Most non-lawyers go through their lives never having heard of ERISA until one day they get a letter from their insurer saying their treatment isn’t covered or their claim is being denied and that they have a certain number of days to exercise their rights under ERISA. For most folks, insurance and an ERISA plan are indistinguishable – both of them are “the thing where you pay premiums” (or maybe your employer does), and then when “the bad stuff” happens (e.g., you get sick or disabled) they cover it. In reality, ERISA employee benefit plans are significantly different from non-ERISA insurance and the difference can affect your rights in important ways, both good and bad.
The upshot is ERISA is a federal law that regulates most employer-provided benefit plans, like health insurance, disability coverage or life insurance. If you get some sort of insurance coverage through your employer, odds are it’s subject to ERISA.
1. What’s ERISA? How do I know if it matters?
ERISA is short for the Employee Retirement Income Security Act. ERISA is a federal law passed in 1974 that establishes minimum standards for employee benefit plans. ERISA was the result of the pension reform movement that gained momentum after the infamous 1963 Studebaker corporation shut-down in which nearly ten thousand workers suddenly lost their pension benefits.
Congress enacted ERISA to protect employees participating in employer-provided benefit plans. ERISA requires benefit plans to disclose important information to participants, establishes minimum standards for benefit plans, and allows participants to file a lawsuit in federal court if their rights are violated.
There are some important exceptions, but generally ERISA applies to most employer-provided benefit plans. That means if you receive benefits such as health, disability or life insurance through your employer, ERISA likely applies. ERISA can apply even if your employer contracts with a separate insurance company or other entity to provide benefits, so even if your plan documents identify an insurer other than your employer, ERISA may still apply.
2. Why does ERISA matter?
ERISA’s important because it gives you significant rights in order to make sure that your benefit plan is treating you fairly. Among other things, ERISA provides participants two important rights. First, ERISA plan participants have the right to receive information about the benefits plan. For instance, ERISA requires that the administrator of a benefits plan (often the employer’s HR department) provide employees with the documents describing the plan’s terms, such as a Summary Plan Description, insurance policies and similar documents, upon the participant’s written request. ERISA also requires plans to provide participants with information the plan relies on in deciding claims for benefits (e.g., deciding whether a health plan will pay for certain treatment).
Getting this info matters: if you dispute your ERISA plan’s adverse decision (e.g., their refusal to cover your treatment) and you want to challenge it, having the information the plan relied on is a big help. For instance, a plan denying coverage for medical treatment because the plan’s doctor concludes the treatment is unnecessary would have to provide a copy of that doctor’s report. That’s a big deal because it lets you make sure the plan’s evidence actually supports their decision (e.g., that the medical report really does say your treatment is unnecessary). Taking this evidence to your own doctor or your lawyer is important in fighting the denial.
Second, ERISA gives plan participants the right to sue in federal court. Plan participants can bring a lawsuit to establish their right to benefits under an ERISA plan (e.g., to establish that their health plan covers certain treatment or that they are covered under a disability plan). Participants can also bring suit alleging that the people administering the plan breached their fiduciary duties or breached federal regulations requiring fair claims handling for ERISA plans.
Importantly, because Congress wanted to make sure ERISA plan participants could easily find lawyers to help them challenge the plan’s wrongful decisions, ERISA allows plan participants who are successful in an ERISA lawsuit to recover attorneys’ fees. That’s really critical, because it helps level the playing field – the ERISA plan or insurance company can afford to (and usually does) hire lawyers at large, multinational corporate law firms who charge hefty fees. Your typical employee can’t pay that kind of money. Without the ERISA attorney’s fee provision, individual employees would ordinarily never have access to the same legal representation as the ERISA plan.
3. What’s the catch?
Unfortunately, there’s a downside to ERISA for employees. ERISA imposes important deadlines and other requirements with which participants must comply in order to protect their rights. One important rule is that participants must notify benefit plans of claims within certain deadlines, and must challenge to adverse benefit decisions (e.g., a benefit plan’s refusal to cover treatment or pay disability benefits) within certain deadlines. Failing to meet these deadlines can mean losing your right to challenge a plan’s incorrect decision to deny coverage. ERISA also requires participants who dispute a benefits plan’s decision to use the plan’s appeal process before filing suit in court. An important rule is that, generally, only information submitted as part of the appeal can be used as evidence in any later lawsuit.
Unsurprisingly, ERISA plans and insurance companies aren’t always up front with their participants about what the rules are. That means that participants who want to challenge their benefit plan’s decisions must be certain they follow the plan’s appeal procedures in order to protect their rights. Failing to dot an “i” or cross a “t” can cause you to lose your right to dispute the plan’s decision.
4. Where Can I Learn More?
The most important place to look to answer questions about an ERISA plan is the Summary Plan Description and other plan documents. Pursuant to ERISA, 29 USC § 1024 and 1132, plan administrators must, upon written request, provide participants with the plan documents within 30 days of the request.
If you have questions about ERISA generally, a potential resource is the U.S. Department of Labor’s Employee Benefits Security Administration, which has authority over ERISA plans. EBSA has an ERISA Frequently Asked Questions page here.