The Employee Retirement Income Security Act of 1974 (ERISA) is federal law that regulates and sets forth uniform standards for private sector employee pension and health benefits plans. The standards include information disclosure to participants, administrator fiduciary duties, claims procedures, appeals of adverse benefit determinations and other remedies.
Defining Key Terms Under ERISA
- Plan Sponsor. The Employer (typically)
- Plan Administrator. The person or company (usually an insurance company) who is responsible for disclosure of information to participants. The Plan Administrator administers the plan benefits.
- Summary Plan Description (SPD). The document that describes the terms of the health benefit plan including coverage, defining medical necessity, etc.
- Participant. The employee who is eligible to receive the health plan benefits.
- Beneficiary. A person designated by a participant, or, one who by the terms of the plan may be entitled to benefits.
- Fiduciary. Those who exercise authority, control and management of the operation and administration of the plan such as the Plan Administrator.
ERISA HEALTH PLAN
An ERISA health plan is a health benefits plan that is established or maintained by an employer for the purpose of providing medical benefits to a participant or a beneficiary. There are generally two types of ERISA health plans: 1) fully insured or 2) self-funded.
A “fully insured” health plan is when the employer pays a premium to an insurer, and the insurer pays the claims out of the pools of premiums it collects from everyone it insures. Laws and regulations that apply to these health plans will include both ERISA law and state insurance law.
A “self-funded” plan is when the employer sets aside a pool of funds and the employer is responsible for paying all claims out of those funds. In these situations, an insurance company may be utilized by the employer to administer the health plans. The insurance company is considered a “plan administrator” when this occurs. The laws and regulations that apply to self-funded health plans is the ERISA law. State insurance laws do not govern these plans since the insurance company is providing administrative services only and does not insure those plans.
The ERISA law and regulations preempt state insurance laws insofar as they relate to an employee benefit plan. Factors to consider for determination whether ERISA preempts state law include whether the state law impacts the structure of ERISA plans, provides an alternate course of action to participants to collect benefits protected by ERISA, impacts the administration of ERISA plans, or provides an alternate cause of action to participants to collect benefits protected by ERISA.
ADVERSE BENEFIT DETERMINATIONS
When a participant or beneficiary receives or requests health care services, the ERISA plan administrator will make a determination as to whether the services are covered by the health plan. When coverage for health benefits is denied, the determination is referred to as an “adverse benefit determination”. An adverse benefit determination is a denial, reduction, or a failure of the health plan to provide or make payment, in whole or in part, for a health benefit, including those based on a determination of eligibility, application of utilization review or medical necessity. ERISA regulates the timing for an adverse benefit determination. Adverse benefit determinations must be made by the plan administrator as follows:
- Urgent care claims. Not later than seventy two (72) hours after receipt of the claim by the plan. If the information submitted by the claimant is insufficient to make a determination, then the plan shall notify the claimant of the insufficiency with twenty-four (24) hours after receipt of the claim.
- Pre-service claims. Not later than fifteen (15) days after receipt of the claim by the plan. This deadline may be extended one time for up to fifteen (15) additional days. If additional information is needed to make the determination, the claimant will have forty-five (45) days to provide the specified information.
- Post-service claims. Not later than thirty (30) days after receipt of the claim by the plan. This may be extended one time up to fifteen (15) additional days. If additional information is needed to make the determination, the claimant will have forty-five (45) days to provide the specified information.
PARTICIPANT AND BENEFICIARY RIGHTS UNDER ERISA
When the plan administrator makes an adverse benefit determination, the participant or beneficiary has certain rights as defined by the ERISA claims procedures regulations. These rights include the right to receive specific information regarding the determination and the right to appeal the determination. The ERISA claims procedures regulations require the plan administrator to set forth the manner and content of notification of benefit determinations. This notice must include the following:
1. the specific reason(s) for the denial;
2. reference to the specific plan provisions on which the denial is based;
3. a description of any additional material or information necessary for company to consider the original claim;
4. a description of the plan’s review procedures including time frames;
5. the internal rule, guideline, or protocol that was relied by the plan administrator to make the adverse benefit determination;
6. if the denial is based on medical necessity, an explanation of the scientific or clinical judgment used to make the determination; and
7. a description of the expedited review process applicable to such claims.
APPEALS OF CLAIM DENIALS
A participant or beneficiary can appeal an adverse benefit determination. To file an appeal, an individual should first review the summary plan description which must specify the appeal procedure. Often, there are deadlines for filing an appeal so participants and beneficiaries should act quickly. Usually the appeal begins with a written request and the deadline is often sixty (60) days after an individual receives the notice. If the appeal is denied, there is often a second level appeal.
U.S. DEPARTMENT OF LABOR
If the appeals are denied, then an individual may contact the U.S. Department of Labor. The Department of Labor provides ERISA information at www.dol.gov.ebsa. This includes information about ERISA requirements and the location of regional offices to contact.
CONTACT AN ERISA ATTORNEY
We invite participants, beneficiaries, and health care providers to review the following to contact us today for assistance with denials and appeals. To speak with an ERISA lawyer, contact The Martin Law Firm at (215) 687-4053.