Category: Disability Insurance

Don’t Assume All Employer-Adjacent Insurance is ERISA-governed, Says Ninth Circuit

There’s often an erroneous assumption that any insurance a person buys in connection with their employment is automatically subject to ERISA. But ERISA does not regulate all employer-adjacent insurance. ERISA only applies to employee benefit “plans.” Whether an ERISA “plan” exists can be complex, but without one, an insurance policy will not be subject to ERISA even if an employer was involved in its purchase.

A recent Ninth Circuit decision is a good reminder of this. In Steiglemann v. Symetra Life Ins. Co., the appellate court determined that an insurance policy purchased in connection with the plaintiff’s employment was not subject to ERISA because the requirements for an employee benefit “plan” were not met. The decision is unpublished, meaning it may be persuasive to lower courts but is not binding.

Jill Steiglemann bought a disability insurance policy from Symetra Life Insurance Company. She had access to the policy through her membership in a trade association for insurance agents. Her company paid for the insurance. The lower court held that the policy was part of an employee benefit plan and subject to ERISA.

The Ninth Circuit Court of Appeals reversed the lower court and held that the policy was not governed by ERISA. Even though Steiglemann’s employer arranged for the option for her to buy coverage and paid premiums, this was not enough to show the employer established an ERISA plan.

The employer never contracted to provide for coverage. It never promised to act as an administrator for the insurance. And it never took the steps necessary to maintain an ERISA plan, like recordkeeping and filing returns with the Department of Labor.

Steiglemann’s trade association also did not do the things necessary to create an ERISA plan. The association did not function for the main purpose of representing employees against their employer.

There was therefore no evidence that Steiglemann’s insurance policy was part of an employee benefit plan. And without a plan, the policy was not subject to ERISA.

This decision is a helpful reminder not to assume that ERISA applies to all employer-adjacent insurance.

Insurers Still Breaking Mental Health Coverage Rules Says Department of Labor

The 2022 report to Congress from the Department of Labor (DoL) on compliance by group health plans with the federal mental health parity laws identifies numerous instances of continued discrimination in coverage for treatment of mental health diagnoses.

Federal law generally prohibits insurers from discriminating against people who need coverage for treatment of mental health conditions. Basically, health insurers cannot have limitations that are more restrictive of treatment for a mental health condition than for other conditions. These rules have only become more important since the COVID-19 pandemic contributed to mental health issues for many Americans; for instance, the CDC noted a 30% increase of overdose deaths since the pandemic.

In large part for this reason, DoL has made enforcement of the mental health parity rules a priority in recent years. One new enforcement tool is a 2021 rule passed by Congress requiring health plans to provide DoL with a comparative analysis of treatment limitations for mental health conditions to help DoL ensure these practices follow the law.

DoL’s report identified many problems with health plans’ reporting about mental health parity. For instance:

  • Failure to document comparisons of treatment limitations for mental health limitations before implementing those limitations;
  • Lack of evidence or explanation for their assertions; and
  • Failure to identify the specific benefits affected by mental health limitations.

DoL also noted that enforcing these reporting rules had led to the removal of several widespread insurer practices that violated the mental health parity rules.

For example, one major insurer was found to routinely deny certain behavioral health treatment for children with Autism Spectrum Disorder. This resulted in denying early intervention that could have lifelong results for autistic children. DoL found over 18,000 insureds affected by this exclusion.

Another example involved the systemic denial of treatment used in combatting the opioid epidemic. New research has found that combining therapy with medication can be more effective for treating opioid addiction than medication alone. DoL found a large health plan excluded coverage for this therapy in violation of the mental health parity rules.

Other treatments DoL’s report identified as being denied on a widespread basis in violation of the law included counseling to treat eating disorders, drug testing to treat addiction, and burdensome pre-certification requirements for mental health benefits.

DoL’s report is a reminder that discrimination on the basis of mental health related disabilities remains a part of the insurance business despite years of federal legislation to the contrary.

Court Ruling Illustrates The Limits ERISA Places On Insurers’ Discretion To Decide Claims

Many ERISA plans give the claims administrator (often an insurance company) discretionary authority to interpret the evidence and the terms of the employee benefit plan in deciding claims. This discretionary authority makes it difficult for claimants to overturn claim denials because court defer to decisions made using this authority.

But ERISA recognizes that claims administrators have an incentive to abuse this discretionary authority and limits it in important ways. Where the facts of a particular claim suggest the insurance company or other claims administrator is abusing its authority, courts are required to view the administrator’s handling of the claim with skepticism.

The Ninth Circuit Court of Appeals’ recent decision in Gary v. Unum is a reminder of the importance that this skepticism has in ERISA disputes. Allison Gary had a medical condition called Ehlers-Danlos Syndrome (EDS). She had disability insurance through Unum as part of her employer’s benefit plan and made a claim. Unum denied her claim and she filed a lawsuit seeking benefits under ERISA.

The lower court sided with Unum and upheld the denial. The Ninth Circuit Court of Appeals reversed.

The Ninth Circuit determined the lower court failed to properly scrutinize Unum’s evaluation of the medical evidence about Gary’s condition. The ERISA plan at issue gave Unum discretion to interpret this evidence. But the Ninth Circuit emphasized that, even where ERISA plan administrators have that discretion, it is checked by common-sense limitations that prevent insurers like Unum from denying claims out of self interest.

The Ninth Circuit held that the facts of Unum’s handling of the claim should have led the lower court to view Unum’s exercise of its discretionary authority to interpret the evidence with skepticism. First and foremost, the Ninth Circuit emphasized that an insurer who, like Unum, is responsible for paying disability claims as well as investigating the claimant’s entitlement to benefits has a perverse incentive to save itself money by looking for evidence to deny claims while ignoring evidence that would support paying benefits. The court emphasized this structural conflict of interest should have been considered.

Second, the appellate court was concerned by Unum’s practice of “cherry picking” certain observations from medical records, i.e., ignoring evidence of Allen’s disability while focusing on evidence that would support denying her claim.

Third, Unum failed to have Gary examined by an EDS specialist. Fourth, Unum cut off Gary’s benefits after exactly six months, an arbitrary measure that was disconnected from the medical evidence.

The Gary decision is unpublished, meaning it is not binding authority but may be relied on at the discretion of lower courts to the extent a judge believes the ruling is helpful.

ERISA at the Supreme Court: How Will Amy Coney Barrett’s Confirmation Shape the Legacy Left By Justice Ginsburg’s Seminal ERISA Opinions?

Amy Coney Barrett was recently confirmed to replace Ruth Bader Ginsburg on the U.S. Supreme Court. Justice Ginsburg is remembered as a champion of civil rights and gender justice. But Ginsburg is also responsible for some of the Court’s most important ERISA decisions. This invites us to look back on some of Justice Ginsburg’s most important ERISA decisions and speculate about how Justice Barrett might decide future ERISA cases.

Justice Ginsburg wrote the seminal opinion in Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003), the decision that set the standard for how ERISA Plans and ERISA-governed insurance companies must weigh the opinions of the claimant’s treating doctors. Nord rejected the rule that ERISA plans must defer to the claimant’s doctor’s opinions about the claimant’s medical condition in a disability insurance claim. But Ginsburg emphasized, and the other justices agreed, that ERISA Plans must give fair weight to claimants’ doctors’ opinions. Her opinions emphasizes: “Plan administrators, of course, may not arbitrarily refuse to credit a claimant’s reliable evidence, including the opinions of a treating physician.” Nord protects ERISA claimants’ right to rely on their treating doctors in claiming benefits–a right that is particularly critical since claimants can rarely afford to hire a consulting physician for the purposes of an insurance claim.

A more technical but still important decision by Justice Ginsburg was UNUM Life Insurance v. Ward, 526 U.S. 358 (1999). Ward concerns the extent to which ERISA preempts (i.e., overrules) state laws that regulate insurance policies. Justice Ginsburg wrote the Court’s unanimous opinion finding that ERISA does not stop states from regulating insurance policies that are issued under employee benefit plans. This means that important state-law consumer protections for insurance policies still apply when the insurance policy is sponsored by an employer.

Justice Ginsburg also wrote the opinion in Raymond B. Yates, M.D., P.C. Profit Sharing Plan v. Hendon, 541 U.S. 1 (2004) which confirmed ERISA can apply to a small business owner who participates in their own company’s benefit plan. Many small business owners are familiar with the frustrations of falling into a grey area where they lack the protections of status as an employee but also lack the advantages of being a large business. For ERISA benefits at least, this “worst of both worlds” scenario is less of a concern. The Yates decision held that the owner of a small business can participate in the business’ ERISA plan and thereby obtain the protections and favorable tax treatment that ERISA affords to plan participants.

These decisions reflect a legacy of implementing Congress’ intention in enacting ERISA of providing real protections to people who earn insurance and other benefits through their employment.

Justice Barrett’s record suggests she is likely to continue that legacy. Justice Barrett decided one important ERISA case during her tenure on the Seventh Circuit Court of Appeals (the federal court that hears appeals from Illinois and other midwestern states). In Fessenden v. Reliance Standard Life Ins. Co., 927 F.3d 998, 999 (7th Cir. 2019), then-Circuit Judge Barrett determined that ERISA plans, and ERISA-governed insurance companies, must strictly comply with ERISA’s rules requiring full, fair, and prompt review of insurance claims.

In that case, Donald Fessenden made a claim for disability insurance benefits through an insurance policy issued by Reliance through his employer’s benefit plan. Reliance denied his claim and Fessenden appealed the denial using the Plan’s internal administrative procedures. Reliance failed to decide the appeal within the deadline imposed by ERISA. That violation of ERISA had consequences that made it easier for Fessenden to pursue his benefits claim.

Reliance asked the Seventh Circuit to let it off the hook. Reliance argued its violation was “relatively minor” and the court should excuse the violation “because it was only a little bit late.” It characterized the ERISA deadline as a “technical rule.”

Then-Circuit Judge Barrett declined. Her ruling emphasized that ERISA deadlines matter to plan participants:

After all, the administrator’s interests are not the only ones at stake; delaying payment of a claim imposes financial pressure on the claimant. That pressure is particularly acute for a disability claimant, who applies for disability benefits because she is unable to work and therefore unable to generate income. Given the seriousness of that burden, the new regulations single out disability claims for quicker review than other kinds of claims.

Her decision also emphasizes that courts have repeatedly required strict compliance with deadlines by claimants, often at the urging of insurance companies. In requiring the same level of exactitude by ERISA plans and insurers, she observed: “What’s good for the goose is good for the gander.”

ERISA Claim Deadlines Extended Due to COVID-19

ERISA-governed insurance claims are subject to specific deadlines that claimants have to meet in order to protect their rights. Normally, the consequences of missing a deadline are draconian. For instance, appealing an ERISA claim denial even one day late can irrevocably waive the right to dispute the denial, no matter the reason for the delay.

The good news is that these deadlines have been relaxed in light of the COVID-19 pandemic. The Department of Labor, the federal agency responsible for overseeing ERISA-governed employee benefit plans, has issued an order extending certain ERISA claim deadlines due to the COVID-19 pandemic. This order comes pursuant to authority granted by Congress in the Coronavirus Aid, Relief, and Economic Security Act (a/k/a the “CARES” Act).

DOL is extending these deadlines so that plan participants, beneficiaries, and employers have additional time to make critical coverage and other benefit decisions during the pandemic. The upshot is:

  • Disability insurance claimants have additional time to submit claims and appeal denied claims. These deadlines do not run during the period from March 1, 2020, until 60 days after the federal government announces the end of the current COVID-19 national emergency. That means an appeal that would normally be due next week might not be due until 60 days after the federal government announces the end of the national pandemic emergency.
  • Group health plans have additional time to comply with COBRA continuation coverage deadlines. This is critical for employees recently laid off and looking for answers about continued health insurance coverage.
  • Group health plans also have extra time to determine benefit claims; and
  • ERISA plans have extra time to provide disclosures and notices required by ERISA, provided the plan acts in good faith and furnishes the disclosure or notice as soon as practicable under the circumstances, including through electronic means.

The Department of Labor has FAQs for ERISA claimants and participants regarding the deadline extensions.

These extensions will help employees and plan participants effectively safeguard their rights during the pandemic.