Health Care Insurance - ERISA Is Not Your Friend (unless you are an insurance company)
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When you sue an insurance company for failing to pay your medical bills, chances are that your lawsuit will be governed by the Employees Retirement Income Security Act of 1974. That Act was originally intended to protect participants in company benefit plans by imposing notice and conduct requirements on those running the plans (fiduciaries). Like other roads paved with the best intentions, this one came with the pot holes in the asphalt machine. Huh? Let me explain.
In order to win an ERISA case, you have to show that the fiduciary's denial was "arbitrary and capricious." That is a very tall mountain to climb. In legalese, it means the consumer loses most of the time. On health care claims, the fiduciary function is often handled by the insurance company that provides the coverage. In such a situation, there is a real incentive for the insurance carrier to deny the claim - it leaves the money in the company's pocket. The fox is guarding the henhouse. Fortunately, recent Supreme Court rulings have made it harder for companies to wrongfully deny claims in such situations.
If that is not enough salt in the wound, consider the damages available under ERISA. Traditionally, the big hammer that has kept insurance companies from cheating their insureds is the threat of punitive damages rendered by a jury of twelve. There is no such hammer under ERISA - the Act abolished the right to a jury trial and punitive damages as a remedy. Most states allow an insured to recover those damages against the insurance company that would put the insured back in the position they were in prior to the company's wrongful conduct. If your health care insurance provider wrongfully refuses to pay a $100,000 hospital bill and you lose your house and car as a result, those damages could be substantial. The judgment might even include an award for the emotional turmoil you went through losing your house and car. Not so under ERISA - the only damages you can be awarded is the amount of the medical/hospital bill not paid and an award for attorney's fees, but only if the judge says you get them.
If you are a teacher, work for a religious organization or work in county/state government, ERISA does not apply to your claim - count your blessings. In my next post, I will discuss how to handle a claim denial. If you have had a bad experience with ERISA, tell us your story.