Jan. 15, 2009
By Bob Coleman
Coleman, Chambers, Rogers & Williams, LLP
My employer has explained to me that my health insurance coverage is not subject to Georgia law because it's a self-funded plan. Instead, it's governed by some federal regulations called ERISA. What's this all about?
Your employer is referring to the Employee Retirement Income Security Act. And if that sounds more like a set of federal pension regulations, well that's because ERISA was designed to regulate just that when it was adopted several decades ago. But if you're health care plan is provided by your employer, it is probably subject to this federal regulation. However, this brief set of regulations are the only federal regulations governing self-funded, employer-based health care plans. So if you get your health care through your employer, like most people do in this country, your plan is probably subject to ERISA's federal regulations. If you have single-payer insurance that's not self-funded or not part of a group plan, it's more likely that your insurance is regulated by state law.
Group plan or single-payer plan -- what's the difference?
ERISA plans are set up and controlled differently from single-payer plans. Single-payer plans are set up more like individual contracts, while ERISA plans are set up more like trusts. It's not really important that you know the mechanics of this. But what is important is that you realize these differences can have major legal implications - especially if you want to challenge the plan's basis for denying you coverage, or requesting reimbursement for certain payments. Several state laws put in place to protect your rights in these situations may not apply to federally-regulated ERISA plans. (For more on reimbursement rights, click here).
So what's in those ERISA regulations I should know about?
Not much. The thing about those regulations is that they do very little regulating. As a result there are not many rules concerning what ERISA plans can and can not do. Most of the rules we do have are derived from a handful of Supreme Court cases, and rulings handed down by Federal courts.
So is this lack of regulation a good thing or a bad thing?
Well it depends on your perspective. From your insurance company's perspective, a lack of regulation is a very good thing. For years they've been able to provide coverage - or not provide coverage - to the people they insure without being subject to any regulations with teeth. They are mostly exempt from state regulations because these federal rules trump state law.
From the insured's perspective, this is sometimes a bad thing. Your state legislators, who you elect to represent your interests, have enacted laws to protect you from certain insurance company practices. For example, Georgia law has specific statutes designed to protect you from having to pay insurance companies back when you've been injured in an accident, but have not been fully-compensated for your injuries. Georgia calls this the "made-whole doctrine." But in most cases, if you have federally regulated insurance - like ERISA - the state's "made-whole doctrine" does not apply. Georgia law also prevents your own health insurance carrier from threatening to deny you future health benefits if you refuse to pay them back for past coverage - even if you have solid legal grounds for doing so. But in most cases, ERISA plans are not subject to those and other state protections.