What is ERISA?

WHAT IS THIS “ERISA” LAW?

• Most group disability insurance policies provided by employers fall under the federal law of the Employee Retirement Income Security Act of 1974, known commonly by its acronym, ERISA
• Originally, ERISA law was intended by Congress to ensure that pension plans were managed responsibly, so that employees would receive the benefits when they retired. They wanted to restrict high risk investment practices and increase the disclosure requirements of pension plans. The law was later interpreted to apply to health and disability insurance plans.
• Unfortunately, the original purpose of ERISA law has been unfulfilled. It has reduced, rather than expanded, the legal protections available to policyholders. It left the door wide open to insurance companies who choose to handle claims with a, “When in doubt, deny the claim” attitude.
• ERISA law replaces state laws that, in Kentucky and most states, can provide a higher level of protection to employees in situations where an insurance company unjustly denies benefits. Under state law, an employee has a right to a jury trial, and could receive damage awards in addition to the benefits due under their policy. Damages could be compensatory, punitive, and emotional distress. These things are not available if the ERISA law applies.
• ERISA law does not apply to private disability insurance policies purchased directly by an individual from an insurance agent. It also specifically excludes policies where the employer is a church or a governmental entity. In special cases, it may not apply, if you paid all the premiums for your insurance through your employer.
• ERISA law permits the plan administrator to decide if a claimant is disabled. You get to appeal, but claimants must exhaust the 180-day appeals process before they can file a lawsuit to obtain benefits. To make matters worse, the courts will usually assume that the plan administrator has made a reasonable decision unless it has acted in an “arbitrary or capricious” manner. ERISA law makes the insurance company’s decision carry a lot of weight.
• It is not unusual for courts to uphold an ERISA plan administrator’s decision to deny benefits based on one opinion from a doctor or nurse chosen by the insurance company. This can happen even if the doctor or nurse is not a specialist, or is less qualified in that medical specialty than the patient’s own doctor.
• In spite of these legal obstacles, those disabled from working can be protected under existing law. Benefits are being approved for many people every day. You can increase your odds of prevailing by hiring one of our lawyers to help.
• Although originally intended to help people obtain benefits, the law has caused insurance companies to more often deny long-term disability benefits.
• Under ERISA, insurance companies basically have free rein to decide whether to accept or deny disability claims. ERISA also protects the insurance companies from having to pay punitive or “punishment” damage awards to the insured person. Most lawyers believe the fear of being punished for wrongful denials help keep the playing field level.
• ERISA does not give insurance companies much incentive to pay claims.
• If you work for the government, ERISA does not apply on any level (federal, state or local). If you work for certain specified non-profit employers, such as churches and other religious institutions, ERISA may not apply.
• ERISA policies generally expect you to cooperate. If you do not cooperate, the insurance company may use this as a basis for denying your benefits. Some forms are very confusing, so much so that one may wonder whether the confusion was intentional! There are specific definitions for different types of physical labor- sedentary, light, etc. If you are unsure as to whether a request made by your insurance company (to take tests or give interviews, etc.) is appropriate, it is best to consult a lawyer with knowledge of ERISA law before you can respond. It is not uncommon for the insurance company to put the insured under surveillance to determine which daily activities you can and cannot perform. If you believe you are under surveillance, it is a very good idea to contact a lawyer to see if your rights are being violated.