Someone Else Learns About ERISA the Hard Way

Seen on the AP wire:

But Spherion Corp., the temporary staffing company where Amschwand worked, told Amschwand-Bellinger she would not receive any of the $426,000 in benefits she believed she was due. When she went to court, Spherion succeeded in getting her lawsuit thrown out. The Supreme Court on June 27 refused to review the case.

Amschwand-Bellinger received a refund of the few thousand dollars in insurance premiums she and her husband dutifully had paid. The total, she said, would not cover the costs of his funeral.

The story has played out often under the federal Employee Retirement Income Security Act. Designed to protect employee benefits, the law has been used by employers as a shield against suits.

Federal appeals courts, interpreting Supreme Court decisions dating to 1993, consistently have said companies that offer health, life and retirement benefits under ERISA cannot be sued for large amounts of money, or damages. Instead, they can be sued only for typically smaller sums such as Amschwand’s insurance premiums.

Several federal judges have bemoaned the unfairness even as they have felt constrained to rule in favor of employers.

"The facts … scream out for a remedy beyond the simple return of premiums," Judge Fortunato Benavides of the New Orleans-based 5th U.S. Circuit Court of Appeals said in the Amschwand case. "Regrettably, under existing law it is not available."

I started this blog as a result of a gripe I have with the health plan I have at work.  My employer’s been great through my family’s difficulties, but the runaround we’ve received from Aetna, acting as a TPA, has sucked.

They can get away with it, thanks to their ability to hide behind ERISA – they have no reason to behave.

The story quoted above provides a different example the problem with ERISA – an employer is able to hide behind the protections in the law; there is no incentive to treat employees fairly.

It’s a shame that folks don’t learn about the problems with ERISA usually until it’s too late.  It’s such a nasty side of the employee benefits world which never has the purifying light of public sunshine directed its way.

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ERISA Reform Discussion Missing the Point

When you talk to a politician about ERISA reform, they’re most likely to think about the movement to defang federal preemption and permit states to impose mandatory benefits requirements.   Consider, for example, this op-ed at Risk & Insurance:

A short-lived law in Maryland, for example, would have required employers with 10,000 or more employees to spend at least 8 percent of payroll for their health plans. Firms spending less would have had to make up the difference by paying into a state fund. Vigorously opposed by employers in the retail industry, the law was struck down by a federal appeals court last year. The court ruled the state law was preempted by ERISA.[...]

As courts block some state initiatives that violate ERISA, some policymakers have responded by launching campaigns to water down ERISA preemption language. Rep. Robert Andrews, D-N.J., chair of the Health, Education, Labor and Pensions subcommittee of the House Education and Labor Committee, was quoted in hearings and interviews classifying ERISA as a “barrier” to state reforms.

Some legislators are studying an exception (or waivers) to ERISA preemption for individual states. Others would totally eliminate ERISA protection for self-insured plans.

I’m encouraged that some politicians are taking another look at ERISA…but I wish that the powers-that-be would take a look at some of the other problems with ERISA — the lack of incentive for plan administrators to act in good faith, for example.

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Class Action Suit Allowed Against Aetna Under ERISA

In my wife’s and my battle against Aetna, I had just about accepted ERISA as currently worded as being a “Get Out of Jail” card for administrators of employer-funded health plans. With a lack of punitive damages and no acceptance of bad faith as an argument against the TPA, there is no incentive for a health plan administrator to behave civilly towards plan members.

So, I was very surprised to see this article at TradingMarkets:

A class-action lawsuit over Aetna Inc.’s (AET) denial of coverage for people with eating disorders may proceed under the federal Employee Retirement Income Security Act of 1974, a New Jersey federal judge has ruled.[...]

Bruce Nagel, an attorney representing the plaintiffs, said the ruling is “significant because it is the first time in the country that a federal court has ruled that there was a bona fide claim and that the insurance company’s internal appeals procedure does not trump the claim.” Nagel said he will try the case to ensure coverage for hundreds of families with children suffering from eating disorders, such as anorexia and bulimia.

In favorable rulings for Aetna, however, Hochberg dismissed the plaintiffs’ claim under the New Jersey Mental Health Parity Law and their claims for punitive damages as pre-empted by ERISA. Attempts to get comment from Aetna were unsuccessful.

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