The Employee Retirement Income Security Act of 1974, in order to protect beneficiaries, establishes minimum standards for benefits plans in the private sector. If an individual is denied benefits under his plan, then he can challenge that decision in federal court. Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 105 (2008). Two types of benefit plans are covered under ERISA: welfare and pension plans. 29 U.S.C. 18 § 1001(b). ERISA does not mandate that employers provide pension or health benefits plans to their employees, but it regulates these plans once they are established. Specifically, ERISA applies to any employee benefit plan established or maintained by any employer engaged in commerce or in any industry or activity affecting commerce and/or by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce. 29 U.S.C. 18 § 1003(a).
Over the years, Congress has passed several amendments to ERISA. In 1985, Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA gives certain beneficiaries the ability to temporarily continue their health insurance coverage under an employer-sponsored group health benefit plan, after they have lost their original coverage. In 1996, Congress passed the Health Insurance Portability and Accounting Act (HIPAA), which in part prevents plans from discriminating based on health status or disability and from refusing to enroll employees because of some pre-existing conditions. Additional ERISA amendments include the Newborns' & Mothers' Protections (Newborns' Act) and the Women's Health and Cancer Rights Act.
ERISA was passed by Congress for the purposes of protecting beneficiaries by setting standards of conduct and requiring employer disclosure and reporting. 29 U.S.C. 18 § 1001(c). In passing legislation, Congress first noted how employee benefit plans had a profound affect on interstate commerce and the federal taxing power. 29 U.S.C. 18 § 1001(b). Congress established six major policy reasons in establishing ERISA: 1) to foster and facilitate interstate commerce; 2) to encourage the maintenance and growth of single-employer defined benefit pension plans; 3) to increase the likelihood that participants and beneficiaries under single-employer defined benefit pension plans will receive their full benefits; 4) to provide for the transfer of unfunded pension liabilities onto the single-employer pension plan termination insurance system only in cases of severe hardship; 5) to maintain the premium costs of such system at a reasonable level; and 6) to assure the prudent financing of current funding deficiencies and future obligations of the single-employer pension plan termination insurance system by increasing termination insurance premiums. 29 U.S.C. 18 § 1001b(c).
ERISA is enforced by the U.S. Department of Labor, the U.S. Department of the Treasury, and the Pension Benefit Guaranty Corporation. Per ERISA regulations, benefit plans must be created in a written instrument, which specifies the fiduciaries that manage and control the plan and the basis on which payments are made to and from the plan. 29 U.S.C. 18 § 1102(b)(4). In addition, plan fiduciaries are required to provide enrollees with information about plan features and funding. ERISA outlines the fiduciary responsibilities as acting “with respect to a plan solely in the interest of the participants and beneficiaries.” 29 U.S.C. 18 § 1104(a)(1).
ERISA is divided into three subchapters. Subchapter I outlines protections of employee benefit rights, as well as pension funding and rules for vesting. This section also includes Congress’ findings and the policy rationale behind the creation of the act. Subchapter I contains numerous regulatory provisions concerning reporting and disclosure, participation and vesting, funding, fiduciary responsibility, administration and enforcement, continuation coverage and additional standards for group health plans, and group health plan requirements. 29 U.S.C. 18 §§ 1021-1191c.
Subchapter II includes provisions for the jurisdiction, administration and enforcement of ERISA. It also provides for the Joint Pension, Profit-Sharing, and Employee Stock Ownership Plan Task Force and for the enrollment of actuaries. 29 U.S.C. 18 §§ 1201 – 1242. Subchapter III concerns the plan termination insurance, including provisions regarding the Pension Benefit Guaranty Corporation. 29 U.S.C. 18 §§ 1301 – 1461.
One area of concern for plaintiffs and defendants alike is the standard of review used by the courts for evaluating ERISA cases. In reviewing whether a denial of benefits was valid, courts will use a de novo (without consideration of previous rulings) standard unless the benefits plan gives the administrator discretionary authority to determine eligibility. If the plan administrator has discretionary authority, then the abuse of discretion standard applies, meaning the courts defer to the plan administrator unless there has been an abuse of discretion on the administrator’s part. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).
Another issue that commonly arises is a conflict of interest, in which the plan administrator, who has the authority to deny claims, is also the entity that pays the plan benefits to the beneficiaries. In 2008, the U.S. Supreme Court in Metropolitan Life Insurance Co. v. Glenn held that if there is a conflict of interest in that the plan administrator is also the payer of claims, then the conflict is a factor “in determining whether the plan administrator has abused its discretion in denying benefits; and that the significance of the factor will depend upon the circumstances of the particular case.” Glenn, 554 U.S. at 105.
The U.S. Department of Labor provides compliance assistance guidelines for employers to comply with all ERISA regulations. These guidelines can be found at: http://www.dol.gov/ebsa/compliance_assistance.html.
ERISA is one of the most regulated areas of the healthcare industry and will most likely continue to remain so. ERISA will also be a continuing source of litigation when benefits claims are denied by plan administrators and subsequently, the courts.
Submitted by Aliyya Haque