Know Your Rights – ERISA Claim Deadlines

We’ve previously blogged about the importance of meeting deadlines in your claim for benefits under an ERISA-governed insurance policy.  Most ERISA plans have strict deadlines for submitting a claim, appealing the insurance company’s denial of your claim, and filing a lawsuit.  The deadlines are strict and ERISA is draconian about deadlines – missing them by even a day can cause you to permanently lose your claim with no recourse.

The good news is that the insurance company and ERISA plan have to follow their own deadlines in handling claims for benefits.  The federal Department of Labor, the agency with oversight over ERISA plans and insurance companies, has a regulation mandating ERISA plans and insurance companies subject to ERISA give ERISA claims full and fair review.  Part of this regulation requires insurers to decide ERISA claims within certain deadlines.

For claims under ERISA-governed disability insurance policies, the insurer must decide the claim within 45 days.  The insurer can extend this deadline by up to 60 days, but must show circumstances outside the insurer’s control in order to do so.  Also, the insurer must notify you of the extension before the initial deadline expires.  Even if the insurer gets the extension, they have to tell you the date they expect to decide your claim.

For claims under ERISA-governed group health insurance plans, the deadline depends on the type of claim. Urgent care claims must be decided within 72 hours. Claims involving an ongoing course of treatment must be decided within 24 hours. Pre-service claims must be decided within 15 days.  And post-service claims must be decided within 30 days. Like disability claims, these deadlines can sometimes be extended, but only under limited circumstances.

If the insurance company misses the deadlines, there are important consequences.  First, you’re entitled to file a lawsuit without waiting for the insurance company to finish its review.  That means you can have your case heard by a judge weeks or months before you otherwise might. Second, once you’re in court, the court may apply greater scrutiny to the insurer’s handling of your claim because the insurer disregarded the ERISA deadlines.

Importantly – and fairly – courts are holding insurance companies to these deadlines just as strictly as they hold claimants to deadlines.  In the recent case Fessenden v. Standard Reliance Life Insurance Company, the Seventh Circuit Court of Appeals held these deadlines are a “bright line”.  Writing “What’s good for the goose is good for the gander,” the court determined that the insurer’s missing the deadlines by even a day violates the rule and allows the claimant to file suit immediately.

 

New ERISA Rule Restores Important Rights to Insureds

For insureds, ERISA (which governs most employer-sponsored insurance) has a serious downside.  Insureds and plan participants who dispute the company’s denial of their claims for coverage or benefits must submit to ERISA’s administrative appeal process before they can file a lawsuit challenging the company’s decision.  This can disadvantage the participant because failure to dot i’s and cross t’s in the administrative appeal can cause the participant to lose important rights in litigation.  Moreover, because ERISA excludes many traditional state-law remedies such as punitive or exemplary damages and gives no right to a jury trial, even plan participants who successfully navigate the administrative appeals process and make it to court often face an uphill battle.

Accordingly, insurance companies spent several decades designing their benefit plans and policies to leverage ERISA against the insured.  One recently-published internal memo recommended the company get as many policies as possible covered by ERISA to reduce the money the company had to pay to its insureds.  The memo did a test study of 12 non-ERISA cases in which the company paid of a total of $7.8 million, estimating that ERISA’s application would have reduced the company’s liability in those cases to $0 to $0.5 million.  The author concluded “the advantages of ERISA coverage in litigious situations are enormous.”

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Wallace Falls, Central Cascades.

Recognizing that ERISA can favor the company over the insured or participant, the federal Department of Labor promulgated a regulation aimed at leveling the playing field, which became effective on April 1, 2018.  Because the Department of Labor concluded the majority of ERISA disputes arise in disability and health plans, the new rule focuses on these types of benefits specifically.  The rule’s upshot is:

  • Insurers can no longer pay their employees more, or promote them, or threaten to fire them, based on how many claims they deny;
  • Claimants under disability policies must receive a clear and detailed explanation of why their claim was denied, and, particularly, the company must explicitly address its disagreement with opinions about the claimant’s condition by treating physicians or Social Security;
  • Clearly state any deadlines by which the insured or participant must file a lawsuit challenging the denial of benefits;
  • Disability claimants must also receive a clear statement of their rights to appeal a denial of a benefit claim;
  • If the company upholds its claim denial based on new information, the company must permit the insured or participant to review and respond to the new information before the denial becomes final;
  • Claimants must be specifically advised of their right to examine the insurer’s entire claim file to permit them to evaluate the basis for the claim denial; and
  • Notices must be written in a culturally and linguistically appropriate manner if the situation warrants.

Importantly, violations of the new rule can permit the insured or participant to bypass the administrative appeal process and sue in court directly.  This reduces the risk that an insured or participant loses rights in litigation through technicalities in the appeal process.

Hopefully, the Department of Labor’s new rule will go a long way towards leveling the playing field for ERISA policyholders and plan participants.

Plain language: What’s this ERISA thing and why should I care?

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.ERISA

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.