now covers most employer provided insurance benefits and does more to protect insurance companies than policyholders.

ERISA covers employer issued benefits including those related to pensions, life insurance benefits, disability insurance benefits and health benefits.

ERISA also set up a series of administrative procedures and standards of review that stripped most policyholders of the ability to sue an insurance company in a normal court of law. Think of ERISA as a different system with its own set of rules.

Limitation of Rights for Claims Under ERISA

Some of the restrictions apply to areas such as:

  • No jury trials
  • Not full trials
  • Breaches of the insurance contract
  • No suits for bad faith (the ability to get punitive damages – a huge incentive for good plaintiff attorneys)
  • Ability to sue an insurance company for its bad behavior
  • Pre-trial discovery (depositions, getting witness testimony, etc.)
  • Evidence admissible about the insurance company in a trial
 
These restrictions limit how badly an insurance company can be punished for wrongfully denying a claim. There is no penalty for behaving badly.

 

Employee Benefits Under ERISA

Under ERISA, employers or their agents must adhere to numerous standards involving areas such as:

Behavior/Conduct:

  • Regulates the conduct required for fiduciaries – such as the person or organization financially responsible for the administration of a covered plan – and health care plan providers – such as insurance companies and managed care plans like HMOs.

Reporting and Accountability:

  • Mandates detailed reporting and accountability to the federal government.

Disclosures and Information:

  • Disclosures and information must be provided to plan participants. A health plan would have to disclose what’s covered and not along with the insured’s payment responsibility. A retirement plan would have to disclose benefits and calculate any defined benefit amounts owed to employee.

Procedural Safeguards:

  • ERISA requires an actual plan that includes policies and procedures for things such as how claims should be filed, appeals process for claims that are denied and standards used to review the appeals.

Financial Protection and Best-Interest:

  • ERISA acts as a safeguard to assure that plan funds are protected and delivered in the best interested of the plan members. ERISA also prohibits discriminatory practices in obtaining, and the collection of, plan benefits for qualified individuals.

Who’s Covered By ERISA

ERISA governs all claims for benefits (whether procured through insurance or otherwise) from an “employee welfare benefit plan” and includes coverage such as life, health or disability. Most employees are subject to ERISA. Exceptions are employees of religious organizations, employees of government organizations and entities and business owners with their own policies.

Generally, any insurance policy that is issued as a benefit of one’s employment is covered by ERISA. This would include disability, health, and life insurance policies. If you have a claim under any such policies, you are probably limited to the very few rights available under ERISA.