What is ERISA?
Profound effects on insurance reimbursement By Mark D. DeBofsky, JD
Introduction
ERISA is an acronym for the Employee Retirement Income Security Act of 1974, a federal law that impacts all U.S. employee benefit programs, except for governmental plans and benefit plans sponsored by religious organizations, as well as plans in which only business owners but no employees participate. Although the law was initially intended to regulate retirement benefits, shortly before its passage, ERISA’s scope expanded to encompass employer-sponsored “welfare” benefits, consisting of both insured as well as self-funded health, life and disability benefits.
ERISA’s regulation of health benefits has had a marked impact on physicians and patients as well. ERISA’s applicability makes it more difficult for physicians to pursue collection actions against insurers; in situations involving union-sponsored plans, the direct assignment of benefit payments to physicians are often not recognized. ERISA also eliminates remedies traditionally available under state law, such as the right of the policyholder to sue for damages or penalties in addition to the benefits claimed. Jury trials are precluded; and courts will rarely consider new evidence outside of the insurer’s claim file. The treating physician’s opinions are given no special deference in ERISA claims and can be overridden by non-examining consultants, although the Affordable Care Act now permits independent reviews upon request. Moreover, ERISA-governed plans frequently incorporate provisions granting insurers the discretion to both interpret policies and decide whether claimants are entitled to benefits. When such clauses apply, a party challenging a claim denial must go beyond simply proving the insurer wrongfully denied benefits or misinterpreted a policy provision. Instead, the insured is required to show the benefit determination or policy interpretation was arbitrary or unreasonable. Overcoming such a formidable burden of proof can be nearly impossible. Fortunately, Illinois, along with several other states, now bars insurers from incorporating such “discretionary” clauses into their policies. That prohibition does not apply to self-funded plans, though.
ERISA Pre-emption
Where ERISA applies, all state laws that impact employee benefit plans are pre-empted, rendering those laws inapplicable, with the exception of laws regulating the content of insurance policies. ERISA pre-emption is triggered by the establishment of an employee benefit plan by the employer, and may be accomplished by the mere purchase of a group insurance policy. Thus, if a medical practice purchases a group health or disability insurance policy that covers even a single employee in addition to the practice’s owners or shareholders, an employee benefit plan is established; and any claim made under that policy is governed by ERISA. Likewise, patients with group insurance coverage or coverage through their union are almost certainly incurring ERISA-governed claims.
ERISA and Your Practice
ERISA profoundly affects insurance reimbursement. If a claim is denied in whole or in part after being submitted, ERISA mandates a “full and fair review” of the claim disposition upon request. Although the review is typically conducted by the same entity that denied the benefit, various requirements promote a fair process. First, patients can be represented either by an attorney or their medical provider who is entitled to access a complete copy of the claim record at no charge. For matters involving medical judgment, the plan must utilize a consultant possessing appropriate medical training and experience and must furnish copies of any articles or treatises relied upon to support the claim decision. Also, if the plan claims a charge is excessive, the insurer’s schedule of reasonable charges must be provided on request. Courts consider pre-suit claim appeals so important that a failure to exhaust pre-litigation appeals will result in a refusal by the courts to entertain any ensuing litigation.
ERISA and You
ERISA also impacts physicians’ own benefits, including group disability insurance or even individual insurance purchased on a discounted “list-bill” basis. Physicians incur a high number of disability claims due to the physical and mental/cognitive demands of their profession. It is critical for doctors to obtain occupation-specific coverage since the inability to practice within a specialty would trigger an entitlement to benefits, even if the physician is able to continue working as a doctor, but only in a less demanding area of practice.
Due to the complexities of ERISA, it is important to immediately secure the services of an experienced attorney if a claim is denied. Waiting to retain a lawyer until after appeals are exhausted could preclude a successful litigation outcome.
Conclusion
ERISA has significantly impacted health and disability insurance claims. However, with some basic understanding and foreknowledge of ERISA’s limitations, issues can be addressed pre-emptively and draconian consequences avoided.
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