The Employee Retirement Income Security Act (“ERISA”) is a federal law, passed in 1974, which sets minimum standards for voluntarily established group insurance and pension plans. The intent of the law was to prevent marketplace abuses. If you receive health, disability, or life insurance through your employer, it is likely governed by ERISA. This means that the plan administrator must comply with federal regulations and if you have a claim dispute and it proceeds to litigation it must be in federal court. What this also means is that if you live in a state with strong consumer protections for insurance, your rights and remedies are limited by ERISA. It is difficut to recover attorneys fees in ERISA disputes and compensatory and punitive-type damages are not available.
Another result of this well-intentioned regulatory framework, is that insurers who administer ERISA plans have saved a tremendous amount of money in claims and litigation costs (see, e.g., this internal memorandum from a major insurer expousing the virtues of ERISA related to potential litigation cost-savings) by avoiding protections afforded under state law. These so-called “unintended consequences” have made ERISA claims challenging for policyholder lawyers and their clients, creating many headaches for consumers regarding denials, offsets, benefits, and other related issues. In 2016, noting the large percentage of ERISA-governed disability claims and “the economic incentive for insurance companies to deny otherwise valid claims and because plans are often able to secure a deferential standard of review in court,” the U.S. Department of Labor adopted some claim handling reforms recommended by UP and others. Below you will find helpful information related to UP’s ERISA advocacy work and practical guidance on handlng health, disability, and life insurance claims and disputes.
UPDATE : In Hawai’i, we have learned from UP Volunteer and ERISA Subrogation and Reimbursement Expert Roger Baron, the Hawai’i Supreme Court upheld protective legislation enacted by the Hawaii legislature concerning subrogation by health insurers (Hawai’i is exempt from ERISA requirements). Subrogation is when an insurance company pays one of its insureds for damages, then makes its own claim against others who may have caused or contributed to the loss. Any resulting payments are payable to the insurance company, not the insured party. The health insurers challenged the protective legislation in federal court in connection with ERISA health insurance coverage. The U.S. District Court in Hawai’i (the local federal court) upheld the legislation in November 2017 and that decision is on appeal to the 9th Circuit Court of Appeals (U.S. Federal Court of Appeals). This is a major case for the citizens of Hawai’i and UP is following this case to determine its impact for health insurance policyholders.